Taxes and Surcharges
Federal Charges
FCC Subscriber Line Charge (SLC)
Federal Universal Service Fund (FUSF) Charge
Local Number Portability (LNP) Charge
Federal Excise Tax
State & Local Charges
Texas Universal Service Fund (TUSF) Surcharge
9-1-1 Emergency Service Fee
9-1-1 Equalization Surcharge
State and Local Sales Tax
State Franchise Taxes or Fees
Municipal Franchise Fee
Public Utility Gross Receipts Tax
Expanded Local Calling Service (ELCS) Fee
Extended Area Service (EAS) Fee
Summary of Charges on
Telecommunications Services Bills
Federal Charges
*Subscriber Line Charge (SLC) and the Presubscribed Interstate Carrier Charge (PICC)
were combined by the FCC effective July 2000 under the name SLC for residential customers.
The current maximum SLC is $6.50. Business customers still pay both fees.
Why is it on the bill?
Title 47, Code of Federal Regulations, Section 69.152; United States Congress via the Federal Communications Commission (FCC) in 1983. The FCC subscriber line charge (SLC) came into being as part of the rate structure following the divestiture of the regional Bell operating companies from AT&T.
Title 47, Code of Federal Regulations, Sections 69.104, 69.153, & 69.154; United States Congress via the FCC, effective January 1, 1998.
What is it?
Local telephone companies assess the SLC to recover interstate costs associated with the local loop that are not recovered elsewhere.
The Subscriber Line Charge (SLC) and the Presubscribed Interstate Carrier Charge (PICC) were combined by the FCC effective July 2000 under the name SLC. The current maximum SLC is $6.50.
Prior to the change, the SLC was capped at $3.50 for each primary residential and business line. The SLC charge for each additional residential line was capped at $6.07 per month; the charge for each additional business line was capped at either the local telephone company's average interstate cost of providing such a line in the state or $9.21, whichever was lower.
The PICC charge is still assessed on multi-line business lines but will be reduced over time for multi-line businesses until it is eliminated from most areas.
Also prior to the FCC changes, the maximum PICC paid by long distance companies for primary residential lines and single-line business lines was $1.04 per line per month. For non-primary residential lines, the maximum PICC paid by long-distance companies was $2.53 per line per month; for each multi-line business line it was $4.31.
Long-distance companies pay the PICC to local phone companies to contribute toward the latter's recovery of costs associated with the local loop, the facility that links each telephone customer to the network. A long-distance company pays this charge for each multi-line business line that is presubscribed to the long-distance company. Long-distance companies may recover the PICC from their customers. If the customer is not presubscribed to a long-distance carrier, the local telephone company carrier may bill the PICC.
Also known as:
FCC-Approved Customer Line Charge
FCC Subscriber Line Charge
Interstate Subscriber Line Charge
Customer Subscriber Line Charge
Federal Line Fee
Easy Access Dialing Charge
National Access Fee (MCI)
Carrier Line Charge (AT&T)
Pre-subscribed Line Charge (Sprint long-distance bills)
Regulatory Related Charge (Sprint local bills, for customers with no presubscribed long-distance carrier).
How much is it?
The cap of residential and single-line business SLC charges is as follows:
July 1, 2000 - $4.35
July 1, 2001 - $5.00
July 1, 2002 - $6.00 (subject to FCC validation)
July 1, 2003 - $6.50 (subject to FCC validation)
For each multi-line business line, the PICC is $4.31. (The PICC charge phased into the SLC charge will be reduced over time for multi-line businesses until it is eliminated from most areas.)
Who gets the money?
Local telephone companies.
Why is it on the bill?
Title 47, Code of Federal Regulations, Sections 36, 54, and 69; United States Congress, via the FCC. Effective January 1, 1998.
What is it?
