Scott City may gain from cell phone tax

Saturday, December 24, 2005

Other cities that already have a telecommunications license tax will have no change in revenue.

Most communities in Missouri will be relatively unaffected by a new telecommunications tax that will include cellular phone service providers.

For Scott City, however, there could be much to gain.

A change in Missouri's rules for telecommunications business license taxes will take effect July 1, allowing municipalities to tax cell phone companies along with land-line companies. While more providers will be taxed, the taxing is required to be revenue neutral.

But for Scott City, which has no telecommunications business license tax, a large revenue increase could be gained by implementing a new tax.

The city has been exploring the possibilities the tax allows. The city council is expected to address the issue soon, city attorney Frank Siebert said. Instituting such a tax would require a vote of the people.

The new tax rules are the result of a compromise for cities that wished to cash in on cellular phone taxes to offset falling revenue from land-line taxes. The compromise will prevent those cities from increasing their tax base, though, and drops all lawsuits by municipalities trying to collect back taxes from cellular phone companies.

The result for municipalities and consumers affected by the change will be lower tax rates on phone bills, and new taxes on cellular bills.

Proponents of the law change and the telecommunications industry say the legislation will be good for both consumers and cities. They cite keeping overall taxes the same as being a benefit for consumers that allows cities to get in on cellular taxes at the same time.

"Overall this is really going to protect consumers from higher taxes," said Marsha Haskell, regional director with SBC.

Most cities are just now exploring what effect the new taxes will have on them. In Cape Girardeau there will be no change, since the city taxes telecommunications at a flat rate of $27,500 per year.

If Cape Girardeau were to change its tax from a flat rate to a percentage rate it would require a public vote.

Cape Girardeau is an exception. Most cities use a percentage of gross receipts as their basis for telecommunications taxes. Those municipalities will have to adjust their rates to make sure the changes are revenue neutral.

Jackson's rate is 5 percent.

Jackson city attorney Tom Ludwig said the new tax should have a neutral effect on the city and consumers.

Companies will be the entities directly taxed, but as with other taxes will pass the cost on to consumers, said Missouri Municipal League president Gary Markinson.

The result for phone users -- those with land-line phones only will likely see a decrease in taxes, while those with cellular phones only will see an increase. The effect for people with both should be negligible.

The result in Scott City, if pursued by the government and approved by the people, could be revenue gains.

335-6611, extension 182

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