Understanding Telecom Taxes, Fees, And Surcharges

Telecom Audit TrainingModuleUnderstanding TelecomTaxes, Fees, and Surcharges

Taxes, Fees & Surcharges. . . can add 20-30% to telecom costs!65432Taxes, Fees,Surcharges1Monthly Charge0

General DefinitionTAX Any charge collected from telecom userson behalf of a government agency. Federal excise tax State and local sales/use taxes Others, including pass-through Regulatory fees, surcharges, and credits 911 and E911 fees Universal Service Fund (USF) charges Poison Control Fee Franchise Fees Right of Way Others

Federal Excise Tax1898currently3% tax onphone bill2012Introduced:1898 – known as luxury tax– imposed on households with phones– considered long-distance taxReintroduced:1914 – to help fund World War I1932 – to help fund national relief programs1941 – World War II:Local service was first taxedThe tax was made permanent by Congress in1990 under the Revenue Reconciliation Act.

Federal Excise TaxDoes not apply to:Installation disseminationServicesservicesUS Internal Revenue Code, Sections 4251, 4252 and 4253, and IRS Publication 510.

Excise Tax Exempt ral,State, and LocalGovernment

Nonprofit Hospital – No Excise TaxNonprofitorganizationsmust paycertain fees.

Excise Tax Exemption Form

Service ChargesFederal Tax

Federal Excise Tax Refund Claim File specific exemption for eachbilled account. Call provider (carrier) to requestexemption. Complete and return paperwork. If exemption applies only tocertain services, considerre-configuring billing.

Federal Excise Tax Refund Claim

Federal Excise Tax Refund Claim

State & Local Sales Use TaxSales Tax Tax on the sale at retail (sale to end user) of tangiblepersonal property (an item that is perceptible to thesenses) and certain taxable services. The percentage varies by state and jurisdiction.Use Tax Tax on storing, using, consuming, and sometimesdistributing tangible personal property or providing ataxable service. The use tax is collected in the state where the eventoccurs.

Exemptions on Sales & Use Tax

Federal Access ChargeBegan by 1984 as part of afederal plan to reduce perminute long distance rates.The charge has many names: End User Common Line Charge Federal Subscriber Line Charge FCC Authorized Line Charge Interstate Access Charge Federal Access Charge 9ZR (the USOC code) FCC Access ChargeIt is the price consumers pay toprocess interstate calls throughthe local carriers’ equipment.The charge is regulated andcapped by the FCC. It is not agovernment tax. 9.20 cap for business lines

Federal Subscriber Line Chargeat&t puts the FederalSubscriber Line Chargeunder the surchargeson a bill.

FCC Authorized Line ChargeClear

Federal Subscriber Line Chargeat&t charges 5.26 forthe Federal SubscriberLine Charge on aresidence line.

End User Common Line (EUCL) ChargeThe EUCL is billed at 9.20,the highest charge allowed by tariff.

FCC Subscriber Line FeeThe FCCSubscriberFee is billedat 9.20 onhunt linesand 6.50on singlelines.

The PICC (pixie)PRIMARY INTER-EXCHANGE CARRIER CHARGE1996Telecom ActPICC used to offsetcharges LD carrierspaid LECs fornetwork access.FCCoverhauledtelephonefees.LDs begancharging PICCto customersin 1998.PICCs were initially 4.31 per line. LECsbegan charging forlines with “No PIC”designation.

The PICC (pixie)PRIMARY INTER-EXCHANGE CARRIER CHARGECustomer phone billsincreased dramaticallythe month afterPICCs began.Charges reduced overtime. PICCs ended forresidence and singlebusiness lines in 2000.PICC becamenegotiation tool inLD contracts. Creditswere given for charges.PICCs are still billing onbusiness accounts in2012. LECs and CLECscharge highest fees.