This is the mechanism for funding the federal Universal Service Fund (USF). The FUSF charge is assessed to all telecommunications companies with interstate operations, including long-distance carriers, wireless companies, pager companies, and payphone companies. The amount collected through this charge funds telecommunications services' discounts to schools, libraries, rural health care providers, and low-income customers; it also provides funds to local telephone companies that serve rural, insular, and high-cost areas. The FCC permits telecommunications companies that pay the charge to recover it from their customers.
Also known as:
Federal Universal Service Fee (MCI)
Universal Connectivity Charge (AT&T)
Universal Service Carrier Charge (Sprint)
How much is it?
The level of the charge varies, depending upon anticipated FUSF requirements. MCI charges 5% of the customer's long-distance bill; Sprint charges 4.5%; and AT&T assesses a flat rate of $0.93.
Which Bill is it on?
Local and Long Distance
Why is it on the bill?
Title 47, Code of Federal Regulations, Section 52.33 and the Federal Telecommunications Act of 1996, Section 251 (e) (2); United States Congress via the FCC, effective February 1, 1999.
What is it?
This charge funds the configuration of local telephone companies' networks so that a customer switching local telephone companies will not need to change his current telephone number as well. It recovers the cost of creating new facilities, the cost of upgrading the network to accommodate number portability, and recurring costs incurred in providing local number portability. The LNP charge aims to promote competition in the local telecommunications market.
How much is it?
SWBT is billing $0.33 as its LNP charge. The FCC allows local telephone companies to assess the monthly charge for a maximum of 5 years. The charge can be assessed only when the local telephone company is capable of providing local number portability within a local calling area.
Who gets the money?
Local telephone companies.
Which customers are exempt from paying this charge?
Subscribers on Lifeline Assistance programs.
Federal Excise Tax
Why is it on the bill?
Title 26, United States Code, Sections 4251 and 3; United States Congress (1898).
What is it?
The federal excise tax was originally initiated as a luxury tax to pay for the Spanish-American War. Now, all proceeds are used for general revenue purposes.
Also known as:
Federal tax
How much is it?
It is 3% of all billed local and long-distance services (except flat-rate long distance services), and teletypewriter exchange services.
Who gets the money?
The U.S. Treasury receives the proceeds, which are then disbursed as needed.
What services are not subject to this charge/which customers are exempt from paying this charge?
Installation charges
Answering services
Mobile radio telephone service
Coin-operated telephones
Telephone-operated security systems
News services and radio broadcasts of news and sporting events
Common carriers and communications companies
Military personnel serving in combat zones
International organizations
Federal, state, and local government communications
State & Local Charges
Texas Universal Service Fund Surcharge (TUSF)
Why is it on the bill?
Public Utility Regulatory Act, Chapter 56; Texas Legislature, in 1987 and 1999; U.S. Congress via the FCC in 1996.
What is it?
The TUSF allows affordable service to high-cost rural customers, funds the Relay Texas and Specialized Telecommunications Assistance programs for the hearing-disabled, and funds telecommunications services discounts to low-income customers (Tel-Assistance and Lifeline).
How much is it?
About 3.3% of taxable communications receipts.
Who must pay it?
All providers of telecommunications services, including wireless, pager, local and long distance telephone companies. Tax-exempt entities do not have to pay the charge.
Who gets the money?
The largest portion of the TUSF goes to provide assistance to local telephone companies providing service in high-cost rural areas. Other monies are allocated to fund the Relay Texas and specialized equipment programs for the hearing-disabled, and to fund discounts on telecommunications services for low-income customers. At this time, it is estimated that the TUSF for fiscal year (FY) 2005 will total approximately $625 million. Of that amount, it is estimated that 92% will be allocated to local telephone companies serving high cost and rural customers; 3% to fund discounts to low-income customers; and approximately 2% to fund programs for the hearing-disabled. The remaining percentage pays for administration of the fund.
