Although operators are allowed to pass local, state and federal telephony taxes and fees on to end users, most prepaid operators don't. As a result most California customers who purchase prepaid airtime cards from a local retailer or pay their mobile operator directly on-line using a debit or credit card do not pay any taxes.
Tax-free prepaid in California is going to end Jan 1, 2016. That's when a new law called AB-1717 goes into effect. It will shift California's state and local taxes on prepaid mobile service from being business taxes imposed on mobile operators to a new point of sale tax on end users. AB-1717 was sponsored by the CTIA, the mobile operators trade and lobby group, and seems to give operators a giant windfall, although the new law's proponents say it will give state and local governments a modest increase in tax revenue.
The new MTS tax is supposed to be collected by anyone selling prepaid airtime in California and to anyone with a California billing address or a California phone number. Customers can probably avoid paying the tax by buying airtime from an out of state online vendor like Callingmart. However, like the state sales tax on online purchases, California residents are supposed to declare and pay the MTS tax on their state tax returns.
Mobile operators are starting to send California prepaid customers texts notifying them of the new MTS tax. I just got one from T-Mobile directing me to mtsnotice.com, which seems to be a site set up by the operators or the CTIA for the sole purpose of notifying customers of the new tax.
Sources: mtsnotice.com, California Board of Equalization (1), (2), (3)
Image:"Seal of California" original uploader was Zscout370 at en.wikipedia - The base image came from  and is PD due to age.. Licensed under CC BY-SA 3.0 via Commons.