Federal Tax Explained

A tax assessed by the U.S. government on telecommunications services. Proceeds go to the federal government's general revenue fund.

Who put it on my bill?

United States Congress (1898)

What is it?

Taxes assessed by the United States government on telecommunications services. It was created in 1898 as a luxury tax to pay for the Spanish-American War. It was not applied to telephone bills until 1971. Today, all proceeds go into the general revenue fund.

The percentage has decreased on a steady basis from its original 10% in 1971 to its current level of 3%. The Federal Excise Tax was set to expire in 1982; however, government action that year made it a permanent tax.

Who gets the money?

U.S. Treasury - General Revenue Fund

Applies to:

  • Basic local service (not including long distance)
  • Vertical services (call forwarding, caller ID, call blocking, etc.)
  • Interstate access surcharge
  • Universal service fee
  • Directory assistance (local)

Exemptions

  • 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
  • Communications serving federal, state, and local government

Also known as:

  • Federal Excise (FET)
  • Federal excise taxes