You wouldn’t fly a hang glider from LaGuardia to LAX. While it might be fun for a stretch, it’s an incredibly cumbersome way to cover 2,811 miles. That’s what using a sales tax solution to manage the complexity of communications tax (CommTax) is like, only less fun.
Even if you’re not at a traditional telecommunications organization, heed my warning. The fact that CommTax compliance requirements are rapidly advancing beyond the boundaries of traditional telecom marked a top takeaway in our recent panel discussion with PwC, Get Ahead of Communications Tax Surprises: New Tax Implications in the Post-COVID World. In fact, panel registrants represented a variety of over 90 industries.
Non-telecom organizations innovating with new solutions and applications often become subject to CommTax, potentially without even knowing it. M&A activity is riddled with (equally unexpected) CommTax filing requirements. Businesses are also trying to decide whether to use contact-tracing apps (often subject to CommTax) as they plot office returns as COVID concerns continue. In addition, organizations are maintaining the use of video conferencing and VoIP services, as business travel is slow to come back.
If you need communications content for your tax code mapping, your sales tax solution likely won’t cut it. You need a communications tax engine now.
Sticking with a sales tax solution to handle CommTax filing obligations typically requires investments in countless customizations along with the incorporation of endless rules and related logic. Depending on which states and countries you operate in, this work can get very cumbersome and resource-intensive – it’s akin to retrofitting your hang glider with a jet engine. You’ll need to hire more staff to manage the manual upkeep while contending with major turbulence in the form of continual tax rules and rate changes.
That’s why I often advise my clients to let a communications tax engine handle the heavy lift. The tool contains the content, research and logic needed to navigate CommTax turbulence, and it updates automatically in response to rates and rules changes. Compared to a sales tax solution, a communications tax engine is a first-class seat on your favorite airline.
Communications tax risks may already lurk inside your organization. That’s why Vertex and PwC’s State and Local Tax group work together to educate tax departments on what to look out for – in that panel discussion and other ongoing collaborations.
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. The views and opinions expressed in Tax Matters are those of the authors and do not necessarily reflect the official policy, position, or opinion of Vertex Inc.
Jamie Brenner, Partner - State and Local Tax (SALT)
With over 20 years of experience, Jamie focuses on helping companies navigate through complex indirect tax issues involving sales and use tax; communications transaction tax; state and federal excise tax; other transaction and gross receipts taxes; and VAT.
Currently, Jamie serves as the New York Metro State and Local Tax (SALT) Indirect Tax practice leader, working with some of the largest communications, utility, technology, and media companies in the U.S. Jamie holds a B.S. in Accounting and an M.B.A. from the University of Maryland and is a licensed C.P.A in the states of New York, Maryland, Virginia, and Georgia.
Jamie Brenner on LinkedIn