For more on corporate taxes, see Kyle's recent study "U.S. Multinationals Paid More Than $100 Billion in Foreign Income Taxes."
- How Much Is Your Cell Phone Taxed? New Study Has State-by-State Rates
How Much Is Your Cell Phone Taxed? New Study Has State-by-State Rates
State-Local Cell Phone Taxes Average 11%; Five States Top 20%
Washington, DC, February 18, 2011 - Taxes on mobile phones are significantly higher than many other common consumer items and are often hidden or obscured by state and local governments, according to a new analysis from the Tax Foundation. Included in the report are the following findings:
- The average U.S. wireless consumer pays taxes and fees of 16.26 percent, of which state-local charges average 11.21 percent.
- 23 states have average state-local wireless taxes and fees in excess of 10 percent; with federal taxes, some cell phone subscribers pay more than 20 percent in taxes.
- States favor the taxes because they can raise revenue in a relatively hidden way. For example, Texas sued Sprint because the company listed a state tax as a line-item in its bill, rather than hiding it from customers.
- Universal Service Fund (USF) charges are modest in most states but particularly excessive in Nebraska and Kansas, where they exceed 4 percent of the wireless bill.
- Cell phones are taxed at a much higher level than other consumer items, even as much as or more than alcohol or cigarettes. In Nebraska, the combined federal-state-local average rate is 23.69 percent, and in four other states (Florida, Illinois, New York, and Washington), it exceeds 20 percent.
- Notably among local jurisdictions, Baltimore, Maryland imposes a $4 per line per month tax on wireless users, on top of federal and state charges. Nearby Montgomery County, Maryland imposes a $3.50 per line per month tax. These per line charges are especially burdensome on low-priced "family share" plans.
Legislation entitled the Cell Phone Tax Moratorium Act that would restrict excessive state and local wireless taxes has been regularly introduced in Congress.
"Cell phone users are overtaxed relative to consumers of other goods, and at risk of double taxation," writes study author and Tax Foundation Director of State Projects Joseph Henchman. "Additionally, the wide number of taxing authorities and the wide variety in rates makes tracking problematic and burdensome."
Tax Foundation Fiscal Fact No. 259, "States Target Cell Phones for Stealth, Burdensome Taxes," is available online.