United States Supreme Court denies VoIP case – what does that mean for providers?

On October 21, 2019, the United States Supreme Court declined to hear Minnesota Public Utilities Commission v. Charter Advanced Services (MN). This case argued whether states are entitled to regulatory oversight of Voice over IP (VoIP) services. By refusing to add this item to the docket, the court essentially sided with Charter, denying states the ability to individually regulate VoIP services.

What does this change for providers?

In most states, it’s status quo for now. This has been a complicated issue for years, as Congress has not updated guidance since the Telecommunications Act of 1996. Meanwhile, both technology and how people prefer to communicate have changed dramatically. While it was a decisively landmark piece of legislation, many of today’s scenarios were simply inconceivable then.

To fill the legislative gap, approximately twelve states put rules in place to collect their own regulatory fees. Their ability to continue collecting those fees will likely face renewed challenge. However, they will be able to continue charging state-level taxes on VoIP services like other states.

Answering top questions

Does this mean that VoIP services are no longer a communications service? The federal government has never officially classified VoIP either way. With this decision, VoIP will continue to remain vague.

Should I expect to change the taxes and fees I collect and remit? Expect changes only if you are providing services in one of the twelve affected states. These changes may not happen at the same time and the affected states are likely to fight challenges to their collection authority on other grounds.

Do I need to change anything in my billing platform or tax system? Avalara provides automatic updates for rule and rate changes in affected jurisdictions. If you are not an Avalara customer, ensure you are calculating VoIP and other OTT services accurately at both the federal and all state levels, carefully monitor rules updates, and be ready to make changes.

What to expect next

With regulatory and judicial bodies failing to take a firm position both now and historically, this issue will likely rear its head again and again in the form of litigation. This isn’t a huge game changer at the moment, but stay vigilant. Keep an eye on updates in those twelve states, be diligent in making changes, and monitor any new pending legislation that could set precedent nationwide.

Learn more about how communications tax automation from Avalara can help you stay on top of tax and regulatory fee changes like this.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.