Understanding Cell Phone Taxes And Surcharges
Ever wonder what exactly those charges under "Taxes, Fees and Surcharges" on your cell phone bill actually are? Because this charge can amount to 10% or more of your cell phone bill, it's important to try to understand exactly what your are getting charged for. Since cell phone taxes, fees and surcharges vary by cellular service provider and by state, it's hard to get an actual number on these charges. You can, however, use our tax rates and definitions below as your tax and surcharge guide to estimate your taxes and fees.
Cell Phone Taxes
Sales Tax - Sales tax rates will apply for every state that charges for a sales tax. These charges can be levied against recurring monthly charges, local usage, toll usage, or roaming usage. If your state does not charge for sales tax, no sales tax rate will be applied. Important note: The sales tax rate is based on the mailing address of your bill.
City Tax - If your city charges a tax on sales, that rate will also apply on your monthly phone bill based on recurring monthly charges, local usage, toll usage, or roaming usage.
County Tax - If your county charges a tax on sales, that rate will also apply on your monthly phone bill based on recurring monthly charges, local usage, toll usage, or roaming usage.
Federal Excise Tax - Telephone services are subject to a 3% federal excise tax on a cellular customers recurring monthly charges. This tax is collected by the cellular service provider and remitted to the IRS. (Internal Revenue Service) This tax does not apply on phone sales, accessories or surcharges.
Annual Regulatory Fee - Telecommunications companies are assessed an annual regulatory fee (sometimes called a Federal Regulatory Charge) by the federal government. This results in a one time annual charge per cell phone number. As of October 2002, it was .24 cents.
Cell Phone Surcharges and Fees
Activation fees - Every cell phone service provider charges a one time fee for activating the cellular service, assigning the cell phone number and turning it on. The standard one time fee is usually $35.
Local number portability - Cellular phone numbers are becoming Portable, which equates to an increase in cell phone surcharges. Fees vary by the service provider, but extra monthly fees will be charged for number portability. Since this fee won't be broken out on your cell phone bill and lumped in "fees in surcharges", it's hard to pinpoint an amount. Carriers such as Verizon Wireless and T-Mobile do not charge for this service as of yet. We do know Sprint plans to charge a monthly fee of $1.10 for this service (Including number pooling) - which is probably a good guide for other carriers that do or may charge.
Telephone number pooling - Carriers share a 'pool' of telephone numbers that they can assign to a new cellular customer. This way, no number can be assigned to two customers at anytime, and it's more efficient. To maintain this pooling resource, the fee is again passed on to the customer. Since the fees are lumped in fees and surcharges, it's hard to gauge an accurate monthly fee for this service. Between .30 - .50 seems the norm per provider.
Emergency 911 Service - Included in every cell phone bill is a monthly charge for emergency cellular service. Fees range from .40 to .75 per provider. This surcharge is again a fee that the government charges the cellular providers that then gets passed onto the customers.
Universal Service Fund Surcharge - All cellular service providers are required to contribute to the Federal Universal Service Fund. The universal service fund subsidizes programs for schools, libraries, and rural health care providers. This monthly surcharge equates to 1.2% on your recurring monthly charges.
Directory Assistance - Each provider charges a fee per call for directory assistance. To avoid this per call charge, use the yellow pages if possible.
Telecommunications Relay Service Surcharge - All cellular service providers are required to contribute to the Federal Telecommunications Relay Service (TRS) Fund in order to finance how relay services get provisioned. Telecommunications relay services enable hearing and speech impaired persons to send and receive messages to and from persons whose telephones are not equipped with specialized telecommunications equipment. This monthly surcharge is 0.073% on your recurring monthly charges.
Cancellation Fees - Since almost all cell phone providers require a year or two commitment with every cellular offer, if the contract is broken you will pay for it. Sometimes this fee, also called a termination fee, can range between $150 to $350 to cancel.