Tax Type
Retail Sales and Use Tax
Description
Prepaid telephone calling cards
Topic
Exemptions
Property Subject to Tax
Date Issued
01-17-1995
See 2007 updated Tax Code 58.1- 602
January 17, 1995
Re: Ruling Request: Retail Sales and Use Tax
Dear**************
This will reply to your letter dated December 7, 1994 in which you seek a ruling on the application of the tax to the sale of prepaid long distance telephone calling cards by*********** (the"Taxpayer").
FACTS
The Taxpayer intends to begin selling prepaid phone calling cards. Card purchasers will receive units (minutes) of long-distance telephone service based upon the type of card purchased. You seek a ruling on the tax status of card sales.
RULING
As you indicate, the department has previously determined in P.D. 93-105 (4119/93) that the retail sales of telephone calling cards enabling purchasers to make prepaid long-distance telephone calls are nontaxable. The "true object" in purchasing a calling card is the long distance service. The card serves only as a medium for securing the telephone service. Accordingly, the Taxpayer's sales of the prepaid phone cards are nontaxable.
Furthermore, Virginia does not impose a state tax on gross receipts. However, it appears that the revenues generated by the Taxpayer from the sale of prepaid calling cards will be subject to the local gross receipts tax in those localities imposing that tax.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8934G
Rulings of the Tax Commissioner