Taxes, Fees & Surcharges  

CTIA Position:
CTIA-The Wireless Association® believes excessive and discriminatory taxes on a service discourage its use, and it makes no sense 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. However, targeting only certain customers – like wireless users – and imposing 15% (on average) in taxes and fees is not right. Over the past four years, the taxes and fees on wireless products and services have increased four times faster than the taxes imposed upon other taxable goods and services.

In recognition of the excessive and discriminatory treatment that wireless consumers face in the states, legislation has recently been introduced in the U.S. House of Representatives, the “Cell Tax Fairness Act of 2009” (H.R.1521) and the U.S. Senate’s companion bill, the “Mobile Wireless Tax Fairness Act of 2009” (S.1192), that would protect consumers from allowing state and local governments from adding any new discriminatory taxes and fees to that burden for five years while states and localities work to reform the existing tax system. 

In addition, Congress is also considering the MOBILE Cell Phone Act of 2009 (H.R.690) and its companion bill (S.144) to amend the Internal Revenue Service (IRS) Code of 1986, which would remove cell phones from listed property. Currently, the IRS rule states that if your employer provides you with a wireless device (e.g. smart phone or cell phone), you must keep a detailed log of all your activity on the work-provided wireless device. Then your employer must compile that data for the IRS to tax you for any personal calls, e-mails or texts made with that device. This use is called “listed property.”

Passing these pieces of legislation is a very modest ask, and one on which we hope that Congress will act swiftly.

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 15% while the average rate of taxes imposed upon general goods and services is less than half that amount. The average taxes on wireless services also increased four times faster than the rate of taxes on other taxable goods and services between January 2003 and July 2007. 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 Taxation Hurts Those Who 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, 27% of households in poverty have wireless service as their only telecommunications service and 59% of “wireless only” households have incomes below $40,000 per year. Taxing wireless services at an average rate of 15% every month adds up quickly and takes a toll on those that can least afford it. As stated in June of 2007 by the NCSL Executive Committee “many government officials have worked to develop programs that bridge the so-called “digital divide,” only to raise taxes on those very same communications services that might be three to five times higher than the general sales tax, thus punishing the people they are trying to assist,” highlighting the fundamental disconnect between the public policy goals and the current taxes applicable to these services.
• 21 States, Including Washington, DC Have Double Digit Taxes, Fees, and Surcharges on Wireless Service. 
  Nearly a decade after the National Governors Association (NGA) and the National Conference of State Legislatures (NCSL) urged states to reform and modernize their telecommunications taxes, most states have failed to enact meaningful reforms that benefit consumers. In fact, in most states the situation has worsened. Five states (Nebraska, Washington, Florida, New York, and Missouri) are each above 15% in state and local wireless taxes, fees, and surcharges.
• State and Local Tax Policies Should Encourage Private Sector Investment in Broadband Networks. 
  Governments at all levels now recognize that investment in broadband networks will play an important role in both the short-term recovery from the current recession, as well as long-term economic growth. A number of new studies from economists 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.
• The IRS Listed Property Rule on Employer-Provided Cell Phones is Outdated and Should Be Repealed. 
  A repeal of the archaic listed property rule is the most sensible and fair action to take on behalf of every American who uses their wireless device for both professional and personal purposes. In a statement issued on June 16, 2009, IRS Commissioner Douglas Shulman and U.S. Treasury Secretary Timothy Geithner agreed and said that “the passage of time, advances in technology, and the nature of communication in the modern workplace have rendered this law obsolete.” Congress is now considering the MOBILE Cell Phone Act of 2009 (H.R.690) and its companion bill (S.144) to amend the Internal Revenue Code of 1986 and remove cell phones from listed property, which would alleviate consumers and businesses across America from burdensome substantiation requirements.