This suggests that of the “typical” consumer’s monthly expenditure of $37.85 per month, approximately $17.79 is for nontaxable internet access and $20.06 is for taxable wireless service. For example, when determining the FUSF, a customer with a $50 monthly wireless voice calling plan is deemed to include $18.55 in interstate calls and $31.45 in intrastate calls. These tools in turn make businesses more productive and profitable so that they can create new jobs that generate economic activity and tax revenues for governments. This is particularly true since the Census Bureau has only been tracking the percentage of wireless expenditures on internet access since 2012, so it would not be possible to go back and retroactively adjust data prior to then. For a detailed explanation of the FUSF surcharge and how it is imposed, see Appendix B. The current total local sales tax rate in Montgomery, AL is 10.000%. A typical American household with four wireless phones paying $100 per month for taxable wireless service can expect to pay about $260 per year in taxes, fees, and surcharges–up from $229 in 2018. Updated July 2018 using state statutes, FCC data, and local ordinances. Alabama has 765 cities, counties, and special districts that collect a local sales tax in addition to the Alabama state sales tax.Click any locality for a full breakdown of local property taxes, or visit our Alabama sales tax calculator to lookup local rates by zip code. They currently do not apply to internet access service, information services, and intrastate telecommunications services. Illinois leads all states in this regard, imposing wireless taxes that are more than twice as high as sales taxes—22.1 percent vs 10.0 percent. In other states, localities have the authority to impose franchise fees on telephone companies in exchange for an exclusive franchise agreement to provide service within the municipality. Depending on local municipalities, the total tax rate can be as high as 11%. Would you consider contributing to our work? The first step towards understanding Alabama’s tax code is knowing the basics. Prescription Drugs are exempt from the Alabama sales tax Counties and cities can charge an additional local sales tax of up to 7%, for a maximum possible combined sales tax of 11% The FCC has also recently decided to use funds to fund broadband deployment. Most of the increase in the wireless tax burden is due to a very large (36 percent) increase in the Federal Universal Service Fund “contribution rate.” Wireless carriers are required to pay this surcharge on all charges for interstate telephone service. Notwithstanding these methodological challenges, the authors have determined that the benefits of retaining the current methodology–consistent measurement of trends in tax rates over time–outweigh the benefits of changing the methodology to adjust to recent trends. In Mobile, the combined sales tax is 10 percent; that’s two percentage points higher than the SSUT’s flat rate. You can add the federal tax rate of 6.64% to the tax rate of your state to find out what percentage you are paying in taxes. Providers are permitted to surcharge these “contributions” on the phone bills. Excessive taxes and fees, especially the very high per-line charges like those imposed in Chicago and Baltimore, impose a disproportionate burden on low-income consumers. [4] Federal Communications Commission, “Tenth Annual Report to Congress on State Collection and Distribution of 911 Fees and Charges for the Period January 1, 2017 to December 31, 2017,”  https://www.fcc.gov/files/10thannual911feereporttocongresspdf. Wireless service is increasingly becoming the sole means of communication and connectivity for many Americans, particularly those struggling to overcome poverty. Below, we have highlighted a number of tax rates, ranks, and measures detailing Alabama’s income tax, business tax, sales tax, and property tax systems. All Rights Reserved, Find the Best Cell Phone and Plan for You, Find The Best TV and Internet Providers For You, Wirefly Is America's Most Trusted Source For All Cell Phones, Plans, TV, and Internet Deals, How To Lower Your Cell Phone Bill: The Ultimate Guide, How To Block a Phone Number from Spam/Robo Calling Your Cell Phone, Guide to Verizon Up: Verizon Wireless Rewards Program, T-Mobile Tuesdays: Everything You Need To Know, Privacy Policy | Term of Use | Contact | About Us. The flat 8 percent sales tax applies to all sales regardless of the locality and or rate of tax of the locality into which the product is shipped in Alabama. Since 2008, average monthly wireless service bills per subscriber have dropped from just under $50 per line per month to $37.85 per month–a 24 percent reduction. The federal tax rate on wireless service (called the USF, or Universal Service Fund) is 6.64%. Less than half of a typical wireless consumer’s calls are interstate calls, so fortunately wireless consumers did not experience the full impact of this large increase. Use our tool to compare Internet providers, TV providers, and bundled services. Select the amount of total data you need for the entire plan. A gross receipts tax is applied to a company’s gross sales, without deductions for a firm’s business expenses, like costs of goods sold and compensation. The federal tax rate on wireless service (called the USF, or Universal Service Fund) is 6.64%. Carriers may use traffic studies to show the actual split between interstate and intrastate calls for all subscribers and apply the FUSF to the aggregated interstate portion of subscriber calls. Appendix C provides a detailed breakdown of the specific taxes, fees, and government surcharges imposed in each state, including the respective rates of each. California is the exception–wireless service is not subject to sales taxes but is subject to local Utility User Taxes (UUT) at rates as high as 11 percent. Below is a list of state & local taxes and fees on monthly cell phone service. New Orleans $1.25/mo. All persons or businesses that sell tangible personal property at retail must collect tax and make payments to the City. In states like Alaska, Arkansas, California, Oklahoma, Kansas, and Nebraska, high-state USF surcharge rates add significantly to the overall burden on wireless consumers. Sales tax is collected by the seller from their customer and remitted directly to the City of Huntsville. - The Income Tax Rate for Mobile is 5.0%. Wireless consumers pay about $12.0 billion in taxes