I am sure we are all at least a little confused and frustrated by all of the taxes and surcharges on our phone bills. We don’t know what they are for but pay them every month because we don’t want our phones interrupted. I cannot remove those charges from your bill but here is a guide to explain where all that extra money, many times 1/3 of your total bill, is actually going?

Let’s start off with the Universal Service Fund or USF also known as e-rate. This fee can be charged on out of state calls and the average is about 9%, however many companies charge much more. It can also be applied to the federal line charge and local number portability charge (see below). This money is passed on to support programs which help ensure that customers in rural areas are able to have competitive pricing and plans with urban areas. It also supports Lifeline, which is a low income program allowing discounts for those who qualify on basic telephone service. Over 7  million Americans are currently in receipt of this program. The Telecommunications Act of 1996 allowed support to providers who give discounts on eligible services to schools, and libraries.

Another federal charge is the Federal Excise Tax. This tax applies to almost all commercial telephone service excluding local calls. For those history buffs you may be interested in knowing that U.S Congress enacted the telephone excise tax as a way to fund the Spanish-American War in 1898. This tax was meant to be eliminated in 1902 at the end of the war.  

The Federal Telecom Relay Surcharge applies to all long distance calls. The funds are used to support the relay service which is designed to assist hearing and/or speech impaired to use the telephone. This fee is also assessed on the federal line charge and local number portability. The rate is set at .08%.

The Federal Line Charge, regulated by the FCC, is listed out on your phone bill and is in place to recover some of the costs associated with providing long distance providers with access to the local networks. The long distance carriers pay the remainder of the cost. The long distance companies may pass this charge onto the customer in a long distance line charge. The United States Federal Communications Commission was successful in persuading Baby Bells to cut the fees they charged the long-distance carriers to access their networks, however they were allowed to increase the flat fee charged for local service, which is listed on phone bills as the FCC line charge. Thus, there was not much change in the money they were collecting, only the source changed.

The FCC has mandated that each telephone line be charged for Local Number Portability which will allow customers to keep their phone number when changing companies and also if available when moving outside of their area, (there are limitations when moving). This fee also provides for upgrades to networks which aid in porting numbers. All numbers are charged, even if they never move or change providers. In essence, they are paying for the ability to do so if they choose.

Commercial customers sometimes use ISDN and DS-1 products. In this case, there is a fee for the use of the port that connects the local loop with the high speed network. They will pay a Port Surcharge on these products only.

Next we have the NYS Gross receipts tax surcharge.  As it states, this is a surcharge only for those in New York State levied by the government on calls made within the state.

A su of urcharge is applied to all NY state gross receipts and NY state excise taxes in the 12 county Metropolitan Commuter Transportation District, called the MTA Surcharge. The funds are designated for the Mass Transportation Operating Assistance Fund to support public transportation.

The State Excise Tax is levied by state government and applies to all intrastate telephone services.

The State Sales Tax is levied by the state and applies to sale of physical property or services. This tax applies to telephone, cable, and data.

The county applies a tax on these same services or goods and so we have our County or City Sales Tax.

The city also imposes a City Excise Tax on service providers of utilities.

 
 The local government charges a City Gross Receipts Tax on all intrastate telephone services. Now this tax cannot be listed separately on a customer’s bill so you will never see the amount listed under the tax section of your bill. A company may increase the tariffed rate so it will include the tax. 

Municipalities may impose a Franchise Fee. This fee is similar to the excise tax. It is used to pay for public streets and right-of-ways.  The town/city bills the end user and this fee is applied to all telephone services.

911 Tax can be state, county or city. The 911 system is computerized to automatically route emergency calls to the correct place. With the enhanced 911 system, the operator automatically sees the phone number and address of the caller. Both commercial and residential lines are charged on a per line basis.  

Some school districts may also impose a School District Tax. In cities with populations below 125,000, the school district may tax. The tax is determined by the local and long distance calls being made.

If you would like more information on explanations of your bills, you can e-mail your request to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .