Telecom Tax Blog

    MetroPCS goes VoIP

    Posted on Fri, Aug 17, 2012 @ 03:28 PM

    As we follow telecom tax and voip tax changes, we follow the industry also.  So, it's interesting to note that MetroPCS has introduced America's first voice-over-LTE service, combining its voice, messaging and Internet services onto a single IP network.

    That seems like quite a technology advance for the carrier that traditionally is know for offering value priced services in metro areas.  Then again, VoIP began in the consumer market as a value driven offer, offering customers POTS like service at a less than POTS price.

    MetroPCS was driven to innovate by the need for more efficient use of spectrum.  Their 2G CDMA and 4G LTE service are on the same spectrum, so moving voice over to the IP network uses spectrum more efficiently.  In wireless, it's all about spectrum.

    There is a tax implication to the change.  Voice and data can be taxed differently.  A flexible tax calculation engine, like SureTax Telecom, can handle that change with ease.

    To read more about MetroPCS and their single IP service, see http://gigaom.com/mobile/metropcs-enters-the-voip-age-who-will-be-next/.

    You can read more about SureTax Telecom here.

     

    Tags: telecom tax, voip tax, i-voip tax, telecommunications tax, voip taxes

    3 Taxation Mistakes that VoIP Providers Make - Part 2

    Posted on Tue, Jul 17, 2012 @ 01:05 PM

    Last post, we covered Mistake #1 - Not understanding what regulatory variation of VoIP you were providing.

    Mistake #2 is to not understand the concept of telecom tax-on-tax.

    Tax-on-tax is a difficult topic.  Tax-on-tax represents a process by which telecommunications providers must factor the additional dollar amount attributable to either the same tax or a different tax invoiced to consumers into their adjusted tax remittance calculations.

    Historically, tax literature has traditionally been silent regarding the rules & system of application to calculate tax-on-tax.  Nevertheless, as a matter of practice, tax authorities require vendors to include tax amounts collected from subscribers within the tax base of a given tax.  Consequently, tax managers need to develop an effective methodology to determine (A) when tax-on-tax applies and (B) how to calculate the amount of tax actually owed to the government.  If a company doesn’t understand all of the nuances associated with factoring tax on tax correctly, the company will wind up paying tax on the amount of the tax passed-through to the consumer - even if this extra increment of tax is NOT collected from the consumer!

    For example, the pass-through amount appearing on a consumer's invoice must be included in the amount of Total Taxable Revenue reported to the taxing authority on the company's tax return.  If a company charges the consumer only the initial sum resulting from the 1st calculation of tax on the service, it will fail to collect the entire amount of tax owed to the taxing authority. In some states, such as New York, this could cost a provider as much as 1% in lost revenue. 

    The company must calculate a “grossed-up” tax rate in order to assure that the amount of tax collected and the amount of tax owed are the same.

    So, what factors do tax managers need to consider in order to determine whether tax-on-tax applies and what taxes may/must be included in the base? 

    The first step is to determine the following:

    1. Does any statutory exclusion exist for tax-on-tax?

    2. Incidence of the tax. Is the tax (A) Consumer-Based or (B) Provider-Based?  As a general rule, consumer-based taxes will be excluded from the tax base of other gross receipts-based taxes, while as a general rule provider-based taxes featuring an optional pass-through rule will be included within their own tax base as well as in the tax base of other gross receipts-based taxes.  However, these are just general and not always the case such as in Pennsylvania where they ruled that disputed taxes and surcharges are a “cost of doing business” that a telco is only allowed to recover from customers pursuant to state PUC regulations and tariffs.

    3. Tax Base Measurement – Is the tax levied as: (A) a Flat Fee or (B) a Percentage of Gross Receipts?  Assessments imposed in the form of “flat fees” will exclude other taxes from their own tax base

    4. Pass-Through Rules – Is the pass-through of the tax:

    5. (A) Prohibited, (B) Optional, or (C) Required? Taxes with a prohibited pass-through rule will generally be excluded from the tax base of other gross receipts-based taxes.

    Next determine if the states in which you operate are part of the Streamlined Sales Tax Project (SSTP).

