You think income taxes are bad? Try managing the tax burdens of a telecommunications provider.
According to the Tax Foundation, U.S. wireless customers paid a total of $17.2 billion in 2016 for federal and state telecom taxes, as well as additional related fees and surcharges. Service providers, the ones assessing and administering these mandatory and discretionary taxes, know well the complexity of telecom taxation and its detriment to their operations.
How bad could it be? Oh, it's bad. Real bad.
Tax types are forever multiplying
Telecom companies today already have a long list of taxes to account for – and it's only getting longer:
- Sales taxes
- Universal Service Fund taxes
- Gross receipts taxes
- 911 service fees
- High cost fund surcharge
- Universal Lifeline Telephone Service surcharge
- Utility user tax
- Special district taxes
- Relay surcharges for the hearing impaired
Each item on this list can be applied differently, based on relevant federal, state, local or district codes, and depending on the type of service being rendered. VoIP, wireless, wireline, residential versus commercial contracts – all of these variables can affect how telecom companies apply taxes to their customers' bills.
Taxes and surcharges are always in flux
Telecoms must contend with another constantly shifting goal post: taxes and surcharges in flux.
Below are just a few examples of the way regional taxes and surcharges have changed in the last year:
- Effective January 1, 2017, the South Carolina Dual Party Relay Surcharge rate was increased and extended to apply to providers of both wireless and VOIP services. In addition, a new flat-rate surcharge was imposed on providers of prepaid wireless service.
- Effective July 1, 2017, Utah updated its 911 funding to replace local 911 surcharges with a single statewide surcharge applicable to traditional landline service, wireless and VOIP. In addition, the Computer Aided Dispatch Fee was repealed, and the 911 surcharge rate on prepaid wireless service increased to 2.45 percent. The State Relay Surcharge was also repealed.
- Effective July 1, 2017, charges for internet access are exempt from North Dakota Sales and Use Tax.
Depending on the area a telecom provider services, any of these changes – as well as the litany of others not recounted here – may apply.
Inaccurate tax management in telecom billing can draw ire from regulators and upset end users to the point of attrition. Thankfully, IDI Billing Solutions, with its innovative telecom billing software, can prevent all this intricacy from stifling tax-related operations at your company.
Complementary integrated tax database
Many telecom providers rely on third-party tax assessment to facilitate in-house tax administration. But just as many understand – and perhaps mourn – the cost, time and effort expended to integrate engines into their standard billing operations.
Billing as a service solutions from IDI include a fully integrated telecom tax service updated monthly with changes to tax, regulatory law and rates necessary to bill customers accurately. IDI's staff of highly trained specialized telecom tax experts are also available to assist our clients as needs arise.
"CoreLogic utilizes geodata to pinpoint usage and automatically apply taxes."
CoreLogic Enhanced Address Validation
The default CostGuard Billing and OSS package comes with literal address recognition, which assigns tax jurisdictions based on end-user addresses.
For customers hoping for more nuanced tax jurisdiction allocation, the CoreLogic option pinpoints services addresses and assigns taxing jurisdiction using enhanced geodata to incorporate the latest boundary changes, annexations and deannexations, as well as any applicable special district layers. The city of Los Angeles, for example, taxes at a different rate than the county of Los Angeles. Rates may even vary from one side of the street to the other. Can your billing department tell the difference?
Advanced customization and configuration
The Federal Communications Commissions and state lawmakers set established safe harbor thresholds for applying USF taxes to interstate and intrastate wireless and VoIP services. But telecom providers can apply USF a lower rate if they can prove these services fall below established safe harbors. This is just one example of how taxes can be customized in CostGuard to suit customer needs. Additionally, CostGuard Billing and IDI OSS users have the power to disable other taxes as needed to the suit any business model.
For carriers with significant filing obligations, summary tax data can be exported to third parties for assistance in preparing and filing tax returns.
With unparalleled service and a product unmatched in the telecom billing market, IDI Billing Solutions can turn your in-house tax turmoil into streamlined, data-driven processes that attract customers and appease regulators. Find out more by visiting our Integrated Telecom Tax Service page or contact an IDI representative today.