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TM_00570_AFC Prepaid and No-Contract Services Mapping Guidelines

Introduction

Non-postpaid telephone service is comprised of two primary offerings:

  1. Prepaid telephone service
  2. No-contract telephone service

The differences between these two services impact the taxation of each service.

Prepaid telephone services include long-distance telephone cards, prepaid wireless telephone service, and prepaid VoIP service. For these services, a specified amount of call time or data is paid in advance by the consumer and value is deducted as the consumer uses the services. No-contract telephone service is similar to traditional postpaid telephone service with the exceptions that the consumer is billed in advance for service and the service lacks a contract.

This guideline examines the differences between prepaid and no-contract calling arrangements and addresses the mapping of these offerings.

Prepaid Telephone Service

Although definitions of “prepaid calling arrangement” differ from state-to-state, the term is often defined as the right to exclusively purchase telecommunications services that are paid for in advance and enables the origination of calls using an access number or authorization code, whether manually or electronically dialed.

There are three types of telephony that most often fall within the definition of prepaid telephone service: 

  1. Long distance/telephone cards
  2. Prepaid wireless telephone service
  3. Prepaid VoIP service

Long Distance/Telephone Cards

According to the Federal Communications Commission (FCC), “Prepaid phone cards are purchased and used for a flat fee to make long distance telephone calls.” These cards provide the user with a specified amount of call time to certain destinations and the convenience of making domestic or international long distance calls from any phone or phone number, without using cash. As calls are made, the usable minutes automatically deduct from the card balance.

The following transaction/service pairs are used when addressing telephone card services.

Transaction Type

Service Type

Name

Description

1

1

Interstate/Toll

Interstate toll calls, monthly recurring charges, and other related service-type charges and features. (Call originates and terminates in different states.)

2

1

Intrastate/Toll

Intrastate toll call, monthly recurring charges, and other related service-type charges and features. (Call originates and terminates within the same state.)

10

32

Sales/Debit

Calculation of sales tax on a debit charge (prepaid charge) that is determined by state law to be a point of sale transaction.

Mapping Long Distance/Calling Cards

Prepaid telephone service is subject to the point-of-sale taxes associated with the purchase of service and the carrier taxes associated with the actual call. Mapping prepaid services is dependent upon the type of service provided and the means of distribution. Three mapping scenarios that apply to most service providers are detailed below.

Scenario 1: Communications Service Provider Distributing via Third Party Outlets

Company A provides prepaid long distance telephone cards distributed exclusively through third party outlets. The company is responsible for carrier taxes associated with usage. When mapping, the user must select either Interstate/Toll (1/1) or Intrastate/Toll (2/1) to return carrier taxes which are applicable with the standard telecom transactions. Company A should use one of the Debit API calls to ensure that only non-point-of-sale carrier taxes are returned.

Scenario 2: Third Party Seller

Company B sells prepaid long distance telephone cards as a third party seller. The company is responsible for point-of-sale taxes associated with the actual transaction. When mapping, the user must select Sales/Debit (10/32) to return the sales and other point-of-sales related taxes. Company B should use a standard API call.

Scenario 3: Direct Sellers

Company C provides prepaid long distance telephone cards and distributes these cards from their in- house company stores. The company is responsible for both point-of-sale and carrier taxes. When mapping, the user must select Sales/Debit (10/32) to return the sales and other point-of-sales related taxes. For this first transaction, Company C should use a standard API call.

The user must also select either Interstate/Toll (1/1) or Intrastate/Toll (2/1) to account for carrier taxes which are applicable with the standard telecom transactions. For this second transaction, Company C should use one of the Debit API calls to ensure that only non-point-of-sale carrier taxes are returned.

Prepaid Wireless Telephone Service

Section 315 of the Streamlined Sales and Use Tax Agreement defines prepaid wireless calling service as “a telecommunications service that provided the right to utilize mobile wireless service as well as other non- telecommunications services, including the download of digital products delivered electronically, content and ancillary services, which must be paid for in advance that is sold in predetermined units or dollars of which the number declines with use in a known amount.” This type of service is referred to as pay-as-you- go (PayGo) and charges users by the minute of talk.

The following transaction/service pairs are used when addressing PayGo services.

Transaction Type

Service Type

Name

Description

10

565

Sales/Debit-Wireless

The Point-of-Sale (POS) purchase of prepaid, pay-as-you-go wireless services sold by the phone carrier or a party controlled by the phone carrier.

