MYTHS & MIS-PERCEPTIONS EDUCATIONAL ADVISORY SERIES: Topic #2

THE MYTH: Retailers of resold telecommunications services do not need to register and/or pay taxes and regulatory fees if their Supplier has already done so.

THE REALITY: Retailers of resold telecommunications services remain responsible for registration and payment of taxes and regulatory fees regardless of their Supplier’s conduct.

Regulatory and Tax Responsibilities for Retailers/Suppliers of Telecommunications Services

There is a common mis-perception that retailers of resold telecommunications services (i.e., resellers) do not need to pay taxes and regulatory fees (e.g., USF fees) directly to government agencies so long as the reseller is paying the taxes and fees passed through by their suppliers (i.e., wholesalers). More than likely, this myth derives from a mis-perception regarding the general prohibition on “double taxation,” and also a fundamental misunderstanding of the supply-chain Tax and Regulatory Fee exemption system that is operative in jurisdictions throughout the United States.

The reality of the Tax and Regulatory Fee exemption system is that retailers generally bear the burdens of billing, collecting, and remitting taxes and regulatory fees on sales of telecommunications or telecommunications services to their end-user customers regardless of whether or not: (A) the retailer has already paid taxes and fees billed by their suppliers (i.e., pass through charges); and/or (B) the retailer’s suppliers has already paid taxes and regulatory fees for the same services.

The purpose of this Educational Advisory is to dispel the Myth and Mis-perception that retailers of resold telecommunications services (including VoIP) do not have any registration or remittance obligations for taxes and regulatory fees if/when either: (A) the retailer paid taxes and fees to their suppliers; and/or (B) their suppliers are registered, and are remitting taxes and regulatory fees for the same services – based on sales to resellers.

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