Most states and many local governments impose a surcharge on telephone subscribers in order to fund enhanced emergency assistance service, most commonly known as E911. E911 surcharges generally require service providers to charge the fee on monthly invoices to customers and source the fee to their customer’s service or billing address. Most E911 surcharges were first imposed ten to twenty years ago and typically excluded prepaid wireless revenues from taxation. Prepaid wireless was and is often sold by third-party retailers who do not collect the customer’s address and do not send monthly invoices. As a result, traditional means of collecting E911 surcharges are ill-equipped for prepaid wireless.
In 2009, the National Conference of State Legislatures endorsed a point-of-sale style model legislation (updated in 2011) for the application of E911 surcharges to prepaid wireless. The model legislation imposes either a flat fee or a percentage on each retail purchase of prepaid wireless telecommunications and requires retailers to disclose the fee on the customer’s invoice. The sourcing of the sale of prepaid wireless is the same as general sales under each state’s sourcing laws.
As of May 2016, 37 states (as well as the District of Columbia and the Virgin Islands) have enacted the point of sale model of legislation. (As supported by ONESOURCE Indirect Tax Determination.) Arizona, California, Colorado, District of Columbia, Idaho, Illinois, Kansas, Louisiana, Michigan, Nebraska, North Dakota, Ohio, Rhode Island, South Dakota, Texas and Utah impose the surcharge on a percentage on each retail sale of prepaid wireless. Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Indiana, Iowa, Maine, Maryland, Minnesota, Mississippi, New Hampshire, North Carolina, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, the Virgin Islands, Virginia, Washington and Wisconsin impose a flat fee on the retail sale of prepaid wireless. Kentucky, Massachusetts, and Puerto Rico impose a monthly E911 surcharge on prepaid wireless services not imposed at the point-of-sale.
Beginning in July 2016, Wyoming will impose a point-of-sale E911 surcharge of 1.5% on prepaid wireless. (See Wyoming House Bill 44, laws 2015.) And beginning in January 2017, Kentucky will change to a point-of-sale style surcharge for sales of prepaid wireless and increase the surcharge to $0.93. (See Kentucky House Bill 585, regular session 2016).