10

643

Sales/ Debit-Wireless (Indirect Non-Carrier Sale)

The Point-of-Sale (POS) purchase of prepaid, pay-as-you-go wireless services sold by a party other than the phone carrier or a party controlled by the phone carrier.

13

10

Cellular/Usage

Cellular/wireless per-minute and/or per-use charges. Charges are in addition to any monthly access or roaming charges billed to a customer.

13

33

Cellular/Roaming Charge

Per-use, per-minute charges for cellular use outside of the designated service area of the providing carrier.

Mapping Prepaid Wireless Telephone Service

Prepaid wireless telephone service is subject to the point-of-sale taxes associated with the purchase of service and the carrier taxes associated with the actual call. Mapping prepaid services is dependent upon the type of service provided and the means of distribution. Three mapping scenarios that apply to most service providers are detailed below.

Scenario 1: Communications Service Provider Distributing via Third Party Outlets

Company A provides PayGo wireless telephone service that is distributed exclusively through third party outlets. The company is responsible for carrier taxes associated with usage. When mapping, the user must select Cellular/Usage (13/10) or Cellular/Roaming Charge (13/33) to return the carrier taxes addressed by standard telecom transactions. Company A should use one of the Debit API calls to ensure that only non-point-of-sales carrier taxes are returned.

Scenario 2: Third Party Sellers

Company B sells PayGo wireless telephone service as a third party seller. The company is responsible for the point-of-sale taxes associated with the actual transaction. When mapping, the user must select Sales/Debit-Wireless (Indirect Non-Carrier Sale) (10/643) to return the sales and other point-of-sale related taxes. Company B should use a standard API call.

Scenario 3: Direct Sellers

Company C sells PayGo wireless telephone service and provides this service from their in-house company stores. The company is responsible for both point-of-sale and carrier taxes. When mapping, the user must select Sales/Debit Wireless (10/565) to return the sales and other point-of-sale related taxes. For this first transaction, Company C should use a standard API call.

The user must also select Cellular/Usage (13/10) or Cellular/Roaming Charge (13/33) to account for carrier taxes which are handled with the standard telecom transactions. For this second transaction, Company C should use one of the Debit API calls to ensure that only non-point-of-sale carrier taxes are returned.

Prepaid VoIP Service

Voice over Internet Protocol (VoIP) allows users to complete telephone calls over a data network rather than the traditional public switched telephone network. Prepaid VoIP service allows consumers to purchase in advance internet telephony service as well as other non-telecommunications services that are sold in predetermined units or dollars of which the number declines with use in a known amount.

The following transaction/service pairs are used when addressing prepaid VoIP services.

Transaction Type

Service Type

Name

Description

10

32

Sales/Debit

Calculation of sales tax on a debit charge (prepaid charge) that is determined by state law to be a point of sale transaction.

19

6

VoIP/Access Charge

Basic monthly flat rate for VoIP service.

19

49

VoIP/Interstate Usage

Portion of MRC, or per-minute charges, attributable to calls that cross state lines but do not leave the United States. (Reserved for use when sending actual interstate and intrastate usage using the Actual CDR billing method).

19

50

VoIP/Intrastate Usage

Portion of MRC, or per-minute charges, attributable to calls that do not cross state lines. (Reserved for use when sending actual interstate and intrastate usage using the Actual CDR billing method).

19

51

VoIP/International Usage

Portion of MRC, or per-minute charges, attributable to calls that originate inside the United States and terminate outside the United States.

20

6

VoIPA/Access Charge

Basic monthly flat rate for VoIP service.

20

49

VoIPA/Interstate Usage

Portion of MRC, or per-minute charges, attributable to calls that cross state lines but do not leave the United States. (Reserved for use when sending actual interstate and intrastate usage using the Actual CDR billing method).

20

50

VoIPA/Intrastate Usage

Portion of MRC, or per-minute charges, attributable to calls that do not cross state lines. (Reserved for use when sending actual interstate and intrastate usage using the Actual CDR billing method).

20

51

VoIPA/International Usage

Portion of MRC, or per-minute charges, attributable to calls that originate inside the United States and terminate outside the United States.

59

6

VoIP-Nomadic/Access Charge

Basic monthly flat rate for VoIP service.

