Excise Taxes and Fees on Wireless Services Increase Again in 2021

State Tax

Key Findings

  • A typical American household with four cell phones on a “family share” plan, paying $100 per month for taxable wireless service, would pay nearly $300 per year in taxes, fees, and government surcharges—up from $270 in 2020.
  • This year, wireless subscribers will pay approximately $11.3 billion in taxes, fees, and government surcharges to state and local governments.
  • Nationally, these impositions make up a record 24.96 percent tax on taxable voice services. Illinois continues to have the highest wireless taxes in the country, at 34.56 percent, followed by Arkansas (32.04 percent), Washington (31.81 percent), Nebraska (31.36 percent), and New York (30.73 percent).
  • The federal Permanent Internet Tax Freedom Act prevents state and local governments from imposing taxes and fees on wireless internet access. Without this federal prohibition, taxes and fees that apply to wireless voice services could be applied to internet access and significantly increase the tax burden on wireless bills.
  • Since 2008, the average monthly wireless service revenue per subscriber has dropped by 30 percent, from nearly $50 per line per month to $35.31 per line. However, during this same period, wireless taxes, fees, and government surcharges have increased from 15.10 percent to 24.96 percent of the average bill.
  • At the end of 2020, about 74 percent of low-income adults had wireless as their only phone service and 65 percent of all adults were wireless-only. The regressive nature of wireless taxes creates significant burdens on low-income consumers.


Taxes and fees on the typical American wireless consumer increased again this year, to a record 24.96 percent. This total includes state and local taxes averaging 13.16 percent and the federal Universal Service Fund (FUSF) rate of 11.8 percent.[1] As has been the case in the last three years, the FUSF increase, from 9.8 percent in 2020 to 11.8 percent in 2021, drove most of the overall growth in wireless tax rates.

This is the twelfth in a series of reports tracking the taxes, fees, and government surcharges imposed on wireless voice service by federal, state, and local governments since 2003. The methodology, originally developed by the Council on State Taxation (COST), compares the percentage rates of the taxes, fees, and government surcharges imposed on taxable wireless service.[2] Flat rate impositions, such as a $1.00 per month/per line 911 fee, are converted to a percentage using the average monthly industry revenue per line as tracked by CTIA—The Wireless Association.

As a result of changing product offerings, this report includes an alternate calculation. Federal law prohibits states from taxing internet access—including data plans—and, this year, data makes up more than 50 percent of the average cost to the consumer. To show how this limitation impacts tax collections and effective tax rates, the alternate calculation illustrates taxes paid as a percentage of both taxable and non-taxable services. As data makes up a greater portion of our wireless consumption every year, state and local taxation policy may be forced to adapt.

Fortunately for wireless consumers, the per-line price for wireless service continues to fall. Over the last five years, the average monthly revenue per wireless line has fallen from $41.50 per month in 2017 to $35.31 in 2021. Unfortunately, this price reduction for consumers was partially offset by higher taxes.

There were about 448 million wireless subscriber connections at the end of 2020.[3] Wireless  subscribers will pay approximately $11.3 billion in taxes, fees, and government surcharges to state and local governments in 2021 based on the tax rates calculated in this report:

  • $5.5 billion in sales taxes and other non-discriminatory consumption taxes that apply to other taxable goods and services,
  • $3.7 billion in state and local 911 fees, which includes hundreds of millions of dollars that are not actually used for 911 purposes in some states, and
  • $2.1 billion in additional telecommunications-specific taxes.

Wireless service is often the sole means of communications and connectivity for Americans, especially younger people, and those with low incomes. At the end of 2020, according to the Centers for Disease Control and Prevention (CDC), about 74 percent of all low-income adults lived in wireless-only households and 65 percent of all adults lived in wireless-only households.[4] The $5.8 billion in state and local taxes that are levied in addition to sales taxes disproportionately impact Americans least able to afford them.

Wireless Taxes and Fees Jump for Fourth Consecutive Year

Taxes, fees, and government surcharges on wireless service increased for the fourth year in a row, with rates increasing for federal, state, and local levies. The state and local burden increased from 12.8 percent to 13.2 percent, while the FUSF surcharge rate increased from 9.8 percent to 11.8 percent. Table 1 highlights the changes in wireless tax rates from 2003 to 2021.

Table 1. U.S. Average Wireless and General Sales & Use Tax Rates
  Weighted Average      
  Wireless – State & Local Tax & Fee Wireless – Federal Tax & Fee All Wireless Taxes & Fees General Sales/Use Tax State & Local Wireless vs. General Sales Tax
1/1/2003 10.20% 5.07% 15.27% 6.87% 3.33%
4/1/2004 10.74% 5.48% 16.22% 6.93% 3.81%
7/1/2005 10.94% 5.91% 16.85% 6.94% 4.00%
7/1/2006 11.14% 2.99% 14.13% 7.04% 4.10%
7/1/2007 11.00% 4.19% 15.19% 7.07% 3.93%
7/1/2008 10.86% 4.23% 15.09% 7.11% 3.75%
7/1/2009 10.74% 4.79% 15.53% 7.26% 3.48%
7/1/2010 11.21% 5.05% 16.26% 7.42% 3.79%
7/1/2012 11.36% 5.82% 17.18% 7.33% 4.03%
7/1/2014 11.23% 5.82% 17.05% 7.51% 3.72%
7/1/2015 11.50% 6.46% 17.96% 7.57% 3.93%
7/1/2016 11.93% 6.64% 18.57% 7.61% 4.32%
7/1/2017 12.11% 6.34% 18.45% 7.65% 4.46%
7/1/2018 12.46% 6.64% 19.10% 7.65% 4.81%
7/1/2019 12.65% 9.05% 21.70% 7.74% 4.91%
7/1/2020 12.82% 9.83% 22.65% 7.75% 5.07%
7/1/2021 13.16% 11.80% 24.96% 7.78% 5.39%

Note: Federal includes 3 percent federal excise tax (until May 2006) and Federal Universal Service Fund (FUSF) charge, which is set by the FCC and varies quarterly. FUSF charge as of July 1, 2021, is calculated by 37.1 percent interstate safe harbor times 31.8 percent contribution factor, which equals a 11.8 percent effective tax rate. See Universal Service Administrative Co., “Contribution Factors,” https://www.usac.org/service-providers/making-payments/contribution-factors/.

