House Approves 5-Year Moratorium on Taxes on Wireless Services

By voice vote, the U.S. House of Representatives has approved the Wireless Tax Fairness Act of 2011, a bi-partisan measure which provides for a 5-year moratorium on any new discriminatory wireless tax or fee.

According to the Library of Congress, the bill would prohibit states or local governments from imposing any new discriminatory tax on mobile services, mobile service providers, or mobile service property (i.e., cell phones) for five years after the enactment of this Act.

The proposed legislation defines “new discriminatory tax” as a tax imposed on mobile services, providers, or property that is not generally imposed on, or that is generally imposed at a lower rate on, other types of services, providers, or property, unless such tax was imposed and actually enforced prior to the enactment of this Act.

To achieve this purpose, the bill amends the federal judicial code to grant jurisdiction to federal district courts to grant injunctive and other appropriate relief to prevent, restrain, or terminate any acts in violation of this Act.

The legislation also requires the Comptroller General to conduct a study, throughout the five-year moratorium imposed by this Act, to determine how, and the extent to which, taxes on mobile services, providers, or property impact the costs consumers pay for mobile services and the extent to which such moratorium has any impact on the costs consumers pay for mobile services.

The House conducted the vote under a suspension of the rules requiring a two-thirds majority for passage.  H.R. 1002 was introduced by Rep. Zoe Lofgren (D-CA) on March 10, 2011, and was referred to the House Committee on the Judiciary.

According to Rep. Lofgren and her co-sponsors Rep. Trent Franks (R-AZ) and Senators Ron Wyden (D-OR) and Olympia Snowe (R-ME), on average, wireless customers now pay 16.3% in taxes and fees, more than twice the average rate of 7.4% on other goods and services. In many localities, this cumulative tax burden is even worse: 26.8% in Baltimore, 19.9% in Omaha, 18.2% in Tallahassee, and 20.4% in New York City.

“The Wireless Tax Fairness Act would halt this trend by imposing a temporary, five-year freeze on new taxes that are imposed only on wireless services. Wireless broadband access is rapidly becoming a key platform for innovation, and this legislation will help foster further investment and access in this key market. Importantly, it does not take away any existing revenue from state or local governments, it simply caps the current taxes and fees,” according to their message that accompanied the introduction of their bi-partisan plan.

According to House Report 112-188, the average combined state and local tax rate on wireless telecommunications services is significantly higher than the combined state and local sales tax rate imposed on the purchase of other goods and services.

“The wireless industry and many state and local government groups agree that wireless tax reform is needed,” the same congressional report stated.

Citing a study by the Congressional Budget Office (CBO), the Republican Party stated that “enacting H.R. 1002 would have no significant impact on the federal budget.  Pay-as-you-go procedures do not apply to this legislation because it would not affect direct spending or revenues.”

After its passage, the House transmitted an enrolled copy of the bill to the Senate, where it was read twice and then referred to the Senate Committee on Finance for study and debate.

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