Your Wireless Bill: Hefty Taxes Included

November 3, 2014 | By: TaxCure Staff

cell phone taxesMany people think that taxes comprise their federal income taxes and state taxes. Others remember that they pay sales taxes as well. However, the vast majority of consumers probably don’t think about the other taxes that they are paying on a regular basis. Among those taxes are those charged as part of your wireless bill.

The Tax Foundation recently released a report on wireless bills and taxes, and what they found might be surprising to a number of consumers.

Wireless Taxes Account for a Large Part of Your Bill

When you first sign up for wireless service, you are often quoted a price that seems quite reasonable and affordable. But when that bill comes, all of a sudden things cost much more. It’s not that your service costs anymore. Rather, it’s the fact that the federal government, your state government, and probably your local government all collect taxes as part of your wireless usage. These taxes are tacked on to your bill.

According to the Tax Foundation, the average wireless bill is comprised of 17.05 percent in taxes. In some states, that number is higher. And, according to the report, there are some local areas where as much as 35 percent of your wireless bill could actually be composed of taxes. Localities like New York City, Chicago, and Baltimore add per-line fees and other charges to the bill. It’s one way to boost revenue since wireless is an increasingly large part of our everyday lives.

In many cases, it’s not the federal government that accounts for the large charges. First of all, there is a 5.82 percent charge. That’s the federal portion, which includes Universal Service Fund fees and an excise tax. After that, the taxes collected depend on the states and cities. States and cities can charge for 9-1-1 service, sales tax, schools district utility sales tax, local and state excises taxes, and more. It starts to add up fast, and you can see how a little bit here and a little bit there can add between $5 and $20 (or more) to your total bill, depending on where you live, and what plan you are on.

What Can You Do About It?

Unfortunately, with taxes like these, there isn’t a whole lot you can do beyond contacting your legislative representatives and talking about your concerns — and asking for relief. It is possible in some cases to switch to lower-cost plans or switch to plans that don’t come with some of the frills that are taxed.

In some cases, it can make sense to use prepaid cell phones. These types of services allow you to buy minutes. You might be charged a sales tax when you purchase the minutes, but other taxes are usually included in the cost of the minutes. That way, there aren’t many surprises when you go to pay for your minutes. However, while this might work well for families that don’t use cell phones a great deal, it’s more difficult to cost-effectively make the prepaid cell phone work when more minutes are used.

Run the numbers for yourself, and look at the taxes you pay. Only then can you make decisions that work for your situation.