Source: Methodology derived from Council on State Taxation, “50-State Study and Report on Telecommunications Taxation,” May 2005; updated July 2021 from state statutes, FCC data, and local ordinances by Scott Mackey, Leonine Public Affairs LLP, Montpelier, VT.

The rate of the FUSF surcharge has increased dramatically since 2018, from an effective rate of 6.6 percent in 2018 to 11.8 percent in 2021. The decline in the price of telecommunications service, combined with the shift in consumer purchases from telecommunications services to internet access, has forced the Federal Communication Commission (FCC) to increase rates just to keep revenues constant. As a result, consumers and businesses who purchase interstate telecommunications services pay very high surcharge rates.

Table 2 ranks the states from highest to lowest in wireless taxes, fees, and government surcharges. Once again, Illinois has the highest wireless taxes in the country with state-local rates of nearly 23 percent. Arkansas, Washington, Nebraska, and New York round out the top five states. Idaho, Nevada, and Delaware have the lowest wireless taxes in the nation.

Table 2. Taxes, Fees, and Government Charges on Wireless Service, July 2021, State Rankings
    Wireless State-Local Rate Federal USF Rate Combined Federal/State/Local Rate 
1 Illinois  22.76% 11.80% 34.56%
2 Arkansas 20.25% 11.80% 32.04%
3 Washington 20.02% 11.80% 31.81%
4 Nebraska 19.57% 11.80% 31.36%
5 New York 18.93% 11.80% 30.73%
6 Kansas 17.69% 11.80% 29.49%
7 Pennsylvania 16.67% 11.80% 28.47%
8 Utah 16.15% 11.80% 27.95%
9 Rhode Island 15.54% 11.80% 27.34%
10 Maryland 15.70% 11.80% 27.50%
11 North Dakota 15.50% 11.80% 27.30%
12 Florida 15.03% 11.80% 26.83%
13 Missouri 14.91% 11.80% 26.71%
14 Oklahoma 14.65% 11.80% 26.44%
15 South Dakota 14.56% 11.80% 26.36%
16 Alaska 14.34% 11.80% 26.14%
17 California 14.05% 11.80% 25.85%
18 Puerto Rico  13.79% 11.80% 25.59%
19 Tennessee 13.75% 11.80% 25.55%
20 South Carolina 12.85% 11.80% 24.65%
21 New Mexico 12.87% 11.80% 24.66%
22 Arizona 12.67% 11.80% 24.46%
23 Colorado 12.71% 11.80% 24.51%
24 Indiana 12.28% 11.80% 24.08%
25 Georgia 12.62% 11.80% 24.42%
26 District of Columbia 12.15% 11.80% 23.95%
27 Texas 11.91% 11.80% 23.71%
28 Kentucky 11.29% 11.80% 23.09%
29 Alabama 11.27% 11.80% 23.07%
30 Minnesota 10.84% 11.80% 22.64%
31 West Virginia 10.88% 11.80% 22.67%
32 Massachusetts 10.50% 11.80% 22.30%
33 Michigan 10.45% 11.80% 22.25%
34 Mississippi 9.97% 11.80% 21.77%
35 Louisiana 10.08% 11.80% 21.87%
36 Iowa 9.92% 11.80% 21.71%
37 Wyoming 9.25% 11.80% 21.04%
38 New Jersey 9.17% 11.80% 20.97%
39 New Hampshire 9.12% 11.80% 20.92%
40 North Carolina 9.07% 11.80% 20.87%
41 Vermont 8.90% 11.80% 20.70%
42 Maine 8.83% 11.80% 20.63%
43 Ohio 8.57% 11.80% 20.37%
44 Connecticut 8.28% 11.80% 20.07%
45 Hawaii 7.91% 11.80% 19.71%
46 Wisconsin 7.74% 11.80% 19.54%
47 Oregon 7.71% 11.80% 19.51%
48 Virginia 7.32% 11.80% 19.12%
49 Montana 6.87% 11.80% 18.66%
50 Delaware 6.76% 11.80% 18.55%
51 Nevada 3.74% 11.80% 15.53%
52 Idaho 2.83% 11.80% 14.63%
  Weighted Avg. 13.16% 11.80% 24.96%
  Simple Avg. 12.14% 11.80% 23.94%

Source:  Methodology from COST, “50-State Study and Report on Telecommunications Taxation,” May 2005.  Updated July 2021 using state statutes, FCC data, and local ordinances.  

Figure 1 maps the states by state/local tax rates. High-tax states are distributed throughout the country, with the exception of the New England states, which tend to have lower rates.

