Voip Blog
How Do You Tax VoIP?
Wednesday, July 23, 2008
Telephony over IP, wireless service, and traditional landlines all provide the same service--a voice channel over which to communicate. Why is each service taxed differently?
Part of this can be explained this way: while telecommunications is global in nature, it is regulated locally--down to the city level! I pay city taxes on my landline bill, in addition to all the state and federal taxes.
Internet telephony service providers like voip.com are not subject to the same regulations as a local telephone company. Due to their interstate nature, they are specifically exempt from state telecommunication regulations!
That being said, companies like voip.com do have to collect money to pay for certain things mandated by the federal government. Your voip.com bill has three fees on it:
E911 Fee: By law, voip.com and other Internet telephony service providers must provide you access to E911 emergency services. This fee covers the cost of providing that service. Traditional telephone bill will have a similar charge.
Regulatory Recovery Fee: This is a generic fee that covers the cost of complying with the various state and federal regulations. Many wireless phone companies charge a similar fee.
Universal Service Fund (USF): The USF was created in 1997 to comply with the Telecommunications Act of 1996. It was established to ensure that consumers in all regions of the Nation have access to quality telecommunications and information services at affordable rates. While not explicitly required, voip.com and other providers currently pay into the USF as it is expected to be required in the near future.
To the question at hand: how to tax VoIP. I don't really have the answer for that. However, there are some good ideas discussed on the 15 July 2008 episode of the Alec Saunders Squawk Box podcast. Jim Kohlenberger, Executive Director of the VON Coalition and Brita Strandberg, Partner at Harris Wiltshire and Grannis discuss these issues with guest host Carl Ford.
