Sales and Use and Telecom Tax....Oh My!

After making a career in multi-state corporate sales and use tax, I am still amazed at how complicated this industry is.  As if understanding the concept of sales and use tax isn’t difficult enough, throw in seller’s use, gross receipts, retailer’s use, excise tax, vendor’s use, B&O, and the daunting world of telecom taxes, it can be confusing to even the most seasoned professionals. There are many different industries and each one has its own set of regulations and can be quite complicated to navigate without help. 

One of the most difficult industries to understand is the telecom industry.  There are various telecom taxes and regulatory fees including communication services taxes, utility users’ tax, E911 fees, Federal Excise Tax, right of way fees, USF, and more.  Oh, and don’t forget that each state has its own rules, definitions and interpretation of how each tax is applied.  One of the first things anyone has to do in the telecom industry is to understand the Acronyms…...CLEC, ILEC, WAN, LAN, DSL, VoIP, IPTV, ISP, MVNO just to name a few.  A tax professional must also have a solid grasp on the products and services their business sells as the tax base and implications are quite different from product to product and state to state.  Did you know that nomadic VoIP can be considered a landline in some states for tax purposes?  As technology continues to evolve, the jurisdictions are in a constant mode of playing catch-up as they continue to adjust their laws and definitions of various types of services.  Could data be considered communication? 

For anyone with questions, don’t be afraid to ask for help.  The various indirect taxes often hover below the radar of many CEO’s, CFO’s and in some situations even the Tax Department.  Sales, use and telecom taxes should not be a financial issue when they are billed, calculated, reported and paid timely.  Unfortunately, many companies may not realize they have nexus in a particular jurisdiction or perhaps they believe a product or service is not subject to tax until they are audited.  If a company is not registered and filing, there is no statute of limitations.  As a result, these taxes that should not be a financial issue (because they are a pass through) can become very costly, including penalties and interest.

Do you give up?  Don’t! There are many ways you can educate yourself in this tax arena.  Here are the resources that I have relied on throughout my career that I have found very beneficial:

• IPT – Institute of Professionals in Taxation – Sales Tax is one of the three areas of expertise that you can educate yourself within this organization.  There is a formal curriculum that you can pursue to become a Certified Member of the Institute (CMI).  www.ipt.org
• Thomson Reuters Checkpoint – This is great research tool for state tax rates, statutes, explanations, case law, taxability, exemptions and more.
• TeleStrategies – “TeleStrategies' annual Communications Taxation Conference brings together the nation's top tax professionals to address the challenging and amazingly complex domain of telecommunications taxation.”  This conference is great whether you are new to the industry or a veteran.  www.telestrategies.com
• “Newton’s Telecom Dictionary” by Harry Newton – This book has been like my Bible helping me understand acronyms and definitions in the telecom industry.
• States’ or jurisdiction’s seminars – This is where you can meet the administrators and get an opportunity to ask questions.  You can find these on the state’s website.
• Consultants – Whether you need help on an audit, nexus study, applicability matrix or are considering outsourcing your sales and use taxes, there are many options you can consider including TaxConnex.
• Visit TaxConnnex.com to read our white papers, blogs, attend monthly webinars and stay up to date on Sales and Use and Telecom Tax news.  Here’s a guide for businesses that are just getting started in the telecommunications industry, Ten Steps to Telecom Tax Compliance.

What are some of the resources you have found helpful.  I’d be interested to see what other options are available.