4 steps to communications tax compliance

Communications tax compliance is complex and can seem overwhelming. It is not a “do-it-yourself” project, as these issues impact compliance with laws and regulations. Missteps can result in penalties, interest, and tax expenses that can drain your profits, undo years of revenue collection, and undermine the value of your business. To comply with communication service tax, it is almost a must to use a sales tax engine that is powerful enough and well-versed in telecommunication tax. 

Although the compliance process may be multifaceted, the concept of tax compliance is simple. Tax authorities require that you collect and remit taxes and fees in exchange for the privilege of providing goods and services to their citizens. Before you provide a service, you need to register with the tax authority (so they don’t have to track you down), and after you provide the service, you will need to calculate what is owed and then report it to the tax authority. You collect the tax due from your customers and then remit those funds to the authority to clear the liability that is owed. Periodically, the tax authority may audit your activity to see if they agree with the tax amounts that you reported. If they don’t agree, additional tax may be due along with penalties and interest. In general, compliance can be viewed as four steps: Registration with tax authorities, calculation of taxes due, invoicing customers for tax due, and finally, reporting and remitting funds for the taxes owed. 

Note that throughout this paper, for simplicity, we will be referring to communications taxes which may also include fees.