59

49

VoIP-Nomadic/Interstate Usage

Portion of MRC, or per-minute charges, attributable to calls that cross state lines but do not leave the United States. (Reserved for use when sending actual interstate and intrastate usage using the Actual CDR billing method).

59

50

VoIP-Nomadic/Intrastate Usage

Portion of MRC, or per-minute charges, attributable to calls that do not cross state lines. (Reserved for use when sending actual interstate and intrastate usage using the Actual CDR billing method).

59

51

VoIP-Nomadic/International Usage

Portion of MRC, or per-minute charges, attributable to calls that originate inside the United States and terminate outside the United States.

65

6

Non-Interconnected VoIP/Access Charge

Basic monthly flat rate for non-interconnected VoIP service.

65

49

Non-Interconnected VoIP/Interstate Usage

Portion of MRC, or per-minute charges, attributable to non- interconnected VoIP calls that cross state lines but do not leave the United States. (Reserved for use when sending actual interstate and intrastate usage using the Actual CDR billing method).

65

50

Non-Interconnected VoIP/Intrastate Usage

Portion of MRC, or per-minute charges, attributable to non- interconnected VoIP calls that do not cross state lines. (Reserved for use when sending actual interstate and intrastate usage using the Actual CDR billing method).

65

51

Non-Interconnected VoIP/International Usage

Portion of MRC, or per-minute charges, attributable to non- interconnected VoIP calls that originate inside the United States and terminate outside the United States.

Mapping Prepaid VoIP Services

Prepaid VoIP service is subject to the point-of-sale taxes associated with the purchase of service and the carrier taxes associated with the actual call. Mapping prepaid VoIP services is dependent upon the type of service provided and the means of distribution. Three mapping scenarios that apply to most prepaid VoIP service providers are detailed below.

Scenario 1: Communications Service Provider Distributing via Third Party Outlets

Company A provides prepaid VoIP services distributed exclusively through third party outlets. The company is responsible for carrier taxes associated with usage. When mapping, the user must select one of the VoIP-related t/s pairs to return carrier taxes which are applicable with the standard VoIP transactions. Company A should use one of the Debit API calls to ensure that only non-point-of-sale carrier taxes are returned.

Scenario 2: Third Party Seller

Company B sells prepaid VoIP services as a third party seller. The company is responsible for point-of-sale taxes associated with the actual transaction. When mapping, the user must select Sales/Debit (10/32) to return the sales and other point-of-sales related taxes. Company B should use a standard API call.

Scenario 3: Direct Sellers

Company C provides prepaid VoIP services and sells these services from their in-house company stores. The company is responsible for both point-of-sale and carrier taxes. When mapping, the user must select Sales/Debit (10/32) to return the sales and other point-of-sales related taxes. For this first transaction, Company C should use a standard API call.

The user must also select one of the VoIP-related t/s pairs to account for carrier taxes which are applicable with the standard telecom transactions. For this second transaction, Company C should use one of the Debit API calls to ensure that only non-point-of-sale carrier taxes are returned.

No-Contract Telephone Service

No-contract telephone service plans are similar to postpaid monthly plans with the exception that the service provider bills users in advance for usage. No-contract services do not include a carrier agreement (contract) specifying the term of commitment and often requires the customer to purchase the telephone upfront.

Monthly No-Contract

Monthly no-contract service plans resemble postpaid monthly plans whereby the service provider charges the consumer a set amount each month for a predetermined allotment of minutes for talk and data.

The following transaction/service pairs are used when addressing monthly no-contract service offerings.

Transaction Type

Service Type

Name

Description

13

591

Cellular/Access Charge-No Contract

Basic monthly flat rate charge for cellular/wireless service that is sold without a contract.

13

592

Cellular/Access Number-No Contract

For use when carrier is passing actual traffic and not using safe harbor percentages. Designates the number of access numbers assigned to a wireless account that is sold without a contract.

Unlimited No-Contract

Unlimited no-contract service plans resemble postpaid unlimited plans whereby the service provider charges the consumer a set price for an unlimited amount of minutes for talk and data.

The following transaction/service pairs are used when addressing monthly no-contract service offerings.

Transaction Type

Service Type

Name

Description

13

591

Cellular/Access Charge-No Contract

Basic monthly flat rate charge for cellular/wireless service that is sold without a contract.

