(The Center Square) – Taxes, fees and government charges on cellphone service in North Carolina are lower than most other states, a report released this week shows.

According to the report released by the Tax Foundation, the combined local, state and federal tax rate and fees on wireless services for North Carolinians in 2021 was 20.87%; the 12th-lowest among other states, Puerto Rico and the District of Columbia.

Like most other states, however, the tax rate on the service increased over last year. The combined rate for taxes and fees on cellphone services in North Carolina was 18.81% in 2020. The Tax Foundation report showed wireless consumer taxes and fees nationwide increased over the year by 2.31 percentage points to 24.96%.

“A typical American household with four cell phones on a ‘family share’ plan, paying $100 per month for taxable wireless service, would pay nearly $300 per year in taxes, fees, and government surcharges – up from $270 in 2020,” the Tax Foundation said.

The Tax Foundation said consumers would pay about $11.3 billion in taxes, fees and government surcharges to state and local governments for their wireless services this year. Even though the average monthly wireless service revenue per subscriber has dropped by 30% since 2008, taxes, fees and surcharges have increased by 9.86%. The tax spike in 2021 was mostly driven by a 2% increase in the federal Universal Service Fund rate.

Established through the Telecommunications Act of 1996, the Universal Service Fund is a system of fees used to keep telephone rates affordable for low-income consumers.

North Carolina's wireless taxes and fees were the 40th-highest among other states and territories in the Tax Foundation report. Illinois had the highest wireless taxes in the country at 34.56%, followed by Arkansas (32.04%) and Washington (31.81%). Idaho had the lowest wireless tax rate at 14.63%.

The Tax Foundation said states should reform their communications tax structures to reduce the tax burden on consumers.

“To alleviate the regressive impact on wireless consumers, states should examine their existing communications tax structure and consider policies that transition their tax systems away from narrowly based wireless taxes and toward broad-based tax sources that do not distort the economy and do not slow investment in critical infrastructure like wireless broadband,” the Tax Foundation said.

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