Telecom Tax Blog

    Communications Tax Compliance: An Overview

    Posted on Tue, Jun 13, 2017 @ 03:02 PM

    Over the years, we’ve spoken with thousands of companies of all sizes that are looking to sell communications services. The common thread to these conversations is that everyone agrees that communications services are heavily taxed and tax compliance is complex.

    Indeed, communications services are the most heavily taxed item on the planet – but why? Because everyone uses communications services – there are now more mobile phones on the planet than there are people – and the taxes are easy to collect. Communications taxes have been used to fund wars, provide rescue service, install rail lines, move overhead lines underground and seemingly everything in between.

    Communications tax began in 1898 to fund the Spanish-American War. In the nearly 120 years that have followed, communications taxes are found across more than 12,000 jurisdictions in North America and cover every conceivable type of communication. If a tax authority wants to raise revenue, a communications tax is an effective fund raiser.

    Success and pervasiveness has led to complexity. There are thousands of taxing authorities at the federal, state, and local level with varying different tax rates, impositions, methodologies, registration and filing requirements, and all within certain jurisdictional boundaries. That is a lot information to track. Then, consider any element can change – even the jurisdictional boundaries – and the complexity is staggering.

    With the complexity and amounts involved, communications tax compliance is not a matter to take lightly. Missteps can result in penalties, interest and tax expenses that can drain your profits, undo years of revenue collection and undermine the value of your business.

    Although the process of communications tax compliance may be complex, the concept of tax compliance itself is simple – taxing authorities require that you collect and remit taxes and fees in exchange for the privilege of providing goods and services to their citizens. Even though the process of compliance may be complex, remember that between you and the taxing authorities are solution providers that make the complexity manageable. For example, Wolters Kluwer has a partner ecosystem that can help with any of the components of the process so that you can operate in compliance.

    In this blog series, we’ll reduce the mystery of communications tax compliance into four steps:

    • Registration with taxing authorities
    • Calculation of taxes due
    • Invoicing customers for taxes due
    • Reporting and remitting funds for the taxes owed

    We will walk you through each of the steps, so that you can start in compliance and remain in compliance, leaving you to focus your time, energy and resources away from tax compliance and onto your business.

    Wolters Kluwer can help guide you through the complex maze of communications tax compliance. Their flagship communications tax solution, CCH® SureTax® Communications, makes tax calculation easy and with their network of partners, they make the other steps of communications tax compliance simple as well.

    To learn more about communications tax compliance, download our free guide, 4 Steps to Communications Tax Compliance.

     

    Tags: communications tax

    Communications Tax Compliance: Tax Calculation

    Posted on Tue, May 9, 2017 @ 03:27 PM

    Communications tax compliance is complex. More specifically, to reuse a line from Warren Buffet, communications tax looks complex, and it is complex, but it’s not as complex as it looks.

    Communications tax compliance looks less complex when you break it down into the four major processes. In this post, we’ll look at an incredibly complex component of communications tax compliance – tax calculation.

    Not to worry, although the tax calculations may be complex, implementing a tax calculation solution complex is fairly simple.

    To begin, communications services will be taxed, to some extent, in almost every state. These taxes may include sales tax, communications services tax, gross receipts tax, business and occupation tax, and utility users tax. Also, each service you provide may have a different tax treatment in each state. To calculate the tax consequences of a transaction, you need to know the applicable tax jurisdictions for the transaction (nexus determination), the taxability of the item sold, the rates and tax rules that apply to the transaction and the quantity and dollar amount of the item sold.

    For audit protection, you should maintain an audit trail of the calculation.

    Communications tax calculation can be a difficult task. There are over 12,000 different tax authorities, each with potentially different tax rates and rules for any given communications service. In addition, with the potential for periodic tax changes, the task of tax calculation and tracking becomes so difficult that it needs automation to be performed and managed properly.

    An automated tax calculation solution consists of four basic components:

    1. Data input/output function for communicating with the billing system
    2. A tax research database that contains all of the current taxability information rates and rules for the communications services you will be selling
    3. A calculation engine that applies the tax research data to determine the tax consequences of your transactions
    4. A reporting system that provides information for reporting tax liabilities to the proper authorities

    At the heart of the tax calculation solution is tax data. Tax data originates with tax research which is compiled from the various tax authorities and then categorized. Without current, quality tax data, the system cannot properly determine tax consequences.

    CCH® SureTax® Communications makes tax calculation easy. CCH SureTax Communications is the tax calculation solution designed specifically for the unique needs of the communications industry. CCH SureTax Communications combines communications tax research with communications tax rules to generate the tax calculations and reports that you need to maintain tax compliance.

    Tax calculations are driven by tax research data from Wolters Kluwer, the source of the most complete, up-to-date research data available in the communications industry, with tax applicability data and rules covering the more than 12,000 jurisdictions in the U.S., its territories and Canada.

    At Wolters Kluwer, we can help guide you through the maze of communications tax compliance. CCH SureTax Communications makes tax calculation easy and with our network of partners, we make the other steps of communications tax compliance easy as well.

    To learn more about communications tax compliance, download our free guide, 4 Steps to Communications Tax Compliance.

     

    Tags: communications tax

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