Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2015
Sales and Use Tax Annotations
515.0000 SERVICE ENTERPRISES GENERALLY—Regulation 1501
(e) MISCELLANEOUS ACTIVITIES
515.1339 Telephone Debit Cards—Resale. A person who transfers a debit card with telephone services does not make a "sale" of tangible personal property for the purposes of the Sales and Use Tax Law. A debit card, as used here, is a symbol or "token" of the telephone service provided. A person who transfers a debit card associated with the telephone time makes a nontaxable transfer because the "true object of the transfer of the card is the future telephone service." (See Annotation 515.1338 (6/16/93).) The application of tax is the same whether the person to whom the transfer is made will use the telephone service or will, in time, transfer the card to another person.
However, when debit cards, or material from which they are made, are purchased in a sales transaction that does not also include the telephone time associated with the debit cards, the "true object of transaction" is the purchase of tangible personal property for use by the purchaser, i.e., the purchase or manufacture and subsequent transfer of the debit card as part of a nontaxable transfer of telephone time. This purchaser is the consumer of the debit cards (or the raw materials from which they are made). Therefore, a service provider in this state may not issue a resale certificate to purchase materials which the service provider will use to make debit cards that it will transfer as a representation of telephone service purchased. Further, if the service provider purchases the material from an out-of-state vendor to make the cards, the service provider is responsible for payment of the use tax on that use. 7/28/95.