L.A. taxes VoIP

L.A. voters have decided to extend the telephone tax to cover VoIP and other Internet IP communications. The budget proposal is expected to raise $270 million, and was endorsed after the rate was cut from 10 to 9 percent. The tax is very wide ranging and attempts to tax "the routing of voice, audio, video, data or other communication information transmitted through fiber-optic coaxial cables, power lines, broadband, DSL or wireless systems."

L.A. has taxed wireline telephony since 1967. When it was extended to cell calls in the 1990s the tax was successfully challenged by mobile operators. They argued calls which did not originate or terminate within L.A. should not be taxed. But because providers can not distinguish local calls, L.A. has continued to collect the tax. A second legal action is now proceeding. How L.A. authorities would seek to capture calls made by the myriad of mobile VoIP applications and click to call web services is not known. The prospect of a multitude of local taxes is, of course, a provider nightmare and almost certainly would see appeals for federal relief.

For more:
- Voters agree on phone tax Article [1]
- Fighting the phone tax Article [2]

Related articles:
Vonage sues Nebraska PSC Report [3]
Top VoIP regulatory trends for 2008 Report [4]