Does the Illinois prepaid wireless E911 surcharge apply to recharges sold to Illinois customers when the actual phone being recharged is used abroad by family or friends on a foreign network?

Plain-English summary

The Illinois Department of Revenue confirmed that the prepaid wireless E911 surcharge still applies to recharges sold to Illinois customers even when the phone being recharged is used entirely outside the United States by someone else.

The taxpayer sells recharges of prepaid wireless service to customers in Illinois. Those customers buy the recharges for cell phones used by their family and friends in foreign countries such as Honduras, Mexico, and Guatemala, on foreign telecom networks that have no connection to a U.S. 911 system. The taxpayer argued that since the actual phone users can never dial 911 in the United States, the surcharge's purpose -- funding 911 service for people who can access it -- shouldn't apply to these sales.

The Department disagreed. The Prepaid Wireless 9-1-1 Surcharge Act imposes a 1.5% surcharge on every retail transaction in which a consumer purchases prepaid wireless service in Illinois (50 ILCS 753/15(a)). The Department's analysis focused on where the purchase happens, not on where or by whom the service is later used: because the Illinois customer buys the recharge in a retail transaction occurring in Illinois, the surcharge applies "regardless of the location where the prepaid calling arrangements are used."

What this means for you

Sellers of prepaid wireless recharges and international phone cards

If you sell prepaid wireless recharges to Illinois customers, you must collect the 1.5% E911 surcharge on those sales even if you know the underlying phone service will be used abroad by someone who can never dial a U.S. 911 system. The surcharge is triggered by the retail sale happening in Illinois, not by the ultimate use or user of the phone service.

Remittance and international-calling businesses

Businesses that primarily serve immigrant communities buying phone credit for relatives abroad cannot treat those sales as exempt just because the recharged phones are on foreign networks. The Department found no exception in the statute for this fact pattern, so the surcharge collection and remittance obligations apply the same as for any other prepaid wireless sale in Illinois.

Accountants and tax professionals advising these businesses

Make sure clients in this space are separately stating the surcharge on receipts/invoices or otherwise disclosing it to the consumer, or alternatively maintaining books and records that clearly identify the surcharge amount, as required by 50 ILCS 753/15(b) and (b-5). Note the narrow home-rule carve-out: the state surcharge does not apply within a home-rule municipality with a population over 500,000 (i.e., Chicago), though such a municipality may impose its own prepaid wireless 911 surcharge on transactions sourced there under 50 ILCS 753/15(a-5).

Common questions

Q: Does the E911 surcharge apply if the recharged phone can never dial 911 in the U.S.?
A: Yes. The Department held the surcharge attaches to the retail transaction -- the purchase of the recharge by the consumer in Illinois -- not to where or by whom the phone service is used afterward.

Q: Is there any exception for phones used by family or friends living abroad?
A: No. The Department stated it could find no Illinois regulation, case law, or ruling creating such an exception, and confirmed the surcharge applies "regardless of the location where the prepaid calling arrangements are used."

Q: Who has to collect and remit the surcharge?
A: The seller collects the 1.5% surcharge from the consumer on each retail transaction occurring in Illinois and remits it to the Department. 50 ILCS 753/15(b).

Q: Does the surcharge apply the same way in Chicago?
A: Not exactly. The state surcharge does not apply within a home-rule municipality with a population over 500,000, but that municipality may separately elect to impose its own prepaid wireless 911 surcharge on transactions sourced there. 50 ILCS 753/15(a-5).

Q: Is this letter binding on the Department for other taxpayers?
A: The taxpayer asked for a Private Letter Ruling, but the Department's own text states that "the nature of your inquiry and the information you have provided require that we respond with a GIL" -- a General Information Letter, which is not a statement of Department policy and is not binding on the Department. See 2 Ill. Adm. Code 1200.120.

