House clarifies phone taxation

Posted: Friday, March 29, 2002

Alaskans using wireless telecommunications devices often make calls from beyond the area of their service provider. That has led to confusion nationwide about where such phone services may be taxed, sometimes resulting in the same call being taxed in more than one jurisdiction.

Under a bill passed unanimously Monday by the Alaska House, that confusion should disappear along with any double taxing. Sponsored by the House Labor and Commerce Committee, House Bill 355 establishes the mechanism for taxing wireless communications in accordance with a federal law passed in 2000.

Under the bill, wireless services would be taxed in a phone's home jurisdiction -- its "place of primary use." Calls made from outside that primary-use area could not also be taxed by the other jurisdiction. In other words, it would prevent a call from being taxed in both Anchorage and in, say, Juneau.

The bill is headed to the Senate. If signed into law, it would go into effect Aug. 1.

In 2000, Congress passed the Mobile Telecommunications Sourcing Act establishing uniform nationwide rules for state and local taxation of mobile telecommunications services. House Bill 355 implements the federal law by specifically adding taxation of such services to the category of things municipalities may tax.

That list currently includes sales taxes levied on sales, rents and services provided within the municipal jurisdiction. The intent of the federal law was to clarify what jurisdictions would be responsible for taxing wireless services.

"Without clear, national rules for determining which jurisdiction is permitted to tax the call, the possibility exists that the same call could be subject to taxation in multiple jurisdictions, or that a call might escape taxation altogether," said Rep. Lisa Murkowski, R-Anchorage, chair of the House Labor Committee.

In this case, "multiple jurisdictions" refers to the taxing of cell phone calls made outside Alaska, said Amy Erickson, Murkowski's Labor Committee aide. Once the law is adopted, calls from an Anchorage-based phone would be taxed in Anchorage, but using that phone in Seattle would not entitle Seattle or the state of Washington to also tax the call.

The same would apply to geographically separate locations in Alaska. In her case, Murkowski said, the municipality of Anchorage, her home, would tax her cell phone, but the city of Juneau, where she spends about half the year, could not.

Under certain conditions, however, multiple jurisdictions within a state already tax the same call. Take the case of cities embedded within boroughs. A Homer resident pays telecommunications sales taxes to the city and the Kenai Peninsula Borough at the rate of 3.5 percent to Homer and 2 percent to the borough.

Those sales taxes show up as one "local tax" on wireless phone bills. Because both municipalities fit the definition of being a person's place of primary use, that particular kind of multi-jurisdictional taxation would continue under HB 355, Erickson said.

The proposed law only clarifies that it is legal for cities, boroughs and the state to tax telecommunications services. It does not require such taxes.

The bill adopts the federal code's provisions for remedy when disputes over taxation occur. It also includes provisions to repeal references to telecommunications taxation from the code if a court determines the state law substantially limits or impairs implementation of the federal law.

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