If you have cell-phone service through a contract carrier, you are on the hook for a long list of fees. The average combined rate for wireless taxes, fees and surcharges hit a high of 17.2% in mid 2012 -- almost two and one-half times the average sales tax rate charged for other taxable goods and services, says wireless consultant Scott Mackey at KSE Partners.
Over the past decade, fiscally challenged governments have piled on rate increases to raise revenue without enacting more high-profile taxes. Mackey thinks the trend is leveling off, although two types of fees continue to rise: local “911” fees, which pay for emergency services, and the federal universal connectivity charge, set by the Federal Communications Commission to assure phone service to all households.
Congress may provide relief in 2014 with a bill that would place a five-year moratorium on taxes that single out wireless services for special treatment. Meanwhile, you could cut the cost of service and avoid most wireless taxation if you buy an unlocked phone and use a month-to-month plan from a prepaid wireless provider, such as Straight Talk Wireless, available at Walmart. (See Cut the Cost of an iPhone in Half.)
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