Offloading compliance eases the tax implications of fast growth

Based in Nashua, New Hampshire, Unified Office provides business-class communications services, including VoIP- and IoT-managed services to small- and medium-sized organizations. Launched in 2011, the company grew quickly. By 2016, Unified Office was providing communications-as-a-service to one of the largest Domino’s Pizza franchises in the country, with stores stretching from coast to coast.

Telecommunications taxes are notoriously complex, sometimes featuring a tax on a tax, in which one tax or fee could be taxable by another. For example, Federal Universal Service Fund charges may be applied to a state’s Universal Service Fund charges, as well as some local regulatory fees and surcharges.

To make matters even more complicated, tax rules and rates are always changing. Usually regulated at the state level, e911 fees may also be imposed at the city and county levels. Complying with these moving targets can be complex and labor-intensive.

The stakes were high for Unified Office, who were also adapting to rapid growth and keeping a clear focus on the future. “We believe that one day our company will be a compelling acquisition target,” says CFO Peter White. “We have an astute board of directors, and they warned us early about making certain that tax liability isn’t sitting on our books when the day comes. They were very clear that the sooner we got started, the better off we were going to be in the long run.”

After receiving a short list of recommended solutions from an advisor, Peter reached out to Avalara. When he asked for customer referrals, he was able to speak with the head of taxation at a large telecom provider that was preparing the business for a public offering. In this case, the company Peter spoke to had not approached communications taxes proactively, and had a $25 million tax liability at the time of their IPO for taxes, penalties, and interest.

“Here we were, a company with less than a million dollars in sales, and we were already taking steps to comply and avoid those needless liabilities and risks,” says Peter. “We want a clean house.”

Avalara’s communications tax team monitors relevant statutes, regulatory rules, and rate changes so customers can have increased confidence.

Avalara’s comprehensive approach won Peter over. “They said, ‘We’re going to take care of this, soup to nuts. All you have to do is give us the data.’ That’s exactly what I wanted, and that is what they have delivered,” he states. “My team spends very little time thinking about communications taxes.”