What Businesses are Subject to Communications Services Tax?
Companies that offer communications services are generally required to collect and remit communications services tax unless a regulatory authority specifically exempts them. As there are many regulating authorities and relatively few exemptions, this is a tax obligation that many companies in the telecommunications industry must attend to.
Many Telecom Companies Are Subject to Communications Services Tax
Most businesses that sell communications services must collect and remit communication services tax, which can be thought of as an extremely complex set of sales taxes on these services. Businesses that provide the following services are generally subject to this tax:
- Voice Services: Voice services are some of the most traditional communications services. These include the wireline, wireless, and voice over internet protocol (VoIP) services that phone companies, cell carriers, prepaid wireless plans, and VoIP companies provide. These services are offered by companies in the telecommunications, unified communications (UC), cable, and software as a solution (SaaS) industries.
- Video Services: Video services encompasses everything from standard television to interactive online content. Paid television subscriptions and over-the-top (OTT) alternatives, such as streaming and on-demand options, fall into this category. As cord-cutting continues, a growing number of telecommunications, cable, satellite, and other media companies will offer video services that are subject to communications tax.
- Tech: Technology companies haven’t historically been subject to communications tax, but many are now as technological advancements change how people reach one another. SaaS providers, networking companies, managed services providers, web hosts, hardware companies, and others may be subject to the tax, depending on exactly what services or products they offer. The advent of 5G will only expand how many tech companies are responsible for this tax.
This isn’t a comprehensive list, and there are other providers, services, and emerging businesses that may also be subject to communications tax. The three-fold approach of voice services, video services, and tech is simply a helpful matrix through which to consider companies’ different services in light of these tax laws.
Many Authorities Assess Communications Tax
If your business is subject to communications tax, there are actually many different individual communications taxes that you may have to pay. The federal government, federal regulators, state governments, state regulators, and local governments may all assess different taxes.
For just one example, consider the Florida Department of Revenue’s communications tax laws. The state normally collects taxes on telephone services, VoIP services, satellite services, video services, private line services, pager and beeper services, facsimiles (fax) services, and telegram services. The state has numerous exceptions, though, including faxes that are used for advertising or professional services, services sold to religious, educational, nonprofit or government organizations, and other exceptions.
Sorting through just one taxing authority’s requirements and exceptions is complex, and that complexity is only compounded when all of the relevant agencies’ regulations are considered. As new federal, state and local tax laws replace outdated ones, navigating communications tax only becomes even more complex.
Work with Telecom Tax Experts
If your business is or might be subject to communications tax, work with a communications tax expert who can review your situation in light of the numerous relevant tax regulations. A knowledgeable consultant will be able to help you accurately determine which communications taxes your business is obligated to collect and pay.
To speak with someone who specializes in communications tax, contact the team of consultants at FAStek.