Lawmakers: Let's be sure we're collecting VoIP tax

A proposal would allow states to tax calls based on a customer's residence

U.S. lawmakers want to make sure they're collecting enough taxes on your VoIP service.

Members of the House of Representatives Judiciary Committee's commercial and administrative law subcommittee on Tuesday expressed concern that some VoIP (voice over Internet Protocol) services could escape state or local taxes because of the mobility of VoIP equipment.

Officials with two VoIP providers and two state organizations asked subcommittee members to clarify where VoIP service can be taxed.

A clarifying law would not only protect VoIP providers from customer lawsuits, but it would also potentially protect customers from multiple states trying to tax their VoIP service, said Robert Cole, manager of tax accounting for Sprint Nextel.

With traditional phone service, state and local taxes were based on where phone calls originated from, typically a customer's home or business. But VoIP allows customers to take their device and plug into the Internet at multiple locations while keeping the same phone number, raising questions about which state or local government has taxing jurisdiction.

Some VoIP providers collect taxes based on the customer's address, but federal law is not clear whether that's the correct method, said witnesses at a subcommittee hearing.

VoIP providers do collect multiple taxes, including state and local taxes for emergency 911 service.

Cole and John Barnes, director of product management and development for Verizon Business, asked the lawmakers to include VoIP in a law governing how mobile-phone service is taxed.

The US Mobile Telecommunications Sourcing Act, passed by Congress in 2000, allows state and local telephone taxes on mobile cellular service based on the place of primary use, generally the customer's home or business address.

"The technology has simply outpaced the rules that apply to taxation for telephone services," Barnes said. "A new system is needed to determine state and local taxation for VoIP services."

No groups representing VoIP customers testified at the hearing, but Representative Bobby Scott, a Virginia Democrat, questioned whether the mobile taxing rules were always appropriate. A customer could give northern Virginia as his home address but do most of his calling from Washington, D.C., he said.

"If I only use the phone in D.C., if all of the calls that you have a list of start off in D.C., and none of them are in Virginia... you tax in my home address?" Scott said. "The only thing that seems to matter is the home address."

Under the Mobile Telecommunications Sourcing Act, Virginia would collect taxes based on the customer's Virginia home address, even if most calls came from Washington, Cole said. "Under VoIP right now, I think you've illustrated the nature of the question," he said. "Which state does get to tax that? We don't know."

Under the mobile taxing law, providers aren't required to check where the calls originate, Cole said.

Despite Scott's questions about the mobile law, other lawmakers said VoIP tax law needs to be clarified.

"It's my hope that we can work together to quickly resolve the issues identified today so that states, industry and, most importantly, consumers can have the clarity and certainty that they need to conduct their affairs," said Representative Trent Franks, an Arizona Republican.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags taxvoip

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Grant Gross

IDG News Service
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Kurt Hegetschweiler

Brother PocketJet PJ-773 A4 Portable Thermal Printer

It’s perfect for mobile workers. Just take it out — it’s small enough to sit anywhere — turn it on, load a sheet of paper, and start printing.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?