The nonpartisan Tax Foundation has released a new report on Wireless Taxation in the United States 2014. The average US wireless consumer pays 17% in combined federal, state, and local taxes and fees. Folks in Chicago, Baltimore, Omaha, and New York City have combined tax rates over 25 percent! Here’s their state-by-state map breakdown:
They also point out that these effective tax rates are much higher than normal sales tax.
Actionable advice? If your area is subject to high cell phone taxes, it may be better to switch to a prepaid plan rather than the traditional postpaid. I’m not sure exactly how these work, but somehow the taxes are averaged out and baked into the flat price. Note that depending on your area, you may still be subject to a e911 fee and sales tax. You can often bring your own off-contract phone and save even more. Most discount providers now accept phones like the iPhone and Galaxy.
I’ve heard of some people fudging their billing addresses to stay in a low cell tax state, but that may be more expensive or trouble than it is worth.
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I live in WA state and this is one of the reasons I’m on a prepaid plan. The best one I’ve found is T-Mo’s $30/month Wal-Mart plan: http://prepaid-phones.t-mobile.com/prepaid-plans (scroll down, it’s slightly hidden but it’s there).
After taxes and everything it comes down to $33.85/month with autopay. It could be slightly less if I bought recharge cards on ebay and whatnot, but autopay is just super convenient.
Agreed that is a great plan. Do you augment your 100 minutes with VoIP or just don’t talk that much on mobile? Here’s my old post on it for others:
https://www.mymoneyblog.com/best-value-in-smartphone-plans-t-mobile-30month-prepaid-4g-with-unlimited-data.html
Yup, I use Google Voice/Hangouts whenever I can. The new Hangouts app for Android now has VoIP so it’s even better now that I don’t have to be at home on my PC to use it 🙂
And before looking at 4 major carrier, look at their MVNOs too. MVNOs are usually cheaper than the big 4.
The taxes are also a big reason the MVNOs pay off. Our 4-person bill went from $200 to $60. Our taxes + fees went from $20 to $3. (Our MVNO does not charge all the little fees that Verizon and Sprint tacked on. I’d have to pull up an old bill to refresh my memory about all those “taxes and fees”).
In addition, there are local taxes. We share a cell plan with my parents in another city. We had our address on the account and I believed their local taxes would be less. So we changed the address but they had some other big flat tax for something or other. So we switched it back to our city. Something to keep in mind if you work for another city or share a plan with people from other states or cities.
With Cricket Wireless (AT&T MVNO) you can get 5 lines with unlimited everything, 1gb high speed per phone for $100 total per month, this is after all taxes and fees. If you need more high speed its $10 more per phone per month to go from 1gb to 3gb and another $10 to go from 3gb to 10gb. You can have a mix also. We have 5 total lines, 2 at 1gb, 2 at 3gb and 1 at 10gb. Our group cost us $140 after all taxes and fees.
I have no reason to question the info underlying this post, but do want to note that the Tax Foundation is only nominally non-partisan. In practice they’re a right wing think tank, not to be confused with the Tax Policy Center, which tends to produce less ideological analyses of tax issues. See, e.g. http://economistsview.typepad.com/economistsview/2011/05/the-disappearing-tax-foundation-blog-post.html
Does federal, state, and local taxes apply to “regulatory fee/charge, or, regulatory cost recovery fee”, “federal universal service charge”, “administrative fees and charges”, “E911 fee”, and any other fees?? Does the Tax Foundation Cell Phone Taxes for Wireless Service include any of these fees? ..my guess is no and no.
I used prepaid in Utah for over six years. Taxes on my prepaid phone were about 10?. Recently switched to republic wireless and the tax is over 20? but still a great deal compared to plans from other carriers.
Did anybody else notice that the highest and lowest tax states are immediately adjacent to each other-WA and OR.
I don’t know what it means, but it is intriguing. Also, Blue and Red states seem eager to tax cellphone service. IE, NE is #2, and as mentioned, WA is #1.