Transcript Tax Compliance Workshop

Tax Compliance Workshop
Robert Dumas, CPA
TaxConnex, LLC
Agenda
• New VoIP Providers
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What creates nexus?
Understanding taxability
Exemptions with carriers
Calculating tax and invoicing
Registering with the DOR
Filing your returns
• Established VoIP Providers
– Determining prior period exposure
– Voluntary Disclosure and Amnesty
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, communications tax, utility
users tax, business + occupation tax, and 911 fees
• Does not include FCC, Federal or State USF or other
PUC administered fees
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
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
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
Exemptions with Carriers
• Myriad scenarios that create risk
– Many carriers do not charge tax at all
– Some charge a “911 administrative fee”
– Most 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
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
– CCH SureTax is a telecom-specific tax calculation engine
– Real-time or Batch options
– Entry level pricing for VoIP providers
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
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 require
monthly reporting
• Manual options
• Software can automate some of the returns but
not all
• Outsourcing the filings
A Bit of Reality
• How can someone that’s just beginning to offer
VoIP service, afford to manage the tax compliance,
regulatory compliance, and tax/fee calculation?
• What are some ideas for balancing risk and cost?
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
Voluntary Disclosure
• Voluntary Disclosure Agreement (VDA)
– Limit the look-back period
– Waiver of penalty and interest
– Audit protection
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 current tax payers
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
Current Amnesty
Program for Texas
• Includes sales tax, franchise tax, and other state
and local taxes administered by the Comptroller’s
office
• Runs from June 12, 2012 through August 17, 2012
• Applies to currently registered and non-registered
tax payers
• Waiver of both penalty and interest
Recap
• Determine where you have nexus
• Understand the taxability of your services
– Quantify your potential exposure
– Determine steps to remediate exposure
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Seek exemptions with your carriers
Set-up a tax and fee calculation routine
Register with the DOR’s
File your returns
Thank You
Robert Dumas
Founder and Managing Partner, TaxConnex
Phone: 877-893-5304
Email: [email protected]