Taxes levied on VoIP services recently are a repeat of the same punitive tax rates applied to traditional and mobile services. Depending upon the state in which you live or operate a business, these taxes range from 6-19% (e.g., Colorado–6%; Florida–17%; Texas–19%). For those businesses and consumers fortunate enough not to have seen the increase, prepare your budgets for an increase in cost.
Recently, one of our SIP Trunk providers emailed:
Dear Customer, Effective 1 July 2013, we will begin collecting county surcharges on our customers' behalf as required by the Maryland Division of Revenue. In accordance with our Terms of Service, the surcharge amount, in addition to other state- and locally-mandated telecommunications taxes and fees, will be displayed on your invoice as a new line item: State and Local Regulatory Recovery Fee. As more and more communications spending moves away from traditional analog towards IP/digital, States, Counties, Municipalities, and "Special Districts" of all kinds are updating their tax and fee regimes to make sure that services such as VoIP are covered. Thank you for your understanding and please do not hesitate to contact us if you have any questions. Best Regards,
We are writing to inform you of an upcoming change to your bill.
Billing Department
Effective 1 July 2013, we will begin collecting county surcharges on our customers' behalf as required by the Maryland Division of Revenue. In accordance with our Terms of Service, the surcharge amount, in addition to other state- and locally-mandated telecommunications taxes and fees, will be displayed on your invoice as a new line item: State and Local Regulatory Recovery Fee.
As more and more communications spending moves away from traditional analog towards IP/digital, States, Counties, Municipalities, and "Special Districts" of all kinds are updating their tax and fee regimes to make sure that services such as VoIP are covered.
Thank you for your understanding and please do not hesitate to contact us if you have any questions.
Best Regards,
Billing Department
In Predatory Telecom Taxing, I warned of the current and now oncoming wave of local and state governments wanting to fatten their coffers using the telecommunications cash cow. 33 states had budget shortfalls totaling an estimated $130 billion in 2011, and it was $107 billion in 2012. These shortfalls have also hit the counties too, since many depend upon shared State revenues. According to the Center on Budget and Policy Priorities, if all the States continue to grow at an annual rate of 8.3% per year (taken from 2011 rate) then it won't be until 2019 that the tax revenue losses from the "great recession" are recouped.
I have also argued that, "Excessive Telecom Taxes Kill Growth, Investment, Competitiveness" and that applying the use of the old model to the Internet today and the NGN is definitely bad karma.
In the Executive Summary (Spring, 2012) of "The Fiscal Survey of States" the National Association of State Budget Officers states that, "Overall, general fund revenues remain tempered by the lingering high unemployment rate and slow growth of the national economy." In this year's report they go on to write that:
"Unemployment rate continues to remain high and the economic recovery is relatively weak compared to other post-recessionary periods. Thus, state operating budgets likely will be constrained by elevated expenditure pressures and slow revenue growth in the upcoming fiscal year."
Seemingly the stage is set so that local, state and the federal government will continue to use outdated thinking and obsolete legislation. Taxing VoIP is a money grab, but it's also more complex red tape. Just ask a telecommunications provider that files over 47,000 tax filings each year what services are taxed or not taxed or exempt or partially exempt. But the complexity isn't an obstacle for regulators, since they created the mess. They simply have an insatiable appetite for new tax revenues, and imposing taxes is their only solution.
Last week, Representatives Zoe Lofgren (D-CA) and Trent Franks (R-AZ) introduced the Wireless Tax Fairness Act to impose a 5-year moratorium on state and local taxes applied to cell phones and wireless services. Matthew Glans, Senior Policy Analyst of the Heartland Institute stated:
"High wireless taxes drag down both consumers and the wireless market, deterring innovation and infrastructure improvements, while disproportionately affecting minority and low-income populations. Wireless taxes have skyrocketed in recent years; placing a moratorium on these discriminatory tax hikes would benefit both the economy and consumers. The Wireless Tax Fairness Act would allow legislators more time to create a new taxing system for wireless services that is more carefully developed, fair, and non-disruptive."
A new taxing system is in order because the current and impending taxes are punitive. Secondly, the burden of these taxes will weigh upon real economic growth. Thirdly, it is unconscionable to continue to raise taxes in an already distressed economy, expecting consumers and businesses to bear another burden. Lastly, because the regulatory process is enveloped with red tape, it needs disruption, dismantling and simplification.
The outright punitive taxing of all telecommunications services, VoIP, wireless etc. needs serious change that extends beyond an "overhaul," and anything less will continue to inflict pain on the national and local economies. Not only is the recent example of the IRS being out of control; regulators are following by expanding regulatory definitions as to what is taxable in telecommunications to raise revenue for their general funds. Instead of increasing the value of telecommunications or encouraging growth and sustainable development, they continue to use the same playbook over and over.
In 1982 we may have lost one monopoly, but we gained several oligopolies that continue to influence and spin the legislative process. Seemingly the old Bell System lives on while everyone continues to enjoy the so-called "benefits of local competition."
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