As prepaid grows, states start to impose prepaid 911 fees

There’s no doubt prepaid services in the United States are gaining traction – and as such, the possibility of taxing those services is getting increased attention as well. Most prepaid users don’t pay 911 fees today, a tax that is regularly imposed on postpaid users via their monthly bills.
As such, CTIA has been working with the National Conference of State Legislatures to develop model legislation about how to best levy 911 fees on prepaid services. “In the postpaid environment, there is no problem collecting 911 fees because there is a monthly bill. In prepaid there is no monthly bill,” said CITA’s Jim Schuler, assistant vice president of external and state affairs. Some states, aware of the growth in the prepaid market, have simply tried to use the same laws for postpaid 911 fees over to the prepaid market, but it doesn’t work, Shuler contends.
CTIA estimates 20% of wireless subscribers are prepaid users, and 80% of those transactions are done through third-party retailers like Walmart and BestBuy. About 9% of prepaid sales take place in the carrier’s store. As such, CTIA believes the point of sale is the best place to tax prepaid users for 911 services. “We believe all of our consumers should contribute to 911,” Schuler said.
To date, Texas, Louisiana, Maine, Virginia, Indiana and South Carolina have adopted legislation that charges prepaid customers at the point of sale. When prepaid customers top up their handsets, they also pay 911 fees. The issue gets complicated in that some prepaid users may top up their accounts weekly and some may only top up their accounts intermittently, so trying to determine the fairest way to implement the fee has been tricky. Ultimately, the model legislation proposed by the NCSL committee asks that prepaid users pay half of the fee collected by postpaid users. Prepaid users traditionally have been lower-income residents and typically spend about half of a postpaid users monthly revenue spend.
Some retailers have resisted the fees because it increases the price of their product, but Walmart, the nation’s largest retailer, is supporting the point-of-sale solution for 911 fees, Schuler said. Prepaid users who top up online also pay the 911 fees if their states impose such a fee, but less than half of the states apply 911 fees to online charges.
Schuler said CTIA got involved in the debate because it wanted to make sure that the policies put in place realize that the prepaid environment is different than its postpaid brethren, and that the policies put in place keep 911 fees low and are actually used for 911 services. States have been raiding their 911 treasuries to fund other services over the years, and the trend has gotten worse recently as states increasingly face budget shortages, Schuler said. Ten states raided their 911 funds in 2009, with Wisconsin among the worst offenders, taking $20 million from its 911 fund, Schuler said.