Frequently Asked Questions
Do we have register and file Form 499Q and 499A with the FCC?
According to the FCC, all intrastate, interstate, and international providers of telecommunications (including VoIP providers) within the United States, with limited exceptions, are legally obligated to file the FCC Forms 499.
We only sell wireless data, so do we have to file FCC Form 499Q and 499A?
Yes. Telecommunications providers include Wireless Data Resellers.
Do you get tax exempt certificates from your resellers in every state they do business in?
As the underlying provider, you deliver service into the state your Reseller sells to their customers. Considering this, you must obtain a tax-exempt certificate from your Reseller or charge them all the appropriate taxes and fees in the jurisdiction the service is delivered.
We sell internet access so there is no tax on our solution, why do we have to file?
The question you really must ask yourself is, did you take a non-taxable service and turn it into a taxable solution?
We thought there was no sales tax on internet access, why do we have to charge our customers sales tax on internet access?
ITFA contained a grandfather clause to allow state and local governments to continue taxing Internet access if they already had a tax on Internet access that was generally imposed and actually enforced before October 1, 1998. Currently six states claim to collect tax revenue from Internet access: Hawaii, New Mexico, Ohio, South Dakota, Texas, and Wisconsin.
Our underlying provider charges us tax, why do we need to charge tax again?
This issue causes you several issues. First, the taxes your underlying provider charged you are on the wholesale price and not the retail price you are charging the end user customer. Second, unless your customer is in the same situs as your company’s billing address, the taxes are likely being paid to the wrong jurisdiction. Third, some of the assessed taxes and fee are ultimately the responsibility of the customer and if your customer is audited and they get penalized for taxes you didn’t asses on the service you sold them, try and imagine what they will say about your company for not charging taxes on the service you sold.
We asked our accountant (or attorney) and they said we didn’t have to file, why are you telling us that we do?
The simple answer is, if you broke your leg, would you go to a psychiatrist for treatment? Telecommunications is so specific that you should consult an attorney and accountant that specialize in telecommunications.
Our company doesn’t have an office in that state so why do we have to charge tax on our service?
If you don’t collect tax on your taxable service, you should at a minimum tell the customer they need to file their own Use Tax Return if applicable in their jurisdiction. In addition, the rules around what establishes Nexus in a jurisdiction have changed significantly over the last couple years. Many states have established economic nexus laws that are based on revenue and number of transactions in the respective states which determine whether or not you are required to assess, collect, file, and remit transaction taxes to a jurisdiction.
As an Underlying Provider of telecommunications service, have you evaluated the validity of the resale exemption certificates your resellers provided?
In some cases, the resale exemption certificates can be invalid depending on how your reseller is marketing their solution and you as the underlying provider must charge all the appropriate taxes and fees on the service? A key question to ask is, who is ultimately enjoying the benefit of the service? If the answer is your reseller, you as the underlying provider should be assessing all of the appropriate taxes and fees on the service.
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