Congress to Consider Cell Phone Tax Rules

March 22, 2011

The Wireless Tax Fairness Act(HR 1002), a bill which would impose a five year moratorium on new taxes and fees for wireless services, was introduced last week in the House of Representatives.

A recently published study shows that the average consumer pays 16.3% in wireless taxes and fees as opposed to just 7.4% in sales taxes, with the disparity growing in recent years. Five states now have taxes and fees (when including federal taxes) which exceed a 20% rate. These five states are: Nebraska (24%), Washington(23%), New York(23%), Florida(22%), and Illinois(21%).

Much of the recent increase has been driven by the growth in federal USF rates from 2% in 2003 to over 5% today. Other drivers have included increases in taxes by states and municipalities, as well as fees which are really taxes in disguise. Chicago, for example, raised their 911 fee one dollar in anticipation for having to ramp up security in preparation for the 2016 Olympic games. The city has yet to remove the fee upon losing the bid.

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