Key insights
- The CPUC’s reclassification and the BOE’s actions suggest California is starting to treat VoIP providers more like traditional utilities than lightly regulated services.
- Without federal clarification, similar approaches could emerge in other states, adding new layers of compliance to track.
- Early positions on service classification, intrastate revenue, and valuation often become the reference point regulators return to later, shaping audits, inquiries, and assessments over time.
Recent actions by California regulatory agencies reflect a coordinated expansion of state oversight of interconnected Voice over Internet Protocol (VoIP) providers.
These developments materially increase compliance, reporting, and financial exposure for affected providers and underscore the consequences of continued federal inaction on VoIP jurisdiction.
Assess how new rules could affect your filings and costs.
BOE tax assessment expansion
Following the California Public Utilities Commission (CPUC) decision to reclassify interconnected VoIP services as traditional telephony, other state agencies — most notably the California State Board of Equalization (BOE) — have moved to extend tax and reporting obligations to VoIP providers operating in the state.
For many providers, these changes may surface first as a filing request, a valuation question, or an unexpected notice — often before there’s time to fully assess the downstream impact. What was once treated as a limited regulatory issue is now touching tax reporting, revenue attribution, and property assessment, with real cost and operational implications.
CPUC reclassification and user fee expansion
When the CPUC issued Decision 24 11 003, it reclassified interconnected VoIP providers as “telephone corporations” and established the Digital Voice Fixed (DVF) and Digital Voice Nomadic (DVN) service categories. As a result, VoIP providers are now subject to CPUC user fees and expanded reporting scrutiny through the Telecommunications User Fee Filing System (TUFFS).
BOE assertion of property tax jurisdiction
Building on CPUC Decision 24 11 003, the BOE has begun notifying VoIP providers that, effective the January 1, 2026 lien date, it will assert centralized assessment jurisdiction over interconnected VoIP providers as “telecommunications companies.”
Under California’s constitution, the BOE centrally assesses regulated telephone companies for property tax purposes. Based on the CPUC’s reclassification:
- DVF and DVN VoIP providers will be treated as BOE-assessed telecommunications companies
- Affected providers must file annual BOE property tax statements by March 1, beginning in 2026
- Additional valuation and reporting guidance is expected in a forthcoming Letter to Assessors (LTA 2025/040)
Federal preemption and industry challenge
This state level expansion is occurring while a federal challenge remains unresolved. The Cloud Communications Alliance (CCA) and Cloud Voice Alliance (CVA) have filed a Petition for Declaratory Ruling with the FCC, seeking reaffirmation of federal preemption over interconnected VoIP services under longstanding FCC precedent, including the Vonage Preemption Order.
The petition challenges California’s fixed versus nomadic framework, registration and bonding requirements, and associated economic burdens.
So far, the FCC has taken no public action on the petition. Without federal clarification, California agencies have proceeded to extend both regulatory and tax authority over VoIP providers.
For VoIP providers, California’s actions turn classification questions into compliance and cost questions — often faster than expected.
As state agencies move forward independently of federal action, many providers are reassessing long‑standing assumptions about how their services are classified, where revenue is sourced, and which filings apply. For organizations with multi‑state operations or limited prior exposure to utility‑style regulation, these questions can surface quickly with little precedent to rely on.
Practical implications for VoIP providers
- Expanded compliance scope — VoIP providers must now address CPUC user fee obligations, enhanced TUFFS scrutiny, and BOE property tax reporting.
- Increased financial exposure — Centralized BOE assessment introduces valuation methodologies traditionally applied to incumbent utilities.
- Risk of broader adoption — California’s approach may serve as a model for other states absent reaffirmed federal preemption.
- Operational burden — Disputes over intrastate revenue attribution and classification are likely to increase.
Key takeaways
- CPUC Decision 24 11 003 reclassified interconnected VoIP providers as telephone corporations, triggering user fee and reporting obligations.
- The BOE is extending centralized property tax assessment to VoIP providers effective January 1, 2026.
- Provider specific disputes, such as intrastate revenue overstatements in TUFFS, illustrate the practical consequences of this regulatory shift.
- Continued FCC inaction has enabled coordinated state level expansion of regulatory and tax authority over VoIP services.
How CLA can help with regulatory developments
For VoIP providers trying to understand how these changes apply to their specific facts, the challenge often isn’t awareness — it’s interpretation. Questions around service classification, intrastate revenue, and valuation approaches tend to be highly fact‑dependent, and early assumptions can shape exposure for years.
CLA’s telecom team can work with your organization to map out how these changes apply to your specific services and revenue streams, offering guidance on:
- Product and service taxability reviews
- Quantifying potential exposure
- Compliance support, including return preparation and payment remittance
- California BOE filings, valuations, and audit defense
For providers operating in or into California, now is a good time to take stock — especially before first filings or assessments are due. A brief conversation can help clarify where obligations may be expanding and where there may be room for reasonable positions, documentation, or planning.