One of the most frustrating and difficult aspects of a telecom audit is making sure client telecom taxes and surcharges are accurate and correct. It seems that the skill you need to possess are that of a CPA, investigator, attorney and tax expert to be successful. It is extremely difficult to sort out reality from fiction. We have gathered a lot of information to assist telecom audit professionals in this difficult area.
One thing you should keep in mind is that many of the telecom carriers use telecom taxes and surcharges to build fluff into corporate phone bills and increase their revenues. Examples of this are most items listed in phone bills as “surcharges” but suprisingly also are listed as “taxes” although as you’ll see, they are often not real taxes that are mandated. The carriers have the right to charge just about anything they want in the area of taxes and surcharges because they cover themselves contractually. Many of those taxes and surcharges can be negotiated away and the key to eliminating them is at the beginning of your relationship with a telecom carrier.
Many telecom surcharges are bogus and are used primarily to pass costs on to the business telecom consumer or masquerade as taxes, when in fact they are hidden administrative fees that going to the bottom lines of the telecommunications carriers. We cannot possibly list every tax and surcharge here, and you should talk to your carrier representative and get a breakdown of each surcharge, what it is, what is the percentage and how its applied on your bill. And again, please remember, many surcharges are negotiable so when you talk to your carrier about pricing incentives, ask them about removing specific surcharges from your bill as a condition of signing up.
911 Service Fee: This fee is charged in some localities to support the emergency 911 telephone service. It normally shows up on the local telephone bill.
Federal Subscriber Line Charge: Also known as: Federal Access Charge, Customer Line Charge, Interstate Access Charge, Interstate Single Line Charge, FCC Approved Customer Line Charge, Subscriber Line Charge or SLC) Federal Subscriber Line Charge: The Local exchange carriers (LECs) are authorized to bill a Federal Subscriber Line Charge fee. These fees can be as low as $3 or as high as $7 per line depending on the local carrier. They are designed to recover cost for access to the long distance network. Some long distance carriers charge their customers various fees on a per line basis but these fees are not mandated, they’re another way for the carrier to add revenue. Remember, when contracting for local and long distance telecommunications service, everything is negotiable. This federally ordered charge billed by your local telephone company pays part of the cost to the local telephone company of supplying a phone line into your home or business. This recouped money is designed to help local phone companies recover the cost of providing “local loops” which refers to outside telephone wires, underground conduit, telephone poles, and other equipment and facilities connecting you to the telephone network. It is a charge that is part of the price you pay to your local telephone company but it is not an actual mandated tax and revenues for it are not sent in to any government entity. The FCC places a maximum cap on this charge. See the FCC website for more information.
California Relay Service: CA Relay and Comm Surcharge- This surcharge appears solely in the State of California, and is charged as a set percentage of your intrastate service. It assists people with hearing and/or speech disabilities who use text telephones to communicate with people using standard voice telephones.
County Sales Tax: Some counties charge a special telecommunications sales tax. This applies equally to all carriers serving that county.
District Tax: Some juristictions charge a special telecommunications sales tax usually to support a school district, new construction of sports or entertainment complexes, or similar purposes. This applies equally to all carriers serving that district.
Federal Tax or Federal Excise Tax: This tax appears on your local phone bills. It is charged as a set percentage regardless of which telephone service provider you use. The majority of this tax was nearly completeley eliminated in 2007 and many companies were refunded previous payments on long distance and cell phone excise taxes by the Internal Revenue Service. The tax still appears minimally on local telephone usage charges and cell phone charges.
Federal Subscriber Line Charge or Federal Access Charge, Customer Line Charge, Interstate Access Charge, Interstate Single Line Charge, FCC Approved Customer Line Charge, Subscriber Line Charge or SLC) This federally ordered charge billed by your local telephone company pays part of the cost to the local telephone company of supplying a phone line into your home or business. It is designed to help local phone companies recover the cost of providing “local loops” which refers to outside telephone wires, underground conduit, telephone poles, and other equipment and facilities connecting you to the telephone network. This is NOT a tax. It is a charge that is part of the price you pay to your local telephone company. Neither the FCC nor any other government agency receives the Federal Subscriber Line Charge. The FCC places a maximum cap on this charge. Currently, as of July 1st, 2002, the FCC places a maximum on this charge of $6.00 for the first line and the lower of actual costs or $7.00 for non-primary lines in residences. For multi-line businesses the maximum allowed is the lower of actual costs or $9.20 per line.
High Cost Fund B or California High Cost Fund Surcharge: Charged as a set percentage of intrastate usage. Similar to how USF functions on a national basis.
Local Connect Surcharge: This fee appears sporadically on some long distance company’s bills. It is not a mandated fee and is negotiable.
Local Number Portability or Number Portability Service Charge or LNP: This fee started to appear on many local telephone bills in February 1999. This fee allows local telephone companies to recover costs associated with supporting the technical capability to allow a consumer or business to retain their existing telephone number when switching to another local provider. Local companies are allowed, but not required, to pass on these costs. However most do pass them on. They are only allowed to charge this fee for five years from the first date they start to charge the fee, and are not allowed to start charging the fee until they can provide the ability to the end-user of retaining their phone number in the event of switching local telephone companies. Local telephone companies are required to make this “number portability” service available within 6 months of being requested to do so by another local telephone company wishing to service the area. This is not a tax. It is a charge that is part of the price you pay to your local telephone company. Proceeds from the fees do not go to the FCC nor any other government agency. Local telephone companies are not allowed to charge this fee for customers on the Lifeline Assistance Program.
