Which Iowa 911 surcharge applies to VoIP services?

Plain-English summary

Iowa placed ordinary VoIP subscriptions under the $1 originating-service-number surcharge and prepaid VoIP retail sales under the separate 33-cent prepaid surcharge.

Vertex provides tax research and compliance tools and asked how Iowa Code chapter 34A applies to VoIP lines.

The Department reasoned that a VoIP provider is an "originating service provider" because its subscribers can originate 911 communications. Nonprepaid VoIP service numbers therefore fall under Iowa Code § 34A.7A. They do not fall under the local-wireline surcharge in § 34A.7 because the order found VoIP does not use a functional dial tone and therefore does not meet the cited definition of an access line.

Prepaid VoIP products—such as prepaid calling cards or prepaid service plans—are treated differently. Their retail sale is subject to the 33-cent surcharge under Iowa Code § 34A.7B rather than the § 34A.7A surcharge.

What this means for you

VoIP providers

Classify offerings by whether they are ongoing subscriptions or prepaid products, then apply the matching surcharge and remittance rule.

Sellers of prepaid VoIP

The order places retail sales of prepaid VoIP calling cards and service plans under the prepaid wireless surcharge.

Compliance providers

The Department answered Vertex's petition but expressly did not bind Vertex's clients, who were not parties to the order.

Common questions

Q: Does the local wireline 911 surcharge apply to VoIP?
A: No. The order concluded that VoIP lines are not access lines because they do not use a functional dial tone.

Q: What applies to a normal monthly VoIP subscription?
A: The $1 surcharge on originating service numbers under Iowa Code § 34A.7A.

Q: What applies to a prepaid VoIP calling card or plan?
A: The 33-cent retail surcharge under Iowa Code § 34A.7B.

Q: Did the order bind Vertex's telecommunications customers?
A: No. The order says those clients were nonparties and the order was binding only on Vertex.

Citations and references

• Iowa Code § 34A.2(23)-(24) — originating service providers and VoIP services
• Iowa Code § 34A.7 — local wireline 911 surcharge
• Iowa Code § 34A.7A — surcharge on originating service numbers
• Iowa Code § 34A.7B — prepaid wireless 911 surcharge
• Iowa Administrative Code rule 701—217.8 — prepaid wireless communications services
• 47 C.F.R. § 9.11(b)(2)(i) — VoIP provider 911 obligations cited by the order

Source

• Landing page: https://revenue.iowa.gov/resources/law-policy-information/administrative-orders
• Archive document link: https://revenue.iowa.gov/media/4502/download?inline
• Original PDF: https://documents.iowa.gov/home/PreviewDocument/10540124

Original ruling text

VERTEX INC (DO) 2026

BEFORE THE IOWA DEPARTMENT OF REVENUE
HOOVER STATE OFFICE BUILDING
DES MOINES, IOWA
IN THE MATTER OF
VERTEX INC
2301 RENAISSANCE BLVD
KING OF PRUSSIA PA 19406-2722

DECLARATORY ORDER
DOCKET NO. 1187310

SALES, USE, OR EXCISE TAX
Pursuant to a Petition for Declaratory Order (“Petition”) filed with the Iowa Department of
Revenue (“Department”) by VERTEX INC. (hereinafter referred to as “Vertex Inc.” or
“Petitioner”) on December 18, 2025, and in accordance with Iowa Code section 17A.9 (2025)
and Iowa Administrative Code rule 701—4.7(17A), “Declaratory order-in general,” the Director
issues the following order.
I.

FACTS
The findings of fact are based on the Petition submitted to the Department and publicly

available information on Petitioner’s website.1 Petitioner is a technology company that provides
tax research and compliance solutions for businesses, including telecommunications
companies. Pet. for Dec. Order at 2, No. 1187310. Petitioner is seeking clarification on the
proper tax treatment of Voice Over Internet Protocol (VoIP) lines in order to provide correct
guidance to their customers, and ensure their customers are charging the correct fees on VoIP
lines.
II.

ISSUE PRESENTED
How does the 911 surcharge imposed by Iowa Code chapter 34A apply to VoIP

services?