13

592

Cellular/Access Number-No Contract

For use when carrier is passing actual traffic and not using safe harbor percentages. Designates the number of access numbers assigned to a wireless account that is sold without a contract.

Mapping No-Contract Telephone Service

Mapping no-contract telephone service is the same for monthly and unlimited service plans. Unlike prepaid communications services, the taxation of no-contract service focuses exclusively on carrier charges. There is no separate point-of-sale transaction.

Scenario 1: No-Contract Wireless Service Provider

Company A provides no-contract wireless service. The company is responsible for carrier taxes associated with the usage. When mapping, the user must select either Cellular/Access Charge-No Contract (13/591) or Cellular/Access Number-No Contract (13/592). Either of these two t/s pairs will return the sales and other point-of-sale related taxes. If the service includes additional features, use standard cellular transaction/service pairs. Company A should use a standard API call.

Additional Services

For all additional services, the user should use a standard API call.

Data

Clients who offer data can use Internet/Access Charge (5/6) as an appropriate mapping.

Transaction Type

Service Type

Description

Primary and other uses

5

6

Internet/Access Charge

Charges for internet access services, MRC, and other related service type charges and features. (Both per- minute and flat fee amounts for internet access services will be mapped to this transaction/service type.)

Other Services

Additional mapping options available for use include the following:

Transaction Type

Service Type

Description

Primary and other uses

13

30

Cellular/Feature Charge

Charges and fees for additional feature charges of Cellular services. (Includes services such as call waiting, caller ID, call blocking, call forwarding, etc.)

13

51

Cellular/International Usage

Portion of MRC, or per-minute charges, attributable to calls that originate inside the United States and terminate outside the United States.

13

572

Cellular/Digital Download

The purchase of goods such as ringtones downloaded to a cell phone.

13

577

Cellular/Enhanced Features

Charges and fees for additional feature charges of wireless services which are separate from voice transmission related features as defined by the FCC. (Includes services such as voicemail, interactive voice response, audio text information services, and protocol processing.)

13

610

Cellular/Early Termination Fees

A fee charged to cellular customers for early termination of services.

13

622

Cellular/Text Message

A fee charged to cellular customers for Text Messaging services.

Additional API Documentation

A complete list of API Calls is included in the Avatax for Communications Telecom User Manual which is updated monthly with the current AFC release documentation.

Populating Data

The data required for accurate taxation varies from service type to service type. The following chart lists which data to populate for each service type.

Transaction Type

Service Type

Description

Required Input Data

1

1

Interstate/Toll

Amount, Minutes

2

1

Intrastate/Toll

Amount, Minutes

10

32

Sales/Debit

Amount

10

565

Sales/Debit Wireless

Amount

10

643

Sales/Debit Wireless (Indirect Non-Carrier Sale)

Amount

13

10

Cellular/Usage

Amount, Minutes

13

30

Cellular/Local Feature Charges

Amount

13

51

Cellular/International Usage

Amount, Minutes

13

572

Cellular/Digital Download

Amount

13

577

Cellular/Enhanced Features

Amount

13

591

Cellular/Access Charge-No Contract

Amount, Minutes

13

592

Cellular/Access Number-No Contract

Lines

13

610

Cellular/Early Termination Fees

Amount

13

622

Cellular/Text Message

Amount

19

6

VoIP/Access Charge

Amount, Minutes

19

49

VoIP/Interstate Usage

Amount, Minutes

19

50

VoIP/Intrastate Usage

Amount, Minutes

19

51

VoIP/International Usage

Amount, Minutes

20

6

VoIPA/Access Charge

Amount, Minutes

20

49

VoIPA/Interstate Usage

Amount, Minutes

20

50

VoIPA/Intrastate Usage

Amount, Minutes

20

51

VoIPA/International Usage

Amount, Minutes

59

6

VoIP-Nomadic/Access Charge

Amount, Minutes

59

49

VoIP-Nomadic/Interstate Usage

Amount, Minutes

59

50

VoIP-Nomadic/Intrastate Usage

Amount, Minutes

59

51

VoIP-Nomadic/International Usage

Amount, Minutes

65

6

Non-Interconnected VoIP/Access Charge

Amount, Minutes

65

49

Non-Interconnected VoIP/Interstate Usage

Amount, Minutes

65

50

Non-Interconnected VoIP/Intrastate Usage

Amount, Minutes

65

51

Non-Interconnected VoIP/International Usage

Amount, Minutes

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