Telecommunications taxes by state range from under 17 percent of a typical wireless bill to more than 38 percent, and the national average hit a record 27.6 percent in 2025.1Tax Foundation. Excise Taxes and Fees on Wireless Services Up Again in 2025 Federal charges make up about 13.36 percent of that total no matter where you live. The rest, roughly 14.25 percent on average, comes from your state, your county, and your city, and that is where two households with identical phone plans end up hundreds of dollars apart each year.
The Federal Layer Everyone Pays
Two federal charges appear on essentially every U.S. phone bill. The first is a 3 percent federal excise tax on local and toll telephone service, imposed under the Internal Revenue Code.2Office of the Law Revision Counsel. 26 USC 4251 – Imposition of Tax The IRS ruled in 2006 that it no longer applies to long-distance calls billed without regard to time or distance, so on most modern plans the 3 percent lands only on the voice component.
The larger federal charge is the Universal Service Fund passthrough. Carriers must contribute a percentage of their interstate and international revenue to the USF, which subsidizes phone and broadband service in rural areas, schools, libraries, and low-income households. For the second quarter of 2026, the FCC set the contribution factor at 37.0 percent of assessable revenue.3Federal Communications Commission. USF Contribution Factor – 2Q2026 Carriers recover that cost by adding a line item to your bill, and how they calculate the passthrough varies by provider.
State Sales and Communications Taxes
Most states apply their general sales tax to telecommunications services, treating a phone bill much like a retail purchase. Some layer a separate telecommunications excise tax on top of that. Taxable items generally include local and long-distance voice service and add-ons like call waiting and voicemail. Lifeline service for low-income households is often exempt.
Several states skip the standard sales tax model and use a consolidated communications services tax that folds state and local portions into a single rate administered at the state level. Others use a gross receipts tax on the carrier’s total revenue in the state. Legally, gross receipts taxes fall on the provider rather than the customer, but the cost is passed through as a line item on your invoice, often labeled something like “Gross Receipts Surcharge.” A few states without a general sales tax still impose telecommunications-specific fees, so a “no sales tax” state does not automatically mean a tax-free phone bill.
Equipment is treated separately from service. Smartphones, routers, and similar devices are usually taxed at the standard retail sales tax rate when purchased, regardless of how the monthly service is taxed.
Local Taxes Are Where the Real Variation Happens
The biggest surprises on telecom bills come from city and county governments. Municipalities with home rule powers or specific statutory authority can add excise taxes, franchise fees, and utility taxes on top of whatever the state already charges. That is why a resident of one city can pay significantly more than a neighbor a few miles away in an unincorporated part of the same county.
Franchise fees are the most common local layer. When a carrier runs cable under city streets, the municipality charges for use of the public right-of-way. Federal law lets local governments require “fair and reasonable compensation” from providers on a competitively neutral and nondiscriminatory basis.4Office of the Law Revision Counsel. 47 USC 253 – Removal of Barriers to Entry There is no hard federal cap, only that “fair and reasonable” standard, and the fee is passed directly to customers inside the municipality. Local councils typically set these rates during public budget hearings, so they respond faster to local pressures than state-level rates do.
911 Surcharges and State Universal Service Funds
Two more line items show up on most bills. Many states run their own universal service fund modeled on the federal program, collecting a percentage of each provider’s intrastate revenue to subsidize service in underserved areas. Rates are typically adjusted each year based on the fund’s projected needs.
911 and enhanced 911 surcharges fund local emergency dispatch centers, including the technology that locates a mobile caller during a call. The national average is about $1.09 per line per month. The lowest fees are around $0.20 and the highest reach $3.81 per month. The revenue is supposed to be restricted to operating and maintaining the 911 system, though in calendar year 2024 three states diverted a combined $225 million in 911 fees to non-911 purposes, with one state redirecting more than 80 percent of collected fees away from emergency services.5Federal Communications Commission. Seventeenth Annual 911 Fee Report
Highest and Lowest States for Wireless Taxes
As of mid-2025, the five states with the highest combined wireless tax and fee rates are:
- Illinois — 38.32 percent
- Washington — 34.98 percent
- Arkansas — 34.00 percent
- New York — 33.96 percent
- Kansas — 32.12 percent
The five lowest are:
- Idaho — 16.82 percent
- Nevada — 18.93 percent
- Montana — 20.40 percent
- Virginia — 21.17 percent
- Hawaii — 21.52 percent
Those figures include every layer stacked together: federal excise tax, federal USF passthrough, state sales and excise taxes, local taxes, 911 fees, and any other government-mandated charges.1Tax Foundation. Excise Taxes and Fees on Wireless Services Up Again in 2025 The gap between the cheapest and most expensive state works out to roughly $250 to $350 per year in extra taxes on a typical family wireless plan. High-rate states tend to share three traits: large cities that layer on local telecom taxes, state-level excise taxes on top of general sales tax, and above-average 911 surcharges.
Which Address Determines Your Rate
For wireless customers, the Mobile Telecommunications Sourcing Act sets the rule. All state and local taxes on your mobile service are applied based on your “place of primary use,” which is the residential or business address you have on file with your carrier, and that address must sit inside the carrier’s licensed service area.6Office of the Law Revision Counsel. 4 USC 117 – Sourcing Rules No other jurisdiction can tax the same call, even if you place it from another state while traveling. If you move to a lower-tax jurisdiction and update your address with the carrier, your telecom taxes should drop on the next billing cycle.
Bundles, VoIP, and Prepaid
The rates above assume a standard wireless voice plan. A few common situations follow different rules.
The Internet Tax Freedom Act permanently prohibits states and localities from taxing internet access, so the data portion of a mobile plan and the internet portion of a home bundle are exempt from state and local telecom tax.7Office of the Law Revision Counsel. 47 USC 151 – Purposes of Chapter; Federal Communications Commission Created – Section: Moratorium on Internet Taxes But if a provider does not separately state the internet access charge, the entire bundled amount can become subject to taxation.8Congress.gov. Public Law 108-435 – Internet Tax Nondiscrimination Act If your bundled bill does not break out the internet component, you may be paying telecom taxes on charges that would otherwise be exempt.
VoIP falls into a gray area that varies by state. Interconnected VoIP, which reaches regular phone numbers, is generally taxed as a substitute for traditional phone service and is required to contribute to the federal USF and collect 911 fees. Non-interconnected app-to-app calling typically faces fewer state and local levies.
Prepaid plans collect taxes at the point of sale rather than through a monthly invoice. The federal excise tax treats the face amount of a prepaid card as the taxable amount, triggered when the card is transferred from the carrier to a retailer or consumer.2Office of the Law Revision Counsel. 26 USC 4251 – Imposition of Tax Many states apply prepaid 911 surcharges as a percentage of the retail transaction rather than as a flat monthly fee per line, so the same dollar value of service can produce slightly different totals depending on how you pay.