States have debated whether to expand the sales tax base from tangible goods to services for decades, with proponents of expanding the sales tax base to services arguing that the disparity in taxation between taxable tangible goods and exempt services does not make sense. When it comes to wireless service, however, the exact opposite is true. As shown in Table 3, wireless service is subject to state and local taxes 1.7 times higher than the sales taxes imposed on goods, with the average state and local wireless tax rate in excess of 13 percent and the average combined sales tax rate at about 7.8 percent. In 15 states, wireless taxes are more than twice as high as sales taxes.

Table 3. Disparity Between Wireless Tax & Fee Rate and General Sales Tax Rate, July 2021
  State-Local Sales Tax State-Local Wireless Tax Wireless Over/Under Sales Tax Disparity Multiple
Illinois 10.00% 22.76% 12.76% 2.28
Nebraska 7.13% 19.57% 12.44% 2.75
Alaska 2.50% 14.34% 11.84% 5.74
Arkansas 9.38% 20.25% 10.87% 2.16
New York 8.44% 18.93% 10.49% 2.24
Washington 9.83% 20.02% 10.19% 2.04
Pennsylvania 7.00% 16.67% 9.67% 2.38
Maryland 6.00% 15.70% 9.70% 2.62
Kansas 8.33% 17.69% 9.37% 2.13
New Hampshire 0.00% 9.12% 9.12% NA
Utah 7.50% 16.15% 8.65% 2.15
Rhode Island 7.00% 15.54% 8.54% 2.22
North Dakota 7.25% 15.50% 8.25% 2.14
South Dakota 6.50% 14.56% 8.06% 2.24
Oregon 0.00% 7.71% 7.71% NA
Florida 7.50% 15.03% 7.53% 2.00
Montana 0.00% 6.87% 6.87% NA
Delaware 0.00% 6.76% 6.76% NA
Missouri 8.41% 14.91% 6.50% 1.77
District of Columbia 6.00% 12.15% 6.15% 2.03
Oklahoma 8.58% 14.65% 6.07% 1.71
Kentucky 6.00% 11.29% 5.29% 1.88
Indiana 7.00% 12.28% 5.28% 1.75
California 9.13% 14.05% 4.93% 1.54
New Mexico 8.16% 12.87% 4.71% 1.58
Michigan 6.00% 10.45% 4.45% 1.74
South Carolina 8.50% 12.85% 4.35% 1.51
Massachusetts 6.25% 10.50% 4.25% 1.68
Tennessee 9.50% 13.75% 4.25% 1.45
Colorado 8.51% 12.71% 4.21% 1.49
Arizona 8.65% 12.67% 4.02% 1.46
Wyoming 5.50% 9.25% 3.75% 1.68
Georgia 8.45% 12.62% 4.17% 1.49
Texas 8.25% 11.91% 3.66% 1.44
West Virginia 7.00% 10.88% 3.88% 1.55
Hawaii 4.50% 7.91% 3.41% 1.76
Maine 5.50% 8.83% 3.33% 1.61
Iowa 7.00% 9.92% 2.92% 1.42
Minnesota 7.96% 10.84% 2.88% 1.36
New Jersey 6.63% 9.17% 2.55% 1.38
Vermont 6.50% 8.90% 2.40% 1.37
Mississippi 7.50% 9.97% 2.47% 1.33
Puerto Rico 11.50% 13.79% 2.29% 1.20
Wisconsin 5.50% 7.74% 2.24% 1.41
Connecticut 6.35% 8.28% 1.93% 1.30
North Carolina 7.25% 9.07% 1.82% 1.25
Virginia 6.00% 7.32% 1.32% 1.22
Alabama 10.00% 11.27% 1.27% 1.13
Ohio 7.75% 8.57% 0.82% 1.11
Louisiana 9.70% 10.08% 0.38% 1.04
Idaho 6.00% 2.83% -3.17% 0.47
Nevada 7.99% 3.74% -4.25% 0.47
US Weighted Average 7.78% 13.16% 5.39% 1.69

Source:  Methodology from COST, “50-State Study and Report on Telecommunications Taxation,” May 2005.  Updated July 2021 using state statutes, FCC data, and local ordinances.

Total Taxes Paid

Wireless consumers will pay about $11.3 billion in taxes, fees, and government surcharges to state and local governments in 2021 based on the tax rates calculated in this report. About half of this amount—$5.5 billion—represents state and local sales and use taxes. These taxes are broadly applied to taxable goods and some services and do not apply solely to wireless service. The remaining $5.8 billion are taxes that apply only to wireless and other telecommunications services. These taxes are discussed further in the next section of the report.

Appendix C provides a detailed breakdown of every tax, fee, and government surcharge imposed by state and local governments in each state. In many states, local government impositions vary by individual jurisdictions, with some cities or unincorporated areas within a state imposing no taxes and others imposing very high taxes. To facilitate interstate comparisons, local rates in the most populated city and the capital city in each state are averaged into a single rate. For a more detailed discussion of the methodology in this report, please see Appendix A.

As mentioned, federal law, the Permanent Internet Tax Freedom Act, preempts state and local governments from imposing taxes on internet access services, including wireless internet access. Data from the U.S. Census Bureau suggests that approximately half of all wireless service revenues are from internet access.[5] Without the protection of the federal law, the high excise tax rates applied to taxable wireless services could be applied to internet access, and consumer tax burdens would be significantly higher. Later in this report, the section on alternative tax comparisons presents data on the total taxable portion of the wireless bill, both including and excluding the internet access portion of the bill.

