There’s a good reason why the improvisational comedy TV show Whose Line is it Anyway? has run for over a dozen years on three networks and in two countries: people love to watch talented performers wing it.
There’s also a good reason why most tax professionals in the telecommunications industry might want to switch channels when Whose Line is on TV: they’re tired of improvising in response to the complex and fluid nature of line-based taxation requirements.
Technology, especially in the form of cellular and wireless network adoption, has played a key role in driving line-based taxation complexity. Until relatively recently, telecommunications enjoyed the more straightforward era of “POTS” – Plain Old Telephone Service; back then, a line was a line was a line, and tax rules were easier to follow. As Voice over Internet Protocol (VoIP) and wireless usage went viral, however, tax authorities began grappling with some fundamental questions they needed to answer in order to sustain their revenue streams:
- What is a line?
- Which lines (or channels, networks, connections, etc.) should we tax?
- What rates should we apply to these lines?
The answers come in several variations, according to this Vertex on demand webcast.
Although a few US jurisdictions have attempted to simplify their line-based taxation processes, numerous factors – including shrinking state revenue and a growing demand for new telecommunications technology – make it likely that line-based taxation complexity will intensify. Growing complexity may result in more providers unintentionally subjecting customers to inapplicable taxes, and/or charging them too little due to improper taxation processes. The webcast lays out how tax professionals can better understand, mitigate, and manage line-based taxation risks – without winging it.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.