At the 2014 Telestrategies' Communications Taxation Conference
The taxation of telecommunications services is complex and varied. And it’s increasingly becoming more complex. The US federal government has several taxes and surcharges that apply to telecommunications, and state governments also tax telecom services. From standard sales and use tax to inter-city gross receipts taxes, to esoteric city football taxes, the potential to miss paying a required tax continues to grow. And that means the potential for penalties, interest and even criminal liability grows for telecommunications companies that are not focused on collecting and remitting the proper taxes on their services. The attorneys at Thomas Lynch & Associates assist clients with identifying and paying taxes on telecommunications services, as well as becoming compliant before state and federal taxing entities.
In addition to typical taxes, various government programs also apply for which surcharges are assessed. The most notable of these surcharges is the federal Universal Service Fund (USF) surcharge, which has been hovering around 15% of a carrier’s gross domestic interstate revenue (and international revenue in some circumstances). Understanding these surcharges, how they are calculated and when they are due adds additional complexity to the taxing regime that applies to telecommunications.
For instance, the 499A annual report, filed yearly with the Universal Service Administrative Company, is used to assess five different surcharges: the Federal Universal Service Fund surcharge, the Telecommunications Relay Service surcharge, the Local Number Portability surcharge, the North American Numbering Plan surcharge, and the Federal Regulatory Fee. States also have surcharges, and the list of states with active surcharge assessments is rapidly growing – especially for VOIP and wireless prepaid providers.
The attorneys at Thomas Lynch & Associates can help you file your 499A registration with the Universal Service Administrative Company (USAC), and make quarterly (499Q) and annual (499A) filings as well. We can also help you categorize your data appropriately on these important filings and provide tax compliance strategies that minimize the taxes due while still complying with applicable law and regulation.
Thomas Lynch & Associates also assists clients with paying taxes and surcharges after a period of non-compliance, and advises investors in quantifying the risk associated with a telecommunications company’s failure to comply with tax laws and regulations. If your company has not paid applicable telecommunications taxes, or a target in which your company is interested for acquisition or investment has failed to pay its taxes, Thomas Lynch & Associates may help the company qualify for a limit on the number of years that a taxing authority will apply tax retroactively. The attorneys at Thomas Lynch & Associates are skilled in preparing and filing what are called voluntary disclosure agreements (VDAs) throughout the United States and Canada, as well as negotiating with the states to limit penalties, interest and your total telecom tax exposure.
Attorneys at Thomas Lynch & Associates were lead counsel in one of the largest voluntary disclosures by a telecommunications company in the United States, and routinely assist carriers with “cleaning up” their tax situation in preparation for a significant liquidity event – typically involving an acquisition or major milestone investment. With contacts in most of the state Departments of Taxation and Finance throughout the United States, as well as with the Universal Service Administrative Company, the attorneys at Brennan Lynch are uniquely positioned to negotiate disclosures and minimize tax burdens.
If your telecommunications company is undergoing an audit for sales tax, telecommunications tax or related surcharges, either at the city level, the state level or by the Federal Communications Commission’s Enforcement Bureau, the lawyers at Thomas Lynch & Associates can assist with the collection and presentation of financial information to auditors, and can help prepare compliant tax returns.
Telecommunications companies that proceed through an audit without adequate counsel are taking a serious risk that could result in the application of taxes, fines and interest well above what it would cost to hire an attorney for representation. Auditors make mistakes, and the law on the taxation of telecommunications contains flexiblity and nuances that may not be readily understood by non-lawyers, including accountants.
The attorneys at Thomas Lynch & Associates have counseled clients in scores of audits before state authorities, large cities, and the FCC Enforcement Bureau. Our clients are universally pleased with the results and we have successfully corrected and even appealed erroneous rulings by auditors. In some cases, the lawyers and Brennan Lynch may also be able to assist companies in securing a payment plan for taxes that are found due.
If you need assistance in identifying or paying applicable telecom taxes, including form 499A, or if you need assistance with a Voluntary Disclosure Agreement or amnesty program, contact our law offices in the Washington, DC metro area to speak with an experienced lawyer.
The law offices of Thomas Lynch & Associates provides legal advice to telecommunications businesses throughout the United States, including Washington, DC, New York, Los Angeles, San Jose and Palo Alto.