911 and 988 Fees

Most states impose per-line fees on telecommunications customers to fund capital and operating expenses for state and local 911 systems. These fees vary significantly, from zero in Missouri to a high of $5.00 per line in Chicago.[6]

In 2021, five states increased their 911 fees. The largest was in Tennessee, which increased the fee from $1.16 per line to $1.50 per line per month. Oregon implemented the second year of a two-year, $0.50 per line increase in 911 fees, which increased from $1.00 to $1.25 per line per month. Colorado imposed a new statewide fee of $0.10 per month, which is imposed in addition to local fees in Denver ($1.20) and El Paso County ($1.38). Fees also increased in Maryland and Virginia in 2021.

A new fee will begin appearing on customer bills in a few states beginning in 2021, and more states are expecting to follow suit in 2022. The Federal Communications Commission (FCC) mandated that a new three-digit number (988) will be designated nationally to contact suicide prevention hotlines that will be operated in the states. A law passed by Congress authorized states to impose “988 Fees” to pay for some of the creation and operation of 988 crisis hotline centers. Virginia was the first state to impose a new 988 fee, which is 12 cents per line per month.

Unfortunately, according to the FCC, some states and localities routinely divert 911 fees for purposes other than 911 services. Last year, the FCC reported that five states—Nevada, New Jersey, New York, Rhode Island, and West Virginia—diverted more than $200 million for uses other than 911 services.[7]

State Universal Service Funds

Twenty-one states have their own “universal service funds” (USFs) that provide subsidies for many of the same purposes as the FUSF. Under federal law, the federal government imposes a charge as a percentage of interstate revenues and states may impose a surcharge as a percentage of intrastate revenues. Recently, however, some states have shifted to a per line USF imposition, which has resulted in a large portion of the state USF burden being borne by family share plans.

As detailed in Appendix Table B1, the highest per-line charge is currently in Nebraska at $1.75 per line. A family with a share plan with four lines pays $7.00 per month ($84 per year) even if they have the lowest price wireless plan. Other per-line state USF impositions are in New Mexico, Maine, Utah, Kentucky, and Maryland. In addition, Oklahoma will switch from a percentage to a per-line imposition effective in November 2021.

The remaining states continue to impose their USF charges on a percentage basis. The highest rate is in Arkansas at 7.1 percent followed closely by Kansas (6.85 percent) and Alaska (6.3 percent).

State Wireless Taxes

In addition to 911 fees, 988 fees, and state USF charges, 14 states impose wireless taxes that are either on top of sales taxes or in lieu of sales taxes but at a higher rate than the sales tax. Table 4 shows these states by type of wireless tax. No states increased or decreased their wireless taxes in 2021.

Table 4. State Wireless Taxes by Type
State Gross Receipts Tax in Addition to Sales Tax Higher State Tax Rate in Lieu of Sales Tax Wireless Tax but No State Sales Tax
Indiana District of Columbia Delaware
Kentucky Florida Montana
New York Illinois New Hampshire
North Dakota Maine  
Rhode Island     
South Dakota    

Source: State statutes.

Local Wireless Taxes

Local governments throughout the country also impose taxes on wireless service that are not imposed on other goods and services. Many of these taxes are imposed because of legacy taxes that were established during the regulated telephone monopoly era that existed prior to the 1980s breakup of AT&T. Local governments in some states have longstanding authority to impose right-of-way (ROW) fees on telephone companies for placing poles, wires, and equipment on local property. In other states, localities impose franchise or license taxes on telephone companies in exchange for the privilege of doing business in a city.

In the late 1990s and early 2000s, when wireless service began to compete with wireline service, localities became concerned about losing revenues from local taxes on wireline telephone companies and sought to extend these taxes to wireless service. This occurred in some states even though wireless providers typically did not use the public ROW to place equipment or, when they did use public property, as on top of buildings, the usage was de minimis and paid for through negotiated rental agreements. This response to changing consumer behavior can also be observed in local taxation of streaming services and cable companies, where localities are fighting to retain revenue by taxing streaming services as if they were using ROW like cable companies.[8]

Local governments in 13 states currently impose some type of tax on wireless service in addition to local option sales taxes. In most of those states, the taxes are additive and only further increase the tax burden on wireless service. California and Illinois are the exceptions—in those states, wireless service is subject to taxes in lieu of the sales tax but in most cases the wireless tax is higher than the sales tax. Table 5 provides a breakdown of the types of local wireless taxes that apply. Local taxes have a significant impact on the overall tax burden on wireless service in several of the states with the highest wireless taxes, including Illinois, Washington, Nebraska, New York, Utah, and Maryland.

Table 5. Local Wireless Taxes by Type
Privilege, License or User Taxes State-Authorized Telecom Taxes School District and Other  Special District Taxes
Arizona Florida Kentucky
California Illinois New York
Maryland Maryland  
Missouri New York  
Nebraska Utah  
South Carolina    

Note:  Excludes local general sales taxes.

Source: State statutes.

California has the highest local taxes, with rates up to 11 percent. Washington follows closely with local taxes as high as 9 percent, followed by Illinois (up to 7 percent), Florida (up to 7 percent), and Nebraska (up to 6.25 percent). In addition to these percentage-based taxes, Illinois allows local per-line taxes of $5.00 in Chicago, and Maryland allows Baltimore to charge $4.00 per line.

The Regressive Impact of Wireless Taxes

Economists use the term “regressive” to describe tax systems that impose higher tax burdens on low-income taxpayers than on higher-income taxpayers, as measured as a percentage of income. The trend of increasing per-line impositions—for 911 fees, state USF surcharges, and even per-line general wireless taxes, along with the addition of 988 fees—is making wireless taxes even more regressive. Many consumption taxes have regressive effects, and while that is not in itself an argument against levying them, lawmakers should be cautious when increasing regressive tax burdens, particularly in the case of a targeted excise tax that does not meaningfully internalize any externalities and far often far exceeds any amount necessary to pay for related government programs.

