Regulated telcos don't pay taxes. Only their customers pay taxes.
> Some of those taxes are itemized on the bill, and some are just buried
> in the rates, but one way or another, every dime of tax paid by the
> telco comes ultimately from the ratepayers.
Regulated telcos are in fact liable for, and do pay taxes of many different kinds, some or all of which are ultimately recovered from ratepayers. There are also taxes that are imposed directly on the end user of telecommunications, which are merely collected by the telco. An example of the latter is the federal telecommunications excise tax, which is levied on the end user directly by federal law, but is collected and remitted to the government by the telco. This is very different from the taxes and tax-like fees and charges that are imposed directly on the telco, but which are ultimately recovered from the end user.
For example, the Federal USF charge is assessed on the carrier based on its end-user interstate telecom revenues; it must be paid by the carrier, whether or not the carrier can recover it from its customer, either as a line item or as a hidden component of its rates. Likewise, there are state taxes and fees, such as gross receipts taxes, state USF fees, 911 charges, sales taxes, intrastate telecommunications excise taxes, etc. These are typically levied directly on the telco, but the telco passes them through to the customer one way or another. And then there are income taxes, state and federal, levied on the telco and paid by it, but taken into account as a cost of doing business when setting rates.
While it's true that, ultimately, all of the taxes on telcos ultimately come out of the pockets of their customers, either directly or indirectly, that is also true of every other business. What is unique about the telecom industry is that the state and federal governments have latched onto telecom as a cash cow, imposing thousands of separate taxes across the country above and beyond the normal income, property, and sales taxes that are imposed on other businesses. There is absolutely no justification for imposing all of these costs on telecom providers, and their customers, alone, other than the fact that they are sitting ducks.
One reason why telecom companies tend to pass these taxes and fees through as line items, rather than absorb them as a cost of doing business, is because they are imposed arbitrarily and are subject to frequent change, so they can't in many instances be internalized into the cost of doing business like income and property taxes. Stores pass through the sales tax as a line item on your register receipt for the same reason. Doing this makes consumers aware that the government, and not the carrier, is responsible for much of the total cost (up to 1/3, or even more) of telecommunications services. Did you know that your telephone bill is inflated by 10% or so in order to subsidize rural telephone companies, many of which are highly profitable?
That's what the federal USF charge does, in part. Thank Ted Stevens for this subsidy, not your carrier. People in rural areas pay less than urban customers for telephone service because the urban subscribers pay a huge subsidy to the rural telcos, all in the name of supporting universal service in high cost areas. Likewise, states impose a 911 surcharge on telecom providers, which is passed through to the customer. In some cases, states have used the funds collected, which were supposed to subsidize the cost of upgrading 911 dispatching facilities, to redecorate police stations while leaving 911 service unimproved. Why should telcos and their subscribers pay for redecorating police stations, or even for upgrading other areas' 911 centers, when these are general government public welfare expenditures? The answer is that it's easier to levy taxes on telecom than to raise income taxes.
Michael D. Sullivan Bethesda, MD, USA Replace "example.invalid" with ".com".