Why Are Cellphones Taxed So Massively?

Illustration for article titled Why Are Cellphones Taxed So Massively?

When tax expert Bob McIntyre's daughter bought a cellphone for $25, he was surprised to learn she ended up paying almost $60 in total, once taxes were added in. What followed was his adventures into the messy world of the government's cellphone taxing scheme, which is calculated based on the original sticker-price of a phone, and not the post-rebate and discount price.


But why are phones taxed so highly, when cigarettes are taxed at around 22 per cent? Cellphones aren't nearly as damaging to lives—nor evil!— as tobacco and the companies who make it. Tax differs from state to state, but according to Slate, New York, Nebraska and Washington have the highest taxes on phones, at around 22 - 23 per cent (that's federal, state and local tax combined.)

Nebraska is actually the worst, where the tax is collected by the local city, and put towards public services. Omaha, for example, is expected to collect $16.5 million this year, from local cellphone taxes alone.

At federal level, we can blame the FCC for a start, which has raised the USF surcharge in recent years. This Federal Universal Service Fund subsidizes low-income earners and rural-dwellers' phone services, along with supplying schools and libraries with internet and phone services. There's no denying it's a tax worth paying—but if only it were the carriers paying it, and not passing it onto their already-crippled customers!

When everyone (and their dog) owns at least one cellphone, it's hardly seen as a decadent purchase—or even avoidable. Yet the government hasn't lowered cellphone tax since day one, despite it no longer being the extravagant purchase it once was (in Wall Street movie-era, naturally). Court cases taking on carriers over these steep hidden charges are becoming more prolific, so over time we might see them lowered. But I wouldn't hold your breath. [Slate. CNET has a handy guide to cellphone bill charges, here.]

Original Image Credit: Pyxopotamus



What the frack is a cellphone tax?? I'd never heard of that before... I think in Europe you only have to pay whatever VAT rate applies in your country. Sin taxes (special excise duties) are reserved for things like tobacco, alcohol and fuels.

[EDIT]By the way, advertising a phone for $25 and then charging more than that in taxes would be impossible this side of the Atlantic. Any price advertised must be the final price to clients, taxes and expenses included.