1

When considering a petition for declaratory order, “[t]he department may solicit comments or information
from any person on the questions raised. Also, comments or information on the questions raised may be
submitted to the department by any person.” Iowa Admin. Code r. 701—4.7(7)“b”

III.​

STANDARD OF REVIEW
A.​

Declaratory Orders under the Iowa Administrative Procedure Act

Iowa’s Administrative Procedure Act (“IAPA”) was enacted “to provide a minimum
procedural code for the operation of all state agencies when they take action affecting the rights
and duties of the public.” Iowa Code § 17A.1(2). Under the IAPA, “[a]ny person may petition an
agency for a declaratory order as to the applicability to specified circumstances of a statute,
rule, or order within the primary jurisdiction of the agency.” Id. at § 17A.9(1)(a). The IAPA also
describes agency rights and responsibilities with respect to declaratory order proceedings. Id. at
§ 17A.9(8). Pursuant to Iowa Code section 17A.9(2), the Department adopted Iowa
Administrative Code rule 701—4.7, which outlines department-specific rules governing
declaratory orders.
The purpose of a declaratory order is to provide a “generally available means for
persons to obtain reliable information about agency administered law as it applies to their
particular circumstances.” Sierra Club Iowa Chapter v. Iowa Dep’t of Transp., 832 N.W.2d 636,
647 (2013) (citing Arthur Earl Bonfield, Amendments to Iowa Administrative Procedure Act,
Report on Selected Provisions to Iowa State Bar Association and Iowa State Government, 1–8
(1998)). Declaratory orders are not contested cases that “entitle[] parties affected by the agency
action to an adversarial hearing” in order to “adjudicate disputed facts pertaining to particular
individuals in specific circumstances.” Greenwood Manor v. Iowa Dep’t of Pub. Health, State
Health Facilities Council, 641 N.W.2d 823, 834 (Iowa 2002); see also Iowa Code § 17A.12.
Instead, the IAPA “contemplates declaratory rulings by administrative agencies on purely
hypothetical sets of facts.” City of Des Moines v. Pub. Emp’t Relations Bd., 275 N.W.2d 753, 758
(Iowa 1979).
As such, “[t]he procedure established by section 17A.9 allows persons to seek formal
opinions on the effect of future transactions and arrange their affairs accordingly.” Bennett v.
Iowa Dep’t of Nat. Res., 573 N.W.2d 25, 26 (Iowa 1997). Declaratory orders issued by an

2

administrative agency do, however, have “the same status and binding effect as any final order
issued in a contested case proceeding.” Iowa Code § 17A.9(7). The Department’s rules
governing declaratory orders are consistent with this understanding of the role of declaratory
orders in administrative procedure. See Iowa Admin. Code r. 701—4.7.
B.​

Statutory Construction and Interpretation of Tax Statutes

“When engaging in statutory interpretation,” the Department “first examine[s] the
language of the statute and determine[s] whether it is ambiguous.” Kay-Decker v. Iowa State Bd.
of Tax Review, 857 N.W.2d 216, 223 (Iowa 2014) (citing Rolfe State Bank v. Gunderson, 794
N.W.2d 561, 564 (Iowa 2011)). “‘Generally, we presume words used in a statute have their
ordinary and commonly understood meaning.’” Id. (quoting McGill v. Fish, 790 N.W.2d 113, 119
(Iowa 2010)). “[L]egislative intent is expressed by what the legislature has said, not what it could
or might have said. When a statute’s language is clear, we look no further for meaning than its
express terms. Intent may be expressed by the omission, as well as the inclusion . . . of
statutory terms . . . .” Hawkeye Land Co. v. Iowa Utils. Bd., 847 N.W.2d 199, 210 (Iowa 2014)
(quoting State v. Beach, 630 N.W.2d 598, 600 (Iowa 2001)).
In addition to applying the general principles of statutory construction, “[s]tatutes which
impose taxes are construed liberally in favor of the taxpayer and strictly against the taxing body.
It must appear from the language of a statute that the tax assessed against the taxpayer was
clearly intended.” Iowa Auto Dealers Ass’n v. Iowa Dep’t of Revenue, 301 N.W.2d 760, 762
(Iowa 1981).
IV.​

DISCUSSION
A.​

Voice Over Internet Protocol

Voice Over Internet Protocol is a service that allows users to make phone calls over the
internet instead of a traditional phone line. It is defined as:
A service to which all of the following apply:
a. The service provides real-time two-way voice communications transmitted
using internet protocol or a successor protocol.

