NEW YORK-The California State Board of Equalization decided April 30 to postpone voting until at least late June on a permanent extension of the state sales taxes to wireless devices sold in a bundle with services.
The proposal would require retailers to pay sales, or gross receipts, taxes on the unbundled sales price of a pager, cellular phone or other wireless device sold in a package that includes service activation or a contract with a specific telecommunications provider.
The tax would be due on the actual retail price of the wireless device if sold individually, whether or not that amount is itemized separately from telecommunications services on the customer invoice.
The proposed regulation would exempt from these taxes one-time fees for activating a wireless telecommunications device when that charge is itemized and the device doesn’t require electronic or physical modification to work within a particular network.
Regardless of the point of sale, a carrier would be responsible for paying the gross receipts tax on the wireless device if a condition of its purchase is that the buyer contract exclusively with that telecommunications company. However, if the carrier rebates money to a third party, the latter then would be considered the retailer responsible for paying the sales tax on the wireless device.
“GTE agrees that wireless telecommunications devices should be taxed like any other personal property; however [we] believe that, in all types of bundled transactions, the retailer should be able to collect the tax … from the customer,” said Susan Asher, manager of media relations for GTE Wireless Inc.
GTE and AT&T Wireless Services Inc. consider the proposed regulation to be one that would formalize an understanding the state board has had with the wireless industry for several years.
The tax has been in place “in a preliminary way since 1995, and this would take it to a more formalized process,” said Brenda Stephenson, director of public relations for AT&T Wireless.
AT&T Wireless is neutral on the tax extension because the carrier and its customers have had time to become accustomed to it, she said.
“We are opposed to this because it means an extra cost for our customers. Most of these kinds of taxes on a customer’s bill are for services, not for handsets,” said Jeff Battcher, media relations manager for BellSouth Cellular Corp.
Battcher said April 29 that BellSouth representatives planned to attend the equalization board’s hearing April 30 to make their objections to the plan known. “There were several speakers who presented comments at the (April 30) hearing, and the board ordered its staff to make changes reflecting [those comments],” said Mary Ann Stumpf, regulations coordinator for the state board.
The content of those changes will be made public in writing by mid-May to those who spoke at the hearing and, upon request, to other interested parties, she said.
The board will review the regulations incorporating the changes made by its staff at its regularly scheduled meeting May 28. If it approves those changes, the final proposal will be sent to interested parties by mid-June. A formal approval vote for the amended proposal then would occur at the regular monthly board meeting June 25.
Once the state board approves the final version, it then will go to the state Office of Administrative Law for a 30-day review before being filed with the California Secretary of State. Another 30 days must elapse after that filing before the regulation becomes effective.
