Cellphone Taxes Often Top 20 Percent
Cellphone users are “overtaxed,” often with hidden charges, and the combined federal, state and local rates can top 20 percent, according to the Tax Foundation.
The number of cellphone subscribers has grown from 48.7 million in 1997 to 321 million in 2012 — more than the official U.S. population — and 34 percent of households now use only wireless phones.
“This trend toward cellphones has not gone unnoticed by state and local governments, many of which have targeted wireless services for higher taxes,” the Tax Foundation observes.
American cellphone users pay an average of 17.18 percent in taxes and fees on their cellphone bill — an average of 11.36 percent in state and local charges, plus federal charges.
The highest combined rate is in Nebraska, 24.49 percent, including the state and local rate of 18.67 percent.
The combined rate exceeds 20 percent in six other states — Washington, New York, Florida, Illinois, Rhode Island, and Missouri.
More than half of all states, 26, have an average state-local rate over 10 percent.
Oregon has the lowest combined rate, 7.67 percent, thanks to a state-local rate of just 1.85 percent. Only two other states have a combined rate of less than 10 percent — Nevada (7.95 percent) and Idaho (8.1 percent).
States favor cellphone taxes “because they can raise revenue in a relatively hidden way,” according to the Foundation, which points out that Texas “even sued Sprint because the phone company listed a state tax as a line item on its bill rather than hiding it from customers.”
In addition to sales taxes on cellphones, seven states also levy gross receipts taxes on wireless service providers, and those taxes are passed along to customers in higher prices.
“Cellphone users are overtaxed relative to consumers of other goods and at risk of double taxation,” the Foundation concludes.
“State and local governments should not single out one product for stealth tax increases as they are doing with wireless services.”
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