Online Filing Instructions – Prepaid Mobile Telephony Services (MTS)

Sellers of prepaid wireless products/services are persons that sell prepaid mobile telephony products and services (MTS) to a consumer in a retail transaction.

Sellers making retail sales of prepaid MTS in California are required to collect, report, and pay the 911 surcharge, 988 surcharge, and any applicable local charges. The surcharges and local charges are collected and reported in a different manner. Please see the sections below for specific information to file and pay them each correctly.

The surcharges and local charges generally apply to amounts charged for:

• Prepaid wireless airtime cards.
• Prepaid wireless cards compatible with pay-as-you-go cell phones.
• Prepaid wireless minutes.
• Prepaid wireless plans.
• Prepaid wireless refill or top-off cards.
• Prepaid wireless 'e-Cards.'
• Prepaid mobile data or any other services when sold with any of the above. If local charges apply, they must be collected on the total combined selling price unless the seller can identify the price of the mobile data services and other services from its books and records.
• Any product (except a cell phone) or service when sold with prepaid MTS for a single price. If local charges apply, they must be collected on the total combined selling price unless the seller can identify the price of the product or service from its books and records.
• A cell phone sold with prepaid MTS for a single non-itemized price, unless only a minimal amount of prepaid MTS is transferred. A minimal amount of prepaid MTS is $5 or less, or 10 minutes or less.

The amount of the surcharges and local charges (if applicable) must be separately stated on an invoice, receipt, or other similar document provided to the prepaid consumer of MTS by the seller, or otherwise disclosed electronically to the prepaid consumer, at the time of the retail transaction. You may combine the 911 and 988 surcharges into a single-line item on your billings, sales invoice, or receipts. The combined surcharge must be labeled as the "911/988 surcharge."

The surcharges and local charge rate information is available on our 911 Surcharge, 988 Surcharge, and Local Charges Rates webpage.

Our Tax Guide for Sellers of Prepaid Mobile Telephony Services (MTS) and Telecommunication Service Suppliers also provides additional helpful information.

Effective January 1, 2020, purchases of prepaid mobile telephone services (MTS) are subject to the 911 surcharge on each retail transaction of prepaid MTS occurring in California, regardless of the transaction amount. In addition, effective January 1, 2023, retail purchasers of prepaid MTS are also subject to the 988 surcharge.

Enter the Total Number of California Retail Transactions (number of sales receipts or invoices subject to the 911 and 988 surcharges).

Sellers of prepaid MTS are required to collect, report, and pay local charges as a percentage of the selling price of prepaid MTS sold at retail, at the time of the retail transaction.

Certain prepaid MTS sellers (other than a service supplier) with less than $15,000 of sales of prepaid MTS in the previous calendar year are not required to charge and collect the local charges from their customers. If you have collected local charges and are not required to, you must still report and pay the local charges.

If you are a seller of prepaid MTS, you are required to:

• Register with us as a prepaid MTS seller (this is a separate account from your seller's permit account).
• Know the correct prepaid MTS local charges rates.
• Charge and collect the correct prepaid MTS local charge rate from your customers who purchase prepaid wireless cards/service.
• Separately state the local charges, on the invoice, receipt, or other document provided to your customer.
• Electronically file your prepaid MTS returns and pay the amounts due to us.

Enter the total amount of prepaid MTS sales (dollar amount) for the quarter, including those not in a local area, and sales subject to a deduction. You will remove any sales subject to a deduction on the Deductions page of the return.

Sales to Other Retailers for Resale

Enter your total prepaid MTS sales to other sellers who submitted resale certificates to you, for their purchases.

In general, you can accept resale certificates from other sellers who are buying prepaid MTS to resell in the regular course of business. If you obtain a timely and valid resale certificate, taken in good faith, local charges will not apply to your sale.

Sales in Interstate or Foreign Commerce (Delivered Outside California)

Enter sales that are exempt from local charges because the sale occurred in interstate or foreign commerce.

For a sale to be exempt, the sales agreement or contract must require the property to be shipped to an out-of-state point, and you must either:

• Use your company vehicle (or other conveyance operated by your business) to ship the property to that location, or
• Deliver the property to a carrier, customs broker, or forwarding agent for shipment outside this state.

Sales of prepaid MTS sold online or remotely to a customer without a known California address may also be exempt when:

• Your records show that the customer's address is located outside California, or
• Your customer provides you an address outside California during the sales transaction (for example, a billing address).

Local Charges (if any) Included in Total Prepaid MTS Sales

Enter an amount on this line only if the amount you reported as Total Prepaid MTS Sales included local charges. Enter only the local charge amount that was included in Total Prepaid MTS Sales.

Bad Debt Losses

Enter bad debt losses to claim a deduction for local charges. You will also be required to enter the total number of retail transactions (sales receipts and invoices) subject to bad debt losses to claim a deduction for the 911 surcharge and 988 surcharge.

If you have reported the 911 surcharge, 988 surcharge, or local charges and have been unable to collect payment for the sale, you may take a deduction for the surcharge portion of the bad debt.

Bad debts may take the form of:

• Checks that have been returned to you unpaid by the purchaser's bank which you have determined to be uncollectible, or
• Amounts from charge or credit sales that you have determined to be uncollectible.

This deduction should be taken on the return filed for the period in which the amount was found worthless and charged off for income tax purposes or, if the seller is not required to file income tax returns, charged off in accordance with generally accepted accounting principles.

Enter only the amount of the sale before the 911 surcharge, 988 surcharge, or local charges. For example, if you sold prepaid MTS products/services for $15 and were unable to collect any amount for the sale, you would claim $15 as a deduction on the local charges. You will also report the number of retail transactions subject to bad debt losses to deduct from the amount due for the 911 surcharge or 988 surcharge.

If you claim a bad debt deduction and later recover a payment, you must report the payment on the return filed for the period in which the recovery payment was made.

Under the Local Prepaid Mobile Telephony Services Collection Act (RTC sections 42100-42111), cities and/or counties (local jurisdictions) may have an ordinance that applies local charges to prepaid MTS. These local revenue charges are imposed on consumers of prepaid MTS and collected by the retailer. Retailers are required to know the correct local charges rates for the areas they sell in.

There are some cities and/or counties (local jurisdictions) that do not have local charges. These sales will be reported in the Prepaid MTS purchases not subject to local charges field.

Seller Reimbursement

A seller of prepaid MTS may retain 2 percent of the local charges as reimbursement for collecting. This amount is claimed on your prepaid MTS return and reduces your overall liability.

The 2 percent reimbursement will display on the Summary page of the return, under the Seller Reimbursement section. The 2 percent seller reimbursement will be based on local charges collected.

Excess surcharges or local charges collected can occur in the following situations:

• When 911 and 988 surcharges or local charges are computed on a transaction which is not subject to 911 and 988 surcharges or local charges;
• When 911 and 988 surcharges or local charges are computed on an amount in excess of the amount subject to 911 and 988 surcharges or local charges;
• When 911 and 988 surcharges or local charges are computed using a higher rate than the rate imposed by law and;
• When mathematical or clerical errors result in an overstatement of the 911 and 988 surcharges or local charges on a billing.

Total Surcharges and Local Charges Due. The system will automatically calculate this field.

Excess Surcharges and Local Charges Collected. If you have collected more 911 surcharges, 988 surcharges, or local charges greater than what is due for this reporting period, enter the amount of excess surcharges and/or local charges collected.

Total. The system will automatically calculate this field.