• United States
by Steve Taylor and Larry Hettick

Business and taxes: Is uncertainty bad?

Oct 22, 20032 mins

* Is uncertainty over Internet taxation a bad thing?

This time we’re concluding our series on taxation of Internet services, in which we’ve proved that even though Ben Franklin may have been correct about the certainty of death and taxes, the certainty of consistency on telecommunications tax policy remains seriously in jeopardy.

But is this uncertainty bad? It depends on your perspective. Uncertainty is always good for consultants and lawyers. And it probably isn’t bad for enterprises. After all, as telecommunications professionals, one of our longstanding traditions is to take an existing set of rules and reshape our networks to fit.

For instance, in the first iteration of voice-data convergence – the T-1 multiplexer-based networks of the 1980s – we routinely hauled voice calls across the country on a private network to take advantage of less expensive in-state calling. For instance, if you wanted to make a call from New York to San Francisco, you would stay on the private net to the California hub, then go onto the public net in California. Today, we can accomplish the same result (saving money) with the opposite approach. Haul intrastate calls across the state line to take advantage of less expensive interstate tariffs.

This same methodology will probably apply to the Internet tax moratorium. Local regulators and legislators are extremely concerned that this moratorium will have a severe negative impact on their ability to gain revenue from telecommunications taxes – especially if VoIP calls are exempt. In fact, as we’ve discussed previously, depending on the methodology (or lack of the same) used to define what percentage of an “Internet service” is used for “telecommunications,” as much as all of this revenue could be lost.

So we’re caught in a quandary. Somehow, we’re going to end up paying taxes on something. And a consistent taxation methodology certainly seems desirable. On the other hand, if the proposed H.R. 49 bill becomes law, it’s only prudent to make sure that your network services are designed to make best use of whatever that law is.