Deciding how to classify your products and services to set the appropriate fees and taxes invoiced to customers requires specialized knowledge to avoid the high risks and high costs of being fully or partly non-compliant.
The registration and filing process may seem straightforward at first glance – register, then collect and remit telecom regulatory fees – but deciding how to classify your products and services to set the appropriate fees and taxes invoiced to customers requires specialized legal knowledge. Further, integrating billing, invoicing, marketing, contracts, and tax systems requires strategic planning.
Most telecom companies treat compliance as an obstacle to how quickly and cheaply they can get to market. Most telecom companies understand that non-compliance or in-house compliance is too risky, so they seek a very cheap, very fast, outsourced solution that includes:
Regulatory Filing Services
Tax Engine Software to Calculate Telecom Taxes and Fees
Accounting Software to Collect Taxes and Fees
However, you still need to consult with a telecom legal specialist in order to classify your products and services correctly so taxes and fees are calculated accurately. If the rates across jurisdictions, products, services, etc., are entered into your tax engine and/or your billing systems incorrectly, you still have a high risk of over- and/or under-collection. Without validating that your products and services are classified correctly, you may technically be “in compliance,” but the risks of over- and under-collection remain.
Creating an Optimized Product Catalog
An optimized product catalog is the foundation on which your regulatory compliance is built. Because of the critical importance of this step, combined with the ever-changing regulatory landscape, it is imperative that an expert in telecommunications law assist your company in the creation of your optimized product catalog.
Naming, deciding how to classify, and providing defensible justification for the class of each component of your offerings is the cornerstone of how your revenue is taxed and subject to regulation.
What you sell, how you sell it, how you describe it, and how you classify it all play significant roles in how your revenue is taxed.
What is a product catalog?
A product catalog is a comprehensive list of all of your products and services broken down into components that reflect their regulatory classification. An accurate, defensible product catalog includes:
The name of each component in a product or service bundle
Each named component will be mapped to a regulatory classification
Each named component will have a detailed description to explain the classification
Optimization of the product catalog requires specialized knowledge to parse through the complicated, sometimes conflicting regulatory landscape to classify as accurately as possible.
What is optimization of a product catalog?
Identification of service bundles and “un-bundling” where permissible to minimize tax and fee exposure
Consideration of optimal classification of revenue to minimize tax and fee exposure
Segregates telecom revenue to reduce tax and fee exposure
Details discretionary pass-through surcharges, including “Cost Recovery Fee” surcharge and its equivalents, to keep compliance costs at zero
Create an optimized product catalog as an internal company resource for invoicing, tax and fee collection, and compliance needs.
Create Tax and Fee Policy Guide to effectively educate your team on the compliance requirements, deadlines, and responsibilities within their roles
Establish company terminology for consistency in communications with regulators, employees, vendors, and customers.
Ensure contracts, disclosures, and marketing and communications are consistent with guidance and terminology.
Map product catalog to the applicable codes in tax engine software.
Run sales scenarios in the tax software program in coordination with your billing team to generate invoices that confirm expectations.
Running real-time or test data, ensure that estimates for fee collection in the tax engine are within projected range(s) in the accounting and billing system
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