PULP Testifies at State Senate Hearing on Telecom Taxes

The New York State Senate Select Committee on Budget and Tax Reform held a hearing August 12, 2009 to examine modernizing New York State’s telecommunications tax system. PULP’s Senior Attorney, Lou Manuta, testified as did representatives from the landline, wireless, cable, and satellite television industries. Representatives from the New York State Department of Taxation and Finance and the state’s Office of Real Property Services were in attendance as well. No one from the Public Service Commission attended or testified.

The current system taxes all telecom providers – landline, wireless, and Voice over Internet Protocol (“VoIP”) – differently. Landline carriers, such as Verizon and Frontier, pay the most in taxes. VoIP providers, such as the cable companies have been exempt from most state and local taxation. In addition, confusion arises because some taxes (such as the E-911 surcharge) appear as a surcharge and not a tax on customer bills, while the FCC Subscriber Line Charge often appears on customer bills as a tax instead of a surcharge.

We stressed six points which will benefit consumers:

1. The need to simplify and streamline any and all telecom taxes.
2. All providers of similar services should be assessed the same taxes at the same tax rate.
3. All taxes on phone service should be explicit, not implicit, on customer bills to avoid confusion.
4. Lifeline recipients should be exempt from telecom taxes, other than sales taxes.
5. If all providers of similar services were equally assessed, the tax rate could be reduced and the state could receive the same or more revenue.
6. Surcharges allowed by utility regulators should be included in the tax discussions since they can be misleading and unclear to consumers.
   

Our testimony also addressed one of the line items on most telecom bills – the universal service fee that supports Lifeline discount telephone service. We noted that only about 300,000 out of a total of at least 1.2 million eligible households subscribe to Lifeline across the state . According to the FCC’s most recent Universal Service Monitoring Report, New Yorkers contributed $445,600,000 into the federal Universal Service Fund in 2007, but New York telephone companies only received $248,838,000 in return (and of that, only $36 million for Lifeline). The difference – nearly half of what is contributed – goes off to help fund programs in other states, such as Alaska, Kansas, Louisiana, Mississippi, and Oklahoma. With an increase in the number of Lifeline customers in New York, more of this money would stay in New York, with little (if any) impact on the contribution level.

The Committee Chair, Senator Liz Krueger, remarked that the state had not examined telecom taxes for many years and there have been significant changes in the marketplace during that time period. More hearings and further analysis is expected over the next several months.