Definitions of Taxes and Surcharges

Nexxis is obligated to administer its customer billing in accordance with the laws and regulations set forth by tax authorities and regulatory agencies at all levels of government (i.e., federal, state, and local). Various jurisdictions and government agencies assess taxes, fees, and surcharges for telephone-related services and programs such as E911 (Emergency Services) that telecommunications providers like Nexxis are obligated to collect from their customers and remit to these agencies. Although not required, there are also surcharges, which are not taxes, that telecommunications providers are permitted to pass through to customers such as the Federal Universal Service Fund.

The information below provides a representative sample of the most common types of federal, state, and local taxes, fees, and surcharges that are imposed on Nexxis by government agencies and taxing authorities. These are costs that Nexxis must cover to stay in business. Nexxis separately itemizes these taxes, surcharges, and fees on customer invoices rather than include these amounts in higher rates for services. Nexxis applies taxes, fees, or surcharges depending on the types of services subscribed to by its end-user customers. Regulatory fees impacting the telecommunications industry are constantly evolving and are subject to change without notice. If additional or different taxes, surcharges, or fees are imposed on Nexxis in the future, Nexxis will include those taxes, fees, or surcharges in applicable billings. More is available on the Federal Communications Commission (FCC) website at www.fcc.gov.

Sales Tax - Sales tax varies by state, and in some states, it may vary by locality. This is a percentage of applicable charges for Equipment and, Voice, Video, and Internet service.

District Tax - These are taxes imposed on the privilege of making sales within a state or a special district (e.g., a rapid transit authority, school district, development zone, etc.).

Federal Excise Tax - The federal government requires this tax on some types of voice services. The rate is applied to local service billed separately from long distance service. This is for Voice service.

State and Local Excise Tax - Excise tax is imposed on payments received for the privilege of sending or receiving telecommunications messages.

State Communications Tax - This state tax is imposed on the sale of certain communications services. This is a percentage of applicable charges for Voice, Video and, Internet service.

Cost Recovery Fee - This fee is applied to all voice related services and used to recover some or all of certain costs that Nexxis incurs, including fees, such as the Local Number Porting (LNP), and costs associated with resources, systems, and services required for complying with its regulatory obligations including, upkeep of our customer and E911 database, legal, regulatory, administrative, and other requirements for federal, state, and local reporting and filings, for the calculation and payment of those and other fees associated with compliance and regulatory requirements, for costs incurred by reporting and managing payments to third party telecommunications services providers, telephone number management, and robocall mitigation requirements. This fee is not a government-mandated fee or tax, and it does not include federal or state Universal Service Fund fees charged separately.

Federal Cost Recovery Fee - This fee is assessed by Nexxis to recover amounts remitted to support the Telecommunications Relay Service (TRS). The TRS is used to help pay for relay services that transmit and translate calls for people with hearing or speech disabilities.

E911 Taxes and Fees - These taxes and fees are imposed at the State, County, or local levels in order to fund E911 Emergency Services. This provides funding for the operation of 911 emergency telecommunications services in your area. Emergency personnel must have the capability to identify the location of a caller when they dial 911. The fee, which is applied per access line, funds communications systems that support emergency and quick response police, fire, and ambulance services with identification of phone number and location. Customers pay for this service and other 911 communication costs through state and county 911 surcharges. Not all counties have the 911 system yet but may collect it for future implementation.

Federal Universal Service Fund - The federal Universal Service Fund (USF) is established by the Federal Communications Commission (FCC) and provides support to enable access to telecommunications and broadband services for those living in rural and high-cost areas, low-income consumers, rural health care facilities, and schools and libraries. This fee covers the cost that all telecommunications and interconnected VoIP providers, including Nexxis, are required to pay into the federal USF. The FCC sets the applicable USF rate on a quarterly basis, and it is subject to change. Certain states also impose a fee for state USF funds, based on the service location.