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California's New Tax on Prepaid Airtime Set At 9.260% to 18.260%

The California Board of Equalization has published its official list of rates for California's new "Mobile Telephony Services" (MTS) tax on prepaid airtime which goes into effect January 1, 2016. The tax is composed of a state portion of 9.260 and a local tax which can be as high as 9%. That means that the total tax will be between 9.260% and 18.260% depending on your city, town or county.

The tax is charged at the point of sale. All brick and mortar retail businesses are required collect it at the rate that's in effect in the locality where the sale occurs. Online business, including the national mobile operators, Walmart.com and TracFone, that operate in California are required to collect the tax from California residents based on their billing address or phone number.

In the majority of localities, including most of the San Francisco Bay Area, the rate is 9.260%. Los Angeles residents aren't so lucky with many LA County cities charging the maximum of 18.260% including Culver City, Hollywood, Santa Monica, Venice and the City of Los Angeles. Los Angelites looking to save on airtime might want to buy their airtime cards in West Hollywood, Signal Hill, City of Industry, Gardena or a number of other LA County cities where the tax rate is "only" 9.260%.

Although I'm sure this post will get lots of comments blaming the new tax on greedy bureaucrats, the real culprits are greedy mobile operators and their influence on legislators. The taxes that make up the new MTS Surcharge are not new, they have been around for years but until now they were collected directly from the mobile operators as business taxes. The operator's CTIA trade and lobbying body sponsored and pushed AB-1717, the bill that authorized moving the taxes from the operators to end users. The change means a massive windfall for the operators at the expensive of consumers. It would be nice if the operators passed at least some of that savings on to customers but I'd be surprised it that happens.

As far as I know, MVNOs that don't have offices in California like Airvoice and non-California prepaid airtime vendors like Callingmart.com and WirelessRefill.com are not subject to California tax rules and won't be collecting it.

Image: Alec - Mr. Money Bags by aisletwentytwo Creative Commons Creative Commons Attribution 2.0 Generic License

Related post: California To Tax Prepaid Airtime Starting Jan 1st

41 comments:

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  1. Callingmart...here I come.

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    1. Or maybe "49% other states to choose from, here I come"

      A state having an excessively greedy government sector has consequences..

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    2. To Everyone: Using "Anonymous" is chicken yellow. Use a name so others may reply to you

      This is another example of two things:
      1. The fallacy of "states rights" where corporations and ultra conservatives lobby and bribe politicians to impose breaks on corporations such as this new increase of cost to California prepaid phone users: The corporations lobbied (yes that means bribed and paid for the CA politicians to pass this new law).
      If the USA had one set of laws and not so much dependent on "states rights" open to the biggest corporation able to bribe their sweet special interest deal the USA would be better off. Starting to feel screwed huh?

      2. The power of corporations. The corporations got together (the CTIA is their own corporate union dont you think) to get passed their own benefit to now be able to KEEP the fees they used to pass to the states and local govts.
      The corporations now get bonus $$$ from you all who pay it. Local govts and the state keep less now. Feel screwed yet?

      Yet so many ignorant users will blame the "politicians" when in reality the poor working slob was blind sided and never got a chance to give an opinion on this new change in CA law that allows the corporations to keep what they used to give to the states to further the operation of things like roads, bridges, street lights, schools, beaches, sewer lines, sewage treatment plants, clean water supplies, public golf courses, police and fire service, rodent control, EMT rescues when you tip over in old age and other needed services YOU receive or your family receives through your taxes

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  2. Yey... Another stupid CA TAX. Will use more Calling-mart or other as such...

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  3. ". . . its official list of rates for California's new "Mobile Telephony Services" (MTS) tax on prepaid airtime which goes into effect January 1, 2015." . . . Typo, Dennis. I believe you meant that the California tax goes into effect on January 1, 2016.

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  4. So beuracrats aren't greedy?!

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  5. The greedy bureaucrats are bought and paid for by the mobile operators. Same difference. All we can hope for is the black market of prepaid cards to start.

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  6. A very regressive tax IMO. People with low incomes who use prepaid services and who are very likely to buy refills at full price at local stores will be most affected.
    Are junk fees for postpaid accounts in CA that high? If not, even more unfair.

