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California Abandons Its Plan to Tax Text Messages Following FCC Ruling

California withdrew a controversial proposal to impose a tax on text messages after a Federal Communications Commission vote classified texts as an information service, exempting them from telecom surcharges in the state.

Last month, the California Public Utilities Commission drafted a proposal to extend an existing tax on telecommunications services, such as phone lines, to text messages. The state agency had been planning to vote on the proposal in January.

Late Friday, the CPUC announced that it had withdrawn the proposal for a vote at the meeting, following the FCC’s finding that texts are not a telecom service but an “information service.” That means the CPUC doesn’t have the authority to add a new tax on text messages in the state.

The surcharge that the CPUC imposes is used to support programs that help bring phone lines to rural areas and subsidize service for low-income and disabled customers. But as mobile phone users have shifted their usage patterns away from voice calls, voice call revenues for these programs have dropped by about a third, while the budget for them has risen by almost half.

The CPUC had estimated it could have raised $44.5 million a year with the change. Applied retroactively it would have amounted to a bill of more than $220 million for California consumers. Chat apps that route messages over the Internet, such as WhatsApp and iMessage, would have been exempt from the proposed tax.