VoIP and Taxes

VoIP is Taxed Much Less than Traditional Telephone Service.

When it comes a VoIP (Voice over Internet Protocol) Broadband Telephone service provider, there are numerous benefits. Unlimited local and long distance calling for a set fee, included features such as Caller ID, Call-Waiting, Find Me/Follow Me, etc., and most importantly, reduced costs. Many people will overlook an important thing when they are comparing the price of a VoIP provider vs. the price of their Traditional Telephone service, and that is:

What taxes will be found on a VoIP telephone bill vs. what taxes will be found on a traditional telephone services bill?

In my opinion, this was a huge factor in making my decision to go with a VoIP Broadband Telephone solution. The only VoIP Taxes (as of the writing Feb. 2008) associated with a VoIP service is a Federal Excise Tax of only 3% of the bill and an E911 fee which comes to roughly $3 per month. For example, if you signed up for a VoIP unlimited calling plan for only $24.95 per month your monthly total would be roughly $27.95. This $27.95 per month would cover all of your calls to the U.S. and Canada (anytime), all of your phone bill taxes, all of the included features, and ourstanding customer service. (Noted exception: Vonage customers located in N.J. are required to pay sales tax on their Vonage VoIP service.)

Conversely, a traditional telephone bill includes numerous taxes and surcharges. For example, I used to have a discount telephone company (Cox) that only charged me $9.99 per month for a basic traditional telephone service in Southern California. I have reviewed this bill and was appauled by the number and cost of taxes that I used to pay with that service. I have included the numbers of one of my bills below. Please note that I used a different long distance carrier, so this bill includes no long distance telephone calls.

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So, my bill total was $26.57 for the month and that was before I ever picked up the telephone to make a long distance telephone call. Also the only feature that I opted for was called the Control Plus plan which was 10.95 per month. That was more than the basic monthly charge! All of these features are built into the VoIP service monthly charge and the VoIP providers give you many more options than what was included in the Control Plus plan.You can draw your own conclusions on whether or not VoIP is right for you. If you don’t make any outgoing calls then you may want to stick to your traditional telephone company or save even more money by getting a reduced calling VoIP plan which start at about $5-6 per month. From an economical stand point alone, VoIP is clearly the less expensive option no matter what your calling habits may be.

Economical is only one reason VoIP is the right choice. Be sure to read my other article on 6 Important Factors to Consider When Selecting a VoIP Provider