3

b. The service is offered to the public, or such classes of users as to be
effectively available to the public.
c. The service has the capability to originate traffic to, and terminate traffic from,
the public switched telephone network or a successor network.
Iowa Code § 34A.2(24). There are several different ways to use VoIP technology, ranging from
plugging an adaptor into a traditional phone, using the service entirely on a computer, or using a
special VoIP phone.2 The Federal Communications Commission (FCC) does warn consumers
about some drawbacks of VOIP. The reliance on an internet connection means that a user is
likely to lose access during a power outage or similar situation where internet connection is not
available. Id. Additionally, the FCC does require VoIP service providers to provide 911 service to
consumers. 47 C.F.R. § 9.11(b)(2)(i). However, VoIP services can present complications when
calling 911 because they do not connect to cell towers so they are not able to transmit location
data to 911 operators. Id.
B.​

911 Surcharge

Iowa law imposes a 911 surcharge in order to offset the cost of implementing 911 service
areas. Iowa Code section 34A.7A(1)(a) imposes a surcharge of one dollar on all originating
service numbers in the state, except that it does not apply to wire-line-based communications or
prepaid wireless telecommunications service. The statute does not provide a definition of
‘originating service number,’ but it does define an ‘originating service provider’ as “a
communications provider that allows its users or subscribers to originate 911 voice or nonvoice
messages from the public to public safety answering points, including but not limited to wire-line,
wireless, and voice over internet protocol services.” Id. § 34A.2(23). Additionally, the originating
service provider is responsible for collecting the 911 surcharge imposed on originating service
numbers. Id. § 34A.7A(1)(c). Iowa Code section 34A.7A(1)(c) requires the service provider to
remit the surcharge collected to the 911 program manager, but allows them to retain 1% of the
gross surcharges collected in compensation for the costs of billing and collection. Based on the
2

Federal Communications Commission, Voice Over Internet Protocol (VoIP) (last visited April 14, 2026),
https://www.fcc.gov/general/voice-over-internet-protocol-voip

4

definition of originating service provider, and the responsibility the provider has to collect the 911
surcharge imposed on originating service numbers, it is reasonable to conclude that an
originating service number is the number provided by an originating service provider. The
service provided is a number that originates 911 voice or nonvoice messages from the public to
public safety answering points. Id. § 34A.2(23).
The definition of originating service provider specifies that it can apply to wireline,
wireless, and voice over internet protocol services. Id. § 34A.2(23). Therefore, the 911
surcharge imposed on originating service numbers applies to all of these services unless
specifically exempted. Iowa Code section 34A.7A(1)(a) specifically states that “[t]he surcharge
shall

not

be

imposed

on

wire-line-based

communications

or

prepaid

wireless

telecommunications service.” Surcharges for those communications are covered elsewhere in
chapter 34A. Since VoIP falls under the general categorization of originating service number, it
is subject to the surcharge imposed by 34A.7A unless it meets the definition of one of the
exempted services.
C.​

Local Wireline 911 Services

Iowa Code section 34A.7(1) imposes a surcharge on local wireline 911 services. The
surcharge is one dollar per month per access line on each access line subscriber, and is to be
collected by the local exchange service provider as part of the periodic billing to the subscriber.
Id. § 34A.7(2)(a). A subscriber is required to pay the surcharge in each 911 service area in
which they have access line service, but they are only required to pay the surcharge on a
maximum of one hundred access lines in each service area. Id. § 34A.7(3). The service provider
is required to remit the surcharge collected to the 911 service board governing the appropriate
service area, but may retain 1% of the gross surcharges collected in compensation for the costs
of billing and collection. Id. § 34A.7(2)(a).
An access line is defined as “an exchange access line that has the ability to access dial
tone and reach a public safety answering point.” Id. § 34A.2(6). A dial tone is emitted by a

