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Illinois, Prepaid Telephone Calling Cards Services Arrangements, and Sales Tax


 Prepaid calling plan arrangements are subject to use tax in Illinois.

The Illinois Department of Revenue has issued a General Interest Letter reminding that prepaid telephone calling card arrangements are subject to sales and use taxes under the Telecommunications Excise Tax Act.

The Act “imposes a tax on the act or privilege of originating or receiving intrastate or interstate telecommunications by persons in Illinois at the rate of 7% of the gross charges for such telecommunications purchased at retail from retailers by such persons.” Gross charges include “amounts paid for the act or privilege of originating or receiving telecommunications in this State and for all services and equipment provided in connection therewith by retailers.”

Furthermore, prepaid telephone calling card arrangements have been considered tangible personal property since January 1, 2013. As such, they are subject to the state use tax, which is currently 6.25%. “The Use Tax Act applies when tangible personal property is purchased anywhere at retail. In essence, the retailer collects the Use Tax from the customer to reimburse it for the Retailers’ Occupation Tax paid by it to the State.”

The DOR explains that a prepaid telephone calling arrangement “does not include an arrangement whereby the service provider reflects the amount of the purchase as a credit on an account for a customer under an existing subscription plan.” Any prepaid telephone plan that is not defined as a “prepaid telephone calling arrangement” is subject to the Telecommunications Excise Tax.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.