Excessive taxes and fees increase the cost of wireless service at a time when citizens are relying on wireless service more than ever for access to government services (including education), health care, remote work, and commerce. In fact, wireless service is becoming the sole means of communication and connectivity for many Americans, especially those struggling with poverty. At the end of 2020, more than 74 percent of all low-income adults had wireless-only service and 65 percent of all adults were wireless-only.

Table 6 shows the impact of these high local taxes on wireless consumers. In Chicago, a family of four paying $100 per month for taxable wireless service would pay about $410 per year in state and local taxes on wireless services. That same family in Baltimore would pay almost $340 in state and local wireless taxes annually.

Table 6. State and Local Wireless Taxes and Fees on Single and Multi-Line Plans in Selected Cities, July 2021
City Tax on 4-line Voice Plan Costing $100 per Month Effective Tax Rate
Chicago, IL  $34.08 34.08%
Baltimore, MD $28.20 28.20%
Omaha, NE $22.17 22.17%
Little Rock, AR $21.44 21.44%
New York, NY $20.47 20.47%
Seattle, WA $20.05 20.05%
Philadelphia, PA $19.60 19.60%
Salt Lake City, UT $18.53 18.53%
Providence, RI $17.00 17.00%
Tallahassee, FL $15.94 15.94%
City Tax on Single Line Voice Plan Costing $35.31 per Month EffectiveTax Rate
Chicago, IL  $9.94 28.16%
Baltimore, MD $7.67 21.72%
Little Rock, AR $7.02 19.87%
Omaha, NE $6.91 19.57%
Seattle, WA $6.69 18.94%
New York, NY $6.61 18.72%
Philadelphia, PA $6.24 17.67%
Salt Lake City, UT $5.81 16.46%
Providence, RI $5.49 15.54%
Tallahassee, FL $5.46 15.47%

Source: Author’s calculations, using state statutes and local ordinances.

Alternative Tax Comparisons

Wireless service provided to consumers has changed dramatically since the first report was published in 2003. Back then, consumers purchased taxable voice service, text messaging, and related ancillary services, and in most states these services were subject to taxation. Today, however, most wireless plans include both taxable wireless services as well as non-taxable data plans used to access the internet. The federal Permanent Internet Tax Freedom Act prohibits state and local governments from imposing any taxes on internet access. It has become increasingly difficult to compare the taxation of wireless service when consumers purchase plans that include a bundle of taxable and non-taxable services.

This section of the report presents alternative measures of the tax burden on wireless consumers that account for the non-taxable internet access included in wireless plans. Data collected by CTIA—The Wireless Association—shows that the average monthly revenue per wireless line fell to $35.31 per month. Of this amount, just over half of the typical bill is non-taxable internet access ($17.78 per month) and the remainder ($17.53 per month) is taxable wireless service.[9]

The first column in Table 7 ranks the states based on the total amount of state and local tax paid on a typical consumer’s bill. By this measure, Illinois still has the highest wireless tax burden in the country, with the typical consumer paying about $5.64 in state and local taxes per month. Column two shows the effective state and local tax rate as a percentage of the price paid for the taxable wireless service. Once again, Illinois has the highest tax burden with the typical consumer paying almost one-third of the taxable portion in state and local taxes. The third column shows the effective state and local tax rate as a share of the entire bill, which includes both taxable and non-taxable services. Even including the non-taxable portion in the calculation, the effective state and local tax rate is nearly 16 percent in Illinois. Finally, the fourth column shows the effective state and local tax rate using the COST methodology that has traditionally been used in this report.

The declining portion of taxable services may explain why more states have begun to rely more heavily on per-line taxes, fees, and government surcharges. For example, while most states have always imposed per-line 911 fees, more states are shifting their state USF impositions from a percentage of intrastate revenue to a flat per-line amount. Nebraska, New Mexico, Oklahoma, and Utah have all recently made this change and other states are considering it as well.

Under the alternative comparisons in Table 7, states that disproportionately rely on per-line taxes, such as Illinois, Maryland, and West Virginia, rank worse than states like California and Florida that rely predominately on percentage-based taxes. By their very nature, per-line taxes are regressive and tend to burden lower-income wireless users more heavily than percentage-based taxes. They also burden families because most wireless providers charge less per line for each additional line added to a family plan. While family and lower-income wireless users bear a higher burden, consumers of higher priced plans, generally business consumers, pay comparatively less on a percentage basis because the per-line taxes represent a lower relative cost to the price of their wireless plans.

