Policy Documents

State and Local Governments Impose Hefty Taxes on Cell Phone Consumers

Joseph Henchman and Scott Drenkard –
January 30, 2013

The number of U.S. cell phone subscribers has grown significantly in recent years from 48.7 million in 1997 to 321.7 million in 2012. That period has also seen a fall in landline telephones, with 34 percent of households now only using wireless phones. This trend toward cell phones has not gone unnoticed by state and local governments, many of which have targeted wireless services for higher taxes.

U.S. wireless consumers pay an average 17.18 percent in taxes and fees on their cell phone bill, including 11.36 percent in state and local charges, according to a newly released study that identifies and calculates wireless taxes and fees. In Nebraska, the combined federal-state-local average rate is 24.49 percent, and in six other states (Washington, New York, Florida, Illinois, Rhode Island, and Missouri) it exceeds 20 percent. Twenty-six states have average state-local wireless taxes and fees in excess of 10 percent, and taking into account the infamous federal telephone excise tax (dating to the Spanish-American War and partly repealed in 2006), cell phone subscribers in seven states pay more than 20 percent in taxes.