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California’s Prepaid Mobile Telephone Services Surcharge

  • Dec 7, 2015 | Gail Cole

 A prepaid mobile telephony services surcharge takes effect in California, January 2016.

Prepaid wireless phone cards and services are subject to a prepaid mobile telephony services (MTS) surcharge in California, effective January 1, 2016. The surcharge is imposed on purchasers but must be collected by all retail sellers of prepaid wireless phone cards and services, including liquor stores. The prepaid MTS surcharge is not the same as a sales tax. Sellers must register with the BOE as a prepaid MTS seller even if they already have a California seller’s permit.

The surcharge is comprised of a combination of the following charges:

  • Prepaid 911 surcharge (rate determined by the Office of Emergency Services)
  • California Public Utilities Commission’s reimbursement fee and telecommunications universal services surcharges
  • Local charges (if applicable)

According to the California State Board of Equalization (BOE), the Prepaid MTS surcharge generally applies to the following:

  • Prepaid wireless airtime cards
  • Prepaid wireless cards compatible with pay-as-you-go cell phones
  • Prepaid wireless minutes
  • Prepaid wireless plans
  • Prepaid wireless refill or top-off cards
  • Prepaid wireless e-Cards
  • Prepaid mobile data or any other services when sold with any of the above
  • Any product or service (except a cell phone) when sold with prepaid MTS for a single non-itemized price
  • A cell phone sold with prepaid MTS for a single non-itemized price, unless only a minimal amount of prepaid MTS is transferred. A minimal amount of prepaid MTS is $5 or less, or 10 minutes or less

Out-of-state sellers

Out-of-state businesses that sell or ship prepaid wireless phone cards to California customers must also register with the BOE as a prepaid MTS seller. The surcharge must be collected on all retail transactions involving prepaid mobile telephony services occurring in California. For example, out-of-state sellers are required to collect the surcharge when one of the following situations applies:

  • The item is shipped to, or picked up by, a customer at a California location
  • Your records show that the customer’s address is in California
  • Your customer provided you with an address in California during the sales transaction
  • The mobile phone number is associated with a California location

Additional information, including MTS rates and resources, is available on the BOE Prepaid MTS surcharge page and in Publication 77.

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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.