I provide prepaid wireless Lifeline service that's fully subsidized so my customers pay nothing -- do I still have to collect the E911 surcharge on those transactions?

Plain-English summary

A wireless carrier recently approved to provide prepaid wireless Lifeline service in Illinois wrote to the Department of Revenue to confirm its understanding of the Prepaid Wireless E911 Surcharge Act (50 ILCS 753, "PW9SA"). Lifeline is a federal program that fully subsidizes eligible low-income customers' monthly wireless service, so the customer pays the provider nothing for that baseline service. The company's understanding was that the PW9SA surcharge -- which sellers of prepaid wireless service must collect from buyers at the point of sale -- does not apply to Lifeline service where the consumer pays the provider nothing, but does apply once the consumer buys additional minutes, texts, or other services beyond the free Lifeline benefit. The company asked the Department to confirm that understanding.

The Department confirmed it, and laid out the general PW9SA framework:

• The PW9SA imposes a prepaid wireless E911 surcharge of 1.5% per retail transaction on consumers. This surcharge does not apply in a home-rule municipality with a population over 500,000, but such a municipality may instead elect to impose its own surcharge of up to 7% per retail transaction sourced to that jurisdiction. 50 ILCS 753/15(a) & (a-5).
• The surcharge is collected by the seller from the consumer and remitted to the Department. It must be separately stated as a distinct line item on the invoice or receipt (or otherwise disclosed to the consumer); if not separately stated, the seller must keep books and records that clearly identify the surcharge amount. 50 ILCS 753/15(b) & (b-5).
• When prepaid wireless service is bundled with other, non-surcharge products or services for a single price, the surcharge generally applies to the entire bundled price -- unless the seller elects to apply it only to the disclosed dollar amount of the wireless service, or to the portion of the price reasonably and verifiably attributable to the wireless service. However, if only a minimal amount of wireless service (defined as 10 minutes or less, or $5 or less) is bundled with a prepaid wireless device for a single price, the seller may elect not to apply the surcharge to that transaction at all -- though the full gross receipts from the sale remain subject to the regular Retailers' Occupation Tax. 50 ILCS 753/15(f).
• The surcharge is not imposed or collected from buyers holding an active Retailers' Occupation Tax exemption identification number under Section 1g of the ROT Act. 50 ILCS 753/15(c).
• Directly answering the company's question: the surcharge is not imposed on the provider or the consumer for wireless Lifeline service where the consumer does not pay the provider for the service. But where the consumer purchases optional minutes, texts, or other services from the provider in addition to the federally funded Lifeline benefit, the consumer must pay the surcharge, and the seller must collect it. 50 ILCS 753/15(g).

The Department closed with a direct confirmation: if the company provides Lifeline service and the customer pays the company nothing for it, the prepaid wireless E911 surcharge does not apply.

What this means for you

For prepaid wireless Lifeline service providers

You do not need to collect or remit the PW9SA surcharge on transactions where a Lifeline customer's service is fully subsidized and the customer pays you nothing. But track the line between the free Lifeline benefit and any add-on purchase: the moment that same customer pays for extra minutes, texts, or other services beyond the subsidized benefit, the surcharge attaches to that additional purchase, and you (the seller) are responsible for collecting it from the consumer and remitting it to the Department.

For sellers bundling wireless service with devices or other products

If you bundle prepaid wireless service with a device or another non-surcharge product for one price, the surcharge normally applies to the whole bundled price unless you affirmatively elect to apply it only to the disclosed or identifiable wireless-service portion. There's a narrow carve-out: if the wireless service bundled with a prepaid wireless device is minimal (10 minutes or less, or $5 or less), you may elect to skip the surcharge on that transaction entirely -- but the regular Retailers' Occupation Tax still applies to the full gross receipts from the sale.

Recordkeeping and invoicing

Whether or not you separately state the surcharge on the customer's invoice or receipt, you need records that clearly show the surcharge amount for each retail transaction where it applies, so you can support your Schedule B reporting on the ST-1 Sales and Use Tax and E911 Surcharge Return.

Common questions

Q: Does the E911 surcharge apply to a Lifeline customer whose monthly wireless service is fully subsidized?
A: No. Under 50 ILCS 753/15(g), the surcharge is not imposed on the provider or the consumer for wireless Lifeline service where the consumer does not pay the provider for the service.

Q: What happens if that same Lifeline customer later buys extra minutes or texts?
A: The surcharge applies to that additional purchase. Once a consumer buys optional minutes, texts, or other services beyond the federally funded Lifeline benefit, the consumer must pay the prepaid wireless E911 surcharge, and the seller must collect it.

Q: What if I bundle a minimal amount of service with a free phone?
A: If only a minimal amount of prepaid wireless service (10 minutes or less, or $5 or less) is sold with a prepaid wireless device for a single, non-itemized price, the seller may elect not to apply the E911 surcharge to that transaction. The full gross receipts from the sale, however, remain subject to Retailers' Occupation Tax.

Q: How much is the surcharge, and does it ever vary by location?
A: The standard surcharge is 1.5% per retail transaction. It does not apply in a home-rule municipality with a population over 500,000, but such a municipality may instead elect to impose its own surcharge of up to 7% per retail transaction sourced there.

Q: Is this letter a binding ruling I can rely on?
A: No. This is a General Information Letter issued under 2 Ill. Adm. Code 1200.120. It directs taxpayers to relevant law but is not a statement of Department policy and is not binding on the Department.

