I have written about this before, but some recent events led me to update this. Telecommunications taxes and fees are skyrocketing and I am seeing a lot of examples from clients of ways that these items are continuing to go up in price.
What is a tax or fee?
Tax – A tax is something required by a regulatory agency for the federal, state, county or city governments. These agencies can routinely change the ‘rate’ of the tax. Examples of this are Federal Universal Service Fund, State Communications Tax, State Gross Receipts, Local Communications Tax, etc.
Fee – this is something that your telecommunications company charges for that is to reimburse them for certain costs, including small miscellaneous taxes they must pay (e.g. North American Numbering Plan, TRS fees, etc.). Some examples of fees are paperless billing fee, physical invoice fee, Cost Recovery Fee, etc.
What taxes are making my bill go up?
The various governmental agencies can raise the taxes they collect if they have budget shortfalls. In many cases, it is easier to raise this type of tax because it does not get publicized or require congressional approval. One example of this is the Federal Universal Service Fund (USF) tax that is controlled by the FCC. It started in 1997 as a result of the Telecom Act the year before, and was initially about a 3% tax on ‘interstate phone calls or services’. This rate grew quickly to over 20% last year, and the new rate for this quarter just jumped to 31.8%! Carriers use a formula to determine how much of your phone bill gets taxed at this rate. Additionally state and local regulatory agencies routinely raise rates to cover budget shortfalls. Declining federal and state sales tax revenues due to COVID are causing them to look at these rates as a way of helping cover shortfalls.
How much of my phone bill is taxes/fees?
It is fairly easy to calculate this – on your phone bill, it should show you what your total services are before taxes/fees, and also how much your taxes/fees are (you may have to add them up). For example if your total services are $300/month, and your total taxes/fees are $100/month, simply divide the $100 (taxes/fees) by the $300 (services) and you will see that your taxes/fees are 30% of your services. Typically, we see on our bills that total taxes/fees are anywhere between 20% – 30% of the services.
How do I know if I have a problem?
If your taxes/fees exceed 30% of your services, you may have an issue, even with recent rate increases. What we are seeing on examples of competitors’ bills are the taxes/fees that are 60% – 100% of the services! How can this be? The carrier is trying to make up for losses in other areas. For example, many carriers bait customers into buying their service based on a low rate, but then make it back by inventing or inflating telecom fees that make their bill extremely high. Most people only know to look at the rate they are paying and not the taxes/fees on the account.
ComRes strives to keep our customer’s telecom bills low, and to only pay the taxes/fees that are required. If you have questions about your telecom bill or are interested in having ComRes provide a competitive quote, please contact us at 954-462-9600.
