Chairman Berry, Vice Chairwoman Crawford, Ranking Member Smith, and Members of the Select Committee on Utilities,
On behalf of National Taxpayers Union’s (NTU) Missouri members, I wish to take this opportunity to provide our thoughts on H.B. 1814, the “Prepaid Wireless Telecommunications Business License Tax Act,” sponsored by Rep. Ron Hicks. A similar bill, HB 756 (committee substitute), was unanimously passed in the House Telecommunications Committee and the Select Committee on Utilities in 2015. HB 1814 would make some sensible changes to help protect taxpayers, but we believe that additional provisions could be fashioned to improve the state’s telecommunications tax climate.
As current Missouri law stands, municipal governments are authorized to apply business license taxes on revenues generated from the telephone business, which clearly applies to landline users. Such laws, however, have not been updated to the modern realities of wireless telecommunications. As a result of litigation, postpaid wireless providers have entered into a settlement agreement to pay these business license taxes only in the city wherein the customer resides, thus providing a safeguard against double-taxation. With landline and postpaid wireless subject to these taxes, uncertainty remains over the application of such taxes to prepaid wireless, along with the prospect of more costly litigation for its providers.
It is estimated that approximately 1.5 million Show-Me State residents rely on prepaid wireless services. If enacted, HB 1814 would provide that revenues from prepaid wireless services are subject to the business license taxes and would be collected at the retail point of sale. While NTU does not support higher taxes for consumers, HB 1814 would protect them from predatory policies that could lead to multiple, discriminatory layers of taxation on the same service.
Nonetheless, by applying the tax to prepaid wireless users, Missouri’s cities and municipalities would see an expanded telecommunications tax base, even as Missouri’s wireless tax rates are very high. As the nonpartisan Tax Foundation has noted, Missouri’s average state and local wireless tax levy are fifth highest in the country at nearly 15 percent. Adding in the federal tax of 6.46 percent, Missourians are paying an average levy of 21.25 percent – well above the national average of 17.96 percent.
For these reasons, NTU would strongly advise lawmakers to cut the state’s levy on all wireless services as part of a package that would allow local governments to subject prepaid wireless service to their business license taxes. By amending or augmenting the current bill to provide a net tax cut, it would ensure equitable tax treatment among various types of telecommunications customers, while at the same time delivering pro-growth tax relief.
NTU has long supported simplifying tax laws and their administration, with an eye toward ensuring as uniform a treatment of services as possible. With an amendment or other concurrent legislative approach creating tax reductions, HB 1814 could be greatly strengthened for overburdened Missouri taxpayers.
Sincerely,
Clark Packard
Counsel and Government Affairs Manager