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

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

Tue, May 5th 2009 1:28am — Mike Masnick

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

19 Comments

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bob, 5 May 2009 @ 2:47am

A Mess I Tell You
Telecommunications in the USA are a mess, look how long it took to get rid of the Spanish American war tax!
Look at the Universal Service Fund where does that money go? How much is it? How is it administered?
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Anonymous Coward, 5 May 2009 @ 3:10am

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.
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inc, 5 May 2009 @ 3:34am

Re:
...or maybe we should get pissed off and elect representatives that do their job right. If none are available you should run for election :)
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Chargone, 5 May 2009 @ 3:39am

problem with that is that people tend to vote on the lizard principle.

candidates not part of the 'lizard' parties thus don't have a hope in most long running democratic systems.
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Blatant Coward, 5 May 2009 @ 3:53am

I vote the Straight Clevage ticket!
More cleavage I get from, or on, a candidate, the more I vote for them.
Except for Monica's ol' man's wife.

Eccccch.
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Batman, 5 May 2009 @ 5:19am

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.
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CleverName, 5 May 2009 @ 5:32am

More like a tax
from their site:
"The fund is maintained through contributions made by telecommunications providers across the country and is disbursed based on four primary support programs."

contributions ?
So is it a tax or a charitable contribution ?
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Rob R., 5 May 2009 @ 5:40am

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.
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mike, 5 May 2009 @ 6:31am

voip tax
Agreed that voip shouldn't be taxed but what about your isp's? the only reason they aren't taxed is because they are exempt for right now. So eventually we could see internet taxes instead of voip taxes. They will get ya one way or another!
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Carol R., 5 May 2009 @ 7:01am

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.
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chris (profile), 5 May 2009 @ 7:58am

Re: Re:
...or maybe we should get pissed off and elect representatives that do their job right. If none are available you should run for election :)

you remind me of myself, when i was young and stupid and thought i could make a difference.
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Anonymous Coward, 5 May 2009 @ 8:04am

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.
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Rezendes, 5 May 2009 @ 8:24am

Re: Re: More like a tax
At least with Socialism you know where the money went and you're entitled to some of the benefits! I still prefer my liberty and Democracy but full disclosure is not a virtue of that system!
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Sean, 5 May 2009 @ 8:53am

Re: Careful Now
Since most of the Telcos now use a VoIP back end for sending communications. Would an additional fee or tax that is specifically for VoIP then be added to "traditional" telcos?
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Anonymous Coward, 5 May 2009 @ 11:35am

Re: Re: Careful Now
Since most of the Telcos now use a VoIP back end for sending communications.

Err, no. They use digital ATM backbones, but it's not Internet Protocol, thus not VoIP.
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Anonymous Coward, 5 May 2009 @ 11:54am

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.
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Anonymous Coward, 5 May 2009 @ 2:13pm

"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.
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Clueby4, 5 May 2009 @ 5:12pm

USF is a joke
USF is a joke, they plunder 6.85 billion from consumers in 2007. Does anyone really think that money is even given the appearance of being used appropriately let alone any tax-payer real world benifits?

And I haven't even mentioned the additional billions telcoms got out of the bailout bill.
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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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