A proposed penalty from the Federal Communication Commission shows the danger of a hire-and-forget attitude toward a third-party for tax compliance.

The FCC has proposed a $153,000 penalty against a Florida-based telecom provider that had outsourced its compliance tasks. 

The FCC alleges that the company failed: to cooperate with the revenue reporting verification functions (i.e., “contributor audits”) by the Universal Service Administrative Company (USAC) on behalf of the FCC; to file accurate FCC Form 499 worksheets; and to maintain current information in the FCC’s Commission Registration System (CORES). 

The company failed to comply with six USAC directives to provide timely and complete documentation to support revenues reported in the Company’s 2019 and 2020 Annual Worksheets, the FCC claims. 

The company tried to direct attention to its third-party compliance vendor and “communications issues” with the vendor. The FCC found that defense “unpersuasive.” 

“If [the company] had ‘communications issues’ with its compliance vendor that impeded [the company’s] compliance, then it was [the company’s] responsibility to resolve those issues,” the FCC said in its Notice of Apparent Liability for Forfeiture. 

“If [the company] was unable to resolve quickly issues with individuals designated to respond to USAC, then [the company] needed to designate someone else to handle the matter. It is well-established that entities regulated by the Commission are responsible for the acts or omissions of their agents.”

In light of this recent development, we’ve developed the Top 10 Tips for tax compliance for telecom companies: 

  1. Identify federal regulatory requirements.
  2. Identify the state and local regulatory requirements.
  3. Determine the state and local transactions tax applicability.
  4. Determine how you will invoice your customers.
  5. Apply for the applicable federal licenses.
  6. Apply for the applicable state and local regulatory license(s).
  7. Register with the applicable state and local tax authorities.
  8. Implement a compliance reporting solution.
  9. Submit the appropriate exemption documentation to upstream carrier(s).
  10. Calculate, bill, collect and remit your taxes and fees

While this guide is not meant to be all encompassing, it will equip you with the baseline information and framework for establishing a process to ensure tax and regulatory compliance for your telecommunications and/or VoIP business. 

(Click here to download our “10 Steps to Telecom & VoIP Tax and Regulatory Compliance.”)

Whatever your company does for compliance, make sure you (or your third party) are managing it correctly.  

“Service providers contemplating failures to comply with these requirements,” the FCC said, “are on notice that we are prepared to impose substantially higher upward adjustments in future enforcement actions for prior violations and for repeated or continuous violations.”

TaxConnex  has worked to assist telecom companies alleviate the burden of tax compliance for many years. Contact us to learn more about how  TaxConnex can take telecom tax off your plate entirely.

Robert Dumas

Written by Robert Dumas

Accountant, consultant and entrepreneur, Robert Dumas began his public accounting career on the tax staff at Arthur Young & Co., followed by a brief stint at Grant Thornton. In 1998, Robert founded Tax Partners, which became the largest sales tax compliance service bureau in the country, and later sold it to Thomson Corporation. Robert founded TaxConnex in 2006 on the principle that the sales tax industry needed more than automation to truly help clients, thus building within TaxConnex a proprietary platform and network of sales tax experts to truly take sales tax off client’s plates.