Top 10 Tips for Tax Compliance in Telecom and VoIP Providers

There are many misconceptions when it comes to telecommunication and VoIP taxes. However, if we had to narrow it down to the two most fundamental misconceptions that impact everything else, it would be: 

1. My services are tax free because they are delivered over the internet, not physically delivered like retail. 

2. My carrier is responsible for the collecting and paying of any taxes and fees, not me.

Let us dispel these rumors.

First, telecom and VoIP are both taxed and regulated. They are not tax free. In fact, these two industries have some of the most complexing taxes and regulations.

Second, when it comes to carriers, they are generally only collecting the taxes and fees that apply to the wholesale transaction when they sell the service to you. As a telecom reseller, you are exposed for the applicable taxes and fees on the mark-up and potentially for the taxes and the fees that you have already paid to your carrier.

To help you keep track of the ins and outs of taxes and regulations, we’ve developed a Top 10 Tips for tax compliance.

1. Identify the 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.

TaxConnex provides services to become your outsourced sales tax department. Contact TaxConnex to learn more. For more information on the top 10, click here to download the complete guide, “10 Steps to Telecom & VoIP Tax and Regulatory Compliance”.