Taxes can add up as a portion of Wireless bills – about 18% of a bill on average – so they are not something to be ignored. And tax rates are rising: 2015 tax rates increased over 2014 and are projected to increase again in 2016.
Take a look at below to see how the rates are charged, rates you should expect in your area and some hints on how to manage these fees.
How are Rates Charged?
Congress passed a Mobile Telecommunications Sourcing Act in 2002, which states that “a cell phone subscriber is liable for cell phone taxes only in his or her “place of primary use.”
Therefore, if you have an Ohio phone number, but live in Virginia and primarily use your mobile device in Virginia, you will liable for taxes only in Virginia.
What are the Tax Rates?
Tax rates average almost 18% of a wireless bill but differ due to location. This rate is almost 2.5 times higher than the average tax rates mandated on most other taxable goods and services, so get your money’s worth! Check out the below Map to see where you stand in relation to the rest of the country.
Source: Tax Foundation
Interestingly, while Wireless rates have been decreasing, taxes and fees have been increasing offsetting any net savings to end users.
The graph below from the Tax Foundation show the relationship between Average Wireless Bills (bars) and Tax scale (line graph). While overall rates are decreasing, the tax rates are increasing rendering the overall net savings at just about $0. Only in America.
Hints on How to Manage
Keep your base rates low: BPI recently renegotiated rates and reduced a Client’s bill by over $50,000 per month (no, that’s not a typo, that’s a bunch of green). In doing so, taxes were decreased by over $15,000 per month because taxes are figured as a percent of the billed amount: lower rates, lower base to tax as a percent, lower tax.
So, the first BIG way to reduce taxes is to reduce your wireless spend. Keep monitoring those bills and continuing reductions: this will keep your taxes lower as a result.
Watch your Device Types with Surcharges and Rates: In a recent BPI audit it was determined that a significant portion of the incorrect billings were due to State Taxes and Surcharges by device type:
- Tax rates are different for different device types. In Virginia, for example, Smartphones should be charged a tax rate of 4% while Phone-only Devices should be charged a rate of 3.3%. BPI found examples of Phone-Only Devices being charged at the Smartphone Rate.
- State surcharges were charged for a smartphone but the billed device was phone-only. This was a 40% difference in rate and can add up over many devices.
So on this April 15th, make your taxes work for you: go ride on some publicly provided roads, enjoy your local library and if you go celebrate too hard, maybe you’ll have some cool interaction with some fellow brothers and sisters in blue.
If you have questions about saving your company money through the auditing, optimizing, or managing of your wireless services, please click here to contact The Bill Police.