Sacramento starts VoIP tax

Sacramento, Calif., initiated a tax on VoIP communications today, as "Measure O," the "Utitlity User Tax Reduction and Fariness Measure" takes effect. The measure drops the overall tax rate on communication services from 7.5 to 7 percent, but the tax now includes VoIP calls, text messages and voice features like call waiting and caller ID as taxable items.

Internet access won't be taxed, but mobile data plans will. Telecommunications companies have until March 1 to begin assessing the taxes on customers' bills.

Measure O passed on November 4, with the stated aim of "ensuring that communications users are treated uniformly without regard to the technology used." Sacramento will receive an estimated $12 million annually from the increased tax revenue.

A VoIP customer in Sacramento averaging $20 per month in charges will spend an additional $16 per year for phone service, which isn't a tremendous increase. But with economic times tight, regulations like Measure O eat away at vanilla VoIP's value proposition. If similar measures pass in other cities, VoIP providers wouldn't lose any direct revenue since the actual service price stays constant. But VoIP taxes might slow adoption and the is always the annoying accounting overhead when different cities set different rates and demanded compliance. 

For more:
- the Sacramento Bee has a preview article [1] and an article on the start of the tax [2] 

Related articles
Los Angeles imposed a similar tax [3] earlier this year
Texas Think Tank Fights Missouri VoIP Taxes [4]