Was a prepaid phone card subject to Virginia's prepaid wireless E-911 fee when one price covered both landline and wireless calls?

Plain-English summary

Virginia ruled that the dual-use prepaid phone cards were subject to the prepaid wireless E-911 fee then in effect. The cards provided both prepaid wireless calling service and landline calling service for one nonitemized charge.

The Department's guidelines said that when prepaid wireless calling service was sold with property or services not subject to the fee for one nonitemized price, the purchase was subject to the fee. The ruling therefore applied the then-$0.50 charge to each retail purchase of these cards.

What this means for you

• Identify whether a prepaid product permits wireless 911 access.
• Separately stated and nonitemized bundles may receive different treatment.
• Check current statutes, rates, and guidance before collecting the fee.

Citations and references

• Va. Code § 56-484.17:1.
• P.D. 10-284 (Dec. 27, 2010), Guidelines and Rules for the Prepaid Wireless E-911 Fee.
• 2010 Va. Acts chs. 466 and 566.

Subject

Prepaid phone cards used for both landline and mobile phones subject to E-911 tax

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 11-115

Original ruling text

June 21, 2011

Re: Ruling Request: Prepaid Wireless E-911 Fee

Dear *:

This is in response to your request for clarification regarding the Department of Taxation's ("TAX's") policy on the application of the Prepaid Wireless E-911 Fee on prepaid phone cards that can be used for both landline and mobile phones.

FACTS

You represent approximately 48 clients who sell prepaid phone cards at retail. According to your letter, these prepaid phone cards can be used for both landline and mobile phones. You contend that as the prepaid phone cards are not specifically for wireless calling service, the phone cards are not subject to the prepaid wireless E-911 fee.

You request a ruling regarding the application of the Prepaid Wireless E-911 Fee on such prepaid phone cards.

DETERMINATION

Effective January 1, 2011, House Bill 754 ( Acts of Assembly 2010, Chapter 566) and Senate Bill 441 ( Acts of Assembly 2010, Chapter 466) repealed the E-911 fee on prepaid wireless service and imposed a new prepaid wireless E-911 fee of $0.50 on each retail purchase of prepaid wireless calling service. The fee is collected at the point of sale by retail merchants or the service provider. Each wireless service carrier and reseller continues to collect a surcharge of $0.75 per month from each of its postpaid customers through its regular billing. On December 27, 2010, TAX issued Guidelines and Rules for the Prepaid Wireless E-911 Fee ("Guidelines"), Public Document 10-284, to provide guidance to taxpayers regarding the new law.

Virginia Code § 56-484.17:1 provides that a $0.50 prepaid wireless E-911 charge shall be collected by the dealer from the end user on each purchase of "prepaid CMRS" from a dealer for any purposes other than resale. "Prepaid CMRS" is defined as CMRS, or mobile telecommunications service, that allows a caller to dial 911 to access the 911 system, which CMRS service is required to be paid for in advance and is sold in predetermined units or dollars of which the number declines with use in a known amount.

The Guidelines provide in the "Imposition of the Fee" section that "Prepaid wireless calling service subject to the Prepaid Wireless E-911 Fee purchased along with tangible personal property or services not subject to the Prepaid Wireless E-911 Fee sold for one nonitemized charge are subject to the Prepaid Wireless E-911 Fee." From the facts presented in your letter, your clients sell prepaid phone cards that provide both prepaid wireless calling service that is subject to the Prepaid Wireless E-911 Fee and calling service that is not subject to the Prepaid Wireless E-911 Fee for one nonitemized charge. Accordingly, such phone cards would be subject to the Prepaid Wireless E-911 Fee.

CONCLUSION

I have enclosed a copy of the Guidelines which provide more guidance regarding the registration of dealers for the purposes of the Prepaid E-911 Fee and the collection and remittance of the Prepaid E-911 Fee. The Va. Code section cited and the Guidelines are also available on-line in the Tax Policy Library section of TAX's web site, located at www.policylibrary.tax.virginia.gov.

If you have any questions about this determination, you may contact * in the Office of Tax Policy, Policy Development Division, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

PD/1-4638362961