My phone bill is probably not very different from yours. I have a simple plan with only some minor bells and whistles, like caller ID. Monthly, it works out to be $57.69. What’s frustrating is that just $42.49 is for phone service itself. The remaining $15.20 is taxes and surcharges. That’s over a quarter of my bill and $182 every year.
So, what’s the story behind those charges listed in the invoices? Here’s the breakdown in descending order of cost:
Federal Access Charge ($6.45): Of all the surcharges, this is the only one unrelated to a government-mandated cost (taxes, regulations) -- despite the “federal” moniker. The Federal Communications Commission has allowed this charge since the mid-1980s as a means to help phone companies cover the cost to maintain wires, poles and other components of infrastructure used to connect customers to the network. The maximum allowable charge is $6.50 so you will see most phone providers at or near the high-water mark. They do this rather than putting it into the main service fee (as you would think they would) because it induces customers into thinking they are paying lower phone bills. In my case, the phone company can market a $42.49 package to consumers, rather than the more accurate $48.94. That seems kind of dirty.
Sales Tax ($4.06): This is the same combined local and state sales tax that we are all familiar with in other economic transactions.
Universal Service Fund ($1.55): This federal tax brings in $9 billion per year. It is responsible for the TV ads that you see touting free or discounted phone service to the poor; $1 billion of the collections provide them with cell phones (which should be noted are a luxury, not a basic human need). The government uses the rest to lessen phone charges in high cost areas and provide telecommunications services to rural health care providers and economically disadvantaged schools and libraries.
Excise Tax ($1.33): This is a 3% tax applied to the local service portion of your bill and its start goes all the way back to the nullification of the income tax of 1894. At the time, the government needed some way to fund the military in the Spanish-American War, so it temporarily taxed telephones. The tax reappeared in World War I as a war tax yet again. Then in 1932 it became a permanent part of Americana as the government searched for new revenues during the Great Depression as other revenue sources dried up. In 2006 the IRS did away with the 3% excise on long distance calls after the US Court of Appeals ruled that the tax was illegal. Unfortunately, the local portion remains and feeds $5 billion to Uncle Sam annually.
Regulatory Assessment Fee ($1.25): This surcharge helps telecommunications companies cover the costs associated with in-state access charges, property taxes, regulations and compliance. In other words, it’s a fee levied against the consumer to help the phone company pay its costs that are specific to doing business in New York.
E911 ($0.35): This tax is supposed to cover the costs of local jurisdictions’ efforts in providing 911 services to their citizens. It doesn’t. The state collects this fee that brings in $200 million per year. Only $8 million of that goes back to the counties for their call centers and central dispatch and it is doled out via grants rather than being sent back to the taxpayers of each county at the same volume it is paid in. The remaining $192 million is used to balance the state budget. Unfortunately, this misappropriation of funds gets almost no pressure from the media and local elected officials from across New York State. This should be especially maddening to the residents of Niagara County where we have to find at least $8 million in taxes and borrowing to pay for the new emergency radio system which should have been paid for in full by the E911 tax.
NY Franchise 184 ($0.19): Every telephone company operating within New York must pay Albany three-eighths of 1% of their gross receipts from all sources within the state. To the uninitiated it sounds like a tax levied against the corporation, but as with all such charges, they are passed onto the consumer.
FCC Regulatory Fee – Wireline ($0.02): This is a tax assessed by the Federal Communications Commission on long distance providers to pay for the FCC’s operations.
So, what’s the story behind those charges listed in the invoices? Here’s the breakdown in descending order of cost:
Federal Access Charge ($6.45): Of all the surcharges, this is the only one unrelated to a government-mandated cost (taxes, regulations) -- despite the “federal” moniker. The Federal Communications Commission has allowed this charge since the mid-1980s as a means to help phone companies cover the cost to maintain wires, poles and other components of infrastructure used to connect customers to the network. The maximum allowable charge is $6.50 so you will see most phone providers at or near the high-water mark. They do this rather than putting it into the main service fee (as you would think they would) because it induces customers into thinking they are paying lower phone bills. In my case, the phone company can market a $42.49 package to consumers, rather than the more accurate $48.94. That seems kind of dirty.
Sales Tax ($4.06): This is the same combined local and state sales tax that we are all familiar with in other economic transactions.
Universal Service Fund ($1.55): This federal tax brings in $9 billion per year. It is responsible for the TV ads that you see touting free or discounted phone service to the poor; $1 billion of the collections provide them with cell phones (which should be noted are a luxury, not a basic human need). The government uses the rest to lessen phone charges in high cost areas and provide telecommunications services to rural health care providers and economically disadvantaged schools and libraries.
Excise Tax ($1.33): This is a 3% tax applied to the local service portion of your bill and its start goes all the way back to the nullification of the income tax of 1894. At the time, the government needed some way to fund the military in the Spanish-American War, so it temporarily taxed telephones. The tax reappeared in World War I as a war tax yet again. Then in 1932 it became a permanent part of Americana as the government searched for new revenues during the Great Depression as other revenue sources dried up. In 2006 the IRS did away with the 3% excise on long distance calls after the US Court of Appeals ruled that the tax was illegal. Unfortunately, the local portion remains and feeds $5 billion to Uncle Sam annually.
Regulatory Assessment Fee ($1.25): This surcharge helps telecommunications companies cover the costs associated with in-state access charges, property taxes, regulations and compliance. In other words, it’s a fee levied against the consumer to help the phone company pay its costs that are specific to doing business in New York.
E911 ($0.35): This tax is supposed to cover the costs of local jurisdictions’ efforts in providing 911 services to their citizens. It doesn’t. The state collects this fee that brings in $200 million per year. Only $8 million of that goes back to the counties for their call centers and central dispatch and it is doled out via grants rather than being sent back to the taxpayers of each county at the same volume it is paid in. The remaining $192 million is used to balance the state budget. Unfortunately, this misappropriation of funds gets almost no pressure from the media and local elected officials from across New York State. This should be especially maddening to the residents of Niagara County where we have to find at least $8 million in taxes and borrowing to pay for the new emergency radio system which should have been paid for in full by the E911 tax.
NY Franchise 184 ($0.19): Every telephone company operating within New York must pay Albany three-eighths of 1% of their gross receipts from all sources within the state. To the uninitiated it sounds like a tax levied against the corporation, but as with all such charges, they are passed onto the consumer.
FCC Regulatory Fee – Wireline ($0.02): This is a tax assessed by the Federal Communications Commission on long distance providers to pay for the FCC’s operations.
Bob Confer is a Gasport resident and vice president of Confer Plastics Inc. in North Tonawanda. E-mail him at bobconfer@juno.com.
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This column originally ran in the 12 March 2012 Greater Niagara Newspapers
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