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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Litigation From time to time, the Company and its affiliates are involved in litigation and other legal disputes or regulatory inquiries that arise in the ordinary course of business. Any claims or regulatory actions against the Company and its affiliates, whether meritorious or not, could be time consuming and costly, and could divert significant operational resources. The outcomes of such matters are subject to inherent uncertainties, carrying the potential for unfavorable rulings that could include monetary damages and injunctive relief. The Company does not believe, based on current knowledge, that any legal proceedings or claims currently exist which, after giving effect to existing accrued liabilities, are likely to have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. It is the Company’s policy to expense as incurred legal fees related to any litigation. Non-Income Related Taxes The Company historically did not collect sales tax in states where it was not able to quantify the appropriate sales tax to be collected. For the periods 2017 through 2021, the Company believed it was probable that a sales tax liability existed for its corporate accounts; however, the sales tax liability for its corporate customers was not estimable until the third quarter of 2022. Prior to the third quarter of 2022, the Company was unable to determine which of these customers were either exempt organizations or resellers and were thus exempt from sales tax. In the third quarter of 2022, the Company completed an analysis of the pool of corporate customers subject to sales tax in order to estimate the range of sales tax liability on its corporate revenues. As a result, the Company recorded an accrual of $8.0 million during the quarter ended September 30, 2022 within accounts payable and accrued expenses on the Company’s Consolidated Balance Sheets, as the exposure became both probable and estimable. Additionally, the Company started sales tax collection and remittance on corporate sales in applicable states in August 2022. In the year ended December 31, 2021, the Company determined that a sales tax liability was probable and it developed a methodology to estimate the sales tax liability for the SoHo revenue stream during the affected periods from 2017 through 2021. The Company has taken the same approach in estimating the SoHo liability for the year ended December 31, 2022. Accordingly, the Company has recorded a sales tax expense within general and administrative expenses in the Consolidated Statements of Income of $9.4 million for both SoHo and Corporate sales for the year ended December 31, 2022, and $8.6 million the year ended December 31, 2021 for SoHo sales only. The Company has initiated a Voluntary Disclosure Agreement (“VDA”) process in the third quarter of 2022, to voluntarily report the prior period sales tax liability. The process is expected to be completed within 6-12 months. While the Company believes that it has sufficiently reserved for historical sales tax liabilities under ASC 450, some state taxing authorities may still challenge the Company’s sales tax position, the methodology used to calculate the sales tax liability, and may also impose other taxes on our business. Taxing authorities may successfully assert that the Company should have collected, or in the future should collect sales and use, telecommunications or similar taxes, and could be subject to liability with respect to past or future tax, which could adversely affect the Company’s operating results. The Company will continue to review and monitor the impact of sales tax rules in order to mitigate any associated risks on its business. As such, the Company has a $13.1 million and $8.6 million sales tax liability within accounts payable and accrued expenses on the Company’s Consolidated Balance Sheets as of December 31, 2022 and 2021, respectively. In conjunction with the state voluntary disclosure agreement process the Company is remitting sales tax for SoHo and corporate sales for current and prior periods.

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