Did you get a new phone for Christmas? Perhaps one with an unlimited plan? Chances are, you or someone in your household did. And while we all know that phones are overpriced and the plans are expensive, there’s just no way to survive without 24/7 phone access, so what are we supposed to do? That kind of thinking is exactly how government has gotten away with imposing a national-average 24.5% tax on taxable voice services. (Important note – federal law prohibits states from imposing taxes on internet services, including data.)
“Well,” you say. “That might be the national average, but Utah’s a low-tax state, so my wireless taxes are probably lower.” Wrong. Utah’s combined federal and state-local wireless rates in 2023 were 27.15%, ninth highest in the nation. 10.83% of this rate is set by the Federal government and cannot be adjusted by state law. However, Utah has the authority – and ability – to reduce its wireless taxes in several ways.
Option 1 – Eliminate or Reduce the State Universal Service Fund
Utah is one of 22 states that imposes its own state Universal Service Fund (in addition to the federal USF of 10.83%) to subsidize the cost of services in high-cost areas – particularly rural areas. This is charged at $0.36 per line per month. This tax could be eliminated and the needed funds distributed from other sources.
Option 2 – Eliminate or Reduce Local Wireless Taxes
Utah is one of 15 states that imposes a local wireless tax in addition to local sales taxes on wireless services. The historical reasoning behind these local wireless taxes is generally redundant and based on legacy taxation of wireline services and right of way fees, but cities enjoy the revenue and continue to impose them. A statewide ban on these local taxes is an appropriate consideration for the Legislature.
Option 3 – Move Away from Per-Line Charges
Many fees and surcharges associated with wireless bills are charged on a per-line basis rather than a percentage of the overall cost. This means that no matter how good a deal the provider is offering, customers retain a significant tax obligation. This form of taxation keeps prices artificially high and is regressive, since everyone is charged an equal base rate. Imposing taxes on a percentage basis will make this tax more equitable, and potentially lower overall since consumers can choose a lower-cost plan.
The inverse relationship between the cost of providing wireless services and the taxes applied unnecessarily burdens Utahns with higher costs. The Legislature has the tools to alleviate this burden, and your Utah Taxpayers Association encourages them to use them.