Cell phone taxes: Did you know they’re triple the sales tax rate?

Imagine purchasing a pair of shoes and being told the sales tax is 21 percent instead of the usual Palm Beach County 7 percent sales tax.

Many consumers would no doubt be outraged, but every month, that’s the tax rate Floridians pay on their cellular phone service bills, often without noticing the charge. It’s a tax once considered a levy on wealthier consumers, but in the mass ownership cellphone era it’s become a universal tax.


In fact, Florida has the nation’s 10th highest state and local tax rate on wireless service, at 14.76 percent. Combined with federal taxes, Florida wireless phone customers pay 21.11 percent in taxes, a Tax Foundation report released this week found.

Nationwide, the wireless service taxes that often go unnoticed by consumers amount to $17.1 billion a year and account for 18.5 percent of the average U.S. customer’s wireless bill.

A typical American household with four wireless phones paying $100 per month for wireless voice service can expect to pay about $221 per year in wireless taxes, fee and surcharges, down from $223 in 2016, the report states.

Scott Mackey, one of the report’s authors and a managing partner at Montpelier, Vt.-based Leonine Public Affairs, said Thursday, “Some of it is an accident of history. Back when the tel-com industry was a regulated monopoly, government put taxes on the bills and they were hidden. The rates approved included taxes. Later, Congress regulated the taxes and you could not do that any more.”

The taxes include the federal Universal Service Fee, a tax that companies are allowed to pass on to consumers, 911 service fees and state and local taxes. The USF is a tax used to subsidize telephone services in rural areas, schools and libraries.

“All companies and customers pay into this huge pot, and it is redistributed,” Mackey said.

Combined, the taxes add up.

“Just about every level of government you can think of has the ability to put a tax on your bill,” Mackey said.

State taxes go to the state general revenue funds. Local government is allowed to charge a city communications tax.

In addition to the taxes, wireless customers also pay non-service related fees such as an administrative fee and a regulatory cost recovery charge.

Mackey said that Floridians have it better than they once did. The state used to rank fifth highest in wireless taxes instead of 10th. In 2015, Florida reduced the communications services tax by 1.5 cents per dollar.

With state and local governments continuing to face revenue challenges, the wireless industry and its customers remain an attractive target for raising new revenues.

It’s also worth noting that the “portable” or car phone that was once considered a luxury item for the wealthy years ago has become more affordable and deemed a necessity for most people.

“What started out as a luxury tax is now a necessity, levied at a rate three times higher than most of other stuff you buy in the store,” Mackey said.

Another reason consumers might not notice the wireless taxes is that many only look at the total bill. Because wireless service is highly competitive, the cost has decreased in the last few years.

Since 2008, average wireless monthly bills have dropped from just under $50 per month to $41.50 per month — a 17 percent reduction — while wireless taxes have increased from 15.1 percent to 18.5 percent, a 22 percent increase.

“To some extent, government has been able to benefit because the overall bill is falling,” Mackey said. “Especially if you are on auto-pay, all you care about is the total amount.”

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