Understanding VoIP Taxes & Fees in 2026

If you’re assessing different VoIP phone services and are particularly focused on the bottom-line price, it’s important to account for telecommunication taxes. The last thing you want, after all, is to budget carefully based on advertised prices only to be surprised with extra charges when your first phone bill arrives.

In addition to a provider’s base charges, you also need to account for costs like regulatory fees, use tax, and excise tax, and note that the taxes you pay can vary by state.

Here’s the good news, though: Even with taxes, VoIP compared to traditional landlines typically saves businesses money. Large businesses can see up to 90% lower upfront costs by eliminating expensive on-site PBX hardware, while maintaining average monthly operational savings of up to 60% compared to traditional landline bills.

As Nextiva’s CEO, I understand all too well how important full cost transparency is, especially when you’re making a decision as significant as choosing a phone provider. So in this post, I’m going to break down how VoIP taxes work, what specific taxes you can expect to see on your bill, and how factors like location can impact what you’re paying.

Why Is VoIP Taxed Like a Telecom Service?

Interconnected VoIP is regulated through the Federal Communications Commission (FCC) because it connects to the public-switched telephone network and supports emergency services.

Once a service can place calls to and receive calls from traditional phone numbers, it enters the same regulatory universe as legacy telecommunications. As a result, it’s taxed as a telecom service.

One important thing to note: The associated taxes are truly taxes, not add-on fees that your provider tacks on for extra profit. They’re designed to fund public infrastructure and do not contribute to your provider’s profit. VoIP providers didn’t invent these fees, as many of them existed long before cloud communications. Tax compliance is the key.

The Core VoIP Taxes and What They Fund

Understanding what specific taxes you may pay and what they fund can help you plan appropriately when choosing a VoIP service provider. Let’s discuss the common VoIP taxes you’ll likely see on your bill.

E911 fees

E911 fees ensure that every VoIP number is associated with a physical address and callback number so emergency responders can locate callers quickly.

These funds support:

• Local emergency call routing systems, ensuring that any emergency call you place is directed to an operator geographically close to your location
• Address databases and location verification
• Ongoing upgrades to 911 infrastructure

And when it comes to what you’re paying, here’s what to expect:

• E911 fees are charged per phone line, per month.
• The typical cost is $0.20–$2.00 per line per month.
• Your rate will be set by state or local governments, not your provider.

Note: While many areas stay at the lower end, certain major metropolitan areas have higher rates to fund Next Generation 911 infrastructure upgrades.

Federal Universal Service Fund

The Federal Universal Service Fund (USF) was created to ensure nationwide access to communication services. It’s particularly important in providing service in underserved communities.

This program helps fund the following programs:

• Rural connectivity initiatives
• Low-income household assistance
• School and library broadband programs
• Rural healthcare communications

I sometimes have to explain to our customers that the USF isn’t a Nextiva fee but a federal requirement. Here are some key details I think every business leader should know about:

• This is a federal tax charged to your VoIP provider.
• The exact contribution factor is adjusted quarterly by the FCC based on the fund’s needs. In recent years, this rate has fluctuated between 30% and 40% of eligible telecommunications service charges.
• Your service provider may pass through the charge to you (though they can legally pass through only what they owe and not extra charges), even though it is charged to them.
• Fees can and often do fluctuate throughout the year, which is why you may see these charges change if they show up on your bill.

State and local telecom taxes

Where you operate matters. In addition to the federal charges I’ve already gone over, VoIP services may be subject to a combination of the following taxes and fees:

• State sales tax on telecommunication services, which would be based on service charges
• Municipal utility or communication taxes
• Franchise and right-of-way fees, which are charged by local jurisdictions if service providers use public infrastructure like poles or underground conduits to deliver service
• State-level 911 or telecom surcharges

State and local taxes pay for local infrastructure and may help pay for programs like telecommunications relay services (TRS), which provide communications access to those who have hearing, sight, or speech disabilities.

The fees and taxes vary widely by geography. They’re based on the customer’s registered service address, which is likely your business address. As a result, it’s always a good idea to look into your individual city and state policies when estimating potential costs.

What Businesses Can Expect to Pay by State

I can’t stress this enough: State and local jurisdictions can set their own taxes and fees outside of federal FCC regulations, so your total costs may be significantly different from those of other businesses with similar usage in other states, even nearby states. Organizations with intrastate branches may even have different tax rates from location to location.

Low-tax states

Examples of low-tax states include Oregon, Montana, and New Hampshire. They have minimal sales tax and limited state-level telecom-specific surcharges.

In low-tax states, you’re likely looking at $1–$3 per line per month for local charges.

Mid-range states

Mid-range states include Texas, Florida, and Colorado. They do have a combination of state sales tax (which often varies throughout the state) and telecom fees. These states also have moderate E911 and regulatory charges, which may help support infrastructure.

In mid-range tax states, you’ll likely pay an extra $3–$6 per line per month.

High-tax states

High-tax states include California, New York, and Illinois. They often have multiple overlapping state and local taxes. There may be higher utility and municipal surcharges, which can add up quickly.

In high-tax states, you may be paying an estimated $6–$10+ per line per month for state-related fees.

The bottom line: Location, not your provider, dictates what you’re paying in local fees.

One-Time and Situational VoIP Fees

We’ve talked about charges that will show up regularly on your bill, but there are also one-time or situational costs that you’ll want to plan for, too.

