The Hidden 17 Percent Tax on Your Cell Phone Bill

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Your wireless carrier isn't the only one pocketing money when you pay your cell phone bill.

Local, state and federal governments, 911 systems and even school districts tack on taxes and surcharges to your wireless bill that end up costing American cell phone customers an extra 17.2%, on average, according to the Tax Foundation. That's up from 16.3% fifteen months ago.

For consumers accustomed to single-digit sales taxes, these double-digit fees can appear unusually burdensome. But unlike sales, income or property taxes, wireless taxes remain largely hidden -- tacked on to the end of your monthly wireless bill and often ignored.

They shouldn't be. A $60 cell phone bill actually costs the average customer $70.32.

In Nebraska, which has the country's highest wireless tax rate, customers would pay $74.69 each month for a $60 cell phone bill. That's $10 per month more than customers in Oregon would spend for the same services. Oregon has the nation's lowest wireless tax rate.

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"The problem with taxes on wireless is so many different jurisdictions impose taxes and fees," said Scott Drenkard, an economist with the Tax Foundation.

A wireless customer who lives in New York, for instance, could have up to 12 different taxes and surcharges show up on his or her wireless bill.

High wireless taxes date back to the "Ma Bell" days of AT&T (T), when few Americans had cell phones and various governments saw wireless surcharges as a way to support expensive services, such as rural telephone infrastructure build-outs. Every American today pays 5.82% of their cell phone bill to the federal Universal Service Fund, which originally paid for those rural phone services.

Some opponents to the current wireless tax structure argue that states, cities and other districts see cell phone bills as an undercover way to dodge the political fallout of raising other taxes.

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"Wireless taxes have long been a fairly frictionless way for states and cities to get revenue," said Jot Carpenter, vice president of government affairs at telecom industry association CTIA. "It used to be a tax on the wealthy, but now that most people have cell phones, it's hard to say it's just targeting the rich now."

Even living in a state with no sales tax doesn't save you from having to pay high taxes on your cell phone bill. Sales-tax-free Alaska has a higher-than-average 17.9% tax rate on wireless services, thanks in large part to its hefty 6%, state-imposed Universal Service Fund tax to support rural telephone services.

People in a high-tax state bordering a state with low fees can't escape by buying a phone across the border. The Mobile Telecommunications Sourcing Act of 2002 demands that taxes be levied at the address that the cell phone company determines to be a customer's "place of primary use." So if you live in Washington -- the state with the nation's second-highest wireless tax rate -- it doesn't necessarily pay to buy your next phone in Oregon, which has the lowest rate in the country.

Relief probably isn't coming any time soon, but wireless taxes may soon stop spiking. Two versions of a "Wireless Tax Fairness Act" that are floating around Congress have garnered bipartisan support. Though the act wouldn't lower taxes, it would place a moratorium on raising them.

"What needs to happen is an overhaul of this poorly thought-out tax policy," Carpenter said. "But before you can fix it, you have to stop digging the hole."

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The Hidden 17 Percent Tax on Your Cell Phone Bill

The promise: Puts all your bills in one place.
Price: Free
Available on: Website, iPhone, Android

Ready to go paperless? Manilla lets you see your bills at a glance and, if you opt in, alerts you via email, SMS, or smartphone notification when one is coming due. The service can't process payments: You click on an account to log on to the biller's site. Manilla also keeps tabs on when frequent-flier miles and other rewards are set to expire. The company makes money by charging partners to host their bills digitally, so firms no longer have to pay to send you a paper statement.

The promise: Determines which credit card is best.
Price: Free
Available on:  iPhone, Android

If you have multiple cards -- and especially if some have awards that change frequently or give extra points at, say, gas stations -- this app will help you use them strategically.

Choose a merchant, and the program calculates which of your cards will give you the best deal (it may also show you a related ad).

Even rewards junkies sometimes use the wrong card, says Randy Peterson, a frequent-flier expert at "Wallaby gets rid of the guesswork."

The fight: Account aggregation
Looking for a user-friendly budgeting helper that will put all your financial data in one spot? Two good ones face off.


