Consumer Guide to the Prepaid Mobile Telephony Services Surcharge
Beginning January 1, 2016, sellers of prepaid wireless services or products will be required to collect from their customers the Prepaid Mobile Telephony Services (MTS) Surcharge.
What is subject to the surcharge?
The surcharge generally applies to amounts charged for:
- Prepaid airtime cards, minutes, plans, and “eCards”
- Prepaid refill, top-off cards, and cards compatible with pay-as-you-go cell phones
- Prepaid mobile data or any other services when sold with any of the above
- Any product or service (except a cell phone), when sold with prepaid MTS for a single non-itemized price.
- A cell phone sold with prepaid MTS for a single, non-itemized price, unless only a minimal amount of prepaid MTS is transferred ($5 or less or 10 minutes or less).
How is the rate calculated?
The rate is calculated by adding:
- The prepaid 911 surcharge rate, determined by the Office of Emergency Services.
- The California Public Utilities Commission's reimbursement fee and telecommunications universal services surcharges.
- Local charges, if applicable.
Since rates vary throughout California, what is the correct rate to charge?
Businesses that sell to a consumer in person from a physical location in California should charge and collect the rate for the city and/or county where the business is located.
If the transaction does not occur in person at a California business location, the customer's location and applicable surcharge rate should be determined in descending order, as follows:
- Where the item is shipped to, or picked up, by a customer.
- The customer's address, according to the seller's records.
- A billing or other address provided by the customer during the prepaid wireless service transaction.
- The mobile phone number associated with a location in California.
Visit the Prepaid MTS Rates Web page for more information.
How much money is the surcharge expected to collect?
The prepaid MTS surcharge is estimated to generate about $5 million annually in new state surcharge revenue, and approximately $36 million annually in new local surcharge revenue. Together, the state and local charges could annually generate an additional $41 million.
See the BOE's analysis of AB 1717 for more information.
Where does the money go?
The surcharge helps pay for 9-1-1 emergency services and various programs that promote access to our telecommunications system. The portion of the surcharge imposed by local governments may fund their local 9-1-1 emergency services or pay for other local services, such as road maintenance, parks, and more.
How does the prepaid MTS surcharge compare to the taxes and fees on postpaid (contract) wireless services?
The prepaid MTS surcharge funds the same programs funded by the taxes and fees paid by postpaid, or contract, cell phone users.
How are sellers affected?
Sellers of prepaid wireless services must do the following:
- Register with the BOE as a prepaid MTS seller.
- Know the correct prepaid MTS surcharge rate and any applicable local rates.
- Charge and collect the surcharge from their customers.
- Separately state the surcharge amount on the invoice or receipt issued to customers.
- Electronically file prepaid MTS returns and pay the amounts collected to the BOE.
How do sellers register?
Retailers that sell prepaid wireless services are required to register for a prepaid MTS account with the BOE beginning December 21, 2015. This account is separate from a seller's permit.
Telecommunication service suppliers, regulated by the California Public Utilities Commission, are known as a “direct seller” of prepaid wireless services per this legislation. They must register as a service supplier or direct seller of telephone or prepaid wireless services.
How are sellers operating outside of California affected by this law?
California law states that all businesses (even those operating outside California) selling prepaid wireless services in a retail transaction that occurs in California must charge the appropriate surcharge rate and remit it to the BOE.
How long will this surcharge last?
Under current law, the surcharge will be owed on purchases made between January 1, 2016 and December 31, 2019.
For more details about the Prepaid MTS surcharge:
To speak to a representative, call the BOE Customer Service Center at 1-800-400-7115 (TTY:711) Monday through Friday, 8:00 a.m. to 5:00 p.m. PST, excluding state holidays.