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Brier Dudley's blog

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

April 9, 2008 at 12:21 PM

Wireless industry says phone taxes whack Washingtonians

Washington has the second-highest taxation of wireless phone services, according to a report that an industry lobbyist is circulating in Olympia.

It says local, state and federal taxes and fees on wireless services here come to 20.62 percent, second only to Nebraska’s 22.54 percent. At the bottom of the list is Oregon, at 5.85 percent.

There are too many taxes tacked onto phone services, wired and wireless. Sales taxes are also high in Washington, particularly in the Seattle metro area. But I wouldn’t take the CTIA’s report as the definitive word on the subject.

I haven’t gone through and checked all the numbers against public records, but it took a few seconds to find one omission that skews the results.

Oregon shows well on the list because it doesn’t charge a sales tax, but the CTIA failed to mention that state charges a business excise tax of 6.6 percent. Add that in, and Oregon would approach the middle of the pack.

It doesn’t show up on your cell phone bill in Oregon, but the state collects an income tax in lieu of a sales tax, so the tax burden on its consumers is probably closer to Washington’s than the CTIA rank suggests.

But the point of the survey wasn’t to compare total tax burdens on consumers. It’s more focused on assessments such as fees that fund 911 services in different states.

Overall, the taxation situation is actually getting better.

Thanks largely to reductions in federal taxes that offset gains in local taxes and fees, the overall taxation of wireless services declined slightly between 2003 and 2007, from 15.27 percent to 15.19 percent. Contributing to the decline was a drop in state and local taxation of wireless services last year, for the first time in five years.

All those “discriminatory” taxes apparently didn’t hold consumers back, according to a different report from the CTIA.

Over the same period, from 2003 to 2007, the number of U.S. wireless subscribers soared from 158,721,981 to 255,395,599. Meanwhile sales of wireless services grew from $87.6 billion to $138.9 billion.

What I want to know is whether Mayor Nickels will tax Seattle wireless customers an extra 20 cents a month for using phones made of plastic. Look out Nebraska, Washington may be heading for first place.

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