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 Good Gear Guide newsletter!

Error: Please check your email address.

Tags taxvoip

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

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 News Articles

Resources

PCW Evaluation Team

Azadeh Williams

HP OfficeJet Pro 8730

A smarter way to print for busy small business owners, combining speedy printing with scanning and copying, making it easier to produce high quality documents and images at a touch of a button.

Andrew Grant

HP OfficeJet Pro 8730

I've had a multifunction printer in the office going on 10 years now. It was a neat bit of kit back in the day -- print, copy, scan, fax -- when printing over WiFi felt a bit like magic. It’s seen better days though and an upgrade’s well overdue. This HP OfficeJet Pro 8730 looks like it ticks all the same boxes: print, copy, scan, and fax. (Really? Does anyone fax anything any more? I guess it's good to know the facility’s there, just in case.) Printing over WiFi is more-or- less standard these days.

Ed Dawson

HP OfficeJet Pro 8730

As a freelance writer who is always on the go, I like my technology to be both efficient and effective so I can do my job well. The HP OfficeJet Pro 8730 Inkjet Printer ticks all the boxes in terms of form factor, performance and user interface.

Michael Hargreaves

Windows 10 for Business / Dell XPS 13

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Aysha Strobbe

Windows 10 / HP Spectre x360

Ultimately, I think the Windows 10 environment is excellent for me as it caters for so many different uses. The inclusion of the Xbox app is also great for when you need some downtime too!

Mark Escubio

Windows 10 / Lenovo Yoga 910

For me, the Xbox Play Anywhere is a great new feature as it allows you to play your current Xbox games with higher resolutions and better graphics without forking out extra cash for another copy. Although available titles are still scarce, but I’m sure it will grow in time.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?