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    1. When my wife was on Sprint postpaid in California taxes were about 30%. That was 8 years ago so they are probably higher now.

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    2. When I was on Verizon prepaid I was also paying astronomical taxes. I'm just glad prepaid has made such big strides in progress. This tax is inconvenient but it's still better than what I had. With 60 bucks I can get 10 gigs of data with Ptel.
      I was getting 2 with Verizon and paying 100 dollars a month...
      Thank God for prepaid, just like others I will buy from out of state online sellers who won't tax.

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    3. My daughter in VA showed me her Sprint postpaid bill - Framily Plan. She pays 12% in taxes.

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  7. I am very pleased to see CA subscribers pay their full share of cellphone service taxes. Since I live in a low-tax state, my purchases won't help subsidize most CA prepaid subscribers (when nation-wide rates are determined). I will save even more when competition drives national prices lower. CA residents can also see just how much their local politicians are hitting them, and do something about it if they really care. "Transparency."

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    1. There's a logical disconnect here. Just because another state steals less from its citizens than your state doesn't mean that your state is subsidizing the other state.

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    2. Yeah, someone who is paying taxes, even a very low amount, is not being subsidized. Subsidization would require that they be paid money, not pay it out.

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    3. Say a carrier collects and pays high taxes for one state, and low taxes for another. For business reasons, they charge the same price nationwide. Say the national, competitive price is $30, including taxes. This means that people in the low tax state are paying extra, as a part of the $30 price, to subsidize the higher taxes the carrier paid to the government in the high tax states. People in the high tax states get a break by only paying $30, the national average price. By charging everyone the tax their state requires, no one pays too much or too little. And people can easily see high taxes charged, and do something about it. It's not just states, either. My relative's county adds $3.50/line to the state tax. The county next door charges nothing extra.

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    4. I doubt a single penny of yours has ever gone to subsidize California; we Californians have always been givers to the rest of our fellow citizens. Check out the following article in The Atlantic: http://www.theatlantic.com/business/archive/2014/05/which-states-are-givers-and-which-are-takers/361668/
      So next time you enjoy your snap benefits say a small prayer for us Californians.

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    5. "This means that people in the low tax state are paying extra, as a part of the $30 price, to subsidize the higher taxes the carrier paid to the government in the high tax states."

      Exactly right. If everyone pays the same price for a specific monthly plan, regardless where they live, then the customers in low tax jurisdictions subsidize the customers in high tax jurisdictions.

      A similar situation exists with flat rate shipping for online sales. The actual shipping costs paid by the company will differ based on the location of the customer. That means customers who live near the seller subsidize the shipping expense for customers who live on the other side of the country.

      The solution is to determine if the all in price you're paying is a good deal for what you receive. If so, stop worrying about other people. If not, stop over paying. LOL

      Delete
  8. Btw, monthly rates will NOT go up for California Cricket users since their rate plans include all taxes and fees.

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  9. So is this on top of what we already pay in taxes? For example I am now paying close to 21% when I purchase a Top Up from Ring Plus, so will I be charged an additional 9% to 18% on top of that?

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    1. Unlike most prepaid operators, RingPlus passes its telecom business taxes on to users. The NTS replaces the following telecom taxes:
      Prepaid 911 surcharge
      California Public Utilities Commission's reimbursement fee and telecommunications universal services surcharges.
      Local charges
      So in less the Board of Equalization snuck in a hidden tax increase, the taxes RingPlus charges should not change.

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  10. I'm not against taxation. After all, adequately payed public officials are the difference between California, with all the great public facilities that people too often take for granted, and an almost failed state like Mexico, where corruption, bribery and lawlessness have made life miserable for a long-suffering and hard-working people. So, by all means, tax TO THE EXTENT ABSOLUTELY NECESSARY, but no more.

    However, it seems to me that cell phone connectivity, like food, should be untaxed - a common human requirement. Tax the luxuries, if we must, but not the basic ability to communicate in a modern society.

