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FeaturedIMA Tax Policy Blog

Cell Phone Tax Burdens State-by-State

By Joseph Henchman, The Tax Foundation . . .

If you’re shocked by the taxes on your phone bill, you have good reason. Our new study, done jointly with Scott Mackey of KSE Partners, today finds the average U.S. customer pays more than 18 percent in taxes and fees on their wireless bill, several times the state sales tax rates. Other key findings:

Each year, consumers pay an estimated $17.2 billion in wireless taxes, fees, and government surcharges combined.

In just two years, the average wireless tax burden has increased by 1.5 percentage points, and wireless taxes are now 4.5 percentage points higher than they were ten years ago.

The average state-local wireless tax in the U.S. is 11.93%, more than 4 percentage points higher than the average state-local sales tax.

The five states with the highest combined state and local wireless taxes and fees are Washington (18.8%), Nebraska (18.7%), New York (18.0%), Illinois (17.8%), and Pennsylvania (15.7%).

The five states with the lowest combined state and local wireless taxes and fees are Oregon (1.8%), Nevada (2.1%), Idaho (2.3%), Montana (6.2%), and Delaware (6.3%).

Six major U.S. cities now have wireless tax rates exceeding 25 percent: Chicago (36.24%), Baltimore (29.84%), New York (27.11%), Philadelphia (26.24%), Omaha (26.06%), and Seattle (25.94%).

It’s important to remember that wireless service is increasingly the sole means of communication and connectivity for many Americans, particularly those with lower incomes. At the end of 2015, more than 64 percent of all poor adults had only wireless service and more than 48 percent of all adults of all incomes were wireless only. Taxes like Baltimore’s $4 per line monthly tax or Chicago’s $3.90 per line monthly tax mean taxes on a family share plan can cost almost as much as the service itself.

Read our full study here.

More information is available here.

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