Communications Tax is hard; we make it easy

Yes. The confusion lies with the sometimes controversial Internet Tax Freedom Act (ITFA), passed in 1998. ITFA does prohibit federal, state and local governments from taxing internet access and from imposing discriminatory internet-only taxes. There were a few states that were “grandfathered” and were allowed to charge tax on internet access; these grandfathered rules have been revoked as of July 1, 2020. ITFA has no application to the taxability of telecommunications services. Understanding that VoIP is not tax-free, each state (and in some situations, each local jurisdiction) is able to decide whether VoIP is taxable or not. For example, California at the state level does not tax VoIP, but various cities in California apply a local utility users tax to VoIP.

Yes. If you are sending an invoice to your customer for telecommunications service and the customer believes and recognizes that you are providing the service, then you may be considered a telecommunications service provider. As a telecommunications service provider, you are responsible for collecting and remitting the applicable taxes and regulatory fees.

As a telecom service provider, you are using infrastructure within a state to deliver your service. This infrastructure includes cell towers, fiber, switched and so on. You may not own this infrastructure, but if it were not present, you could not deliver your service. As a communication service provider, wherever you have customers, you must collect the taxes.

The main factor to consider is that by providing VoIP service, you are now considered a telecom service provider. And as a service provider, you have direct responsibilities related to taxes and regulatory fees. Your upstream carrier may be charging you these various taxes and fees, but that does not relieve your responsibility.