Wireless taxes used to balance city budgets

May 16 2005 - 03:45 PM ET | In The News

Ken Belson writes in the New York Times about a little known practice some cities are using to balance the budget--imposing stiff wireless taxes. It's no secret that wireless service is heavily taxed (CTIA says an average of 17%), but typically it all goes to state and federal coffers. Starting in August 2004, the city of Baltimore began collecting $3.50 monthly from each of the city's 238,000 mobile phone subscribers (that makes for a cool $833,000 per month). Such actions have lit a fire under mobile carriers, likely because consumers like to blame the carrier for getting a higher bill. bq. Cingular Wireless, Verizon Wireless, Sprint and T-Mobile filed a lawsuit in February in Maryland Tax Court against Baltimore and Montgomery County, which has its own wireless tax. They contend the cell phone fee is effectively a sales tax, which only the state has the right to impose. They also say that cities have no authority to collect taxes on services consumed outside their borders, noting that many of the cell phone calls made in Baltimore go outside the city limits.

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