Citations and references

Statutes cited:

• 50 ILCS 753/15(a) & (a-5) (1.5% surcharge per retail transaction; up to 7% in certain large home-rule municipalities)
• 50 ILCS 753/15(b) & (b-5) (seller collection, remittance, and disclosure/recordkeeping duties)
• 50 ILCS 753/15(f) (bundled pricing rule and the minimal-service exception)
• 50 ILCS 753/15(g) (no surcharge on fully-subsidized Lifeline service; surcharge applies to add-on purchases)
• 50 ILCS 753/15(c) (no surcharge for buyers with an active ROT exemption number under Section 1g)

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/st19-0008-gil.pdf

Original ruling text

ST 19-0008-GIL 04/04/2019 MISCELLANEOUS
This letter discusses the Prepaid Wireless 9-1-1 Surcharge Act. 50 ILCS 753. (This is a GIL.)
April 4, 2019
Dear Xxxx:
This letter is in response to your letter dated March 6, 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:
COMPANY d/b/a COMPANY1 was recently approved to provide prepaid wireless Lifeline
services in Illinois. COMPANY1 intends to remit E911 surcharges for its Illinois customers in
accordance with the Prepaid Wireless E911 Surcharge Act (50 ILCS 753) (“PW9SA”).
It is COMPANY1 understanding that the PW9SA imposes on sellers of prepaid wireless
service the duty to collect the surcharges from buyers at the point of sale, and requires the
Illinois Department of Revenue to administer collection of the sum; it does not, however,
impose a surcharge on the consumer or provider for wireless Lifeline service where the
consumer does not pay the provider for the service, i.e. where the consumer’s monthly service
charge is fully subsidized by the federal Lifeline benefit. 1
COMPANY1 hereby seeks a written response, addressed to the undersigned and returned
using the included postage-prepaid envelope, affirming that the Company’s understanding set
forth herein is correct, or, if applicable, providing detailed clarification as to how the PW9SA
should otherwise be interpreted.
If you have any questions, or if I may provide you with additional information, please contact
me at the above address or telephone number. Thank you for your attention to this matter.
DEPARTMENT’S RESPONSE:
1
See 50 ILCS 753/15(g) which states: “(g) The prepaid wireless 9-1-1 surcharge imposed under subsections (a) and (a-5) of the
Section is not imposed on the provider or the consumer for wireless Lifeline service where the consumer does not pay the provider for
the service. Where the consumer purchases from the provider optional minutes, texts, or other services in addition to the federally
funded Lifeline benefit, a consumer must pay the prepaid wireless 9-1-1 surcharge, and it must be collected by the seller according to
subsection (b-5).”

ST 19-0008-GIL
Page 2
The Prepaid Wireless 9-1-1 Surcharge Act imposes on consumers a prepaid wireless 9-1-1
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 not to
exceed 7% per retail transaction sourced to that jurisdiction. 50 ILCS 753/15(a) & (a-5).
The prepaid wireless 9-1-1 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 9-1-1 and shall be remitted
to the Department by the seller. The amount of the prepaid wireless 9-1-1 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 9-1-1 surcharge for retail transactions. 50 ILCS 753/15(b) & (b-5).
When prepaid wireless telecommunications service is sold with one or more other products or
services that is not subject to the prepaid wireless 9-1-1 surcharge for a single, non-itemized or
bundled price, then the appropriate prepaid wireless 9-1-1 surcharge shall be applied to the entire
non-itemized or bundled price unless the seller elects to apply the prepaid wireless 9-1-1 surcharge to
(i) the dollar amount of the prepaid wireless telecommunications service if that dollar amount is
disclosed to the consumer or (ii) the portion of the price that is attributable to the prepaid wireless
telecommunications service if the retailer can identify that portion by reasonable and verifiable
standards from its books and records that are kept in the regular course of business for other
purposes, including, but not limited to, books and records that are kept for non-tax purposes.
However, if a minimal amount of prepaid wireless telecommunications service is sold with a
prepaid wireless device for a single, non-itemized or bundled price, then the seller may elect not to
apply the prepaid wireless 9-1-1 surcharge to such transaction. For purposes of this subsection, an
amount of service denominated as 10 minutes or less or $5 or less is considered minimal. 50 ILCS
753/15(f).
If a minimal amount of prepaid wireless telecommunications service is sold with a prepaid
wireless device for a single, non-itemized or bundled price and the seller elects not to apply the
prepaid wireless 9-1-1 surcharge to such transaction, no amount of prepaid wireless 9-1-1 surcharge
will be added to Schedule B of the ST-1, Sales and Use Tax and E911 Surcharge Return. However,
all of the gross receipts received from the sale will be subject to Retailers’ Occupation Tax liability.
Except for the situations when a minimal amount of prepaid wireless telecommunications
service is sold with a prepaid wireless device for a single, non-itemized or bundled price, all sales of
prepaid wireless telecommunications services, regardless of the amount, are subject to the prepaid
wireless 9-1-1 surcharge and reported on Schedule B of the ST-1, Sales and Use Tax and E911
Surcharge Return.
The surcharge is not imposed or collected from entities that have an active tax exemption
identification number issued by the Department under Section 1g of the Retailers' Occupation Tax
Act. 50 ILCS 15(c). As you noted in your letter, the prepaid wireless 9-1-1 surcharge is not imposed
on the provider or the consumer for wireless Lifeline service where the consumer does not pay the
provider for the service. Where the consumer purchases from the provider optional minutes, texts, or

ST 19-0008-GIL
Page 3
other services in addition to the federally funded Lifeline benefit, a consumer must pay the prepaid
wireless 9-1-1 surcharge, and it must be collected by the seller. 50 ILCS 15(g).
If your Company provides Lifeline service and the customer does not pay your Company
anything for the Lifeline service, the prepaid wireless 9-1-1 surcharge would not apply.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.
Very truly yours,

RSW:rkn

Richard S Wolters
Associate Counsel