July 12, 2013 in City

Washington cellphone taxes are 2nd highest

By The Spokesman-Review
 

The next time you change the ring tone on your cellphone, consider choosing the sound of a cash register ringing. Or maybe The Beatles’ song “Taxman.”

Washington cellphone users have the dubious distinction of paying the second-highest taxes in the country. Nebraska has the highest cellphone taxes.

It’s something you may have suspected the last time you checked your cellphone bill – if you were able to decipher it.

And if that’s not enough to make you swear at your iPhone, consider this insult added to injury: The two neighboring states have cellphone taxes among the nation’s lowest.

A study by the Tax Foundation says the combination of federal, state and local taxes on mobile phone service for Washington customers adds about 25 percent to the bill’s bottom line. The exact amount varies a bit from one community to the next because of differences in the local sales tax. There are also business taxes, utility taxes and fees for emergency service.

“A lot of overlapping jurisdictions have been given overlapping authority,” said Scott Drenkard, who co-authored the study for the foundation. The state and many local jurisdictions both charge a fee for 911 services. The federal government tacks on something called a USF.

“It’s like alphabet soup. Who actually knows what the federal USF involves?” asked Drenkard, who explained it stands for a universal service fee that subsidizes service to rural areas.

With so many government entities having taxing authority and with cellphone use rising, taxes have gone up in most states, Drenkard said. Cellphones are now taxed at higher rates than most other consumer items, including alcohol and cigarettes in some states.

The number of taxes and fees on cellphones is so complicated in Washington that the Department of Revenue couldn’t easily determine the total amount raised last year.

The Tax Foundation, which argues that taxes should be applied as broadly as possible and kept as low as possible, questions the fairness of cellphone taxes. It also notes the taxes and fees are easy to hide from consumers.

“It’s easy to do it in a way that people aren’t fully aware,” Drenkard said. “It’s a less transparent method.”

There’s another quirk of cellphone taxes that most consumers don’t realize. Because the phones and the service are portable, determining what taxes should apply can be complicated. Where the phone was purchased? Where the user first contracted for service? Where most of the calls are made?

Federal law says the taxes are based on the user’s primary address, so a former Idaho resident who moves to Washington probably can’t escape the higher taxes by keeping that 208 area code. And under law, what the phone company says for taxes goes. “It’s unappealable,” Drenkard said.

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