House OKs Bill to Simplify Taxes on Cell Phones

A measure to clear up the confusing patchwork of taxes now assessed on cellular phone calls cleared the House today.

The legislation would modify the existing system so that wireless users would be taxed only in their place of primary use — essentially the area in which they have subscribed for the service.

The bill passed by voice vote. A similar measure is moving through the Senate.

Currently, consumers are taxed in a variety of ways by states and localities. They can be taxed based on the cell site or local switch closest to where they originate their call, or their home billing address.

Don’t Expect Lower Taxes

The result is a complicated scheme for calculating monthly bills, since mobile users typically make calls from a number of different localities. For example, on a drive between Baltimore and Philadelphia, a consumer crosses a dozen different tax jurisdictions, meaning that each call made on this route could be assessed different state and local taxes.

In another example provided by the Cellular Telecommunications Industry Association, a business caller who makes 39 wireless calls in three different cities could fall into 26 different state and local tax jurisdictions.

If the measure becomes law, consumers won’t necessarily have lower taxes on their wireless bills. Depending on the taxes in the locality where they primarily use their phone, consumers may see their bills decrease or increase. But it will reduce the possibility of errors and give consumers a more consistent monthly bill, said lawmakers and industry officials.

The measure will ensure that wireless calls “are not confronted with a thicket of taxing jurisdictions,” said Rep. Jerrold Nadler, D-N.Y., who introduced the measure along with other members of the Judiciary Committee. “It will simplify the process of tax collection without imposing any new taxes.”

Easier to Understand, Administer

Under the current system, consumers who have a “bucket plan” — in which they pay a flat fee and receive a set number of minutes — sometimes see the taxes on their bill fluctuate month to month even though their total charges are the same.

But the changes would make the taxing process clearer to consumers, and industry officials say it will also make it easier for them and local and state governments to administer, particularly as more subscribers opt for wireless plans they can use anywhere in the nation.

“This legislation is good for wireless customers, good for local and state governments, and good for the industry, because it provides clarity and certainty,” said Tom Wheeler, president of CTIA, the wireless industry group based in Washington.

There are more than 94 million wireless customers nationwide, according to the association.