    The Streamlined Sales Tax Project (SSTP) adopted official policies regarding tax-on-tax.  In both the Agreement itself (SSUTA) and the accompanying “Rules & Procedures” (which interpret the actual text of the Agreement), specific provisions have been adopted informing:

    1. Taxpayers when tax-on-tax needs to be collected 

    2. Taxing authorities as to the situations where laws or regulations may be enacted to replace the default guidelines with a customized set of rules, as well as the conditions that must be satisfied in order to implement such state-specific policy “overrides”.

    To know what these host of conditions are and what states apply them, download our presentation on our website entitled “Tax-On-Tax: Hall of Mirrors”.

    What about Federal Taxes?  Do I include those in the base?

    The general rules concerning federal Taxes are:

    1. Any federal tax that is directly imposed upon a consumer (based upon the same set of rules governing state or local taxes) are excluded from “sales price” when separately stated on the invoice given to the consumer.       Example:  Federal Excise Tax on Communications (FET)

    2. Federal taxes/surcharges that are imposed upon the seller or treated as a “cost of doing business” to the seller are included within the sales price, regardless of whether such taxes are separately stated on the consumer invoice.  Example:  Federal Universal Service Fund (FUSF) Surcharge

    [Streamlined Sales Tax Rules and Procedures – Rule 327.9]

    Again, these are just general rules and are not necessarily the rules that every state applies.  In order to properly calculate tax-on-tax you must know how each state you do business in treats things like franchise fees, FET, Right of Way fees, and e911 fees as they relate to gross receipts for the purpose of taxation.

    If you feel confused or overwhelmed, don’t feel bad.  This certainly isn’t “the flat tax”.  The topic is confusing and overwhelming.  But, if you are a VoIP provider, you have a duty to collect and remit taxes no matter how difficult the process. 

    Coming soon...  Mistake #3.

    Tags: telecom tax, voip tax, telecom taxes, telecommunications taxes, telecommunications tax, voip taxes

    3 Taxation Mistakes that VoIP Providers Make - Part 1

    Posted on Thu, Jun 28, 2012 @ 12:53 PM

    So, you’re a VoIP operator trying to figure out your VoIP taxes.  Confusing, isn’t it?

    It’s so confusing that many new operators decide that calculating telecom tax is just too complex (our VoIP whitepaper can help).  Some implement the “Ostrich Strategy” and stick their head in the sand - figuring that they will pay their tax once they get “big enough”.  Other operators rely on best guesses or tax advice from their general accountants and attorneys.  Either choice can be disastrous, leading to audits from any number of federal and state agencies that can put their VoIP start-up on the road to destruction before it even gains traction.

    Let me help you sort through the VoIP tax confusion.  Let’s start with the beginning.

    VoIP tax was born in 2004.  As the FCC attempted to shore up the Universal Service Fund,  it created the “IP-in–the-Middle” Order.  In that order, the Commission ruled that VoIP is a telecommunications service and thus subject to USF obligations if it is “an interexchange service that: (1) uses ordinary customer premises equipment with no enhanced functionality; (2) originates and terminates on the public switched telephone network (PSTN); and (3) undergoes no net protocol conversion and provides no enhanced functionality to end users due to the provider’s use of IP technology”. 

    Next, regulated VoIP was defined in 2005.  The FCC created a new category of regulated communications service called I-VoIP (Interconnected Voice over Internet Protocol.  I-VoIP is the standard that the legal community uses to decide which VoIP services are regulated).  The FCC defines I-VoIP with four major characteristics, and a provider must possess all four of these characteristics or it is not I-VOIP, but perhaps a VoIP Toll.  (For a detailed understanding of these characteristics, please download our VoIP whitepaper).

    Suppose you checked your VoIP offering versus the FCC’s  four characteristics and you’ve determined that you are regulated.  Now you need to figure out what "flavor" of VoIP you are offering.  

    While the FCC has defined two categories of VoIP (I-VoIP and VoIP Toll), there are still different flavors of VoIP within these categories - such as Fixed and Nomadic VoIP (details are included in the VoIP whitepaper) - and each flavor carries with it even more nuances. 

    These flavors are important.  Each VoIP nuance carries significance not only at the federal level, but also at the state level because taxation and regulation vary so much from state to state.  Some states limit their regulatory powers to E-911 and Public Safety, while others regulate through their Department of Revenue and other state taxing authorities.  The taxes that they may assess include:

    • State and Local Sales and Use Tax
    • Excise Tax
    • Gross receipts tax
    • Utility Users Tax
    • E-911 (both State and Local)
    • Local Telecommunications taxes

    If you are an I-VoIP; you must also file a Form 499-A (at a minimum), which reports your revenue data for the calculation of obligations to:

    • Federal USF
    • Federal TRS (Relay) Fund
    • North American Numbering Plan Administration
    • Shared costs of local number portability
    • FCC Regulatory Fees

    Still confused?  It’s understandable.  It’s a complex subject.

    What next?  The first step is to download our VoIP whitepaper.  Then, watch for our next two installments of this blog.  The whitepaper and blog articles will help you sort this out.   Until then, figure out what flavor of VoIP you offer. Here are some questions you should answer:

    1. Is the service fixed or nomadic?
    2. Is the service associated with static IP address or is it “over the top”?
    3. How do I source the fees, by jurisdiction of the calls or billing address?
    4. How do I represent these taxes properly to comply with Truth-in Billing?  (Hint: see blog post #3 in this series).

    If you need more immediate help, contact me.  I’m glad to talk you through issues and share my expert contacts with you.  

    Until then...stay tuned for Part Two – Tax-on-Tax..

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    Tags: telecom tax, voip tax, i-voip tax, i-voip taxes, telecom taxes, telecommunications taxes, telecommunications tax, voip taxes

    The EU, VoIP Tax and Net Neutrality

    Posted on Thu, Jun 28, 2012 @ 08:47 AM

    Telecommunications, by it's very nature, is perhaps the most international of all services.  So, as I follow the internet tax/telecom tax/VoIP tax issue, I found this article from Europe to be interesting.

    Europe's main telecommunications operator's association (ENTO) said it is not asking the UN to impose internet taxes on content providers.  Rather the ENTO wants telecommunications network operators to consider commercial deals with the content giants.  ENTO would prefer to offer commerical arrangements where partners get a preferred/priority level of service.  

    That sounds very profitable for them.  ENTO is smart.  Why charge a tax, when you could charge a fee that affects the competitive nature of the game and has some upside?  

    Telecom tax, VoIP tax, internet tax and the global future of internet policy is being decided right now.

    ETNO's proposal was submitted as a topic for debate at the UN's International Telecommunication Union (ITU) in December.

    You can read more about it here:

    http://www.pcworld.com/businesscenter/article/257223/eu_carriers_were_not_asking_the_un_for_internet_taxes.html

    Tags: telecom tax, voip tax

    SureTax presents 'Tax on Tax: Hall of Mirrors' at TeleStrategies 2012

    Posted on Mon, May 21, 2012 @ 11:04 AM

    Last week the CCH SureTax contingent invaded Orlando for the 2012 TeleStrategies Conference.  Our knowledge team was honored to be asked to present two seminars.  The first seminar entitled ‘Tax on Tax: Hall of Mirrors’  gave great insight as to how not properly handling Tax on Tax can cost you as much as a full percentage point of lost revenue and lead to liability exposure of even greater than that.  This seminar not only proved to be informative, but demonstrated how deep our team’s understanding is of the even the smallest detail of taxation issues that can negatively impact your business.  Please visit our Resource Center or click here to download the Power Point deck of 'Tax on Tax: Hall of Mirrors'.
     
    The second seminar was held as a roundtable discussion on handling taxation issues as it relates to trunk lines.  Again, the CCH SureTax team displayed a very impressive command of the subject matter.
     
    Overall the conference was very successful and once again proved that our depth of knowledge and commitment to serving your industry is second to none.  For more information on these two presentations or just to simply ask a question related to your taxation challenges, please contact us.

     

    suretax telestrategies main 1 600b copy


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    Tags: telecom tax, voip tax, telestrategies

    Digital Goods and Services Tax Fairness Act

    Posted on Thu, May 17, 2012 @ 04:37 PM

    As I speak with providers about telecom tax, the HR 1860:Digital Goods and Services Tax comes up in conversation.  I've posted a copy of the act at the bottom of the Papers and Presentations section of our Resource Center.

