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Is California Going to Tax Your Texts?

By Lisa M. Schaffer, Esq. on December 14, 2018 | Last updated on March 21, 2019

The California Public Utility Commission (CPUC) wants to tax text messages in order to subsidize programs that make phone service accessible to the underserved. But the Federal Communication Commission (FCC) may have just blocked that possibility by reclassifying text messaging as information services rather than communication services. This reclassification may not seem like a big deal to the general public, but it could delay, and potentially eliminate, the possibility of the California Text Tax, which is set for a vote on January 10, 2019.

State Tax Proposal Up for Vote

The CPUC is facing a budgeting deficit, and needs to raise additional revenue to fund certain programs. The group has proposed a monthly surcharge to appear on cellular bills that include text messaging services. Cell phone carriers would have some leeway as to how they wish to approach the exact structure of the charge, but they would still have to impose it. Cell phone carriers want to avoid this tax, since it will lead to a rise in pricing to the consumer, with no added revenue to them. In addition, cell phone carriers insist that the tax would be inequitable, since applications that provide a similar service but are not technically texts, such as WhatsApp and iMessage, could avoid the fee, which would create an unfair competitive pricing situation.

Effect of FCC Classification

On Wednesday, a wrench was thrown into the CPUC's plan. The FCC voted 3-1 that wireless Short Message Service (SMS) and Multimedia Messaging Service (MMS) are "information services", similar to email, under the Communications Act. They are not "communication services", and therefore they cannot be managed, or taxed, by the CPUC because they would fall outside of the CPUC's jurisdiction. The purpose of this classification was to protect cell phone users from spam text messages, but it has the added effect of removing SMS and MMS texts from CPUC regulation.

Proponents of the tax believe that this FCC classification does not drive a dagger into the heart of the tax. Indeed, the vote isn't scheduled for another month, so there is time for the bill's drafters to make amendments that accommodate this new classification. "Nothing the FCC has done prevents leadership in this area," according to Mindy Spatt, spokesperson for The Utility Reform Network, a consumer group in favor of the texting surcharge.

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