LR 8118

Phone Cards are Subject to Prepaid Wireless Emergency Telephone Service Charge

October 29, 2020

Dear Applicant,

            This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated August 24, 2020.

            The facts as presented in your letter ruling request are summarized as follows:

Applicant is a retailer that sells prepaid wireless telecommunications services.  One of the ways that customers of Applicant purchase these services is through unlimited use cards.  These cards can be activated on phones for unlimited use for the time period that is indicated on the card.

ISSUE:

            Are unlimited use phone cards sold by Applicant subject to the Prepaid Wireless Emergency Telephone Service Charge ("PWETSC") imposed by Section 190.460.2, RSMo?

RESPONSE:

            Yes, unlimited use phone cards sold by Applicant are subject to the PWETSC imposed by Section 190.460.2, RSMo.

            Section 190.460.2, RSMo, states, in relevant part:

(1)...there is hereby imposed a prepaid wireless emergency telephone service charge on each retail transaction.  The amount of such charge shall be equal to three percent of the amount of each retail transaction.  The first fifteen dollars of each retail transaction shall not be subject to the service charge.

(2)  When prepaid wireless telecommunications service is sold with one or more products or services for a single, nonitemized price, the prepaid wireless emergency telephone service charge set forth in subdivision (1) of this subsection shall apply to the entire nonitemized price unless the seller elects to apply such service charge in the following way:

(a)  If the amount of the prepaid wireless telecommunications service is disclosed to the consumer as a dollar amount, three percent of such dollar amount; or

(b)  If the seller can identify the portion of the price that is attributable to the prepaid wireless telecommunications service by reasonable and verifiable standards from the seller's books and records that are kept in the regular course of business for other purposes including, but not limited to, nontax purposes, three percent of such portion;

            Section 190.460.1(6), RSMo, defines "retail transaction," in relevant part, as "the purchase of prepaid wireless telecommunications service from a seller for any purpose other than resale."

            Section 190.460.1(5), RSMo, defines "prepaid wireless telecommunications services" as "a wireless telecommunications service that allows a caller to dial 911 to access the 911 system and which service shall be paid for in advance and is sold in predetermined units or dollars of which the number declines with use in a known amount."

            If stated separately, or if can be determined to be separate through records kept in the regular course of business, the unlimited use phone cards are taxable because they meet the definition of "prepaid wireless telecommunications services" found in Section 190.460.1(5), RSMo. 

            The unlimited use phone cards do have "units... which the number declines with use in a known amount."  While the cards do allow for unlimited usage, the unlimited usage is only allowed for a specified time range (i.e. one month).  As a result, each day reduces the amount of time available to use the data and therefore constitutes a unit for the purposes of section 190.460. 

            As the time to use the card declines with each day, the unlimited use phone cards are subject to the service charge under 190.460.2 in addition to any other applicable taxes or fees.

            This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals.  If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change.  For this reason, the interpretation set forth above should be reviewed on a regular basis.  Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

            Should additional information be needed, please contact Managing Counsel Christopher R. Fehr, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone 573-751-0961), or me.

Sincerely,

Kenneth Zellers