Bill imposes tax on phone service

Phone companies say the new taxes could squash investment in Pennsylvania.
HARRISBURG, Pa. (AP) -- Cellular phone users and people dialing interstate long-distance on land lines would begin paying a 5 percent tax on those services Jan. 1 under legislation passed by the House of Representatives on Monday.
The bill allows the cost of the proposed taxes to be passed onto consumers, while telecommunications companies warned that the added expense would dampen the purchase of their services and slow the expansion of a network that is important to business development.
"Many of the state policy-makers are looking for wireless to be built out [but] at a time when wireless prices are coming down, this only serves to raise the price to the consumer," said Dan Mullin, a public policy specialist for Verizon Wireless, the largest wireless provider in Pennsylvania.
The company would pass the entire cost to its subscribers, Mullin said.
The telecommunications levies are included in a $1 billion package of taxes to help fund new learning initiatives sought by Gov. Ed Rendell, restore budget cuts, and close a deficit.
The proposed tax on gross receipts -- historically assessed on utilities or monopolies, such as railroads -- from interstate land-line calls would raise about $124 million in fiscal year 2003-04 and $98 million in the fiscal year 2004-05 beginning July 1. It includes an exemption for call centers.
The proposed tax on gross receipts from cell phone services would raise about $194 million annually and includes a sales-tax exemption for telecommunications companies on purchases of infrastructure equipment.
Dan Langan, an AT & amp;T spokesman, said the added cost "will affect the company and ultimately consumers" who use the company's long-distance services, but he would not be more specific. AT & amp;T is the state's largest long-distance provider.
Sprint, which has both wireless and long-distance operations in Pennsylvania, would be saddled with $20 million in new costs, roughly doubling the amount it is already assessed in taxes in Pennsylvania, said David Bonsick, a company lobbyist.
The company has not decided whether any or all of the costs would be passed on to consumers until it determines "what the marketplace will bear," Bonsick said.
Sprint is Pennsylvania's third-largest long-distance provider and also has about 500,000 wireless subscribers in the state.
Mullin said many other states levy a gross receipts tax on wireless services, but unlike Pennsylvania have lifted other taxes to offset the cost.
"To the extent you tax this and make it more expensive for consumers, that goes in the opposite direction of attracting new high-tech customers to the state," Mullin said.