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CTIA-The Wireless Association® believes excessive and discriminatory taxes on a service discourage its use, and it makes no sense from an economic or tax fairness standpoint to place such arbitrary burdens on wireless consumers, especially when policymakers are continuing to look for additional ways to ensure affordable broadband access for all Americans.
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Taxes, Fees and Surcharges
CTIA Position:
CTIA-The Wireless Association® believes excessive and discriminatory taxes on a service discourage its use, and it makes no sense from an economic or tax fairness standpoint to place such arbitrary burdens on wireless consumers, especially when policymakers are continuing to look for additional ways to ensure affordable broadband access for all Americans. In general, a wireless tax that is no higher than the rate placed on other taxable goods and services is fair and reasonable. However, targeting certain customers – like wireless users – and imposing 16.3 percent (on average) in taxes and fees is counterproductive and will not advance broadband adoption or broadband deployment. Unfortunately, consumers in 47 states and the District of Columbia currently pay a monthly wireless tax, fee and government charge rate that exceeds the general rates on retail sales taxes for other goods and services.
To protect consumers from new discriminatory state and local wireless taxes and fees for five years while state and local governments reform their existing tax systems, the U.S. House of Representatives passed the bipartisan "Wireless Tax Fairness Act of 2011" (H.R.1002) in November 2011. CTIA and our members will continue to educate and urge U.S. Senators to pass the companion bill (S. 543) to provide millions of wireless Americans with some much needed financial relief.
As states address significant budget shortfalls, the current excessive and discriminatory approaches to wireless services are being aggressively transferred to new products and services. The U.S. Congress has recognized the unfair treatment of wireless services and is working to prevent an expansion of a broken telecommunications tax system with the Digital Goods and Services Tax Fairness Act of 2011 (H.R. 1860 and S. 971) which would establish a national framework to prevent multiple and discriminatory taxation of digital goods and services. This legislation will provide tax administrators and consumers a better understanding of how digital commerce should be taxed while continuing to encourage digital commerce to flourish and assist the nation’s economic recovery and enhance American economic competitiveness. The federal measure would prevent states and local governments from imposing multiple or discriminatory taxes on music, books and other products downloaded over the Internet with mobile devices or other Internet connections.CTIA is pleased to report that the MOBILE Cellphone Act of 2009 (H.R.690) and its companion bill (S.144) to amend the Internal Revenue Service (IRS) Code of 1986 passed and was signed into law in September 2010. This outdated IRS rule that has been repealed had required employers that provide employees with wireless devices to either treat the cost of the phone as a taxable benefit or keep ridiculously complicated paperwork documenting the purpose of every call.
CTIA strongly supports the Wireless Tax Fairness Act and the Digital Goods and Services Tax Fairness Act. We hope Congress acts swiftly to pass them so our wireless consumers receive some financial relief in these challenging economic conditions.
Key Points:
- Discriminatory Taxation on Wireless Services is Unfair and Costly to Consumers.
The average rate of taxes and fees imposed on wireless consumers is more than 16.3 percent while the average rate of taxes imposed upon general goods and services is 7.4 percent. Currently 23 states impose taxes on wireless service in excess of 15 percent per line/per month with five states above 20 percent per line/per month. 47 states and the District of Columbia impose state, local and federal taxes and fees higher than those on other goods and services. Wireless users are clearly a target for discriminatory taxes, and we do not believe consumers should pay more in taxes to use their wireless service than they pay to for other taxable goods and services. - Excessive Taxes, Fees and Surcharges Discourage Investment in Broadband Networks.
Governments at all levels now recognize that investment in broadband networks play an important role in both the short-term recovery from the current recession, as well as long-term economic growth. Economic studies across the political spectrum show that broadband networks boost productivity and economic growth by enabling businesses and governments to be more efficient. Tax policy plays an important and growing role in decisions about how and where to invest in communications networks. Excessive taxes that drive up the cost of wireless service lead consumers to cut back on wireless purchases. In turn, wireless providers have less revenue to reinvest in network improvements. - Excessive Taxation Hurts Those That Can Least Afford Communications Services.
Recent studies by the Centers for Disease Control illustrate how wireless taxes and fees are regressive in nature. According to the CDC survey (released in June 2011), more than one-third (39 percent) of adults living in poverty or living near poverty live in wireless-only households. Taxing wireless services at an average rate of 16.3 percent every month adds up quickly and takes a toll on those that can least afford it. Unfortunately, some cities and states with high poverty rates levy some of the highest taxes in the country. In fact, consumers in 47 states and the District of Columbia currently pay a monthly wireless tax, fee and government charge rate that exceeds the general rates on retail sales taxes for other goods and services. The following states impose taxes, fees, and surcharges exceeding 15 percent of the bill: Nebraska (23.69%); Washington (23%); New York (22.83%); Florida (21.62%); Illinois (20.90%); Rhode Island (19.67%); Missouri (19.28%); Pennsylvania (19.13%); Kansas (18.39%); Texas (17.48%); Maryland (17.28%); Utah (17.21%); South Dakota (17.07%); Arizona (17.02%); Washington, DC (16.63%); Tennessee (16.63%); Arkansas (16.12%); Oklahoma (15.79%); North Dakota (15.73%); California (15.72%); New Mexico (15.57%); Kentucky (15.47%); and Colorado (15.45%).
Last Updated: November 2011
