Are you the owner of a cell phone? If so, did you know that on a monthly basis you may be paying more in taxes for your cell phone than what you pay for regular goods and services? In fact, between the years of 2007 and 2011, the wireless tax rate increased at a rate three times faster than any other taxable good and service. Last year, the US House of Representatives passed the “Wireless Tax Fairness Act” which would prohibit local and state governments from adding new taxes and fees on specific communications services, including your wireless bill, for five years.
Currently, the federal rate for wireless taxes and fees is around 5.05%. However, the local and state wireless tax rates vary by state. Surprisingly, the top three states with the highest rates of local and state wireless tax rates are Nebraska, Washington, and New York. In Nebraska, the local and state wireless tax rate is 18.64%. That figure is more than double the local and state sales tax in Nebraska which is 7%. In some jurisdictions in Nebraska, consumers may pay up to a whopping 24% in local and state wireless taxes. CTIA, the Wireless Association, recently reported that approximately 1.5 million Nebraska consumers with wireless subscriptions pay an average of $48 per month in local and state wireless taxes. This means that Nebraska consumers carry a tax burden of $140 million dollars a year, to simply carry a cell phone.
In Washington, the local and state sales tax is 9%, while the local and state wireless tax rate is 17.95%. Rounding out the top three, is the state of New York. In New York, the average local and state sales tax is 8.25%, while the local and state wireless rate is 17.78%. Other states rounding out the top ten with high local and state wireless tax rates include: Florida, Illinois, Rhode Island, Missouri, Pennsylvania, Kansas, and Texas.
If you are trying to avoid paying the most in local and state wireless taxes, then Oregon is the state for you. Interestingly enough, Oregon does not have a local and state sales tax. Their average local and state wireless tax rate is only 1.81%. Conversely, Oregon’s local and state wireless tax rate is around six times less than Nebraska’s local and state wireless tax rate. Next to Oregon, Nevada has the second lowest local and state wireless tax rate at 2.08%. However, Nevada has a local and state sales tax of 7.91%. Above Nevada, Idaho is the third lowest with a local and state wireless tax rate at 2.20%, while its sales tax is 6%. Other states with lower wireless tax rates include: Montana, West Virginia, Delaware, Louisiana, Virginia, Alaska, Connecticut, Maine, and Michigan.
Hopefully with the possible passing of the “Wireless Tax Fairness Act” by the Senate, wireless consumers may receive some relief from local and state wireless taxes. If not, consumers who want to escape the high rates should consider moving to states like Oregon, Nevada, and Idaho who have the lowest wireless tax rates.
For a complete listing of state monthly wireless rates as of July 2010, please visit: http://www.mywireless.org/state-issues/state-tax-rankings/