While state regulation of interconnected VoIP services remains relatively streamlined, state tax and assessment levies are growing increasingly complex. State regulation of VoIP generally encompasses consumer protection issues, E911, CPNI and general business law principles. Although a handful of states require an upfront registration submission from a VoIP provider before commencing services, traditional state entry requirements such as Certificates of Public Convenience and Necessity have been preempted with respect to nomadic VoIP services. Moreover, in 2009, a federal court of appeals preempted the ability of states to assess state Universal Service Fund (USF) assessments with respect to nomadic VoIP services.
State Tax and Assessment Laws
State tax and assessment laws are either worded broadly enough to already encompass interconnected VoIP services, or states increasingly and aggressively take the position that such tax and assessment laws apply to interconnected VoIP services since they are a substitute for conventional telephony services. The net effect of this is that a varied array of taxes and assessments, which differ on a state-by-state basis, potentially apply to VoIP services. These taxes and assessments need to be carefully examined, individually and on a state-to-state basis, to determine applicability.
Generally Applicable State Taxes and Assessments
As a general rule, the following taxes and assessments apply to interconnected VoIP services: a) sales and use taxes; b) gross receipts taxes; c) excise taxes; d) franchise taxes; e) utility taxes; f) E911 surcharges; and g) various state and local assessments and charges. By way of example, Illinois assesses a 7% telecommunications excise tax applicable to all gross charges assessed by a provider to a service address within the state of Illinois. The tax specifically applies to VoIP services. Pennsylvania applies a 6% sales tax to all telecommunications services, including interconnected VoIP services. In 2005, the Pennsylvania Department of Revenue issued a sales tax bulletin which concludes that VoIP is a taxable telecommunications service subject to Pennsylvania state and local sales tax.
State taxation and regulation of VoIP services is an evolving area and considerable ambiguity and confusion remains. In the case of nomadic VoIP services, one such issue is which taxing jurisdiction's laws to apply. For example, with nomadic VoIP, a customer can access the internet to make a call from any broadband connection, which means that calls can originate in multiple states. Is the call tax based upon where it originates, the customer's primary place of use, or the customer's billing address? As a result of federal legislation, mobile service providers apply taxes based upon specific sourcing guidelines, but no such definitive standard has been established for interconnected VoIP services.
Another complex area for VoIP providers is the payment of 911 fees. In many cases, states delegate 911 assessments to local authorities which collect the surcharges and administer local 911 funds. For example, in Illinois, each county or municipality administers its own 911 fund, each having its own assessment amount, for which payments are remitted. Such a regime can result in the need for tracking and remitting assessments in dramatically different ways down to the municipality level throughout a given state.
The foregoing is intended to provide a general overview only and should not be viewed as a substitute for conferring with qualified legal counsel. Each business will have unique requirements that should be analyzed by counsel.
Our Rating is calculated using information the lawyer has included on their profile in addition to the information we collect from state bar associations and other organizations that license legal professionals. Attorneys who claim their profiles and provide Avvo with more information tend to have a higher rating than those who do not.
What determines Avvo Rating?
Experience & background
Years licensed, work experience, education
Legal community recognition
Peer endorsements, associations, awards
Legal thought leadership
Publications, speaking engagements
This lawyer was disciplined by a state licensing authority in .
Disciplinary information may not be comprehensive, or updated. We recommend that you always check a lawyer's disciplinary status with their respective state bar association before hiring them.