I'm fairly competent at math, but I was initially baffled when I recently sat down to figure out the taxes and "fees" on my monthly wireless bill.
I'd received an email from an angry reader complaining about Washington's "second-highest in the nation" wireless taxes, and pointing me to a website that claimed we pay an astronomical 24.44 percent rate. That does sound high. But it didn't add up. A quick look at my latest AT&T bill showed that I paid $10.98 in taxes, surcharges, and fees on $74.29 in voice, data, and text charges. That comes to about 14.8 percent. Not inconsequential, but nothing like what the angry emailer claimed.
But for the life of me, I just couldn't get the numbers to add up, nor could I find useful online documentation. Finally, after a fair bit of algebra and some back and forth with the Department of Revenue, I think I've finally sussed it out, at least to within a penny or two. And it turns out that these various "taxes" aren't always what they first appear.
As a point of reference here's how my monthly AT&T Wireless bill breaks down (the tax and fee rates are not included on the bill; I had to figure that part out for myself):
Nation 450 with Rollover
Data Unlimited for iPhone 4S
Total Monthly Charges:
Surcharges and Other Fees
City Utility Users Surcharge (6%)*
Federal Universal Service Charge (per line)
Regulatory Cost Recovery Charge (per line)
Total Surcharges and Other Fees
Government Fees and Taxes
COUNTY 911 SERVICE FEE (per line)
City District Sales Tax - Telecom (0.9%)
City Sales Tax - Telecom (2.1%)
State 911 Service Fee (per line)
WA State Sales Tax - Telecom (6.5%)
Total Government Fees and Taxes
At a glance, the first thing that might strike you is that the tax rates seem off; you don't need to do the math to see that a WA State Sales Tax of $3.22 is way too low to be 6.5 percent of my total charges. Because it's not. Turns out, federal law exempts data charges from state and local taxes, so that part of the bill is entirely untaxed. But $3.22 is also too high to be 6.5 percent of my voice and text message charges. In fact, the state sales tax is levied on the voice and message charges, plus the $5.42 of total "surcharges and other fees."
And that's the most important revelation about your wireless bill: About half the "taxes" on your bill aren't taxes at all. These are fees and surcharges the government allows the wireless companies to charge, but does not mandate or collect. It's not that these surcharges don't necessarily reflect actual regulatory costs (they might), but it would be kind of like McDonalds adding a separate line item to your bill to reflect the cost of their B&O tax, instead of just working that into the price of the burger.
So since these surcharges and fees add to AT&T's bottom line in the exact same way as they would if they were just transparently worked into the listed price of the service (you know, like prepaid wireless plans do), the state charges sales tax on them. Fair enough. And not all that unintuitive once you understand what these charges represent.
Oddly enough, the 2.1 percent City Sales Tax and 0.9 percent City District Sales Tax (Sound Transit?) are calculated a little differently, being levied on all the same charges as the state sales tax except the so-called City Utility Users Surcharge fee. Weird. But even weirder is the 6 percent City Utility Users Surcharge fee itself, which is levied on the exact same base as the state sales tax, including the City Utility Users Surcharge. That's right: In a weird bit of recursive math, this surcharge is levied on itself! So the true rate is closer to 6.383 percent. I think.
The remaining taxes are per line charges to support state and local enhanced 911 services. As long as the legislature doesn't raid the fund, it's hard to complain about that.
So, are the state and local taxes on my wireless bill high? Well, my total taxes and fees as a percentage of my non-data service come to 24.8 percent. That's high. But my actual state and local taxes—$5.56—amount to less than 7 percent of my total non-tax bill. I can live with that. And I'm guessing everybody else can too.