Tax Type
Retail Sales and Use Tax
Description
Telecommunications; Prepaid telephone cards
Topic
Taxability of Persons and Transactions
Date Issued
06-30-1999
June 30, 1999
Re: Request for Ruling: Retail Sales and Use Tax
Dear***
This will reply to your letter in which you request a ruling on the application of sales and use tax to retail sales of prepaid phone cards made by * * * * * (the "Taxpayer').
FACTS
The Taxpayer plans to sell a prepaid phone card that entitles the purchaser to one month of local telephone service. The local telephone service is provided by a third party. The Taxpayer asks if retail sales of the phone cards are subject to sales tax.
RULING
The department has previously ruled in Public Document 93-105 (4/19/93, copy enclosed) that transactions involving the retail sale of prepaid phone cards for long distance telephone service are not subject to sales tax. The "true object' of purchasing a phone card is to secure the telephone service.
The card serves as the medium for securing the service. The prepaid phone card in this case entitles the holder of the card to local telephone service. While the type of phone service may be different, the true object of the transaction is to obtain the phone service. Therefore, retail sales of phone cards for local telephone service are not subject to sales tax.
If you have any questions concerning this ruling, please contact * * * * * at * * * * *
Re: Request for Ruling: Retail Sales and Use Tax
Dear***
This will reply to your letter in which you request a ruling on the application of sales and use tax to retail sales of prepaid phone cards made by * * * * * (the "Taxpayer').
FACTS
The Taxpayer plans to sell a prepaid phone card that entitles the purchaser to one month of local telephone service. The local telephone service is provided by a third party. The Taxpayer asks if retail sales of the phone cards are subject to sales tax.
RULING
The department has previously ruled in Public Document 93-105 (4/19/93, copy enclosed) that transactions involving the retail sale of prepaid phone cards for long distance telephone service are not subject to sales tax. The "true object' of purchasing a phone card is to secure the telephone service.
The card serves as the medium for securing the service. The prepaid phone card in this case entitles the holder of the card to local telephone service. While the type of phone service may be different, the true object of the transaction is to obtain the phone service. Therefore, retail sales of phone cards for local telephone service are not subject to sales tax.
If you have any questions concerning this ruling, please contact * * * * * at * * * * *
Rulings of the Tax Commissioner