Table 7:  State and Local Taxes, Fees, and Surcharges Paid on Single Line Wireless Plan, As of July 1, 2021
Rank State Monthly Estimated State-Local Tax/Fee Paid Monthly Estimated Tax Paid as % of Taxable Service Monthly Estimated Tax Paid as % of Voice/Internet Bundle Current Report Methodology: Adjusted State-Local Statutory Tee/Fee Rate
1 Illinois  $5.64 32.16% 15.96% 22.76%
2 Nebraska  $4.55 25.97% 12.89% 19.57%
3 Maryland  $4.48 25.54% 12.68% 15.70%
4 Arkansas  $4.22 24.10% 11.96% 20.25%
5 New York  $4.07 23.24% 11.54% 18.93%
6 Washington  $3.99 22.74% 11.29% 20.02%
7 West Virginia  $3.84 21.91% 10.88% 10.88%
8 Pennsylvania  $3.75 21.41% 10.63% 16.67%
9 Utah  $3.75 21.38% 10.61% 16.15%
10 North Dakota  $3.74 21.33% 10.59% 15.50%
11 Kansas  $3.55 20.28% 10.07% 17.69%
12 Alaska  $3.50 19.97% 9.91% 14.34%
13 Rhode Island  $3.35 19.13% 9.50% 15.54%
14 South Dakota  $3.26 18.58% 9.22% 14.56%
15 Tennessee  $3.17 18.06% 8.96% 13.75%
16 New Mexico  $3.06 17.44% 8.65% 12.87%
17 Louisiana  $2.99 17.09% 8.48% 10.08%
18 Georgia  $2.97 16.93% 8.41% 12.62%
19 Colorado  $2.96 16.88% 8.38% 12.71%
20 Oklahoma  $2.94 16.80% 8.34% 14.65%
21 Alabama  $2.91 16.61% 8.25% 11.27%
22 Florida  $2.84 16.18% 8.03% 15.03%
23 Indiana  $2.67 15.24% 7.56% 12.28%
24  Puerto Rico  $2.67 15.23% 7.56% 13.79%
25 California  $2.61 14.91% 7.40% 14.05%
26 Missouri  $2.61 14.91% 7.40% 14.91%
27 Massachusetts  $2.60 14.81% 7.35% 10.50%
28 South Carolina  $2.58 14.72% 7.31% 12.85%
29 Michigan  $2.52 14.36% 7.13% 10.45%
30 District of Columbia  $2.51 14.34% 7.12% 12.15%
31 Kentucky  $2.42 13.82% 6.86% 11.29%
32 Minnesota  $2.41 13.77% 6.84% 10.84%
33 Texas  $2.37 13.52% 6.71% 11.91%
34 Arizona  $2.32 13.24% 6.57% 12.67%
35 Mississippi  $2.28 12.99% 6.45% 9.97%
36 Iowa  $2.26 12.88% 6.39% 9.92%
37 New Jersey  $2.06 11.76% 5.84% 9.17%
38 Maine  $2.05 11.71% 5.81% 8.83%
39 Oregon  $2.05 11.70% 5.81% 7.71%
40 Wyoming  $2.02 11.52% 5.72% 9.25%
41 New Hampshire  $1.98 11.28% 5.60% 9.12%
42 North Carolina  $1.96 11.16% 5.54% 9.07%
43 Virginia  $1.82 10.36% 5.14% 7.32%
44 Connecticut  $1.79 10.23% 5.08% 8.28%
45 Montana  $1.76 10.03% 4.98% 6.87%
46 Wisconsin  $1.73 9.90% 4.91% 7.74%
47 Hawaii  $1.72 9.81% 4.87% 7.91%
48 Ohio  $1.63 9.29% 4.61% 8.57%
49 Vermont  $1.56 8.90% 4.42% 8.90%
50 Delaware  $1.50 8.54% 4.24% 6.76%
51 Nevada  $1.28 7.28% 3.62% 3.74%
52 Idaho  $1.00 5.71% 2.83% 2.83%
Average Monthly Revenue Estimates Used in Calculations
  $ Percent
Monthly Service Revenue (taxable & non-taxable)  $35.31 100%
Monthly Wireless Telecom Revenue (taxable)*  $17.53 49.64%
Monthly Internet Access Revenue (not taxable)*  $17.78 50.36%
Source:  CTIA estimated wireless monthly service revenues; Internet Access service percentage of wireless service revenues from US Census Bureau survey, see https://www.census.gov/services/qss/qss-current.pdf Excludes equipment sales and repair revenues.

The Economic Impact of Excessive Wireless Taxes

The popularity of wireless service, and the explosive growth in the number of wireless subscribers, has led some to question whether wireless taxes matter to wireless consumers and the wireless industry. There are two compelling reasons why policymakers should be cautious about expanding wireless taxes, fees, and government surcharges. First, as discussed, wireless taxes are regressive and have a disproportionate impact on low-income consumers. Excessive taxes and fees increase the cost of access to wireless service for low-income consumers at a time when consumers are relying on wireless service for education and remote work during the COVID-19 pandemic. Second, discriminatory taxes may slow investment in wireless infrastructure. Ample evidence exists that investments in wireless networks provide economic benefits to the broader economy because so many sectors—transportation, health care, energy, education, and even government—use wireless networks to boost productivity and efficiency. These economic benefits have proven especially important during the COVID-19 pandemic because wireless networks help employees work remotely and allow students to continue their studies.

Network investment is important not only to consumers and businesses that use these wireless networks but also to the entire American economy. A report by the International Chamber of Commerce (ICC) in Paris surveyed the evidence from the United States and Europe as well as from the developing world. Economists that have examined the link between investments in communications and information technology infrastructure and economic growth have consistently found a strong correlation. Simply put, wireless infrastructure investment enables an entire entrepreneurial culture to focus on creating applications and devices to make businesses more productive and to improve the lives of consumers. These tools in turn make businesses more successful so that they can create new jobs that generate economic activity and tax revenues for governments.

While most infrastructure investments create these types of multiplier effects, the multiplier effects for telecommunications infrastructure are higher than other industries because communications and information technology are so deeply embedded in business processes. These infrastructure investments also benefit the government and nonprofit sectors in ways that do not necessarily show up directly in economic statistics, but nonetheless make these sectors more efficient and enable them to lower the cost of providing government services. As noted by the International Chamber of Commerce, “Remedying the discriminatory tax treatment of telecom goods and services may reduce tax receipts in the short-term, but the longer-term increase in the use of advanced capability devices, service demand, and network deployment resulting from these tax reductions is likely to counteract this loss of revenue over time.” [10]  Policymakers need to weigh the trade-offs between the short-term revenue benefits of excessive wireless taxes and the long-term economic impact on the state from reduced infrastructure investment.

