& cplSiteName &

How Taxing Will OTT Be?

Tony Susak

It's not just cable providers that are being affected by the cord-cutting movement. As new advances in over-the-top programming push more consumers toward à la carte streaming subscriptions, a rapidly escalating number of companies face the possibility of contending with potentially serious communications taxation implications.

As bundles are broken down and rebuilt to meet consumer demands -- as is currently being done by Discovery, Disney, Viacom, AMC and others as they move further into streaming services -- it's important to consider tax compliance when making key business decisions. With so much of the conversation centering on the impacts on the pay-TV industry, it can be tempting to view streaming services and cable services through two very different lenses. However, from the perspective of communications taxation and regulations, they may be viewed as very similar services.

Tax authorities at all levels of government are working to determine how these content offerings should be categorized, how they differ from traditional communications services, and how to apply taxes and regulations accordingly. As the lines separating the cable and wireless industries continue to blur, due both to company mergers and expanding product offerings, taxing jurisdictions and regulatory agencies are paying attention. And with such a steady climb in competition -- recent surveys indicate an increasing number of consumers are willing to pay for multiple streaming subscriptions -- there's little doubt that auditors are closely watching these developments as they unfold.

Suffice it to say that this is an area where the unprepared company could experience significant consequences. There are many instances where video streaming services may be subject to the same taxes as traditional cable services. Plus, any time a product or service is deemed to cross over into the communications realm, it opens the door to a complicated array of hundreds of different types of telecom taxes and thousands of transactional tax filings at the federal, state, county and local levels.

For this reason, as the OTT industry proliferates and expands, it's imperative that businesses are prepared to meet these new demands. Issues can arise when a company moves forward with a new offering under the assumption that certain communications taxes and federal regulations will not apply, which can be easy to do amidst so much innovation and change. However, the web of communications taxation is an intricate one that is constantly shifting and continually evolving.

What will happen when a state determines that video streaming services fit its definition of pay television? Will companies be prepared to meet the new tax obligations as they are assessed? Which states will continue to regard a video that's downloaded instead of streamed as a taxable digital good -- instead of a non-taxable digital service?

The answers to these questions and others like them aren't always clear cut. But to remain competitive, it's critical to understand when streaming services may be held to the same standards as cable services. This is one area where telecom is still working through a great transformation. That means compliance depends on staying ahead of all the latest federal, state and local tax developments and definitions with each new innovation and offering.

— Tony Susak, General Manager, Telecom Communications and Marketing Avalara for Communications

(2)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Tony Susak
Tony Susak,
User Rank: Blogger
12/28/2017 | 11:47:17 AM
New Tax Legislation
While new legislation is being created to address these scenarios, it's very difficult for most organizations to stay up-to-date with every taxing jurisdiction in which they file (more than 14,000 in the US alone) without outside assistance. In the event of an audit, the first critical step is to show why your company made the decision to tax accordingly and that you consistently applied that decision. 
User Rank: Light Sabre
12/26/2017 | 4:57:14 PM
A Moving Target
While you are right that these businesses have to take taxes into account, the reality is that the taxes could shift unexpectedly -- the recently signed tax legislation moved at lightning speed for U.S. law; yet there are still techical issues that will likely be addressed in future rules (or in court cases). So businesses need to have contingencies if their interpretation of taxes owed is different from the IRS thinking.
More Blogs from Column
Riverbed's Phil Harris explains how service providers are well positioned to help enterprises discover new business opportunities in IoT and throughout their cloud migration.
With the traditional operator business dying, CSPs must adopt new operating models to deliver digital services.
Protecting the web-scale content user experience lies in utilizing emerging analytics and automation technologies.
Achieving the world's first interoperable 5G New Radio (NR) data connections at 3.5GHz and 28GHz.
As networks extend into the cloud, security and monitoring need to step up their games accordingly, writes Jeff Harris of Ixia.
Featured Video
From The Founder
Light Reading founder Steve Saunders grills Cisco's Roland Acra on how he's bringing automation to life inside the data center.
Flash Poll
Upcoming Live Events
March 20-22, 2018, Denver Marriott Tech Center
March 22, 2018, Denver, Colorado | Denver Marriott Tech Center
April 4, 2018, The Westin Dallas Downtown, Dallas
May 14-16, 2018, Austin Convention Center
All Upcoming Live Events
Hot Topics
MWC 2018 Threatens to Be 5G New Radio Bore
Iain Morris, News Editor, 1/10/2018
Sprint Says No to mmWave, Yes to Mobile 5G
Dan Jones, Mobile Editor, 1/11/2018
Altice USA Embraces Home-Alone Strategy
Alan Breznick, Cable/Video Practice Leader, Light Reading, 1/11/2018
Huawei Still Knocking on US Door – but AT&T Deal Thwarted
Ray Le Maistre, International Group Editor, 1/9/2018
Animals with Phones
Customer Support Done Right Click Here
"You've reached 'Who's a Good Boy?' How can I direct your call?"
Live Digital Audio

A CSP's digital transformation involves so much more than technology. Crucial – and often most challenging – is the cultural transformation that goes along with it. As Sigma's Chief Technology Officer, Catherine Michel has extensive experience with technology as she leads the company's entire product portfolio and strategy. But she's also no stranger to merging technology and culture, having taken a company — Tribold — from inception to acquisition (by Sigma in 2013), and she continues to advise service providers on how to drive their own transformations. This impressive female leader and vocal advocate for other women in the industry will join Women in Comms for a live radio show to discuss all things digital transformation, including the cultural transformation that goes along with it.

Like Us on Facebook
Twitter Feed