Local number portability

When you sign up for a new phone service, you can transfer your phone number to that new service. This is called porting, and some providers charge a fee to do so.

Porting fees cover the carrier costs to move phone numbers and typically range from $10–$20 per phone number if you’re charged.

I say “if” for a reason. Many providers will waive porting fees to minimize the friction of switching and to win new customers.

Intercarrier compensation

Intercarrier compensation fees are the fees carriers pay each other to originate and terminate calls. These fees will depend on the call type and the network path.

You may not see these fees at all on your invoice. They’re usually embedded in your overall standard pricing automatically and aren’t itemized on your bill. But if you see them, this is why these costs are showing up.

Fees That Are Legal but Require Scrutiny

The fees we’ve discussed so far are all standard and expected. There are a few fees, however, that are technically legal but that I’d raise an eyebrow if I saw them on my VoIP invoice. These are the fees that are set by providers and could potentially be negotiable.

Regulatory recovery and compliance fees

A regulatory recovery fee or compliance fee may be used to offset the following:

• The provider’s compliance operations
• The provider’s reporting and filing requirements
• The provider’s fraud prevention and security costs

Less trustworthy sales reps may make these fees sound like they’re required to maintain compliance or security, but that’s not the case. If providers charge these fees, they should be able to explain them clearly, and they should keep the fees modest.

Many providers won’t charge recovery or compliance fees. Instead, they will account for their compliance costs in their overall pricing model.

Administrative and service fees

You may see vague line items listed as an admin fee or a service charge. These should raise red flags right away, because they’re likely just additional ways for providers to pad their profit.

If you see these charges on an invoice, you should ask what the fee covers. Request written documentation that explains the charges, and ask them to be specific.

Because providers may add these charges onto your invoice quietly and not disclose them upfront, it’s always a good idea to compare sample invoices across providers before committing to one provider.

Contractual and feature-based fees

Without naming names, some VoIP service providers have less-than-transparent pricing models. They might flash an impressively low monthly cost up front, but then tack on fees, hidden in the fine print, after the fact.

These fees may include:

• Essential features like messaging, automation, or integrations that are sold as paid add-ons (even if the marketing wasn’t clear about that upfront)
• Early termination fees that are tied to long contracts
• Low base pricing that inflates over time

It’s important to read contracts upfront and to make sure you understand exactly what you’re paying for. Ask about cancellation processes and if there is a way to lock in your rate for a specific period of time without a long contract.

Finally, check out customer reviews on sites like G2. Look for reviews that discuss hidden fees, cancellation processes, price increases, or overall pricing transparency.

Why VoIP Still Delivers up to 60% Savings

After scrolling through a long list of fees and taxes, I’m sure you may be wondering why you’re even considering switching to a VoIP service.

Here’s the good news: If you want to reduce your telecom expenses, opting for VoIP can still deliver up to 60% savings compared to traditional telecom options.

One of the major VoIP advantages, which helps reduce costs, is that cloud-based solutions eliminate major expenses such as:

• On-premise hardware maintenance
• Dedicated copper lines
• Legacy long-distance pricing (which adds up fast)
• Fragmented vendor contracts

It’s important to note that providers of legacy systems often bury taxes inside their base rates, which are higher than the base rates of VoIP providers. This tactic just masks the true cost by making it seem like there are fewer fees associated with their service.

The actual cost, of course, depends on the individual provider you choose. Nextiva, for example, prioritizes transparent pricing through our Core, Engage, and Power Suite plans. We ensure that essential features like business SMS, video meetings, and AI-powered tools are clearly included in your tier rather than hidden as surprise add-ons.

How to Evaluate a VoIP Bill Before You Buy

When you’re choosing a VoIP provider and getting budget approval, it can be frustrating to hear “it depends” when you’re asking about the cost of taxes and fees. Unfortunately, because so much is determined at local levels (including local sales tax laws), that’s the answer that’s often given.

Smart buying behavior, however, will help equip you with the information you need for evaluating providers.

The first step to smart buying is to request a sample invoice based on your expected usage and location, which should have all of the taxes and fees broken out. Take the time to separate mandated government taxes from optional provider fees and to inquire and learn more about admin or service fees.

You’ll also want to get clarity on price adjustments and additional fees, specifically:

• Frequency of fee changes and notice periods
• Contract length, exit terms, and fees (if any)
• Additional fees or costs, including set-up fees and add-on features

Transparency up front prevents frustration for the end-user later. At Nextiva, we prioritize pricing transparency, but not all providers do. Ask plenty of questions and get documentation so you’ll know exactly what you’re getting into.

Evaluating VoIP providers and have questions? Check out our VoIP FAQ for more.

You Know What You’re Paying for With Nextiva

It’s never fun to get an invoice and see a long list of taxes and fees. Unfortunately, telecom taxes aren’t optional, but they’re also not unique to VoIP service.

What matters, though, is how clearly providers explain potential costs and how responsibly and transparently they’re passed through.

Nextiva is a UCaaS platform and VoIP phone system known for straightforward pricing. We only have transparent tax pass-throughs, so you’ll always know exactly what each line on your invoice is for. We also minimize nonessential fees, ensuring that businesses understand what they’re paying for while still benefiting from the cost efficiency of modern cloud communications.