For the past several years I've been a subscriber of an Internet telephone company that just recently started applying almost 10% in state taxes to my invoices. Are VOIP telephone services taxed the same way my old PacBell service used to be?
This is an excise tax question and not a income tax question. VoIP phone service at one time had a 3% federal excise tax. To find out why they are billing almost 10% in state taxes you have to call the company or the Public Utilities Commision. Check your math. If this started in January it may be a new regulation because states are looking for money. I am sorry for the vague answer. I answered your question because I thought it would be as helpful as possible for AVVO.
Disclaimer of California Attorney
Although the above response is believed to be accurate, it should not be relied upon as any type of legal advice because the information provided is incomplete. It is intended to educate the reader and a more definite answer should be based on a consultation with a lawyer. No attorney client relation is formed with me without a written contract.
Good Luck starts with a strategy and a plan.
Robert J. Suhajda, MS,CPA
17721 Norwalk Blvd. #43
Artesia, CA 90701
Former financial auditor and controller. Admitted to US Tax Court, Income Tax, IRS representation, Fiduciary income tax returns, Estate and Gift tax returns,
Homeowner Association Strategist.
If your billing address is within the city of Los Angeles and the communications service you are consuming in Los Angeles is a VoIP service, similar to Vonage, then you are most likely being assessed the 9% communications Users Tax ("CUT").
The CUT ordinance is an amended version of the Utility Users Tax ordinance contained in Article 1.1 of Chapter II of the Los Angeles Municipal Code. The CUT ordinance is applicable to usage charges for VoIP, Private Communications Services (such as T-1 lines), custom calling features, text messaging, instant messaging, ancillary services, prepaid and post-paid services, paging services and 800 services as well as other covered charges such as monthly service fees, feature charges, equipment rentals, deaf trust surcharges, State PUC users fees, Universal Life Trust Fund, late payment charges and charges for non taxable services billed together with taxable services. The CUT at the 9% rate became effective in March 2008.
There are no federal taxes on VoIP communications services. A majority of the states, however, do impose taxes on VoIP services, such as general sales, use and excise taxes. In addition, states have been increasingly interpreting their tax statutes to extend the application of tax obligations specific to the telecommunications industry to VoIP service providers (i.e., state communications taxes).
When VoIP services first came onto the scene, there was a widely held mis-perception that all service even remotely associated with "the Internet" were tax free. In reality, however, states have always been free to tax VoIP communications services, most just refrained from doing so. And many states that did lack the statutory authority to tax VoIP have long since amended their regulations and laws to permit taxation.
VoIP and the Internet, in general, are no longer the bastions of tax and regulatory freedom they were once perceived to be. For more information and a free, in-depth White Paper discussing the evolution and current state of VoIP Taxation and Regulation, visit: www.CommplianceGroup.com.
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