Could a Tax Liability be on the Horizon?
Over the last several years, the resale market for VoIP Providers has exploded, creating a highly competitive market that benefits customers with lower prices and constantly evolving technology. Traditional land lines are going the way of the VCR; and many businesses, from SMB to Enterprise, are moving to lower-cost VoIP and UCaaS solutions to support their communication needs. Some VoIP providers have even extended the capability of the traditional PBX to the cellphone with incredible market disrupting technology. It is truly an exciting time in telecom!
With all the new businesses getting in the VoIP/Unified Communications space, racing toward customer acquisition, there’s no shortage of options, features, and price plans for customers to choose. Customers need to be extremely mindful when choosing a service provider to ensure all the appropriate taxes and fees are assessed on their invoice.
If a customer chooses to buy VoIP/UCaaS from a provider that offers a lower point of purchase, because get the proper taxes and fees on the service are not charged, they need to ask themselves: “Are the upfront savings worth the back taxes, penalties, and interest I may have to pay, if the state finds out my VoIP/UCaaS provider isn’t charging the proper taxes and fees on my service?”
What do you think about tax liabilities?
Modas Systems queried 25 businesses regarding tax liabilities due to providers not appropriately assessing the taxes/fees on invoices. All 25 responded with wanting the proper taxes and fees charged on the invoice rather than risk tax exposure and an expensive audit.
The Telecommunications Sourcing Act outlines where taxes and fees are assessed and that is usually the customer’s billing address or designated “Primary Place of Use”, i.e. the customer’s designated location. This determines where the taxes and fees are calculated and owed on most telecommunication services.
Simply ask yourself: “How do I know if my VoIP provider is charging the right taxes and fees?
Modas recommends looking on your invoice to ensure the state and city taxes where you are located are displayed. Modas also recommends looking to see if your service provider lists Federal Universal Service Fund (FUSF or USF) on your bill. If your bill shows the wrong state, has no description and/or no USF, you might be subjected to tax liabilities.
Beyond a shadow of a doubt, telecommunications taxation and regulatory compliance is extremely complicated. This doesn’t mean customers should face exposure to tax liabilities for improper tax assessment by their service providers.
Modas understands no one wants to pay taxes and fees – but after all, it is the law. If you think your company has been exposed to tax liabilities, contact Modas today for a confidential consultation and we will discuss your specific business situation and individual needs