Whilst calculating sales tax can be a difficult task that most companies leave down to their accountant to do, communications tax is something that is much more complicated and should not be attempted by yourself, especially if you have no prior knowledge of the tax compliance system. This is because calculating it is based on a number of complex rules and regulations. You are required to manage communications tax across federal, state, and local regulatory authorities, as well as at the same time complying with the strict rules that have been imposed by the taxing jurisdictions. It is pretty obvious then from all of this that this tax can pose a huge burden for any company. That is why it is important to get some Communications Tax experts on board in order to help you manage this.
For those companies that are subject to communications tax and intend to tackle the burden directly themselves, then it is important that they considered the following points:
- Having technical systems in place – it is critical that a specialist engine for communications tax is used alongside a billing platform. These two things work together to perform numerous calculations that are highly accurate, as well as bringing together details for invoices that are required for communications taxes.
- Having a strong team in place – with there being so many rules and regulations in place around taxing jurisdictions at the various levels, keeping track of and managing these can be somewhat overwhelming. Having a large number of people on board who are able to tackle this for you is imperative to be fully prepared.
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What companies are subject to the tax
Communications tax is predominantly applied to those companies operating within the world of voice services and telecommunications. However, there are now other areas of industry that are subject to the tax, although identifying these areas is not as easy as it could be. Some of the parts of the industry that are required to pay the tax include:
- Video services – this covers both digital and traditional video content. Traditional television offerings include content that can be found on satellite and cable providers across the country. Digital content includes that which is provided through life, on-demand, and streaming services. However, as these two separate video services continue to blur the lines between one another, with streaming services being offered through cable and satellite, the complexity of taxability becomes more ambiguous.
- Technology services – over previous years, technology companies have not been subject to communications tax. However, there is some belief that they should be given the markets that these businesses are now moving into. Those providing VPN or Internet services and those working with circuits do, in fact, meet the requirements required to pay communications tax. With the current onset of 5G services, more and more tech companies will soon find themselves meeting these specific requirements. This is depending on the connectivity method used so there are many things to consider when considering the requirements.