Author: Kevin Donoghue, CEO - Telesoft
Since the early days of the Internet, the U.S. Congress has passed temporary bills prohibiting state and local governments from imposing taxes for online access. Now the Senate has voted to make the ban permanent as part of legislation that includes a bill that updates trade laws. This legislation has been inspired by a popular view that entry to the Internet should be free.
This bill is important because telecom and related data services are subject to a wide range of federal, state and local taxes. Tax jurisdictions are able to get away with imposing these taxes because they are buried in complex invoices. Few people take the time to really look at their phone bills, and taxes on enterprise bills receive even less scrutiny.
There are so many different jurisdictions imposing taxes on enterprises’ phone bills that these taxes are nearly impossible to validate. Carrier Service Guides contain language that allows them to “pass through” taxes, regulatory fees, and unspecified surcharges. Most organizations simply pay the taxes on their telecom bills without review. A review of all taxes on these bills can save organizations money and should start by determining a) if the tax is valid and b) how the taxes are calculated.
According to the Congressional Research Service, seven states have been collecting a combined $563 million from Internet access taxes for several years. These taxes will now be banned. Even with this ban, taxes and surcharges still comprise about 20% of telecom bills, with 15% to 25% of that for mobile services and 30% for local and PBX trunks.
Taxes are complex and a detailed review often goes beyond the scope of a standard TEM program, requiring specialized knowledge that some TEM firms provide as a special audit project due to its complexity. It is also more time consuming and often, the findings are not as clear cut as those with a standard audit that reviews contractual items and rates. If the tax is not correct, the savings can be substantial. Once the audit is complete, enterprises can use TEM automation software to ensure invalid taxes are no longer levied on their bills.Tags: telecommunications taxes