CloudTechWhitePapers

The Tax Challenges of Accurately Identifying Customer Locations

The billing components that seem so simple on the surface – a street name, a zip code, a phone number – are in fact riddled with complications. These location identifiers dictate which jurisdiction gets to tax each individual customer and what rates to apply at the local, state and federal levels.


The Tax Challenges of Accurately Identifying Customer Locations
Published By - hitechnectar

For communications service providers, there’s a lot on the line

All communications service providers (CSPs), from wireline to wireless to VoIP and from emerging companies to established corporations, face a similar set of challenges. There are regulatory fees to track, nexus requirements to determine and tax on tax calculations to get right.

The billing components that seem so simple on the surface – a street name, a zip code, a phone number – are in fact riddled with complications. These location identifiers dictate which jurisdiction gets to tax each individual customer and what rates to apply at the local, state and federal levels. For this reason, pinpointing customer locations at a granular level is a critical component of compliance and profitability. Yet many of the most commonly used methods for identifying locations aren’t very reliable for tax purposes.

While location accuracy is hard to achieve in any industry, CSPs face an especially difficult set of challenges. Historically, locations have been dictated by the physical or billing addresses typically placed at the top portion of paper bills. The nomadic nature of today’s customers is causing a dramatic shift in how providers can, and should, identify customer locations for tax purposes.

This whitepaper explains the correlation between customer location IDs and profitability, explores current methods for obtaining locational data for taxation and outlines steps CSPs are taking to resolve common location issues.

 

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