How Much Is Your Cell Phone Taxed?
The Tax Foundation recently published a new study of state-by-state cell phone tax rates, noting, “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 Tax Foundation analysis (Fiscal Fact #259).
Their news release provided these additional findings (emphases in the original):
- 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.
Virginia ranked 43rd among the 50 states and the District of Columbia with an average state-local tax rate of 6.56%. When combined with federal taxes, Virginians pay a 11.61% combined tax rate. By comparison, Marylanders pay a 17.28% combined rate while D.C. residents pay a combined tax rate of 16.63%.
Now that’s a reason for living on the west and south of the Potomac.