Telecom Tax Blog

    Unified Communications Revenue Tops $2 Billion

    Posted on Mon, Feb 11, 2013 @ 06:33 PM

    Unified Communications services is a hot segment of the telecom market.

    New data from Synergy Research Group shows that annual service provider revenues from cloud UC services have now topped $2 billion. While today 75% of the cloud UC services market is for individual services – web conferencing, videoconferencing and contact center – the smaller UCaaS business suite market segment is growing more than twice as fast and will soon dominate.

    Today the UC standalone SaaS segment is dominated by Cisco, thanks to it having a 54% share of the web conferencing SaaS market – though its market share is edging downwards. The main challengers in UC standalone SaaS include Citrix, Microsoft, Adobe and Intercall, Meanwhile leaders in the higher growth UCaaS business suite segment are mainly up-and-coming new operators – including RingCentral, 8×8, ShoreTel/M5 and West IP Communications. It is notable that traditional telcos have not led the charge in either segment, though companies like AT&T, Verizon and BT are now becoming increasingly active.

    If you are thinking about getting into Unified Communications, SureTax® Telecom can handle any communications tax calculation, including Unified Communications.  With our partners, we can help new and existing providers with regulatory, calculation and compliance solutions.

    Tags: telecom tax, telecom taxes, telecommunications tax, ucaas

    Machine 2 Machine Telecom, Telecom Tax and Bananas

    Posted on Fri, Feb 8, 2013 @ 09:57 AM

    The SureTax® team just returned from the IT Expo East conference where is it clear that telecom continues to be a growth industry.

    Among the takeaways from the conference was the enormous explosion of the M2M (machine to machine) market.   Just when you thought the telecom market could not get any more diverse, enter the banana monitoring devices.  Yes, that is right - banana monitors. 
 


    Apparently bananas are one of the most profitable items in a grocery store, but with the shortest shelf life.  So, one ingenious company has developed a monitor to track the stage of ripening on the tree.  That information is transmitted to logistics where the process between harvesting, packing, shipping and stocking is timed precisely to maximize the amount of shelf life the bananas have in the store. 
 


    This was just one of many examples of telephony enabled devices (in this case wireless network) that are rapidly entering our day to day activities.  Rest assured that as these new telecom markets grow, governments will be right behind them, ready to capture new tax revenues.
 


    CCH SureTax is leading the way in research and knowledge for emerging telecom markets such as M2M.  As the universe of tax changes, we are here to help.

    Tags: telecom taxes, telecommunications taxes, telecommunications tax, machine 2 machine, m2m

    Telecom Tax Avoidance and "Qui Tam"

    Posted on Wed, Jan 9, 2013 @ 11:11 AM

    At SureTax®, our services support telecom tax calculation for the purpose of compliance.  The notion being that if a company does not comply with tax laws, they are subject to fines and penalties.

    But, what if a company cheats - doesn’t pay taxes - and is caught by a whistleblower?  Then what happens?

    There is a provision in common law call called qui tam, which is short for the Latin phrase qui tam pro domino rege quam pro se ipso in hac parte sequitu, meaning ‘he who sues in this matter for the king as for himself’.  It’s a principle that is still alive in US law and it means that whistleblowers can earn some or all of the collections of a case presented on behalf of the government.

    Earlier this year, a whistleblower brought a qui tam case in New York under the state’s False Claims ActNew York attorney general Eric Schneiderman intervened in that case against a national wireless provider for deliberately under-collecting and under-paying $100 million dollars in sales taxes on wireless access plans.

    But, what about the federal tax?  Why not bring a qui tam case there also?

    A loophole in federal law prohibits whistleblowers from bringing qui tam cases.  The IRS has a whistleblower office, where whistleblowers can go to file a complaint.  But, if the IRS decides not to take the case, it’s over and the whistleblower has no qui tam option.

    In New York, the defendant must have at least $1 million in sales and must have deprived the state of at least $350,000 in revenue.

    Maybe Congress needs to take a look at New York to figure out how to increase collections.  A federal qui tam law could do for tax fraud what nickel return deposits did for aluminum can recycling.

     

    Tags: telecom tax, voip tax, telecom taxes, telecommunications taxes, telecommunications tax, ucaas, tax calculation, voip taxes, VAT tax

    California PUC prohibited from Regulating VoIP services

    Posted on Wed, Nov 7, 2012 @ 12:35 PM

    As we scanned our VoIP tax news, we noticed this interesting article about VoIP regulation.

    California recently signed Senate Bill 1161 into law.  SB 1161, "Communications: Voice over Internet Protocol and Internet Protocol enabled communications service", prohibits the California PUC from regulating VoIP services until at least 2020.

