Court Says VoIP Is Not A Telco Service; States Can't Tax It As One

from the just-say-no-to-usf dept

In recent years, various state regulators, desperate to dredge up extra tax income, have targeted VoIP providers, using the infamous “like a duck” test, to say that since they look like a traditional telephone service, they need to pay taxes like one — despite the fact that they don’t make use of the same infrastructure (which is part of the reason why telco services were taxed in the first place). A couple years ago, an appeals court rejected this theory in Minnesota, and now an appeals court has come to the same conclusion in Nebraska, stating that VoIP services, such as Vonage, are not telecom service providers, and thus are not responsible for taxes such as the Universal Service Fund. Of course, this also contradicts some other rulings… so perhaps we’ll eventually see this in the Supreme Court as well.

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Companies: vonage

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Comments on “Court Says VoIP Is Not A Telco Service; States Can't Tax It As One”

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19 Comments
Anonymous Coward says:

Trust me on this one, you really don’t want to know where that money goes or how its divided up. All it would really do is raise your blood pressure and piss off a ton of people. Because in the end, short of what would damn near be civil war, we really have no way to correct a screwed up situation.

Batman says:

Careful Now

The ruling is that Vonage is not a telecom service at the state level. The FCC has yet to decide what Vonage. And while pretending that it does not know what Vonage and other VoIP providers are, it has imposed 911, CALEA, Disability Access, number portability and other obligations on Vonage. In other words, the FCC is regulating VoIP exactly the same as regular telephone service without the bother of actually declaring that it is a phone service. This next FCC meeting, on the agenda is wither VoIP providers can discontinue service without compliance with the FCC rules for providing notice to customers of discontinuance of service.

Rob R. says:

Re: More like a tax

Neither. It’s a fee. They levy a fee against your on your bill, then they “contribute” to this fund from that. What is not said is that if I pay $15.00 on the fee, do they then “contribute” $15.00 to the Fund, or a lesser amount and just keep the rest?

This is just another of many many things that need to be fixed. Either that or wait for socialism to fully engulf us and then we won’t have to worry about it any more.

Carol R. says:

Re: Re: More like a tax

The surcharge is two fold: first, the actual payment into the federal fund (which needs to be reviewed; I mean who are they funding these days? Everybody is wired) and the second, a much smaller piece, is an admin fee from the Telco for the expense of accumulating and paying this money to the government. This is a much smaller piece. Many states have their own funds, so this charge can layer up.

Anonymous Coward says:

They don’t make use of the same infrastructure as the telco’s, which is why the telco’s were taxed in the first place?

What infrastructure are you referring to? The infrastructure that the Telco’s put in? The right of way?

What happens if you get Vonage over DSL? Then that is the same infrastructure as the telco’s.

Anonymous Coward says:

Re: Re:

What happens if you get Vonage over DSL? Then that is the same infrastructure as the telco’s.

Vonage is a service runs over a variety of Internet paths. It doesn’t matter if it’s DSL or not. Now if they want to tax DSL over telephone lines as if it’s a telco service then that’s a different question.

Anonymous Coward says:

“despite the fact that they don’t make use of the same infrastructure (which is part of the reason why telco services were taxed in the first place)”

Which is why I didn’t understand this passage. I don’t understand what the infrastructure has to do with the equation, since the infrastructure is owned by the telco and wouldn’t be the reason for the taxation.

sys admin says:

Universal Slush Fund

The Universal Service Fund was supposed to subsidize rural telephones so that everyone would have a phone. Good idea.

Then politicians started playing Santa with it. About 11 years ago I worked for a Canadian company that booked millions in easy sales from US school boards when the universal service fund was used for “educational connectivity,” which means free computer stuff for school boards. They were placing these gigantic orders because they knew it was a windfall that would not last.

I lost all respect for the universal slush fund right there.

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