Mint: Easy to use. Create and track a budget in a few clicks. Sends bill reminders. Plus, it's free.
HelloWallet: Analyzes your accounts and gives advice on how to save more and avoid bank fees.


Mint: Some dislike how the site gets a cut from its suggested credit cards.
HelloWallet: The price is steep for an aggregation site. The first 30 days are free, but then it costs $8.95 a month.


Mint: Certain employers offer HelloWallet as a free benefit. If yours does, go for it. Otherwise the service doesn't have the features to justify its price.

Availability: Both apps are available on their individual websites, the iPhone and Android.

The promise: Scans your credit and debit cards for "gray charges."
Price: Free for up to three credit cards
Available on: Website, iPhone

BillGuard spots charges you may miss, like the "free" credit report that signed you up for credit monitoring. The service "saves time people spend poring over their statements," says Aite Group analyst Ron Shevlin.

The site also helps with billing disputes. So far, the firm says, users have gotten $1.2 million in refunds.

The app is available only through Apple Passbook and can't be used on an iPad.

The promise: Compares your energy bills with those of similar homes and gives suggestions for how to shrink costs.
Price: Free
Available on: iPhone, Android

Describe your house, and the site, which makes money by licensing its technology to companies looking to reduce their energy use, calculates how much you might save.
Wattzon gives information about improvements -- such as adding insulation or using efficient light bulbs -- as well as associated rebates and tax credits.

The fight: Internet talk and text apps
Finding the right VoIP app can help keep your phone bill under control. Are you already using the best one, or is it time to try something new?


Skype: Free IM, voice, and video calls to Skype users. Low-cost calls may let you try a cheaper cell plan, says CNET's Rick Broida.
Viber: Call or text any Viber user for free. Automatically searches your contacts for other users. No ads.


Skype: The free service is supported by ads targeted to your age, gender, and location. The premium service costs $4.99 a month.
Viber: Routes calls to non-Viber users through your cell plan. Video calls not supported.


Skype: Yes, the ads are annoying, but Skype is still the more useful choice. Until Viber lets you talk to people who don't have the app -- without using your cell minutes -- the service stays at No. 2.

Availability: Both apps are available on the iPhone, Android and Windows Phone. Skype is available on its website. Viber is also available on the BlackBerry.

The promise: Alerts you the moment an item you want goes on sale.
Price: Free
Available on: Website, browser add-on

Add Hukkster to the bookmark bar of any major browser. When you spot, say, a nice duvet at, click on the item, then on your "Hukk It" bookmark. You'll get an email or text if the price falls.

Choose to get the heads-up as soon as the product is marked down, when the price drops by 25%, or only for a dip of 50% or more. If you decide to buy, Hukkster gets a cut.

The promise: Finds discounts to apply to your online-shopping order.
Price: Free
Available on: Browser add-on

This Chrome-only browser extension (get it at adds a "Find Savings" button to the checkout page of 100-plus shopping sites, including

Hit the button, and Honey will find and apply any available discounts to your order. The service saves time and money, says Lifehacker editor Adam Dachis: "It spares you the extra step of testing the coupon codes."

The fight: Price comparison apps
Both apps will scan a product's bar code and search for the best available price. Which one is the best price detective?


RedLaser: The most comprehensive search results. Particularly strong on nearby brick-and-mortar listings.
InvisibleHand: Often lists shipping costs. Save a scanned item and get an alert if the price drops or hits a certain level.


RedLaser: Shipping and tax aren't usually factored into price comparisons.
InvisibleHand: Searches only online results. So far the app is available just for iOS.


It's a draw: Having two scanners is a good idea. The apps use different algorithms, and one may catch a deal the other missed, says bargain-shopping expert Andrea Woroch.

Availability: RedLaser is available on the iPhone, Android and Windows Phone. InvisibleHand is only on the iPhone. Both apps are free.

Price: Free
Available on: Website
Looking for the right savings account, credit card, cable company, or wireless service? Tell BillShrink a bit about your needs and usage, and the site will find your best match.
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