The Public Utility Commission of Texas (PUC) is currently conducting proceedings addressing the TUSF. As a result of those proceedings, consistent with state law, increases in the TUSF will be offset by reductions in the access charges that long-distance companies pay to local telephone companies, and by reductions in the toll charges that local telephone companies charge their customers. Long-distance companies must pass through these access charge reductions to their residential customers on a proportionate basis.
What services are not subject to this charge/which customers are exempt from paying this charge?
Lifeline, Link-Up America, and Tel-Assistance customers; long-distance services not originating and/or terminating in Texas; and tax-exempt entities such as schools and universities.
Why is it on the bill?
Texas Health & Safety Code, Section 771.071; Texas Legislature, in 1987.
What is it?
This fee funds the provision of 9-1-1 emergency telecommunications services.
How much is it?
The 9-1-1 Service Fee is set at $.50 per month in areas served by an RPC and is remitted to the Texas Comptroller of Public Accounts.
The 9-1-1 Service Fee varies in areas served by an ECD or HRC and is remitted directly to each entity.
Who gets the money?
Local telephone companies must collect the fee from their customers, and then remit those amounts to the relevant regional planning commission or other designated public agency. The amount collected pursuant to the fee can be spent only in the region in which it is collected. Revenues may also be appropriated to the emergency medical services and trauma care system fund.
Why is it on the bill?
Texas Health & Safety Code, Section 771.072; Texas Legislature, in 1995.
What is it?
This surcharge generates additional funds for regions that do not collect sufficient funds through the 9-1-1 emergency service fee. The Texas Commission on State Emergency Communications imposes this surcharge for each local exchange access line, equivalent local access line or wireless telecommunications connection.
How much is it?
The Equalization Surcharge must be a fixed amount, not to exceed 10 cents per month for each local exchange access line, equivalent local exchange access line, or wireless telecommunications connection.
Who gets the money?
Regional 9-1-1 planning commissions receive an allocation of the revenue to implement 9-1-1 service, while the Texas Department of Health receives an allocation to fund poison research and maintenance of the poison control centers.
Why is it on the bill?
Texas Tax Code, Sections 151.051, 151.308, and 151.323; Texas Legislature and local jurisdictions including cities, counties, special purpose districts, and transit authorities.
What is it?
These taxes are levied on tangible personal property and taxable services, including amusement services, cable television services, personal services, repair and remodeling services, aircraft services, telecommunications services, real property services, and data processing services.
How much is it?
The state tax rate is 6.25%; the total of all local taxes cannot exceed 2%. Therefore, state and local taxes combined cannot exceed 8.25%.
Who gets the money?
General Revenue Fund and local governmental authorities.
Must you pay taxes on the charges that appear on your bill?
Yes, according to the Texas Comptroller of Public Accounts. These charges are not taxes imposed on the customer, but rather upon the providers/sellers of telecommunications services. They are considered a part of the total sales price of the telecommunications services provided. These charges cannot be passed through to the ratepayers as a tax or fee, but are collected as a reimbursement.
What services are not subject to this charge?
Long-distance services that are not originated and terminated in Texas.
Prepaid calling cards
Services obtained through a reseller.
Why is it on the bill?
Texas Tax Code, Sections 171.001, .002, .065, and .080; Public Utility Regulatory Act, Section 53.202; Texas Legislature, in 1991 (House Bill 11).
What is it?
A franchise tax assessed to corporations doing business in Texas.
Also known as:
House Bill 11 Surcharge
Cost of service surcharge
How much is it?
Only local telephone companies that have not elected incentive regulation, and for which the PUC has not set rates in a general rate proceeding since 1991, can assess this surcharge. If the qualifying local telephone company requests the imposition of this surcharge, the PUC must allow the local telephone company to adjust its billing to do so. The amount recovered from customers varies annually, depending on the level of franchise taxes incurred by the local telephone company.
Who gets the money?
General Revenue Fund.
What services are not subject to this charge?
Local telephone service provided by cooperatives
Why is it on the bill?
