Public law filings have revealed that California's Public Utilities Commission is examining a plan to tax text messages which could raise up to US$44.5 million in annual revenue.

By Daniel Herborn

Posted on December 13, 2018

California’s Public Purpose Programs directs tax revenue into making telecommunications services available to low-income locals.

Some state officials are now concerned, however, that the mass exodus from landline phone calls to text messages, email and web browsing has allowed the telecommunications industry completely bypass the tax.

The revenue collected assists poorer residents through the state’s Lifeline program. Participants in the program would not be taxed to send text messages under the proposal.

Business groups have opposed the proposed tax

In 2011, revenue from voice calls in California was US$16.5 billion, but it had fallen to US$11.3 billion in 2017. In the same period, the budget for subsidising low-income phone users went from US$670 million to US$998 million.

Lawmakers will vote on the proposal in January 2019 but business groups have already come out in opposition to the plan.

“It’s a dumb idea,” said Jim Wunderman, President and CEO of the Bay Area Council. “This is how conversations take place in this day and age, and it’s almost like saying there should be a tax on the conversations we have.”

Should text messaging be categorised as an ‘information service’?

The wireless industry has also argued that the tax would be unfair since popular messaging services such as Facebook Messenger, WhatsApp and Apple’s iMessage would not be caught by the tax.

Trade body Cellular Telecommunications Industry Association (CTIA) said in the filings it had “repeatedly” shown that text messaging is an information service. If text messaging is considered an information service, the tax cannot be imposed on it under Californian law.

“Subjecting wireless carriers’ text messaging traffic to surcharges that cannot be applied to the lion’s share of messaging traffic and messaging providers is illogical, anticompetitive and harmful to consumers,” the CTIA argued.

Regulators in favour of the proposal said charging for text messages would help “preserve and advance” access to text messaging for low-income Californians.

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