Telecom Taxes and Surcharges
I was reviewing some telecom invoices and was reminded of the extreme variances in taxes and surcharges that are assesed on telecom invoices. In the ten or so invoices I reviewed from different providers I found taxes and surcharges ranging from 5-17% of the invoice. They ranged from USF, State and Local taxes, surcharges, high cost fund, and federal taxes. I have heard of extreme cases of taxes totaling more than 30% in some states.
Are all these taxes fair and just? The answer is not an easy one. The taxes telecom companies must pay are complex, confusing, and differ by the type of service and plans they offer. As a result, telecom usage is one of the most heavily taxed services in the US. More than tobacco in some cases. This leaves the door wide open on how telecom companies choose to collect taxes from consumers.
“Surcharge or “Regulatory Recovery Fee”
Typically, a surcharge or a “regulatory recovery fee” is a per user estimate of the fees they need to collect to recover the cost of collecting taxes. In some cases surcharges are purposly over estimated as it adds to the bottom line revenue. While I think this is deceptive, they are running a company with the goal to make a profit. If the consumer does not question the surcharge then there is no incentive for them to properly adjust it or remove it altogether. If you see this charge on your invoice consider it part of your monthly cost when comparing like plans.
For example, you have two companies offering unlimited voice calls for $29.95, if one has “regulatory recovery” or “surcharges” for $3 per month, then their advertised service should really be $32.95. However, they would not be competitive with the other carrier so the reason is obvious as to why they structure the fees like this. It is best to call the company your are switching to and ask them for a list of all taxes and surcharges they apply so that you can do a real comparison.
Ok, what about actual taxes. Well that depends on your state. If you see an exsesive amount of taxes run a search on each one and see if it is valid for your services. If not, call the carrier and ask them to remove it. If they don’t then you can file a complaint with your local Public Utilities Commission (you can search for your local ones here: www.naruc.org ).
How About Federal Excise and USF (Universal Service Fund)
Federal Excise tax is now obselete if you have a flat rate or per minute type of calling plan. If you are/were being charged you are actually entitled to refunds back three years. However, the forms are complex and you must provide records of the amounts that were charged. The Federal Excise tax was 3% of usage based services. Call your tax proffessional for more information or visit www.fcc.gov and search for federal excise tax or see here: http://www.fcc.gov/cgb/consumerfacts/understanding.html.
USF (Universal Service Fund) – This is a fee telecom companies must pay to help support phone service to under devleoped areas or low income families. The rate is changed every quarter based on the amount of money the fund feels it will need to meet the budget. For this current quarter it is capped at 11.3% see http://www.fcc.gov/omd/contribution-factor.html. Carriers have a choice, they can choose to bill this to their customers or not. If they do, they can not exceed the contribution rate they pay see http://www.fcc.gov/cgb/consumerfacts/universalservice.html. So, it is always a good check to see what you are being invoiced. If it is greater then the 11.3%, you may be entitltiled to a lower rate or refund. If you feel you have been miss-billed you can contact the FCC at 1-888-225-5322.
In summary, there is no correct tax amount that you can verify against. Your best course of action to find the best value is to know before you commit to services what taxes and surcharges will be assesed. For your current accounts, be diligent about looking at the fees. If they seem exssive, call your carrier and find out what they are. Research the tax on-line and if you feel it is to much or not valid ask for the fee to be removed. If they won’t, contact your Public Utilities Commission. (You can always threaten that you are going to call the PUC to get more action from your carrier).
I hate to say it, telecom companies are stubborn and your time will probably be lost with little results. The best advice as always, be proactive and know the details before making any switch. It is hard to get them to agree to refunds.
I ecourage visiting this link as the FCC gives more in-depth summaries of the types of fees that may appear on invoices: http://www.fcc.gov/cgb/consumerfacts/understanding.html (see the bottom of this link for instructions on how to file a complaint) or http://www.fcc.gov/cgb/phonebills/samplePhonebill.html