Telecommunications Taxes and Surcharges

Over the years, we the people have attached an abundance of taxes and surcharges on our Telecommunication services. From the EUCL to the Universal Taxes are complex to understand, calculate and to track. Plus, Telecommunications Service Providers or Carriers tend to use different descriptions and acronyms to represent the Taxes on their bills.

The following guideline is meant to give you a general understanding of what to look for in regards to Taxes on your bill. The percentages that are representative may vary from one State and Local Government to another. Plus, telephone service providers seem to have variations on what taxes, which are disclosed or collect. You may acquire more precise information or more current Tax rates from the appropriate Regulatory Agency within your State or Local Government.

Federal Excise Tax (California Example, the effective rate as of 1/1/1983 is 3.0%)

Under the Internal Revenue Code, Federal Excise Tax is applied to telephone services consumed and it applies a monthly percentage to the following types of charges:

State 911 Tax (California Example, the effective rate as of 11/1/94 is 0.72%)

This tax was established to provide funds to public agencies that operate emergency 911 services.  It applies monthly percentage to the following types of charges: 

Local Taxes

Local governments may choose whether or not to impose a Telephone Utility User's Tax (a.k.a. City or Local Tax) and at what rate. Various local ordinances provide that certain telephone services are taxable and others are not and certain customers are exempt from all or part of telephone services provided.  Generally, the local tax applies to:

Federal Universal Service Fund

All telecommunications companies are required to contribute to the Federal Universal Service Fund (FUSF). This Fund, established in January 1998, supports the telecommunications needs of low-income households, consumers living in high-cost areas, schools (K-12), libraries and rural hospitals. The fund was established in the Telecommunications Act of 1996 and was created by assessing both intrastate and interstate revenues of providers of interstate telecommunications services.

The Federal Communications Commission (FCC) determines on a quarterly basis a contribution factor that is based on the ratio of total projected quarterly costs of the "universal service support mechanisms" to total end-user interstate and international telecom revenues. The calculation of the FUSF Flat Rate End User Charge takes all interstate and international revenue less special access end user revenues. The result is then multiplied by the contribution factor released by the FCC (currently 7.2805% for 2Q02) and then multiplied by four. The result is then divided by the annualized amount of Presubscribed Inter-exchange Carrier Charge (PICC) lines (minus resold and lifeline counts) for the period of three months prior to the obligation period. Needless to say it's not a simple calculation.  Conversely the special access end user USF obligation is recovered through a percentage surcharge factor applied to the end user billed special access charges.

Primary residential and single line business, including multi-line business customers are assessed one USF charge per line.  PRI ISDN customers are assessed five (5) times the business USF charge.  Centrex customers are assessed one-ninth (1/9) of the business USF charge on all lines. A special access USF factor is assessed monthly to end user billed special access recurring charges.

Charges for Network Access for Interstate Calling

The Federal Communications Commission's (FCC) Order on Access Reform, effective January 1, 1998, was designed to realign the recovery of costs for access service more closely to the cost using entity(s).

There are three rate elements included under this umbrella:

End User Common Line Charge (EUCL) This allows Pacific Bell (and all other Local Exchange Carriers) compensation for the cost to maintain the local loop connecting the customer to the local switching office via wire, poles and conduits. These costs were originally subsidized by long distance revenue prior to Divestiture in 1984. The effective rate as of 8/11/01 is $4.40 for business lines and changes annually and sometimes more frequently.

Presubscribed Interexchange Carrier Charge - PICC

This was a monthly per line recurring charge assessed on customers who have not selected a Primary Long Distance Provider.  It was also billed to a Long Distance Provider when a customer selected and subscribed to their service.  However, SBC Pacific Bell ceased to charge the PICC on 7/1/99 for BRI ISDN, PRI ISDN, Centrex, Multi Line Business Lines and SuperTrunk.  It is charged today ONLY for a single business line where there is only one account billed to that name in the state of California. The effective rate as of 4/1/99 is $0.87.

Digital Line Port Charge This is a monthly charge applied only to ISDN customers.  Effective 07/01/98 the cost is $0.97 per line for a Basic Rate Interface (BRI) and $32.80 per Primary Rate Interface (PRI).

Federal taxes apply to these charges and local tax applies only if a local tax is applied to interstate and international charges State taxes do not apply.

California Billing Surcharge (Rate Surcharge)

The rate surcharge was established to collect revenue for the CPUC ordered changes to AT&T/SBC Pacific Bell's revenue requirements until such time as individual rates for products and services are adjusted.  It applies a monthly percentage to all recurring and nonrecurring rates and charges for service or equipment provided under our tariffs. The surcharge has different rates for IntraLATA exchange service, IntraLATAtoll and IntraState access (products contained in CPUC 175T).

