This year companies subject to FCC reporting must file their annual Form 499A by April 3, 2017, for reporting 2016 revenues. If any of the reported revenue was sold to resellers, the filer may report it as wholesale revenue NOT subject to Federal Universal Service Fund (FUSF) assessments if its reseller customer meets the following conditions:
The reseller purchased service(s) for resale, at least in part, and the reseller is incorporating the purchased services into its own offerings which are, at least in part, assessable U.S. telecommunications or interconnected VoIP service; and
The reseller is either directly contributing or has a reasonable expectation that another entity in the downstream chain of resellers directly contributes to the federal universal service support mechanisms on the assessable portion of revenue from offerings that incorporate the purchased services.
Exemption Certificates are Required
The seller must have an exemption certificate on file for each reseller, stating that they meet the two conditions above. And, the exemption certificate must be specific to the year for which the exemption applies. A new exemption certificate is required for each year, even if the service and its exemption status did not change. The applicable date must be on the exemption certificate and signed prior to the filing of the 499A.
To stand up to an audit, the seller will need to be able to produce the certification documentation. It is helpful to use the Safe Harbor language on the exemption certificates.
- The filer must have, at a minimum, the following information about each reseller for each calendar year and keep this information for 5 years:
- 499 Filer ID
- Legal Name, Address
- Name and telephone number of contact person
- Annual certification by the reseller regarding its reseller status – state the calendar year the certificate covers and have it signed prior to submitting the 499A on April 1 the next year.
- A filer may demonstrate that it has a reasonable expectation that a customer is a reseller with respect to purchased service(s) by providing a certificate signed each calendar year by the reseller customer that specifies which services the customer is (or is not) purchasing for resale pursuant the certificate. The reseller customer must sign an oath consistent with this wording:
“I certify under penalty of perjury that the company is purchasing service(s) for resale, at least in part, and that the company is incorporating the purchased services into its own offerings which are, at least in part, assessable U.S. telecommunications or interconnected Voice over Internet Protocol services. I also certify under penalty of perjury that the company either directly contributes or has a reasonable expectation that another entity in the downstream chain of resellers directly contributes to the federal universal service support mechanisms on the assessable portion of revenues from offerings that incorporate the purchased services.”
Conditions when Exemption Certificates are NOT Required
A FUSF exemption certificate will not be required for services used for INTRAstate communication. Keep in mind that private line services are considered entirely interstate if the service is used 10% or more for interstate transmission of voice or data. If the 499A filer lists private line service revenue as intrastate, they may be asked to support that categorization with a statement from their customer about how the service is used. In the interest of efficiency, it is best to get the customer to provide that information upon placing an order rather than trying to obtain it after the fact.
An exemption certificate is not required for services that are broadband services equipped by the seller for Internet access. However, if it is the reseller that provisions the service for Internet access, the service provided by the seller is not exempt from FUSF. Note that facilities-based filers who equip broadband services for Internet access are also required to report those connections using the FCC 477 report.
Documentation for Audits (excerpts from USAC website)
Documentation to support the accuracy of carrier’s carrier revenue classification, such as:
Listing of reseller customers– include legal name, Filer 499 ID, legal address, contact information, revenue amount, reported Form 499A Line, description of specific products/services which are resold, and the date in which those products were purchased.
Documentation to support reseller classification, such as, but not limited to, annual reseller certificates, and/or other reliable proof in accordance with the FCC Rules and Instructions.
Documentation to support the accuracy of revenues from resellers, such as:
- Carrier Access Billing System report
- Universal Service support revenue
Documentation to support the classification of products, such as:
- Traffic studies and minutes of use analyses
- Billing system reports
- Call Detail Records (CDRs)
- Methodology for good-faith estimates
- For private line revenues, a listing of circuits including the revenues generated by each circuit and the end-points of each circuit (Note: The revenues in the listing should agree to amounts reported as private line revenues on the FCC Form 499A)
Documentation to support the jurisdiction classification of private line circuits, such as, a traffic study, access service request forms noting percent interstate usage (PIU), documentation from customers certifying traffic carried over circuits, or any other reasonable means in accordance with the FCC Rules and Instructions.
Best Exemption Certificate Practices
Keep the FUSF exemption certificate simple. Adding extra information to the certificate confuses both resellers and USAC, the FCC’s FUSF agent.
Consider using the FCC exemption certificate safe harbor language and oath.
Have a convenient archive of past and current exemption certificates. Retain exemption certificates for five (5) years, along with supplemental documentation noted above. Insure that the archive is accessible to others in the company for continuity.
Have a plan for sending out updates in timely manner. Follow up to insure all are in hand prior to April of the following year. Have a methodology for obtaining exemption certificates for new sales throughout the year.
Next Scheduled TMI Seminar & Workshop
Our Spring 2017 Seminar and Workshop is May 9 - 10 in Maitland, FL !
