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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Filed Under: telco service, voip
Companies: vonage

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  1. identicon
    sys admin, 2 Jun 2009 @ 7:26am

    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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