The effective rate as of 1/1/02 is: -1.7200% for exchange service, -1.7220% for toll service and -1.7260% for access service.

California High Cost Fund-A (CHCF-A)

The fund was adopted to provide financial support to small and mid-size Local Exchange Carriers (LECs) of which there are over 20 in California.  It subsidizes basic exchange rates for small and mid-size LECs and was originally imposed against Interexchange Carriers via an increment to the carrier common line rate.  Effective 1/1/95, it was imposed against same billing base as California Relay and Universal Lifeline Telephone Service surcharges (described below).

It applies a monthly percentage to each subscriber's intrastate services.

The effective rate as of 1/1/02 is:  0.30%

California High Cost Fund-B (CHCF-B)

This surcharge is collected to fund "Carriers Of Last Resort" for a portion of its cost of providing service to residential customers in high cost (rural and suburban) areas. The subsidy allows basic service rates to remain low for primary lines and ensures basic service providers will have an incentive to continue to serve high cost areas.  It's mandated by the CPUC as part of introducing competition within local exchange companies' service territories. All telecommunications carriers within California are required to bill the CHCF-B surcharge that funds the California Universal Service Fund (CUSF). This is a statewide fund established to assess and reimburse "Carriers Of Last Resort" and the CPUC is administrator of the California Universal Service Fund (CUSF)

It applies a monthly percentage to the same billing base as the California High Cost Fund-A (CHCF-A)

The effective rate as of 11/1/01 is: 1.47%

California Relay Services and Communications Devices Fund

The CPUC order states each certified deaf or severely impaired subscriber or user will be furnished a telecommunications device and a signal unit at no charge in addition to basic exchange service.

The cost of providing such minimum basic equipment is funded by this surcharge on all telephone customers' bills in the state.   Prior to 7/1/94, it was known as the Communication Devices Funds for Deaf and Disabled.

It applies a monthly percentage to each end user's intrastate services:

The effective rate as of 12/1/01 is: 0.480%

California Teleconnect Fund Surcharge

This surcharge is collected to fund discount of service provided to qualifying schools, libraries, municipal and county owned hospitals and qualifying community based organizations.  It is mandated by the CPUC as part of introducing competition within local exchange companies' service territories. All telecommunications carriers within California are required to bill appropriate surcharge. It is part of the California Universal Service Fund (CUSF) administered by the CPUC. Discounted Advanced Services is SBC Pacific Bell Telephone Company's name for services offered under California Teleconnect Fund.

It applies a monthly percentage to each end-user's intrastate services as the CHCF-A previously discussed. The effective rate as of 11/1/01 is: 0.30%

Equal Access Recovery Charge

Equal Access Cost Recovery Charge (EARC), mandated by the California Public Utilities Commission, was a three year cost recovery surcharge for expenses associated with the conversion of IntraLATA Presubscription (ILP) in Pacific Bell territory. This charge began on 8/3/99 and stopped on 8/3/02. EARC applied to all originating local toll call minutes of use.

Local Number Portability

The Federal Telecommunications Act of 1996 required local telephone companies to initiate measures that permit customers to retain their local telephone numbers should they change their local telephone service provider while remaining at the same location. This capability is commonly called "number portability". The Federal Communications Commission (FCC) has allowed that the costs associated to provide "number portability" be recovered through a customer service charge. This service charge will be a monthly charge per line*. This service charge will:

The Service Charge may be applied in ratio format to certain products, e.g., Centrex. PRI ISDN- PBX trunks. The effective rate as of July 7, 1999 is S.34 per line.

State Regulatory Fee

Formerly known as the CPUC Surcharge, the California Public Utilities Commission Reimbursement Fee was established by State Legislature in 1983 and is paid by the utilities to fund regulation by the CPUC.

It applies a monthly percentage to:

The effective rate as of 7/16/96 is 0.11%.

Universal Lifeline Telephone Service Surcharge

Imposed by the CPUC to help subsidize the Gwen Moore Fund for Universal Lifeline Telephone Service, it is billed to all customers, Business and Residence. It applies a monthly percentage to each subscriber's intrastate services. Includes recurring and nonrecurring rates and charges:

Inter-exchange Carrier's portion of bill carries surcharge portion covering intrastate service and calls carried by carrier. The effective rate as of 7/1/01 is: 1.45%

Universal Service Fund Sur-credit

This fund was established to refund revenue until such time as individual rates for products and services are adjusted.  It applies a monthly percentage to all regulated charges for:

The temporary effective rebate rate from 2/1/02 to 4/30/02 had been 29.143% and as of 5/1/02 is zero percent.