Taxes: Whose Call Is It?

Wireless might finally get a break on taxes -- sort of. Legislation before Congress would simplify the taxation of wireless carriers by state and local governments by creating a uniform national methodology that assigns tax revenues to a jurisdiction based on a subscriber's billing address.

The Mobile Telecommunications Sourcing Act would tax all wireless calls, including roaming charges, based on the subscriber's place of primary use, either a home or business. No longer would calls be taxed by multiple jurisdictions. Instead, only the taxing jurisdiction in which the primary place of use is located would be allowed to levy a tax.

The legislation, introduced by Sens. Sam Brownback (R-KS) and Byron L. Dorgan (D-ND), was praised by state and local governments and the wireless industry, which together have sought for three years to streamline the taxation methodology.

Proponents said the legislation would reduce administration costs for carriers and taxing agencies. Consumers would enjoy simplified billing statements and be less likely to be double-taxed by competing jurisdictions.

Currently, carriers employ several different methods, including the location of an originating cell site, relay tower or switch, to ensure correct tax collection. With public-safety agencies, transit authorities and even school districts able to tax a call as it passes through their territories, carriers say they're left with a perpetual accounting nightmare.

"It's almost impossible using all the differing methodologies to get (revenues) to 36,000 different taxing entities and have a great degree of consistency," said Steve Berry, CTIA senior vice president of congressional affairs.

The current approach to taxation also can sap the profitability of flat-rate plans when multiple jurisdictions demand their cuts.

"Wireless companies have always tried to follow traditional wireline rules to apply to mobile telecommunications, and it never fit given the mobile nature of our service," said Robert Landau, a BellSouth tax manager.

The taxing authority of state and local governments wouldn't be undercut by the legislation, and they wouldn't be asked to spend any tax money to implement the changes.

States have the options of creating a database that assigns each address to a particular jurisdiction or using a third party. Carriers that develop their own databases wouldn't be held liable for any misrouted revenues provided their data uses the more accurate enhanced 9-digit zip codes to match addresses with jurisdictions, said a Sen. Brownback aide.

Dan Bucks, MultiState Tax Commission executive director, said the legislation would not cripple the tax base of local governments.

"Whatever the short-term impacts are is of less concern than the fact of simply making the taxes viable over the long-term," he said.