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Wireless Device Service Fees & Taxes Out of Sight

Uncle-Sam-iPhone-TaxWireless communication services may be invisible, but the hefty tax bill attached to them can make a major household budget dent that’s hard to ignore.  A new report shows wireless telephone service fees and taxes are now at an all-time high.  In fact, with an average tax rate of 17.05%, the taxes you pay to use your wireless phone are now more than double most general state and local
sales taxes.

The Tax Foundation has released an extensive study comparing wireless device use tax rates to general sales taxes for each state as Congress is preparing to debate whether to levy new taxes on wireless Internet services.

Of the average 17.05% rate, 5.82% is a federal tax and the rest is made up of a combination of state and local taxes and fees.

The report shows consumers in seven states pay wireless taxes and fees that exceed 20% of their bills.  Those seven states include:

Washington – 18.6% + 5.82% federal tax

Nebraska – 18.48% + 5.82% federal tax

New York – 17.74% + 5.82% federal tax

Florida – 16.55% + 5.82% federal tax

Illinois – 15.81% + 5.82% federal tax

Rhode Island – 14.58% + 5.82% federal tax

Missouri – 14.58% + 5.82% federal tax

The state of Kansas is ranked 11th on the list with state and local wireless taxes and fees amounting to 12.87%.  Iowa is included with states that charge lower wireless taxes ranking 31st at 8.61%.  The states with the lowest state and local rates include Oregon (1.76%), Nevada (1.86%), Idaho (2.62%), Montana (6%) and West Virginia (6.15%).

The national average for general sales and use tax is 7.51%. So the report’s findings confirm taxes and fees on wireless telephone services are more than twice the average sales tax rates for most other taxable goods and services. In fact, if you happen to live in the cities of Chicago, Baltimore, Omaha or New York City, your effective tax rate for wireless services are in excess of 25% of the total bill.

The Tax Foundation’s summary calls the taxes and fees “excessive” and points out that “cell phones are increasingly the sole means of communication and connectivity for many Americans, particularly those struggling to overcome poverty.”  A government survey confirms that more than 56% of low income adults rely only on wireless communications and nearly 40% of all adults use only wireless telephone services.

The report is adding fuel to the heated debate about taxing access to the Internet and charging extra fees for high-speed Internet delivery services.  Currently, the Internet is considered an “information service” and access to it is not taxed.  The Federal Communications Commission has been in hot water since last April when a series of public hearings were launched on its plan to reclassify the Internet as “telecommunication services”.  The reclassification would make it easier to not only regulate, but also tax.

Reclassification has been a political hot potato.  Many Democrats argue it would help preserve the Internet as a communications tool for all Americans by guaranteeing unrestricted access while Republicans argue regulations would lead to taxation and eventual access restrictions because of higher costs.

Some Internet providers have requested Internet reclassification to support their efforts to charge website owners higher rates for faster consumer access.  Opponents argue that would allow only larger, richer companies to have more accessible ‘fast lane’ websites giving them an unfair advantage over competitors in the access ‘slow lane’.

Currently, a federal moratorium is in effect on state and local internet access taxes.  The news about the high wireless taxes on communications devices could put pressure on Congress to not only keep the moratorium in place, but also regulate the amount of state and local taxes that can be charged on all wireless services.


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