Applying the sales tax, a traditional broad-based consumption tax, is perfectly appropriate, but excessive targeted taxation of wireless services lacks the traditional justifications—a “user-pays” system or the internalization of social costs—for excise taxation, raising consumer costs and undercutting investment in a vital market.


Wireless consumers continue to be burdened with high taxes, fees, and government surcharges in many states and localities throughout the country. About half of the $11.3 billion in state and local taxes imposed on wireless service are discriminatory in nature, as they only apply to telecommunications services. These taxes disproportionately burden low-income Americans, especially as more and more states shift to flat per-line taxes and fees that impose high burdens on family share plans.

To alleviate the regressive impact on wireless consumers, states should examine their existing communications tax structure and consider policies that transition their tax systems away from narrowly-based wireless taxes and toward broad-based tax sources that do not distort the economy and do not slow investment in critical infrastructure like wireless broadband.

Appendix A: Methodology

The methodology used in this report to calculate wireless taxes compares the applicable federal, state, and local rates on wireless voice service in the capital city and the most populated city in each state. This methodology was developed by the Council on State Taxation (COST) in its landmark “50-State Study and Report on Telecommunications Taxation,” first published in 2000.

The use of a consistent methodology allows for accurate time-series comparisons across states and over time. However, changes in consumer demand for wireless services pose challenges when measuring the impact of wireless taxes on consumer bills. Three trends in the industry are significantly impacting the amount of taxes that wireless consumers pay on their monthly bills.

First, a growing share of wireless consumer purchases is for internet access. U.S. Census Bureau data from 2018 suggests that about 50.4 percent of total wireless service revenues (which excludes sales and rental of equipment and other non-service operating revenue) for the industry are from the sale of internet access.[11] This percentage will continue to grow as wireless consumers utilize more internet access and less voice telephone service each year.

Under federal law, as of July 1, 2020, all states are precluded from imposing taxes on internet access. This suggests that of the “typical” consumer’s monthly expenditure of $35.31 per month, approximately $17.78 is for non-taxable internet access and $17.53 is for taxable wireless service. A consumer applying the tax rates in this report to their total bill will find that the effective tax rate overstates their actual tax paid if their calling plan includes both taxable voice service and exempt internet access.

Second, the report’s methodology understates the tax rate impact of flat rate taxes and fees—those that are imposed as a set dollar amount per line. Under the report’s methodology, a $1.00 per month per-line tax is converted to a percentage amount by dividing $1.00 by the $35.31 average monthly bill, resulting in a tax rate of 2.8 percent in this example. However, these flat rate taxes and fees are only permitted to be imposed on the portion of the wireless bill that is not internet access. In this same example, if the $1.00 per month were divided by the taxable portion of the bill ($17.53), the tax rate would be 5.7 percent.

Third, the methodology for calculating the rate for the federal Universal Service Fund charge relies on the use of the FCC 37.1 percent “safe harbor” for determining the share of a bundled service plan that represents interstate telecommunications service. Telecommunications providers have the option of either using the safe harbor percentage or a “traffic study” to determine the actual percentage of interstate revenues.

Since the traffic study typically results in a lower share of interstate revenues than the safe harbor percentage, wireless carriers use their own traffic studies, which result in a lower effective rate for the FUSF than the rate calculated in this report. The report therefore overstates somewhat the rate of the FUSF. The report also understates the rate of the state USF impositions since carriers must rely on the same traffic studies to calculate the intrastate portion of their revenues because a traffic study that reduces assessable interstate revenues will increase assessable intrastate revenues. For a more detailed discuss, please see Appendix B.

Due to the changes in product offerings and consumer behavior, we have included a section in this year’s report that provides alternative comparison methodologies that allow readers to understand the impact of the internet access exemption on the effective rates paid by wireless consumers. This section is also helpful when considering why lawmakers have routinely increased rates on the taxable share of wireless services.

However, despite these changing behaviors and services, the authors have determined that there are benefits to also retaining the current methodology, providing a consistent measurement of trends in tax rates over time by continuing to calculate the effective tax rate for the taxable voice and text share of consumers’ wireless bills as well.

Appendix B:  What Are Universal Service Funds?

The Federal Universal Service Fund

The Federal Universal Service Fund (FUSF) is administered by the FCC under open-ended authority from Congress. The program subsidizes telecommunications services for schools, libraries, hospitals, low-income people, and rural telephone companies operating in high-cost areas. The FCC has also recently decided to use funds to subsidize broadband deployment.

 The FCC has authority to set spending for these programs outside of the normal congressional appropriations process. After deciding what to spend on the various programs, the FCC sets the quarterly “contribution factor” or surcharge rate that telecommunications providers must remit to the FUSF to generate sufficient revenues to fund the expenditure commitments. Providers may elect to surcharge these “contributions” on their customer bills.

FUSF surcharges apply only to revenues from interstate telecommunications services. They currently do not apply to internet access service, information services, and intrastate telecommunications services.

Wireless carriers generally sell plans that include either unlimited voice minutes or a fixed number of voice minutes for a set amount. Since these plans include both interstate calls (subject to the FUSF) and intrastate calls (not subject to FUSF), the FCC allows providers to allocate the fixed monthly plans to interstate and intrastate calls by one of two methods. Carriers may use “traffic studies” to show the actual split between interstate and interstate calls for all subscribers and apply the FUSF to the aggregated interstate portion of subscriber calls.

