Article
Refund opportunities and compliance changes for FUSF charges in New York
June 16, 2025 · Authored by CJ Beck, Shane Griffiths and Ben MacPherson
The New York Tax Appeals Tribunal (Tribunal) has issued a significant decision in Time Warner Cable Information Services (New York), LLC (DTA No. 830442), ruling that Federal Universal Service Fund (FUSF) charges passed on to customers aren’t subject to New York sales and use tax. This decision took place May 20, 2025.
This ruling presents immediate opportunities for telecommunications providers and businesses to pursue refunds and adjust compliance practices.
The decision clarifies that FUSF charges, which recover a provider’s mandatory contributions to the FUSF for interstate and international telecommunications services, are receipts tied to nontaxable services under Tax Law § 1105(b)(1)(B).
Gain more information about this ruling and how it can impact your telecommunications business with the following insights.
Background
New York imposes sales tax on intrastate telecommunications services but explicitly excludes interstate and international services.
The FUSF is a federally mandated fee that telecommunications providers must pay based on revenues from interstate and international services. Providers often pass these fees to customers as a line-item charge on invoices.
The Tribunal found that FUSF charges are receipts of nontaxable interstate services, not expenses of a bundled taxable service, reversing a prior determination that assessed $6.67 million in sales tax on such charges.
Implications and opportunities
The Tribunal’s decision present significant implications and opportunities for telecommunications businesses operating in New York, including the following.
Telecommunications providers
Providers that have collected and remitted New York sales tax on FUSF charges may be eligible to:
- File Refund Claims. Recover sales tax erroneously collected and remitted on FUSF charges for prior periods — typically within three years from the filing date.
- Refund Customers. Issue refunds or credits to customers for sales tax collected on FUSF charges, as required for refund claim approval.
- Update Compliance. Cease charging sales tax on FUSF fees prospectively and adjust sales tax reporting processes to align with the Tribunal’s ruling.
Businesses with significant New York operations
Businesses that have paid material amounts of New York sales tax on FUSF charges embedded in their telecommunications bills may:
- Seek Refunds. Work with their providers to claim refunds for overpaid sales tax, like refund opportunities following the mid-2000s federal excise tax (FET) rulings on telecommunications services not based on time and distance.
- Review Invoices. Analyze telecommunications invoices to identify FUSF charges and quantify potential refund amounts, particularly for businesses with high telecommunications usage.
Action steps
Leverage this opportunity with the following action steps.
Telecommunications providers
- Review historical sales tax filings to identify FUSF-related tax collections.
- Consult with tax advisors to prepare and file refund claims with the New York Department of Taxation and Finance.
- Update billing systems to exclude sales tax on FUSF charges going forward.
Businesses
- Examine telecommunications invoices for FUSF charges and associated sales tax.
- Coordinate with providers to pursue refunds or credits for overpaid taxes.
- Engage tax professionals to assess refund potential and ensure compliance.
Five FAQs: Determine your contributions to the federal universal service fund
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.