Arizona Legislature establishes New Prepaid Wireless 911 Excise Tax
Tuesday, April 10th, 2012
Arizona Governor Jan Brewer recently signed House Bill (HB 2094) into law creating a new prepaid wireless 911 excise tax. Ariz. Sess. Laws ch. 198 (2012). The act, which takes effect on or after December 31, 2013, imposes an excise tax amounting to eight-tenths of one percent (0.8%) of the gross income derived from the retail sale of prepaid wireless telecommunications service.
In 1983 Arizona established the Emergency Telecommunication Services Revolving Fund (TSR Fund) in order to assist Arizona localities with creating, implementing, and operating emergency telecommunications services. Accordingly, Arizona enacted a tax on telecommunications to finance the TSR Fund activities. See Ariz. Rev. Stat. sec. 42-5252. This tax does not currently apply to any prepaid wireless service; instead, it is imposed only on accounts for home phones and cell phones billed on a monthly basis. The new prepaid wireless 911 excise tax enacted by HB 2094 rectifies this discrepancy by imposing a separate but corresponding tax on sales of prepaid wireless telecommunications services that provide access to the 911 system.
The seller will be liable for remitting this tax, but the new law allows the seller to separately state the amount of tax on the invoice provided to the consumer.
The new tax is based on income from retail sales, so what constitutes a retail sale of prepaid wireless telecommunications services is a crucial element of understanding the new tax. According to HB 2094, a retail sale of prepaid wireless telecommunications services occurs in any of the following circumstances:
- A retail sale is completed in person at a business location in Arizona.
- The product is delivered to the consumer at an address in Arizona.
- The seller's business records indicate that the consumer's address is located in Arizona and those records are not made or kept in bad faith.
- The consumer gives the seller an Arizona address, including a payment instrument, and the address is not given in bad faith.
- The wireless telephone number is associated with a location in Arizona.
HB 2094 also provides that this new prepaid wireless 911 excise tax will be the only funding obligation for prepaid wireless telecommunications services in the state. Additionally, the seller of prepaid telecommunications may retain 3% of the amount of tax collected before remitting the remaining amount collected to the Arizona Department of Revenue.
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