Confused by all the taxes and fees on your phone bill? Want to know if you can eliminate some of them? Read on.

In this section I will break down your phone bill into its various parts and explain what they mean, who imposes them, and more. The articles include:

• Phone Bill Overview (this page)
• Those Dreaded Taxes
• We Don’t Need No Stinking Fees
• Billing Increments — How Long Is a Minute
• Who Controls The Rates
• The Skinny About Rates
• Minimum Call Length
• What About Low and Minimum Usage Fees

This is the planned list of articles, and they will be added as time allows. You can page through them using the navigation below, or select them individually from the above links or from The Basics main summary page.

• State & Local Municipal Tax - imposed by state, local, and municipal governments. Could appear as a “gross receipts” tax in some states. These are not federally mandated taxes. The percents vary depending on your location and are set by your state, local, and municipal governments, respectively.
• Federal Excise Tax - a 3% tax imposed on all telecommunications services (including local, long distance, and wireless). This tax is mandated by the federal government (not the FCC) and is based on usage.

These are the only taxes you should see on your bills. You cannot do anything about the Federal Excise Tax. If you feel your State, Local, or Municipal taxes are too high, the next time you receive a “public hearing” notice concerning these rates, you should plan to attend if possible.

If you move your service from your local provider to a local bundled service, you will pay the same taxes that were charged by your local provider. Switching your long distance service from your local provider’s default carrier to one of your own choice will not eliminate the Federal Excise tax either. Your local provider and long distance provider will each apply the tax to your usage.

Some bundled providers will lump some of these taxes into their plan charge if they charge a flat fee for a basic plan that includes a specific number of minutes. The problem with that is that unless they tailor their plans geographically, they tend to average the taxes (meaning customers in low tax areas will pay more than they should and customers in high taxes will pay less).

Fees/Charges on Local or Local Bundled Bills

• Subscriber Line Charge (Federal) - covers the costs of the local phone network. The FCC sets the maximum allowable Federal Subscriber Line Charge. This is not a government charge or tax, and it does not end up in the U.S. treasury. This could appear as any of the following names:
  • FCC Charge for Network Access
  • Federal Line Cost Charge
  • Interstate Access Charge
  • Federal Access Charge
  • Interstate Single Line Charge
  • Customer Line Charge
  • FCC-Approved Customer Line Charge
• Subscriber Line Charge (State) - mandated by some states’ public service or utility commissions to compensate the local phone company for part of the cost of providing local telephone lines associated with state services, such as intrastate long distance and local exchange service.
• Telecommunications Relay Services Charge - state charge that helps to pay for the relay center that transmits and translates calls for the hearing-impaired and speech-impaired. Your state may or may not assess this fee.
• Local Number Portability (LNP) Charge - The FCC allows local telephone companies to recover certain costs for providing telephone number portability to its customers. Telephone number portability allows residential and business customers to retain, at the same location, their existing local telephone numbers when switching from one local telephone service provider to another. The LNP Charge is a fixed, monthly charge. Local telephone companies may continue to assess this charge on their customers’ telephone bills for five years from the date the local telephone company first began itemizing the charge on the bill. This charge began in Feb 1999, which would make this expire in Feb 2004. However, if your provider did not begin this charge until sometime later, it’s possible that you are still within the 5-year mandate. This is not a tax, and your local provider may or may not assess the charge.
• 911 - charge imposed by local governments to help pay for emergency services such as fire and rescue.
• Universal Service Fund (USF) - This is the one that irks us all. The federal government requires all telephone companies that provide interstate service to contribute a portion of their usage revenue to the USF, which is used to provide affordable service to rural health care providers, schools and libraries, and anyone living in an area where the cost of providing phone service is high. The rate varies by community. Basically, this fund is a good thing; but the Congressional mandate does NOT require the phone companies to pass this cost on to the consumer. This should be part of their cost of doing business - providing lower cost service to specific classes. Unfortunately, almost without exception the providers do pass this on to us. So we are the ones who are actually making phone service affordable to these folks. We’re a benevolent bunch. Now, to add insult to injury, some states mandate their own State USF (in addition to the federal USF).
• Non-Primary Lines - Any additional line billed to the same address is considered a non-primary line and is subject to a higher Federal Subscriber Line Charge (even if the bill is under a different name at that address).

All of these fees and surcharges are a set amount with the exception of the USF fee, which is billed at a percentage of your usage.