Local Sales Tax: Some local governments charge a special telecommunications sales tax and are equally applied to all carriers in those jurisdictions.
Monthly Fee: Some calling plans charge a monthly fee, watch these.
Minimum Monthly Revenue Commitment: This fee is charged by some carriers and is imposed as a shortfall fee. It is actually a penalty for not meeting call volume specified by the carrier. Be very wary of this charge. They are often disguised as something else, I’ve seen even seen them called “general account activity fees” and “administrative fees.”
Monthly Recurring Charge: These are charges that are the normal monthly fees that you are billed a per your telecom service agreement. These charges do not include usage charges, only pegged monthly service charges.
Municipal Right of Way: Tax on local telephone services designed to cover the cost of managing and maintaining municipal rights of way. Frequently they are charged as a flat per line fee each month, depending on the municipality. This is charged the same by each provider within a given state, however, each state has a different rate. Check with the state department of revenue and ask them what the rate should be, then check the math on the phone bill.
Payphone Access Fee. Under the 1996 Telecommunications Act, payphone operators must be compensated by long-distance operators for toll-free calls made through their phones. Most long distance companies pass this charge on to you on your long distance bill for calling card calls placed from a payphone or toll free calls received by you from a payphone. This is NOT a tax, and can vary from carrier to carrier.
Long distance PICC Fees: Also known on your phone bill as: National Access Fee, LD Line Charge, Presubscribed Interexchange Carrier Charge, Carrier Line Charge. Presubscribed Line Charge, Regulatory Related Charge, FCC Primary Carrier 1st Line. This long distance portion charge started on January 1, 1998 as part of the FCC overhaul of telephone fees. Long distance companies pay a flat fee to the local telephone company when you pre-subscribe your telephone line to their long distance service. The charge is designed to compensate the local telephone companies for the costs associated with providing “local loop” service. If a consumer or business has not selected a long distance company for its telephone lines, the local telephone company may bill for the PICC. Although every long distance company is charged the same flat rate per line, long distance companies are allowed to pass on this charge using disquised methodology, and each company uses a different method to charge this carrier specific fee. Although it does not appear negotiable, it often is. Some telecom providers do not charge this fee at all, and some charge a “carrier specific” flat fee. This is NOT a tax. Please note that on July 1, 2000 the FCC ruled that long distance companies no longer will have to pay this fee to local companies for residential lines, or single line businesses, therefore no longer something the carriers should ethically pass on. The charge continues for multiple line businesses. Many long distance companies are still charging customers for this, although though they aren’t paying it anymore as a pass on to the local telephone companies.
Property Tax Recovery Fee: This is a carrier specific charge only charged by certain carriers. It is not a tax. You should view it as an additional charge and it is negotiable.
PSC Fee: Some states add a surcharge to help support and fund their state’s Public Service Commission.
PUC Fee: Some states add a surcharge to fund their Public Utility Commission.
State Deaf and Disabled Fund: Some states charge a tax to help provide access to telephone and teletype services for deaf and disabled people.
State and Local Municipal Taxes (Also known as: Gross Receipts Tax Surcharge, State Additional Charges, Interstate Tax Surcharge, State Universal Service Fund, State Infrastructure Maintenance Fee, Municipal Utility Tax, Municipal Franchise Fee) State and local governments assess various taxes in different ways and at different rates. Proceeds go to the local governing body. It can be imposed on the revenues of local telephone companies, and long-distance companies operating within a state. Although these taxes vary by your location, they are the same for all providers serving that area. For more information about these taxes, please contact your local and state tax offices, check GOOGLE or your local directory.
Various State USF Taxes: Most USF state tax rates are universally applied to all state telecommunications carriers. State Universal Service Funds – Most telecommunications providers should be familiar with the federal universal service fund. However, approximately one-third of the states have a similar universal service fund of their own. Although the programs supported by state-level USFs can differ considerably, typically they subsidize telecommunication service to “high cost” areas, underprivileged persons, hospitals, schools and libraries. The contribution amount for state USFs varies widely, from approximately 0.20 percent of intrastate revenues to just under 5 percent of intrastate revenues, and is paid to the state USF administrator. Check with your carrier or state Public Utilities Commission for verification of telecom tax amounts.
1. Alaska USF, Alaska Universal Service Fund: This is a targeted percentage of intrastate usage.
2. Colorado Universal Service Fund: A charge on all intrastate telecommunications services.
3. Kansas USF or Kansas Universal Service Fund: Charged as a targeted percentage of intrastate usage. Similar to the national FUSF charges.
4. Nebraska USF or Nebraska Universal Service Fund: Charged as a set percentage of intrastate usage. It is similar to the FUSF charge applied nationally.
5. Texas Universal Service Fund: Charged as a targeted percentage of intrastate, international, and interstate usage that meets 2 of 3 conditions (call must originate in Texas, terminates in Texas, and be billed to an address in Texas). This is a separate surcharge from the Texas Infrastructure Fund.
6. Utah USF: Billed as a targeted percentage of intrastate usage. Mirrors conditions billed nationally by the FUSF.
7. Wyoming USF: Charged as a targeted percentage of intrastate usage. Mirrors conditions billed
Through FUSF.
Are you looking for someone to perform a telephone bill audit? here to contact a corporate telecom audit and telecom cost savings experts . Be sure ask for the free initial phone bill audit review.
Tags: phone bill audit, Telecom Audit, telecom cost savings, telephone bill audit