and fees that are specifically levied on telecommunications services but not on other taxable goods and services. - Tax Rates can have a big impact when Comparing Cost of Living. The Alabama state sales tax rate is 4%, and the average AL sales tax after local surtaxes is 8.91%. First, as discussed above, wireless taxes and fees are regressive and have a disproportionate impact on poorer citizens. Alabama collects a 2% state sales tax rate on the purchase of vehicles, which includes off-road motorcycles and ATVs. Tax on a Single Line Voice Plan Costing $37.85 per month. of Cedar Rapids (1%) & Des Moines (1%). Sales tax is a tax paid to a governing body (state or local) on the sale of certain goods and services. You can add the federal tax rate of 6.64% to the tax rate of your state to find out what percentage you are paying in taxes. However, changes in consumer demand for wireless services pose challenges when measuring the impact of wireless taxes on consumer bills. The FUSF rate is set by the FCC each quarter. 3. $2.9 billion in other industry-specific state and local taxes and fees. Fortunately for wireless consumers, price competition continues to push down the average monthly per-line cost of wireless service. For example, the USF rate in Alaska is 10.0 percent of all intrastate charges. In the late 1990s and early 2000s, when wireless service began to displace landline service, localities became concerned about losing taxes and fees from landline telephone services and sought to extend these taxes and fees to wireless services. A sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. For flat rate per line impositions, the per line rate is multiplied by the estimated number of postpaid wireless lines. During that same period, wireless taxes increased by 2.45 percentage points–from 10.20 percent to 12.65 percent. Despite the growing burden on wireless consumers, Congress has shown little interest in restricting or otherwise limiting the growth of the programs funded through the FSUF. January 2, 2019 . State USF surcharges are imposed on intrastate revenues, while the FUSF surcharge is imposed on interstate revenues. Alabama Legislative Act #2010-268 now mandates that customers using a Visa or Mastercard will be charged a 2.3% fee ($1.50 minimum) for each registration year renewed, as well as $1.00 mail fee for decals.A mail fee of $2.50 will apply for customers receiving new metal plates. Source: State statutes. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and make up a relatively small and volatile portion of state and local tax collections. In most of these states, the local wireless tax is in addition to state taxes. Local government taxes have a significant impact on the overall tax burden on wireless consumers in many of the states that rank high in the overall wireless tax and fee burden. If you need access to a database of all Alabama local sales tax rates, visit the sales tax data page. Note: Federal includes 3% federal excise tax (until 5/2006) and federal universal service fund charge, which is set by the FCC and varies quarterly: Federal USF 7/1/2019 — 37.1% Interstate safe harbor x 24.4% contribution factor = 9.05% effective tax rate. In addition to 911 fees and state USF charges, 14 states impose taxes on wireless service that are either in addition to state sales taxes or in lieu of sales taxes but imposed at a higher rate than the state sales tax. Sales Tax is imposed on the retail sale of tangible personal property in Huntsville. The first step towards understanding Alabama’s tax code is knowing the basics. $5.9 billion in federal Universal Service Fund surcharges. - Tax Rates can have a big impact when Comparing Cost of Living. As in the previous example, if a consumer has a $50 monthly wireless voice plan, 62.9 percent of that charge ($31.45) is deemed to be an intrastate service subject to the state USF charge and $18.55 is an interstate service not subject to state USF charges. Other states where 911 fees increased in 2019 are Alabama, Colorado, Kansas, Maryland, Massachusetts, Michigan, North Dakota, and Utah. We work hard to make our analysis as useful as possible. [6] Economists that have examined the link between investments in communications and information technology infrastructure and economic growth have consistently found a strong link. Jefferson City (3.5%) & Kansas City (4.875%), Jefferson City (7%); Kansas City (6% residential), Washoe County = $.85 / month; Clark County no tax, Avg. 4. Average wireless tax rates increased nearly three times faster than average sales tax rates. The sales tax jurisdiction name is Semmes Pj Un, which may refer to a local government division. The average tax rate is the total tax paid divided by taxable income. Reform of communications taxes in states with excessive tax rates would position those states to attract additional wireless infrastructure investments that generate economic growth through the new jobs and revenue growth they produce while helping provide relief to low-income wireless users. 2. Column 1 shows the average combined state-local tax rate in the largest city and the capital city in each state, while column 2 shows the effective rate of the FUSF surcharge. Second, discriminatory taxes may slow investment in wireless infrastructure. Alaska, California, Kentucky, and New Mexico lowered the rates of their state USF surcharges. The December 2019 total local sales tax rate was also 10.000%. Alabama has 765 cities, counties, and special districts that collect a local sales tax in addition to the Alabama state sales tax.Click any locality for a full breakdown of local property taxes, or visit our Alabama sales tax calculator to lookup local rates by zip code. Since these plans include both interstate calls (subject to the FUSF) and intrastate calls (not subject to FUSF), the FCC allows providers to allocate the fixed monthly plans to interstate and intrastate calls by one of two methods. As of this writing, no local jurisdictions had imposed a wireless 911 fee. The FUSF surcharge has also increased throughout the period, by 36 percent between July 2018 and July 2019. Santa Fe (3.3125%) & Albuquerque (2.75%), mobile telecom service — includes interstate, NYC & surrounding counties – .72%; Albany 0%, Statewide combined rate includes local rates, Statewide Interoperable Radio Network Tax, Avg. The state general sales tax rate of Alabama is 4%. 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