North Carolina’s taxes on cellular users are 9.12%, more than three percent below the national average of 12.82 percent. The state rate increased only slightly from 9.05% in 2023.
Nationwide, wireless service taxes increased 8.8% on average nationwide in 2024, according to a new report from the Tax Foundation. State and local taxes on wireless services nationwide have fluctuated since 2022 but increased annually over the previous decade.
The average monthly single-line cell phone bill has dropped from $47 to $33.65 since 2012, according to the Tax Foundation. However, the decrease is offset by a steady increase in wireless user taxes. During this same time frame, taxes, fees, and surcharges have jumped from 17.2%, to 26.8% of the total bill.
Despite the fluctuating tax rates around the country, North Carolina rates have held steady, at roughly nine percent since 2022. In 2023, when the country saw a slight decrease in wireless tax rates overall, North Carolina saw a minor increase from 9.04 percent (2022) to 9.05 percent (2023).
Data from the Tax Foundation shows that wireless taxes and fees have steadily increased since 2003, from 15.27 percent to 25.39 percent in 2022. In 2023, we saw a slight downtick to 24.53 percent, but this year, it jumps back to 26.77 percent.
Wireless customers will pay about $12.4 billion in taxes, fees, and government surcharges to state and local governments in 2024. Of this, $5.3 billion, or less than half, will be state and local sales use taxes. The remaining $7.1 billion will be taxes on wireless and other telecommunication services.
These numbers are down slightly from 2023 when customers paid $12.6 billion. This is broken down into $5.3 billion in sales tax and non-discriminatory consumption taxes, $3.8 billion in state and local 911 and 988 fees, and $3.5 billion in telecommunications-specific taxes.
The Tax Foundation report shows the breakdown of wireless fees and taxes by state.
Another contributing factor to rising taxes is the Federal Universal Service Fund (FUSF). This program, administered under the FCC, subsidizes schools, libraries, hospitals, low-income individuals, and rural telephone companies operating in areas with high living costs. The FCC sets a “quarterly ‘contribution factor’ or surcharge rate that telecommunications providers must remit to the FUSF to generate sufficient revenues to fund the expenditure commitments,” according to the Tax Foundation. Service providers can opt to surcharge these rates on customer bills. We have seen a steady increase in FUSF rates since 2000, when they were at 5.5 percent, and have steadily increased yearly to 34.4 percent in 2024.
According to the Tax Foundation, the average rate of state and local taxes is 14 percent, and the average FUSF rate is 12.8 percent.
“The North Carolina wireless tax rate has been relatively stable due to the fact that rates have not been adjusted for a significant period of time,” Joseph Harris, fiscal policy analyst for the John Locke Foundation, told the Carolina Journal. “The tax on telecommunications service and ancillary service has been 7 percent since 2005, and the 911 service charge has remained at 65 cents since 2018.”