    As we know from the VoIP tax calculation side, IP services can be complex when it comes to taxation and bundling.  VoIP, an obvious substitute for landline PSTN service, is an IP voice service.   So, is it voice and regulated like the PSTN or is it IP and not regulated by the PUC?

    In California, the answer is clear.  It's not regulated by the PUC.

    California, the leader in tech innovation, knows that government is always a step behind innovation.  This move is designed to allow VoIP to continue to grow and evolve.

    California is now the 25th state to enact a law that clarifies that VoIP services are not subject to state regulation. 

    It is worth noting, however, that nearly all states currently require providers of VoIP services to fund state and local 911 and, in addition, there are at least 22 states requiring providers of either fixed and/or nomadic VoIP services to contribute to certain state programs, such as Universal Service and Telecommunications Relay Service funds.  Indeed, several of the states with laws declaring VoIP services immune from state regulation still require VoIP service providers to Register and Contribute to state programs; California is one such state.  A common misconception is that immunity from State Regulation includes immunity from ALL state-mandated requirements.  A more appropriate way to view laws like the one adopted by California is as follows: If it's good enough for the FCC and if it's required by the FCC, then the same regulation can be adopted by the state regulator without violating the ban on regulation.

     

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

    Don't Stop at Tax Calculation and Collection - Be Sure to Remit

    Posted on Wed, Sep 26, 2012 @ 11:02 AM

    At SureTax®, we focus on telecom tax calculation.  Calculation is but one step in the process that begins with laws and ends with funds being remitted to the jurisdiction.

    As your business grows and consumes cash in the process, make sure your billing, tax management, and remittance policies are all in place and working properly.  It is easier than you think to find yourself using tax revenue as a source of funds, accidentally or out of a perceived necessity.  While we know that early stage businesses often require creative solutions to the ever occurring challenges, sales tax is one area in which you must have a conservative approach.  

    Here's why:

    As a business, when you collect tax on your service, you are acting as an agent of the taxing authority. So, for example, if you collect state tax in Florida, you are collecting tax on behalf of the State of Florida.  The tax you collect is not your money, it's Florida's money.

    It's not a loan.  It's not profit.  It's not next week's payroll or the new server you need.  It's Florida's money.  Period.  Florida is very serious about this, and so are most jurisdictions throughout the country.

    As an example, here is Florida's legal code, just to make it perfectly clear how this one state feels about their sales tax revenue.

    § 206.56. Unlawful use of tax collected; theft of state funds

    (1) Any person who knowingly obtains or uses, or endeavors to obtain or use, taxes collected pursuant to this chapter, with the intent, either temporarily or permanently, to deprive the state of a right to the funds or a benefit therefrom, or appropriate the funds to his or her own use or to the use of any person not entitled thereto, commits theft of state funds.

       (2)(a) If the total amount of revenue involved is $100,000 or more, the offense is a felony of the first degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

       (b) If the total amount of revenue involved is $20,000 or more, but less than $100,000, the offense is a felony of the second degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

       (c) If the total amount of revenue involved is $300 or more, but less than $20,000, the offense is a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

       (d) If the total amount of revenue involved is less than $300, the offense is a misdemeanor of the second degree, punishable as provided in s. 775.082 or s. 775.083. However, any person who commits theft of state funds involving less than $300 and who has previously been convicted of any theft of state funds is guilty of a misdemeanor of the first degree, punishable as provided in s. 775.082 or s. 775.083. Any person who commits theft of state funds involving less than $300 and who has previously been convicted two or more times of any theft of state funds is guilty of a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

    That's right.  If you use over $300 of Florida's sales tax revenue for your own purposes, even TEMPORARILY, you have committed a felony.   

    States, especially Florida, are much more likely to imprison offenders for unlawful conversion of tax revenue than is the federal government.  Here's an example - In August, the State of Florida arrested a Ft. Myers convenience store owner for failing to remit $8,000 in sales tax.  That owner now faces up to 5 years in prison and up to $5,000 in fines as well as potential repayment of stolen tax, penalties, interest, and investigative costs.

    Bottom line...  Remit your tax revenue promptly.  The Governor wants his money, now!

     

     


    Tags: telecom taxes, telecommunications tax, Sales tax

    Smartphones for Everyone

    Posted on Mon, Sep 10, 2012 @ 09:42 AM

    As we at SureTax® focus on telecom tax and VoIP tax, we can’t help but a little distracted by the new hardware.  The new Kindles have just been released (not a smartphone, but 3G and 4G enabled) and the new iPhone 5 debuts tomorrow.

