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Tax Compliance Workshop

Tax Compliance Workshop. Table of Contents. Tax Compliance for VoIP Service Providers. New Providers. 01. What creates nexus? 02. Understanding taxability 03. Exemptions with carriers. 04. Calculating tax and invoicing 05. Registering with the DOR

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Tax Compliance Workshop

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  1. Tax Compliance Workshop

  2. Table of Contents Tax Compliance for VoIP Service Providers New Providers 01. What creates nexus? 02. Understanding taxability 03. Exemptions with carriers 04. Calculating tax and invoicing 05. Registering with the DOR 06. Filing your returns Established Providers 07. Determining prior period exposure 08. Voluntary Disclosures and Amnesty

  3. What Taxes Are We Talking About? There are often different definitions Administered by the Departments of Revenue (DOR’s) or local jurisdictions Includes sales tax, telecommunications tax, utility users tax, business + occupation tax, gross receipts tax, and 911 fees Does not include FCC, Federal or State USF or other PUC administered fees

  4. What Creates Nexus • Income Tax Nexus and Sales Tax Nexus Is Different • PL 86-272 affords immunity to mere solicitation of orders for sales of TPP. • Other transactions involving TPP or intangibles are not protected under PL 86-272. • The Supreme Court ruling in the 1967 case between National Bellas Hess and the state of IL established the physical presence rule for sales and use tax purposes. • In Quill, ND set out to rewrite Bellas Hess citing the changing economy – Overruled by the Supreme Court. • For VoIP providers • Where you have physical offices, sales reps, trade shows, etc. • Where you have customers

  5. Understanding Taxability • It’s different for every state • Interconnected VoIP Services in Florida • Basic service is not subject to sales tax but is subject to the FL Communications Services Tax and 911 Fees • Additional minutes for local and long-distance are not subject to sales tax or 911 Fees but are subject to FL CST • Hardware and maintenance on the phones are subject to sales tax only

  6. Understanding Taxability (cont.) • Interconnected VoIP Service in Georgia • Basic service is not subject to transactions tax but is subject to 911 Fees • Additional minutes for local and long-distance are not subject to sales tax or 911 Fees • Hardware is subject to sales tax but maintenance on the phones is not subject to sales tax

  7. Exemptions with Carriers • Myriad scenarios that create risk • Many carriers do not charge tax at all • Some charge a “911 administrative fee” • Some charge on the wholesale portion only • Get a detailed perspective on what the carriers are charging you • Just because they collect on the wholesale amount doesn’t mean you’re not exposed

  8. Calculating Tax and Invoicing Complexity that increases exponentially as you add states Manual could be OK in the beginning Purchase and implement in-house software Subscribe to a service for calculations

  9. Registering with the DOR Each state where you need to collect and remit tax will require a sales tax id Some states, like Florida, require a separate communications tax id This is separate from registrations with the SOS but they should be coordinated

  10. Filing Your Returns • The DOR will assign a filing frequency • Certain states will require additional local level reporting • California cities assess a Utility Users Tax that requires monthly reporting • Manual options • Software can automate some of the returns but not all • Outsourcing the filings

  11. Prior Period Exposure • Quantify how much additional tax is due • This can be an estimate • Based on the risk profile of the business, make a decision on how to remediate: • Register and file prospectively • Voluntary Disclosure • Amnesty

  12. Voluntary Disclosure • Voluntary Disclosure Agreement (VDA) • Limit the look-back period • Waiver of penalty and possible limitations of interest • Audit protection

  13. VDA Procedure Typically a third party is involved Anonymous negotiation to obtain a favorable position Prior period returns are prepared or spreadsheet submitted with tax liabilities Registration and prospective collection and filing responsibilities Often not available to active taxpayers

  14. Amnesty Specific program requirements are described by the state Prior period returns are prepared or spreadsheets submitted in adherence to the program Registration and prospective collection and filing responsibilities May be open to current tax payers

  15. Recap • Determine where you have nexus • Understand the taxability of your services • Quantify your potential exposure • Determine steps to remediate exposure • Manage exemption certificates • Set-up a tax and fee calculation routine • Registering with the DOR’s • Filing your returns

  16. Thank You Robert Dumas Founder and Managing Partner, TaxConnex Phone: 877-893-5304 x701 Email: robert.dumas@taxconnex.com

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