Washington Explains Tax Treatment of Dark Fiber

Tuesday, April 17th, 2012


The Washington Department of Revenue recently published guidance regarding the tax treatment of dark fiber used in providing telecommunication services in the state. Wash. Excise Tax Advisory ETA 3171.2012 (Dept. of Revenue Apr. 4, 2012).

"Dark fiber" is fiber optic cabling that has been installed but has not yet been "lit." Typically, dark fiber becomes "lit" when a telecommunications provider activates the fiber with a laser and other associated equipment so that the fiber can transmit signals.

Washington defines "telecommunications services" as services that "transfer, convey, or route voice, data, audio, video or any other information or signals to a point, or between or among points." Because it is "unlit," dark fiber is unable to transmit, convey, or route information between points; thus, leasing dark fiber does not qualify as a "telecommunications service." Wash. Rev. Code sec. 82.04.065(27).

Nevertheless, "dark fiber" does fall within the definition of "competitive telephone services" (CTS). Washington defines CTS as "providing . . . telecommunications equipment or apparatus, or services related to the equipment or apparatus." Wash. Rev. Code sec. 82.04.065(5). Since CTS is included within the definition of "retail sale," the sale or lease of dark fiber that falls within the definition of CTS will be subject to retail sales tax and the business and occupation tax, unless specifically exempt by law.

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