FET Fundamentals

The FET was first introduced as a "temporary" luxury tax in 1898 to fund the Spanish American War. The FET remains in effect today, over 100 years later.

The FET is imposed on communications services at a rate of 3 percent (this rate was made permanent in 1990). Unlike other excise taxes which arguably serve some good by decreasing the consumption of the taxed product (i.e., alcoholic beverages and tobacco), there is no such benefit from the FET on telephone service. Additionally, unlike other excise tax revenues, the FET revenues are not "earmarked" for a specific purpose -- they flow directly into the general revenue.

Taxable Services:

• Local Telephone Service
  • Subscriber Line Charges
  • Add-on features, such as Call Waiting and Caller ID
  • Local Area Message Charges
• Toll Telephone Service
  • Toll Message Charges
  • WATS
• Centrex
  • Exchange access portion
• Directory Assistance
• Long Distance Telephone Service
• Wireless Telephone Service

Non-Taxable Services:

• Private Communication Service
• Installation
• Centrex
  • Intercommunication portion
• Repair and Maintenance of customer owned equipment

FET Exemptions:

• Certain governmental customers
• American Red Cross
• Non-profit Educational Organizations
• Non-profit Hospitals
• Toll Telephone service for common carriers, radio and television broadcasting stations and networks
• Services, other than local, used exclusively in collection of news for the public press, radio or television broadcasting or collection or dissemination of news.
• Sales for resale (i.e., Carrier Access)

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