Alternatively, carriers may use a single uniform national “safe harbor” percentage to its fixed monthly plans. The FCC currently sets this safe harbor at 37.1 percent of the fixed monthly charge. For example, when determining the FUSF, a $50 monthly wireless voice calling plan is deemed to include $18.55 in interstate calls and $31.45 in intrastate calls. If a carrier elects to use the safe harbor, the FUSF rate would be applied to $18.55 of the bill each month.

The FUSF rate is set by the FCC each quarter. For the period beginning July 1, 2021, the rate is 31.8 percent. Thus, the FUSF rate applied on assessable wireless revenues using the FCC safe harbor amount is 11.8 percent (31.8 percent times 37.1 percent).[12] Figure B1 highlights the significant growth in the FCC contribution rate since 2003.

Despite the growing burden on wireless consumers, Congress has shown little interest in restricting or otherwise limiting the growth of the programs funded through the FSUF.

Federal universal contribution fund rates 2021 cell phone taxes and fees, 2021 wireless taxes and fees

State Universal Service Funds

States also have the authority to supplement the programs funded through the FUSF with their own programs funded through state universal service funds. The state programs are funded by surcharges applied to the intrastate portion of telephone charges. In this report, the inverse of the FUSF safe harbor is used to calculate the rates of the state USF in all states except Vermont, which imposes its state USF on both interstate and intrastate charges. As in the previous example, if a consumer has a $50 monthly wireless voice plan, 62.9 percent of that charge ($31.45) is deemed to be an intrastate service subject to the state USF charge and $18.55 is an interstate service not subject to state USF charges.

Like the FUSF, state universal service fund charges do not apply to internet access. State USF charges are a key factor in the high wireless tax burden in states like Arkansas, Alaska, Kansas, and California.

Table B1. State Universal Service Fund Rates on Wireless Service, As of July 1, 2021
State Effective Rate Calculation
Arkansas 7.08% 11.25% times FCC safe harbor
Kansas 6.82% 10.84% times FCC safe harbor
Alaska 6.29% 10.00% times FCC intrastate safe harbor
Nebraska 4.96% $1.75 per line per month
California 4.87% 7.28% times FCC intrastate safe harbor
Oklahoma 3.95% 6.28% times FCC safe harbor
Oregon 3.77% 6% times FCC safe harbor
Louisiana 3.65% Carrier rates assigned by Public Service Commission
New Mexico 3.06% $1.08 per line per month
Vermont 2.40% Funds 911 and other programs
Texas 2.08% 3.30% times FCC safe harbor
Colorado 1.64% 2.60% times FCC safe harbor
South Carolina 1.51% 2.18% times FCC safe harbor
Wyoming 1.51% 2.40% times FCC safe harbor
Maine 1.25% $0.44 per line
Utah 0.96% $0.34 per line per month
Indiana 0.88% 1.40% times FCC safe harbor
Puerto Rico 0.87% 1.39% times FCC safe harbor
Kentucky 0.42% $.15 per month
Nevada 0.24% 0.38% times FCC Safe Harbor
Maryland 0.14% $0.05 per month per line
Wisconsin 0.12% 0.185% times FCC safe harbor

Source:  Author’s calculation from state statutes and state utility commissions.

Appendix C

ReportDownload Data

[1] The program subsidizes telecommunications services for schools, libraries, hospitals, low-income people, and rural telephone companies operating in high-cost areas. The calculation of the Federal Universal Service Fund (FUSF) surcharge rate assumes that wireless providers use the “safe harbor” percentage. See Appendix B for a full explanation of the methodology.

[2] As used in the remainder of this report, the term “tax” includes taxes, fees, and government surcharges.

[3] Figure includes watches, tablets, and other connected devices. See Robert Roche, “CTIA Wireless Industry Indices Report, Year End 2020 Results,” July 2021, 18.

[4] Stephen J. Blumberg and Julian V. Luke, “Wireless Substitution: Early Release Estimates from the National Health Interview Survey, July-December 2020,” National Center for Health Statistics, August 2021,  https://www.cdc.gov/nchs/data/nhis/earlyrelease/wireless202108-508.pdf.

[5] U.S. Census Bureau, “Quarterly Selected Service Estimates, Second Quarter 2021,” Sept. 9, 2021, https://www.census.gov/services/qss/qss-current.pdf.

[6] Missouri has no 911 fee on billed 911 service but does have a 911 fee on prepaid service.

[7] Federal Communications Commission, “FCC Issues Annual Report on State 911 Fees,” Dec. 8, 2020, https://www.fcc.gov/document/fcc-issues-annual-report-state-911-fees-1.

[8] Ulrik Boesen, “Cutting the Cord from Cable Has States Courting New Revenue Streams,” Tax Foundation, July 19, 2021, https://www.taxfoundation.org/streaming-services-tax/.

[9] These figures are derived from the U.S. Census Bureau’s “Service Annual Survey Historical Tables,”

Dec. 10, 2010, table 4, https://www.census.gov/data/tables/2018/econ/services/sas-naics.html.

[10] International Chamber of Commerce, “ICC Discussion Paper on the Adverse Effects of Discriminatory Taxes on Telecommunications Service,” Oct. 26, 2010. https://cdn.iccwbo.org/content/uploads/sites/3/2010/10/ICC-discussion-paper-on-the-adverse-effects-of-discriminatory-taxes-on-telecommunications-services.pdf.

[11] U.S. Census Bureau, “Service Annual Survey Historical Tables.”

[12] For the purposes of this report, the FCC safe harbor percentage is used. This allows for consistent multiyear comparisons of taxes, fees, and surcharges.

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