The PICCPRIMARY INTER-EXCHANGE CARRIER CHARGEThe charge has various names:Presubscribed Inter-exchange Carrier ChargePresubscribed Line ChargeRegulatory Related ChargeNational Access FeeCarrier Line Charge

PICC Example CLECs tend to charge more for PICCs than incumbent carriers. The highest fee charged were in 1998 at 4.31 per line. Granite is charging 4.28 each, for four lines.

PICC Example The Carrier Access Fee is another name for the PICC. Clear Rate charges 3.21 per line for the PICC.

PICC ExampleLECs charge PICCs:1. Lines that haveno LD carrierdesignated.2. Lines with nocalling on bill.3. Lines using theLEC for longdistance.

TelecomAct of 1996expandedUSF chargeto includeruralhealthcare,schools andlibraries.USF FCC beganUSF chargeto subsidizetelephoneservice tolow-incomeand highcost areas.USFUSFUniversal Service Fund Charge Today’s USFchargesupports allfour areas. Chargesare on localand longdistancebills.

Regulatory Cost Recovery FeeRegulatory Cost Recovery Fee:a fee assessed to recover someof the charges the governmentimposes on the carriers: Telephone Relay Service FCC Assessment Fee North American Numbering PlanIt also covers othercosts associated withadministering the FCCprograms andcompliance.

Federal Regulatory FeeAT&T Business Service GuideEffective: 12/01/09Version: 1Federal Regulatory FeeFederal Regulatory FeeBeginning with bills dated on or after December 1, 2009, the Federal Regulatory Feeapplied to all interstate and US billed international charges to recover amountspaid for federal regulatory costs and telecommunications services for thehearing impaired will be increased to 2.95%. The AT&T Business Services Guidewill be revised to reflect this revision.

E911 TaxThis tax is on the LEC bill.It helps support theequipment needed toallow 911 respondersto know the exactlocation of anemergency call.

Other Surcharges and FeesPoison Control Fee: A Texasfee that supports the poisoncontrol centers.Cost Recovery Charge:A charge tocompensate carrier forenergy and fuelexpenses associatedwith networkmaintenance & relatedwholesale costs.NY MetropolitanTransitAuthoritySurchargeFranchise Tax:A tax paid tothe city for useof the citiesresources.County Tax: A tax paid tothe county for use of thecounty’s resources.

Tax and Fee Example14% taxCounty E911Federal Excise TaxFederal Universal Fund SurchargeLocal Sales TaxLocal Utility Users TaxState E911State Sales TaxState Telecom Assistance Service FundState Telecom Relay Service14% Tax

Tax and Fee ExampleBill From ColoradoThis bill shows percentagesof taxes and fees charged.

Tax and Fee ExampleCenturyLink explains the purpose of each tax on the bill.

Tax and Fee ExampleGranite is billing13 different taxesand surcharges.

Tax and Fee ExampleVerizon is only billing two taxes and two fees.

Tax and Fee ExampleThere are 11different taxesand surchargeson this Verizonbill in CA.

Taxes, Fees, and AuditsUnderstand tax and feedifferences between carriers.Before changing carriers,make sure all line charges,taxes, and fees are comparedbetween providers.Know exempt qualificationsfor organizations.

Taxes, Fees and AuditsIdentify inappropriatetax applications.File appropriate exemptionforms with providers.File claims with IRS tocorrect errors.Evaluate cost effectiveness ofclaiming refunds.

I hope you enjoyed watching thistraining module and learning abouttaxes, fees, and surcharges that areincluded on telecom bills.To purchase additional training modules,or to review the variety of servicesTelCon offers, please visit our comThanks!Karen Thatcher, PresidentTelCon Associates, Inc.10500 Barkley, Suite 100Overland Park, KS 66212913-383-3200

General Definition Federal excise tax State and local sales/use taxes Others, including pass-through Regulatory fees, surcharges, and credits 911 and E911 fees Universal Service Fund (USF) charges Poison Control Fee Franchise Fees Right of Way Others TAX Any charge collected from