An Open Letter to the South Dakota Legislature: Taxpayers Want You to "Hang Up" on the Wireless Gross Receipts Tax

Dear Legislator:

On behalf of the more than 1,500 members of the National Taxpayers Union (NTU) in South Dakota, I urge you to repeal the gross receipts tax on wireless services. Introduced by a bi-partisan team of lawmakers, Senate Bill 111 and House Bill 1106 would liberate the state's nearly 500,000 wireless users from the scourge of double taxation on wireless services.

South Dakota residents pay almost 18 percent of the cost of wireless service to cover the expense of federal, state, and local taxes, thereby earning the state the dubious honor of ranking 10th-highest in the nation for wireless taxes and fees. The 4 percent gross receipts tax on wireless service, along with a 6 percent state and local sales tax, makes up a sizable portion of this overall tax burden and has had the effect of stifling economic growth, creating a barrier to wireless service for low-income families, and raising costs for small businesses and other individuals who rely on their cell phones every day.

A study conducted by the National Taxpayers Union Foundation determined that the tax burden heaped upon mobile service was among the worst of all the "hidden" taxes not readily apparent or visible to the people paying them. Many consumers won't notice the federal excise taxes, 911 surcharges, hearing impaired fees, or sales and use taxes listed at the end of their wireless bills, but they undoubtedly still have to pay for them. Yet the revenue created by this litany of taxes does very little, if anything, to improve wireless service or coverage. The time of the crank-handle telephone has passed, and so should the era of onerous telecom taxes.

South Dakota has made it a priority through the 2010 Initiative to "become a recognized leader in research and technology development," but high taxes on technologies like wireless service are particularly unwise from an economic standpoint. The innovation and high-quality jobs that follow telecommunication growth are chased away by crushing taxes. Industry research has shown that for every 1 percent increase in cost (such as taxes), the demand for such services decreases by 1.12 to 1.27 percent. Imagine the potential for growth if this equation was turned around!

The best way to invite new development while improving conditions for existing businesses and residents is to offer a hospitable, low-tax environment. Repealing the wireless gross receipts tax is an excellent opportunity for lawmakers to answer the call for tax relief from overburdened South Dakotans.

Kristina Rasmussen

Government Affairs Manager