    From there, you can download HR 1860 and track the progress of the legislation. 

    At the moment, the tracking shows that HR 1860 has a 25% chance of becoming law.

    Tags: telecom tax, voip tax

    Announcing SureAddress, the advanced address correction solution

    Posted on Tue, May 8, 2012 @ 07:46 AM

    (FOR IMMEDIATE RELEASE)

    ATLANTA, GA. Announcing SureAddress™, the advanced address correction solution optimized for billing, taxation, direct marketing, and more. SureAddress enables companies of all sizes to improve operations by correctly identifying the correct situs down to the complete zip+4.

    SureAddress takes incomplete, misspelled, or otherwise incorrect addresses and “scrubs” them down using a robust algorithm to determine the correct address with complete zip+4. This corrected information is then used for proper jurisdiction assignment and mapping.

    “Incorrect address information always is a burden for companies who sell multiple products or services across jurisdictions. Sales reps, field reps and customer service reps often enter incorrect addresses in the system, and without realizing it, they can dramatically affect billing and taxation. SureAddress enables companies to automatically identify and correct these issues without having to interrupt the customer. SureAddress pays for itself by improving billing and taxation efficiency. For example, addresses can cross over a jurisdictional line, creating taxation issues that can lead to settlement expenses, interest and penalties. With the jurisdictional mapping capabilities of SureAddress, providers can rest assured that they have more accurate data for basing their tax collection and remittance decisions."

    SureAddress also makes sure your direct marketing dollars go farther. Target mailing lists are often incomplete or misspelled and seldom have an accurate zip+4. Processing the list through SureAddress before mailing improves deliverability, ensuring more of your promotional material actually reaches the intended recipient.

    SureAddress is delivered as a “real-time”, software-as-a-service (SaaS) based, cloud computing methodology. Utilizing an easy to use interface, SureAddress enables a streamlined workflow that is easily integrated into billing or tax systems.

    About the SureAddress team

    For almost 2 decades, the team behind SureAddress has extensive technical expertise in developing high volume, high security, transaction processing systems in areas such as Telecom Tax, VoIP Tax, Health Care, Payment Processing, and Government Search Database systems which are subject to extensive security and uptime protocol. SureAddress is hosted in redundant Type II SAS 70 co-located facilities in Atlanta, GA and Phoenix, AZ.

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    Tags: telecom tax, SureAddress, address correction

    Telecom Tax - 114 years of Telecom Tax Compliance

    Posted on Mon, Apr 9, 2012 @ 01:38 PM

    Greetings telecom entrepreneurs!

    As we experience this new "Telecommunications Spring" where entrepreneurs again redefine the world of telecom offerings, I thought for a moment about where this all started.  For us at SureTax, we do telecom tax, so for us it started in 1898.

    114 years ago this month, the United States instituted the first telecommunications tax.  The Spanish-American war was causing federal deficits and new taxes were needed to refill the treasury.

    It's difficult to imagine what telecommunications meant in 1898, but you can be certain that to any user, the service was amazing and revolutionized life in America.  The telegraph, America's first digital service ("baud rate" was a telegraph term!) barely compares to current digital offerings, but for us tax and billing techs, you have to wonder how they billed for the services.

    Today, the billing is as advanced as the communications.  At SureTax, we handle a variety of telecom taxes - VoIP, digital goods, M2M just to name a few, and provide the services that go along with rating calls.  With a telegraph, you might have been billed per message.  Now, with wireless, there are separate billing schemes for fixed plans, overages, phone purchases, data and more.  With over 10,000 jurisdictions, the billing can be as complex as the technology behind the service.

    At SureTax, we provide the technology to stay in compliance with telecom tax laws.  Plus, we offer SureAddress, an address validation and correction tool that will make your billing system happy. All of this comes from CCH, the most powerful name in tax content.

    If you're a startup in this "Telecommunications Spring", we can help.  We know telecom tax, telecom billing and telecom solutions.  Give me (Brent) or Mike a call and we can help you figure out how to implement a tax compliance solution for your telecom business.

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    Tags: telecom tax, voip tax

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