In case you missed it, last week the California Public Utilities Commission, a group of unelected State Regulators, proposed a plan to tax text messages. Apparently in the never ending pursuit of helping the disadvantaged afford cellular coverage our state ruling class saw a bountiful source of revenue. Just think of all the teenage girl’s parents seeing THAT phone bill!

Well, in comes the Federal Government to the rescue. In a ruling that eviscerates the CA PUC’s authority to tax texts, the FTC ruled that text messaging is an information service, not a telecommunications service. Not sure about the logic there, but heck, it gets the best result. In so doing, it restricted states’ authority over them and thankfully the ability to tax.

This reminds me of the IRS’ ruling earlier this year that wiped out CA and other high tax states backdoor plan to make state taxes a charitable deduction, and in so doing preserve some federal tax benefits. I wrote about that when it was initially proposed and thankfully the IRS came out with the big guns and issued a ruling last summer explaining how that wouldn’t work, before anyone had a chance to file returns and set themselves up for big penalties when the schemes ultimately cratered later.

In case you’re keeping score, that’s Feds – 2, California – 0. We can only guess what Sacramento will come up with next, but hopefully it won’t be a lump of coal for taxpayers.

Here’s wishing all of you a safe and Happy Holiday Season!

Read more tax articles from Paul’s tax blog