House Bill 1777, Section 283.051(a); Texas Legislature, in 1999; Public Utility Regulatory Act, Section 54.206; Texas Legislature, in 1995.
What is it?
Recently enacted House Bill 1777 requires certificated telecommunications providers that provide telecommunications service within a municipality to compensate the municipality for the use of public rights-of-way. House Bill 1777 gives the PUC responsibility for determining these amounts; previously, municipalities and carriers addressed the compensation issue through negotiated agreements. The PUC is in the process of adopting rules implementing House Bill 1777.
State law also gives a certificated telecommunications carrier the right to recover, on a pro rata basis, the amount paid to a municipality from its customers who are within the boundaries of the municipality. This charge may be separately stated on the customer's bill.
How much is it?
The amount of the fee will vary by municipality and type of customer.
Who gets the money?
Local telephone companies, who are recovering the amount paid to the municipality for the use of public rights-of-way.
Why is it on the bill?
Public Utility Regulatory Act, Sections 16.001-021; Texas Legislature, in 1975.
What is it?
Revenues generated from this tax are used to appropriate funds to the PUC and the Office of Public Utility Counsel (OPUC). Amounts generated but not appropriated to those agencies remain in the General Revenue Fund. In FY 1999, the total amount collected is estimated to be $41.2 million. Of this amount, the PUC was appropriated $10.1 million, and the OPUC was appropriated $1.4 million.
Also known as:
State Regulatory Tax
Regulatory Fee
How much is it?
All public utilities, including long-distance companies, pay one-sixth of 1% of their gross receipts.
Who gets the money?
State of Texas, PUC, and OPUC.
Why is it on the bill?
Public Utility Regulatory Act, Section 55.048; Texas Legislature, in 1993.
What is it?
Customers in many rural exchanges are not able to call schools, state agencies, hospitals, and businesses in their communities of interest without paying long-distance charges. Subject to certain restrictions, state law allows such customers to petition the PUC to obtain expanded local calling service (ELCS). ELCS expands rural customers' local calling scopes by allowing them to call additional exchanges by paying a flat fee, rather than incur long-distance charges assessed on a per-minute basis. If the cost of providing ELCS exceeds the revenues received from the service, state law allows the local telephone company to surcharge all of its customers in Texas to make up the difference.
How much is it?
For the first five exchanges, the maximum ELCS fee is $3.50 per month for a residential line and $7.00 per month for a business line. This fee may increase by $1.50 for each additional exchange over five. The ELCS surcharge varies among companies. Southwestern Bell charges 16 cents per month, while GTE bills 73 cents. The PUC must approve all ELCS fees and surcharges.
Who gets the money?
Local telephone companies.
Why is it on the bill?
Public Utility Regulatory Act, Section 55.021-024; Texas Legislature, in 1983.
What is it?
Customers in rural and metropolitan areas often desire to make calls to/receive calls from homes, schools, state agencies, hospitals, and businesses in their communities of interest without paying long-distance charges. Extended area service (EAS) expands customers' local calling scopes by allowing them to call additional contiguous exchanges for a flat fee, rather than incur long-distance charges assessed on a per-minute basis. The PUC can approve mandatory EAS or optional EAS either pursuant to a joint agreement between affected local telephone companies and affected communities, or upon a petitioning community's showing that traffic volumes justify EAS. EAS may be either one direction only (one-way) or in both directions (two-way).
How much is it?
For mandatory two-way EAS involving a non-metropolitan exchange, the maximum EAS fee is $3.50 a line for residential customers and $7 a line for business customers. This fee limitation, however, does not apply to EAS involving a metropolitan exchange or to optional EAS. If the cost of providing mandatory two-way EAS involving non-metropolitan exchanges exceeds the revenues from such service, state law allows the local telephone company to surcharge all of its customers in Texas to make up the difference. The PUC must approve all EAS fees and surcharges.
Who gets the money?
Local telephone companies.