    So, how is the handset market?  Handset shipments had grown at a compounded annual growth rate of over 15% between 2009-2011.  Over 2 billion handsets will be shipped in 2015.  The primary driver of demand has been new smartphones, like the iPhone and Droid phones.  Even in the most remote corners of the planet, it’s not enough just to talk any more.

    Worldwide, global mobile penetration is 91%.  The implications of bringing mobile communications and data access to everyone on the planet are astounding.  

    Smartphones have driven that penetration, taking Western Europe and North America to OVER 100% in some markets.  Asia Pacific and Africa are still growing at over 9% per year.

    What does that mean in terms of opportunity?  As subscriber growth mirrors population growth, the opportunity is in the replacement handset market and providing services to the users on the platform.  Give some thought as to what services could be provided if everyone in the world had a smartphone.  By “if”, we mean “when” because that day is coming.

    While you do that, we’ll think about who’s going to impose the telecom taxes and how we’ll provide the tax calculation piece of the equation.

     

     

     

     

     

     

     

     

     

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

    Today's Telecom Tax Could be Tomorrow's Internet Tax

    Posted on Mon, Aug 27, 2012 @ 01:42 PM

    As followers of all things telecom tax and internet tax, we remain interested in how changes in the American telecom infrastructure become changes in our taxes, which in turn becomes changes in the types of tax that SureTax® calculates.  So, it seems logical that today's USF becomes tomorrows Universal Internet Fund.  After all, taxing communications is as American as apple pie.  But, an Internet USF Tax is not a sure thing.

    USF goes back to communications being a fundamental enabler of democracy and commerce.  From the beginning, the founders of this country envisioned a nation that was connected with communications infrastructure. The postal service connected Americans with each other (and their bill collectors!). It was subsidized using a flat fee system, so the inexpensive letters carried across town helped pay for the letters sent across the country.  The Communications Act of 1934 continued in that spirit, envisioning a system for "a rapid, efficient, nationwide, and worldwide wire and radio communication...for ALL of the people of the United States."  That notion led to the Universal Services Fund (USF).

    As telecom continues to go digital, the FCC wants to implement a new fee similar to USF, to enable broadband access to all across the country.  It makes sense that a community without broadband today would be as disadvantaged as a community without dial tone before the days of the internet.

    So, here comes the Internet USF Tax.  Seems like a done deal.  Some customers pay a little every month so that the people with difficult economics can also benefit from service.  Simple.

    No, not simple!

    In 1998, Congress passed the Internet Fairness Act, prohibiting taxation of internet access!  So, no tax.  But, wait.... is USF a tax?  The FCC says it isn't.  They say it's a fee collected by carriers.  So, if USF is simply a fee, then an Internet USF would be legal.

    Who knows what will happen?  I do know that whenever they sort this out, we'll be ready to make the calculations that keep everyone in compliance.

    You can read more here....

    http://thehill.com/blogs/hillicon-valley/technology/245479-fcc-eyes-tax-on-internet-service.

     

    suretax whitepaper cta

     

     

     

     

    http://thehill.com/blogs/hillicon-valley/technology/245479-fcc-eyes-tax-on-internet-service

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

    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

    PSTN ends on 2018, at least that's the plan

    Posted on Tue, Aug 7, 2012 @ 11:01 AM

    As VoIP tax and telecom tax service providers, we find telecom to be fascinating.  It seems not that long ago when 96%+ of all Americans had a landline telephone.  In fact, if you DIDN'T have a landline phone, it was a sign that something was wrong.  It was tough to get a loan without a landline phone.

    Here are amazing stats presented by the Technology Advisory Council to the FCC.

    - By 2014, the United States will have fewer than 42M access lines

    - Access line losses were nearly 6.6 million between 2Q09 and 2Q10, a drop of 7.3%.

    - By 2014 US consumers will have 31.6 million VoIP lines accounting for 42.5% of all U.S. access lines

    - Fixed lines continue to decline; mobile is the preferred choice for voice communication

    - More than 25% of U.S. consumers aged 18 or older have already given up their voice landline for voice wireless‐only service.

    The biggest stat of all is that by 2018, only 6% of Americans are expected to have traditional landline service.  So, 2018 is expected to be the last year of the PSTN (and its tax revenue).

    Perhaps the supreme irony is that in the early days of the internet, families would get a second phone line for their modems.  Phone companies (even the term "phone company" seems archaic) saw PSTN line growth exploded.  That same desire for digital and mobile communication is leading the PSTN's demise.

    There's a moral in there somewhere....

     

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

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