Sales and use tax for telecommunications
Telecommunications companies deal with sales and use tax on two fronts. They pay tax when they buy equipment and services. They also collect tax from customers on what they sell.
Fairview Audit connects you with a partner firm that can review these areas. Fairview does not do the review itself and does not give tax advice.
This page covers Sales and use tax for Telecommunications businesses.
Why this matters for telecom companies
Telecom services are taxed in ways that differ from ordinary goods. Rules vary by state and locality, and several different taxes and fees can apply to one bill, some of them specific to communications. Some states do not tax communications services, and a few use an excise tax instead of a retail tax. Whether a service is taxable can depend on what it is, how it is delivered and where the customer is located. For mobile service, federal law ties the taxing jurisdiction to the customer's place of primary use. [VERIFY: current state treatment of telecommunications and related services]
On the purchase side, a telecom company buys large quantities of equipment, such as towers, cables, switching gear and power systems. Some of those purchases may qualify for an exemption or a reduced treatment in some places, and some may not. The paperwork behind that treatment matters.
What a review typically examines
A partner firm usually reviews either purchases, sales or both. For this industry, typical questions include:
On what you buy
- Whether tax was charged on equipment that may be eligible for an exemption in the relevant state, and whether exemption certificates were on file with vendors.
- Whether items were classified as network equipment, general office items or construction, since classification can change tax treatment.
- Whether tax was paid twice, once to the vendor and again directly to the state as use tax. Use tax generally applies when a seller did not charge the tax.
- Whether capital projects were split correctly between materials and installation labor.
On what you sell
- Whether the tax setup in your billing system matches the taxability of each service you offer.
- Whether customers who claim an exemption, such as government or resale customers, have valid certificates on file.
- Whether bundled offerings combining taxable and nontaxable elements were broken out in line with the rules.
- Whether customer locations were assigned to the right taxing areas.
Warning: Tax rules change and differ by jurisdiction. This page is general information only. Confirm specifics with a qualified tax adviser.
What to have ready
- Purchase records and vendor invoices for network equipment and services.
- Exemption and resale certificates, both those you gave and those you received.
- Tax returns and filings for the periods in scope.
- Billing system tax configuration, such as product and tax code tables.
- A list of services you sell and how each is tax coded.
- Correspondence from any tax authority.
- Names of contacts in tax, billing and accounts payable.
Why records matter
Exemption claims depend on documents. State rules generally protect a seller only when the certificate is properly completed, so a missing or incomplete one can put the exemption at risk even when the underlying transaction qualified. Gathering certificates early is one of the more useful things you can do before a review starts.
How matching works
You pick a request path: larger business, smaller business or not sure. There is no fixed size cut-off. Fairview matches each request by hand. A matched partner firm contacts you, or Fairview matches you by hand. The firm reports findings to you, and you decide what to do with them. Fees and terms are between you and the firm. [CONFIRM: which partner firms cover sales and use tax for telecommunications]
An independent partner firm that specializes in sales and use tax handles this work. Fairview Audit makes the match. We do not perform the review ourselves.Who does the work
Frequently asked questions
Does a review mean an audit by the state?
No. A review by a partner firm is separate from any audit by a tax authority.
Is a review the same as tax filing?
No. Preparing and filing returns is different work. A review looks at whether tax was applied correctly on transactions.
Where do supplier billing questions fit?
Those fall under supplier contract compliance for telecommunications.
Tell us what you need reviewed. We match you by hand with an independent partner firm. You keep your existing vendors.Find out what you are overpaying.