Municipalities and states, hungry to find ways to fix their own budget woes, are targeting the wireless industry. As reported last week in RCR Wireless News, the city of Overland, Mo., and the states of South Dakota and Pennsylvania, all have added or are considering special taxes for wireless carriers for the privilege to bring wireless service to the people living in those states. Overland is charging carriers a $1,000 annual fee for placing towers on city property. Carriers in South Dakota are paying a new 4-percent gross-receipts tax. And the Pennsylvania governor believes a new 5-percent tax is more appropriate for his state.
Is wireless the new sin tax? It would seem so.
In the early 1980s, oil operators in North Dakota faced a similar challenge. The state had been charging a 5-percent gross-receipts tax since oil was first discovered in the 1950s. But beginning in 1980, oil companies had to pay another 6.5-percent “extraction” tax. Why oil? One argument was because it stripped the land of valuable resources, etc. True, but it also was the second-largest employer of people in the state at the time. A more cynical view was because the oil industry was easy pickings. Oil is produced predominately in the western part of the state, but the population (read voters) is in the east. Also, while oil companies had offices in the state, they didn’t headquarter there, so legislators didn’t have to answer to powerful business constituents. But most of all, the oil industry was chosen because people are quick to smell money and quick to implement fees that they think won’t hurt them. Likewise, legislators are quick to support issues that won’t hurt their re-election chances.
The wireless industry likely is going to face similar challenges . Of the six nationwide carriers, none call Missouri, South Dakota or Pennsylvania home. Wireless is easy pickings. Carriers build those towers alongside highways and city streets. Most people also believe the wireless industry is flush with funds, and having a carrier like Verizon pay a measly 4-percent extra to fund the state budget is something the nation’s largest wireless carrier can afford.
That thinking is flawed, however, and industry is going to have to do an end run around states and local governments by going straight to consumers with a simple message: Taxes get passed on to customers. You implement the tax, and your bill will go up. For example, South Dakota cell-phone users already pay 4 percent in sales tax, 75 cents in 911 taxes, another 15 cents per month in TRS fees and a PUC fee. Do they really want another fee added on to their bills?
It’s a difficult message to deliver, but one need only look to the oil industry to see how a gross-receipts tax is not always the end of the road.