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    1. California is famous for grossly overpaid public officials, not "adequately paid". The differences with Mexico that you mention have nothing to do with relative pay, but with the moral cloth the bureaucrats/leaders/etc are cut from.

      http://www.bloomberg.com/news/articles/2010-07-20/california-official-s-800-000-salary-in-city-of-38-000-triggers-protests

      It's the golden rule, dude: those who make the rules get the gold. There's really no reason to pay any public "servant" more than 100K. That's already in the upper income level. Anything more, and it becomes clear that the public serves them not the other way around.

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    2. "Tax the luxuries, if we must, but not the basic ability to communicate in a modern society."

      That can and will backfire. The Clinton-era luxury tax is a perfect example. During that time. they attempted to appeal to greedy/jealous voters by "going after the rich". They taxed yachts and the like.

      The result? The rich didn't buy yachts, as to avoid being robbed by the government even more for doing so. And Joe Sixpack working in boat-building factories got fired.

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  11. So if I go into Cricket to pay my bill I don't have to pay taxes ? Will I be charged taxes if I buy a prepaid card at a retailer ?

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    1. It would be nice to see something from cricket directly about not paying the tax. I wouldn't believe it from an unofficial source.

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  12. I got this from cricket.
    "Cricket here. The California Public Utilities Commission requires us to inform you that the Prepaid Mobile Telephony Surcharge will take effect on 1/1/16. NO WORRIES, YOUR MONTHLY PAYMENT WILL NOT INCREASE BECAUSE CRICKET RATE PLANS INCLUDE ALL TAXES AND FEES."

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  13. I was on BYO that was merged over to Budget and they sent me a text the other day saying coming the 1st they will be adding the MTS to your top up.

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  14. These new, CA taxes are regressive; they will affect poor people who pay cash locally much more than wealthier citizens who use credit cards and PayPal and can buy online. Once again, CA politicians screw up. Expect a thriving black market on PINs and cards. Untaxed. Surrounding states will benefit from this.

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    1. They voted for big government so it's only fair they pay their fair share.

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    2. Poor people don't pay phone taxes. They get lifeline phones provided courtesy of the phone taxes the rest of us pay.

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    3. Many working poor make too much to qualify for Lifeline and similar programs yet to little to live on. This is especially true in places like the San Francisco Bay Area and Greater Los Angeles where part-time and minimum wage jobs and plentiful and housing costs are astronomical.

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  15. I hadn't heard of "Los Angelites". I usually hear it as Angelinos / Angelenos:
    http://www.thefreedictionary.com/Angelino
    https://en.wikipedia.org/wiki/Angelino

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  16. I'm moving back to Nevada or Oregon

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  17. So Sprint is passing it along to their prepaid customers to pay, and Cricket is not. What about the other prepaid services? Can anyone chime in about MetroPCS, T-Mobile, AT&T, Tracfone, Verizon, etc?

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    1. Cricket, MetroPCS and Pure TalkUSA are the only operators I'm aware of that absorb point of sale taxes like the new California MTS.

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    2. When we used them, AirVoice, a provider local to me, collected state sales tax. Nothing else.

      Dale

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    3. That's what most prepaid operators, including AT&T GoPhone, Boost and T-Mobile Prepaid do. However because they have facilities in every state that they offer service in, they have to collect sales tax everywhere there is one.

      In California, prepaid airtime is exempt from sales tax and Boost, GoPhone and T-Mobile Prepaid currently don't charge any taxes in California. The new CA MTS is a point of sale tax, like sales tax is, and they will collect it on auto-pays and direct to carrier one time payments.

      MetroPCS and Cricket have a long standing policy of paying their customers' taxes, including sales tax, for them. Cricket and MetroPCS have announced that they will pay the MTS for their customers as well.

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    4. AirVoice only collects sales tax in Michigan.

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  18. Check your bill carefully. I use Straight Talk and was charged 18.26%, however, I live in West Hollywood and the rate for WeHo is 9.26% not 18.26%.

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  19. I just bought my prepaid card from Walmart the tax is ridiculous $17.89. The whole purpose of having a prepaid phone that It was cheaper now I'm having second thoughts.

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  20. Try callingmart if they sell refills for your carrier/MVNO.

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