Cell Phone

Even though smartphones have become necessities and a crucial component of the digital economy, they’re still taxed in large part as a luxury item. (Georgijevic / Getty Images/iStockphoto)

David Lazarus
November 24, 2015

The good news: Thanks to increased competition, wireless companies’ rates have dropped nearly 7% since 2008.

The bad news: Average federal, state and local taxes and fees for California customers reached a record 18%, meaning that the government’s slice of your wireless bill is now at least twice as high as the state sales tax imposed on most other goods and services.

Those eye-opening stats come courtesy of the nonpartisan Tax Foundation, which said in a report last week that wireless customers nationwide are paying about $5.8 billion annually in state and local taxes and fees — on top of an additional $5 billion in federal wireless surcharges.

“It’s surprising how high the taxes on smartphones are,” said Joseph Henchman, the Tax Foundation’s vice president for state projects. “They’re easy to miss because it’s 40 cents here and 60 cents there, but they really add up.”

For consumers, one troubling element is that these so-called utility user taxes aren’t intended to support a municipal service, such as sewer cleaning or garbage collection. They’re a tax on a service provided by private companies, which charge their own usage fees.

“At some point, we’re talking about a revenue grab,” Henchman told me.

The city of Los Angeles alone charges a 9% wireless tax, one of the highest in California. That’s before the state and the feds cut themselves in for a piece of the action.

Even though smartphones have become necessities and a crucial component of the digital economy, they’re still taxed in large part as a luxury item. Blame that on the Spanish-American War.

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