Citations and references

Statutes:

• 50 ILCS 753/5 (legislative findings and purpose of the Prepaid Wireless 9-1-1 Surcharge Act)
• 50 ILCS 753/15(a) (1.5% surcharge per retail transaction)
• 50 ILCS 753/15(a-5) (home-rule municipality exception and local election)
• 50 ILCS 753/15(b) (collection and remittance by the seller)
• 50 ILCS 753/15(b-5) (separate statement/disclosure or recordkeeping)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2019.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2019/st19-0004-plr.pdf

Original ruling text

ST 19-0004-PLR 12/04/2019 MISCELLANEOUS
This letter discusses the Prepaid Wireless 9-1-1 Surcharge Act. 50 ILCS 753.
December 4, 2019
This letter is in response to your letter dated July 23, 2019, in which you requested information.
The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are issued by the
Department in response to specific taxpayer inquiries concerning the application of a tax statute or
rule to a particular fact situation. A PLR is binding on the Department, but only as to the taxpayer
who is the subject of the request for ruling and only to the extent the facts recited in the PLR are
correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in the
Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information Letter
(“GIL”) is to direct taxpayers to Department regulations or other sources of information regarding the
topic about which they have inquired. A GIL is not a statement of Department policy and is not
binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to your
inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
My name is NAME, my address is ADDRESS, my phone number is NUMBER and my
EIN is NUMBER. I am requesting a private letter ruling concerning whether the E911
surcharge tax should be imposed on the sale of a recharge of a prepaid telephone
calling arrangement for a phone device that is located and will be used in foreign
countries and not within the United States.

1. Question:
   Is the E911 surcharge tax applicable to the sale of recharges of prepaid
   telephone calling arrangements for a phone service that is provided by a foreign
   company in a foreign country and is used by the citizens living in those foreign
   countries?
2. Statement of Facts and Law
   In conformity with title 2 Ill. Adm. Code 1200.110(b)(1), the material facts are as
   follows: Sales of telephone recharges are made to customers in Illinois. Illinois
   customers purchase cell phone recharges for the cell phones that their family
   and friends use in foreign countries such as Honduras, Mexico, Guatemala, etc.
   Once the Illinois customer pays for the telephone recharge, the cell phones of
   their family and friends in foreign countries get time they can use to originate or
   receive calls to their cell phones in those foreign countries. The cell phone
   services in those foreign countries are operated by foreign telecommunication
   companies.
   According to 101st General Assembly Public Acts 50 ILCS 753/5, the purpose of
   the E911 Surcharge tax is as follows:

ST 19-0004-PLR
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December 4, 2019

The General Assembly finds and declares that maintaining effective
and efficient 9-1-1 systems across the State benefits all citizens.
The fees imposed upon the consumers of telecommunication
services that have the ability to dial 9-1-1 are an important
funding mechanism to assist the State and units of local
government with the deployment of enhanced 9-1-1 services to
the citizens of this State.
Prepaid wireless telecommunication services are an
important segment of the telecommunications industry and have
proven particularly attractive to low-income and low-volume
consumers. Unlike traditional telecommunication services, prepaid
wireless telecommunications services are not sold or used pursuant
to term contracts or subscriptions and monthly bills are not sent to
consumers by prepaid wireless telecommunication service
providers or retail vendors.
Prepaid wireless consumers have the same access to
emergency 9-1-1 services from their wireless devices as wireless
consumers on term contracts. Prepaid wireless consumers benefit
from the ability to access the 9-1-1 system by dialing 9-1-1.
Consumers purchase prepaid wireless telecommunication
services at a wide variety of general retail locations and cash-andcarry or pay-as-you-go basis from retailers.
It is the intent of the General assembly to:
(1) ensure equitable contributions to the funding of 9-1-1
systems from consumers or prepaid wireless
telecommunications services:
(2) collect 9-1-1 surcharges from purchasers of prepaid
wireless telecommunications services at the point of sale;
(3) impose the collection and remittance obligation for 9-1-1
surcharges
on
sellers
of
prepaid
wireless
telecommunication services;
(4) impose a statewide administered 9-1-1 surcharge on
point of sale transactions in order to minimize
administrative costs on retailers.
(Source: P.A. 97-463, eff. 1-1-12.)
However, the purchase of cell phone recharges by customers in Illinois is not for the
personal enjoyment of the customers in this State but for the enjoyment of their families
and friends in foreign countries that do not have the ability to dial 911.

