When a taxpayer provides a service that relies on a multistate technical network for its delivery, costs of performing that service can be analyzed in one of two ways: (1) the cost incurred by a taxpayer includes the cost in maintaining the national network (an "operational" approach); or (2) the cost incurred by a taxpayer only involves the cost of engaging in the individual transaction with a customer (a "transactional" approach).
In an unpublished decision, a Massachusetts Appellate Court chose the operational approach, affirming a 2011 Appellate Tax Board (ATB) decision that held telecommunication services should be sourced using the costs of performance associated with a service provider's integrated telecommunications network rather than costs associated with each individual call.[Commissioner of Revenue vs. AT&T Corporation, Mass. App. Ct. #11-P-1462 (7/13/12)]