A complicated cell phone bill can make it difficult for consumers to know exactly how much they are paying in taxes for their wireless service. The Tax Foundation, a non-profit think tank that collects data and publishes research studies on tax policies at the federal and state levels, has revealed that “U.S. wireless consumers pay an average 17.18 percent in taxes and fees on their cell phone bill, including 11.36 percent in state and local charges, according to a newly released study that identifies and calculates wireless taxes and fees.”
In the past decade, there has been a sharp increase in the number of cell phone users. The number has jumped from 48.7 million users in 1997 to 321.7 million in 2012. In some states, the combination of federal, state and local charges results in cell phone taxes exceeding the 20 percent mark.
According to data collected by the Tax Foundation, the U.S. states with the highest combined federal, state and local taxes and fees on wireless service are:
- Nebraska: 24.49 percent
- Washington: 24.44 percent
- New York: 23.67 percent
- Florida: 22.41 percent
- Illinois: 21.76 percent
The U.S. states with the lowest combined federal, state and local taxes on wireless service are:
- Oregon: 7.67 percent
- Nevada: 7.95 percent
- Idaho: 8.10 percent
- Montana: 11.91 percent
- Delaware: 12.10 percent
A complex cell phone bill often hides extra taxes. Most consumers are not even aware of how much they are paying in taxes due to the complexity of the bill.
Many times, taxpayers have to pay double taxes for their wireless service. Seven states, namely New York, Kentucky, Indiana, North Dakota, Pennsylvania, Rhode Island, and South Dakota, impose sales taxes for wireless service on customers and gross receipts taxes on wireless service providers. Even gross receipts taxes are ultimately transferred to consumers by wireless service providers.
State and local governments have targeted many wireless service providers for charging higher taxes. Still, what taxpayers are paying currently is much higher.