Study finds Iowa's cell phone taxes lowest of surrounding states

Iowans pay lower taxes on cell phones than any surrounding state, according to a recent studying examining the rise in taxation of wireless services.

Many states have been raising cell phone taxes “because they can raise revenue in a relatively hidden way,” the Tax Foundation said in a study released this month

Twenty-three states have state and local taxes and fees on wireless services of over 10 percent, the study said. Nebraska has the highest average tax rate on cell phones, with state and local taxes alone of 18.64 percent. With federal taxes and fees added, Nebraskans face pay a combined federal-state tax rate of 23.7 percent on wireless bills.

The study found Iowans pay 7.91 percent in state and local taxes on wireless bills. With federal taxes added, it amounts to 12.96 percent. That's lower than the national average of 16 percent for combined federal, state and local taxes and the average stated local charges of 11.21 percent.

The study included as tax the Universal Service charges that are intended to spread the cost of providing telecommunications services to hard-to-serve customers such as the hearing impaired and people living in remote areas.

One of the higher municipal taxes is in Baltimore, the study said, which imposes a $4 per line monthly tax on top of federal and state charges.

Six states impose both sales tax on wireless customers and gross receipts taxes on wireless carriers, the study said, effectively double-taxing the revenues collected from wireless subscribers.

The study was introduced in support of federal legislation, the Cell Phone Tax Moratorium Act, that would restrict “excessive” state and local wireless taxes. That bill has been regularly introduced in Congress, the study said, with little success.

Wireless providers apply tax based on the subscribers “place of primary use,” which is determined based on the address provided by the subscriber.

State-local taxes on wireless carriers

Illinois: 15.85%

Missouri: 14.23%

Kansas: 13.34%

Nebraska: 18.64%

South Dakota: 12.02%

Minnesota: 9.38%

Wisconsin: 8.34%

Iowa: 7.91%