3. Analysis
   If the purpose the Prepaid Wireless 9-1-1 Surcharge Act is to impose fees upon
   consumers of telecommunication services that have the ability to dial 9-1-1 (See 50
   ILCS 753/5 The fees imposed upon the consumers of telecommunication services that

ST 19-0004-PLR
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December 4, 2019

have the ability to dial 9-1-1 are an important funding mechanism to assist the State and
units of local government with the deployment of enhanced 9-1-1 services to the
citizens of this State), then, consumers making purchases of cell phone recharges for
the cell phones that their family and friends use in foreign countries such as Honduras,
Mexico, Guatemala, etc., should not be subject to the prepaid wireless E911 Surcharge
Tax since they have no access to 911 services in their own countries.
I could not locate any Illinois regulation, case law or administrative rulings evaluating if
the sales of recharges to use in foreign countries would be subject to the E911
Surcharge Tax.
Some sellers of recharges are imposing the 911 Surcharge tax to their customers while
others are not. To be in compliance, I respectfully request the issuance of a PLR from
the Department regarding this issue.
According to title 2 Ill. Admin. Code 1200.110(b)(3), the tax period at issue is July 2019
through the present. There are not pending audits or litigation with the department.
According to title 2 Ill. Admin. Code 1200.110(b)(4), to the best of my knowledge, the
Department has not ruled on the same or similar issue presented in this PLR request for
me or a predecessor. Neither, myself or any representative have not submitted the
same or a similar issue to the Department in the past but withdrew it before a letter
ruling was issued.
I look forward to the Department’s response.
consideration.

Thank you for your time and

DEPARTMENT’S RESPONSE:
The Prepaid Wireless 9-1-1 Surcharge Act imposes on consumers of a prepaid wireless a 911
surcharge of 1.5% per retail transaction. This surcharge does not apply in a home rule municipality
having a population in excess of 500,000. A home rule municipality having a population in excess of
500,000 on the effective date of the Act may impose a prepaid wireless 9-1-1 surcharge per retail
transaction sourced to that jurisdiction. 50 ILCS 753/15(a) & (a-5).
“‘Consumer’ means a person who purchases prepaid wireless telecommunications service in a
retail transaction.” “‘Retail transaction’ means the purchase of prepaid wireless telecommunications
service from a seller for any purpose other than resale.” “‘Prepaid wireless telecommunications
service’ means a wireless telecommunications service that allows a caller to dial 911 to access the
911 system, which service must be paid for in advance and is sold in predetermined units or dollars of
which the amount declines with use in a known amount.”
The prepaid wireless 911 surcharge shall be collected by the seller from the consumer with
respect to each retail transaction occurring in this State and home rule municipality having a
population in excess of 500,000 that elects to impose a prepaid wireless 911 surcharge and shall be

ST 19-0004-PLR
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December 4, 2019

remitted to the Department by the seller. The amount of the prepaid wireless 911 surcharge shall be
separately stated as a distinct item apart from the charge for the prepaid wireless telecommunications
service on an invoice, receipt, or other similar document that is provided to the consumer by the seller
or shall be otherwise disclosed to the consumer. If the seller does not separately state the surcharge
as a distinct item to the consumer, then the seller shall maintain books and records which clearly
identify the amount of the 911 surcharge for retail transactions. 50 ILCS 753/15(b) & (b-5).
The Prepaid Wireless 9-1-1 Surcharge Act imposes the prepaid wireless 911 surcharge on
persons who purchase prepaid wireless. The purchases you describe are made by purchasers
during a retail transaction that occurs in Illinois. The prepaid wireless 911 surcharge must be
collected by the seller from the consumer with respect to each retail transaction occurring in this
State. Therefore, the surcharge is imposed on the purchase of prepaid wireless in this State,
regardless of the location where the prepaid calling arrangements are used.
I hope this information is helpful. If you have further questions related to the Illinois sales tax
laws, please visit our website at www.tax.illinois.gov or contact the Department’s
Taxpayer Information Division at (217) 782-3336.
Very truly yours,
Richard S. Wolters
Associate Counsel
RSW:bkl