Portable Numbers and Cell Phone Taxes
Interesting article on how cell phone carriers treat the portable numbers after you move to a new area.
Forbes has this information as well as a way that you can get around it (although you need to change your cell phone number).
How To Duck Cell Phone Taxes
Cell phones have not been proven to cause cancer, so why exactly are they taxed like they do?
Steve Largent, head of the main cell phone lobbying group, recently complained to Congress that the average 16.8% in combined federal, state and local taxes his customers pay has traditionally been levied on products like cigarettes. Americans pay an average of just 6.9% for typical non-carcinogenic goods and services.
Exorbitant cell phone taxes may seem like one of life's annoyances you just can't do anything about. In fact, as I recently discovered, you can.
So far, cities and towns have gotten away with treating the country's 182 million cell phone subscribers as easy marks. Cell phones taxes increased nine times faster than taxes on other goods and services between January 2003 and April 2004, according to one industry study. In a particularly egregious case, Baltimore just hit its residents with a new $3.50 per month tax.
But ever-higher cell phone taxes are likely to have another effect: More people will go to the effort of dodging them.
That's what I did. A year after moving to Los Angeles from New York, I was reading my Verizon Wireless bill and noticed I was still paying New York taxes. New York, as it happens, has the highest state and local taxes in the country: 16.2% (if you add federal charges, it's 22.2%). I estimated I was giving my former city and state about $75 per year they didn't deserve.
When I called Verizon Wireless, a joint venture of Verizon Communications and Vodafone, to complain about the tax screw-up, I learned something odd. The operator told me that as long as I kept my old New York number, I would have to keep my old New York tax bill. It didn't matter that I had switched my billing address to L.A., she said, taxes are linked to area codes. If I wanted to pay L.A. taxes, she suggested, I needed to switch my phone number to an L.A. area code.
That gave me a better idea. There are some states, blessedly, that don't soak their cell phone-using residents. One of those, I happened to know, is Idaho--a state I visit regularly. (The Gem State has a 2.2% tax rate, I would later discover, the fourth lowest in the country.) Well, I triumphantly informed the operator, I am moving to Idaho.
Since it was clear I'd have to lose my coveted New York number to avoid Verizon-levied taxes, I changed to an Idaho number, provided an Idaho address, then promptly turned around and requested paperless billing, which I paid from my Los Angeles address.
Since my fake move, my monthly bill has shown a tiny Idaho tax of about $1.15 per month. At that rate I figure I am saving about $60 per year. If I was a bigger cell phone user, I would have saved far more. (I learned later, if I wanted to be a real cheapskate, I should have "moved" to Nevada, which holds the record for the country's lowest cell phone taxes at just 1.1%.)
I also felt a bit guilty. I had established that is was practical to dodge high cell phone taxes. But was it legal? And was it ethical?
The relevant federal law, it turns out, is the Mobile Telecommunications Sourcing Act, which went into effect in 2002. Cell phone users are supposed to pay taxes in their "area of primary usage," the law says. For me, that area is clearly California, not Idaho, so to comply with the law I should have switched my area code to Los Angeles. Though phone companies are physically able to determine where most calls originate, they also take easier shortcuts and simply use billing addresses and area codes.
There is a good bit more in the article including a chart of what each state charges. The chart told me that my own Washington State has the 3rd highest tax rate at 21.52% (of which 5.48% is the overall Federal tax).
Sheesh -- the things you find on the internet these days...
Posted by DaveH at June 22, 2005 10:06 PM