5

telephone to indicate that the system is functioning and ready to make a call.3 Dial tones are
traditionally heard on landline phones. Cell phones do not rely on dial tones to let the user know
that the system is functional; they indicate functionality by showing the number of bars in
relation to how strong the service is. VoIP services, similarly, do not need to rely on a dial tone
because they are connected via the internet, so the signal is dependent on whether the user
has an internet connection.4 Many VoIP service providers do provide a dial tone when using a
VOIP adapter on a landline phone simply because users are accustomed to hearing one.5
However, in those cases it is merely a sound being provided to users, and it does not serve any
functional purpose. Id. Since the tone provided is not a real, functional dial tone, the definition of
access line is not met. Therefore, VoIP service lines are not access lines and the surcharge
imposed under 34A.7 does not apply to VoIP.
D.​

Prepaid Wireless Telecommunications Service

Iowa Code section 34A.7B(2) imposes a prepaid wireless 911 surcharge on each
purchase of prepaid wireless telecommunications service from a seller, other than a sale for
resale. A prepaid wireless telecommunications service is defined as “a wireless communications
service that provides the right to utilize mobile wireless service as well as other
nontelecommunications services, including the download of digital products delivered
electronically, content and ancillary services, which must be paid for in advance and that is sold
in predetermined units or dollars of which the amount declines with use in a known amount.”
Iowa Code § 34A.2(19). Prepaid wireless communications services are further defined in Iowa
Administrative Code rule 701—217.8, which is the rule sedition implementing Iowa Code section
34A.7B. According to this rule, prepaid wireless communication services include “prepaid
wireless phones, prepaid wireless phone calling cards, rechargeable prepaid wireless phones,
3

Dial Tone, Merriam-Webster.com Dictionary, (last visited April 14, 2026),
https://www.merriam-webster.com/dictionary/dial%20tone
4
Brynne Ramella, What is a Dial Tone and How it Works, getvoip.com (last visited April 14, 2026),
https://getvoip.com/library/dial-tone/
5
FCC, Voice Over Internet Protocol (VoIP) (last visited April 14, 2026)

6

rechargeable prepaid wireless phone calling cards, and prepaid wireless service plans.” Iowa
Admin. Code r. 701—217.8(1).
When an originating service provider is providing VoIP services, it is an ongoing
subscription billed on a specified timeline. If a seller does provide a prepaid VoIP service, such
as a prepaid calling card or prepaid service plan, those transactions would be subject to the
surcharge of 33 cents imposed by Iowa Code section 34A.7B. However, any VoIP service
subscriptions that are not prepaid are not subject to this surcharge.
E.​ Applicability to Petitioner’s Clients
​

Petitioner is not an originating service provider, nor do they make sales of wireless

telecommunications services. According to the facts presented in the Petition, Petitioner
provides tax research and compliance solutions to businesses. Pet. for Dec. Order at 2, No.
1187310. Petitioner’s clients are not parties to this Order. The Department cannot issue a
Declaratory Order that would “substantially prejudice the rights of a person who would be a
necessary party and who does not consent in writing to the determination of the matter by a
declaratory order proceeding.” Iowa Code section § 17A.9(1)(b)(2). Since Petitioner’s clients are
not parties to the Order, this Order is not binding on any party other than the Petitioner.
V.​

CONCLUSION
Iowa Code section 34A.7A imposes a 911 surcharge of one dollar on all originating

service numbers in Iowa. This surcharge applies to service numbers provided by originating
service providers to wire-line, wireless, or voice over internet protocol services. Iowa Code §
34A.2(23). However, the surcharge explicitly does not apply to wire-line-based communications
or prepaid wireless telecommunications service. Id. § 34A.7A(1)(a). As discussed above, VoIP
services do not fit under the definition of wire-line-based communications because they do not
have a functional dial tone. Some VoIP services may be prepaid, and sales of those services
would be subject to the surcharge under Iowa Code section 34A.7B instead of the surcharge
imposed by Iowa Code section 34A.7A. Any VoIP subscription services that are not prepaid are

7

subject to the 911 surcharge imposed under Iowa Code section 34A.7A because they are
provided by originating service providers.
ORDER
THEREFORE, based on the facts presented, foregoing reasoning, and applicable
provisions of the law, the Director finds that voice over internet protocol services are subject to
the 911 surcharge imposed by Iowa Code section 34A.7A. Additionally, the retail sale of any
prepaid VoIP services are subject to the surcharge imposed by Iowa Code section 34A.7B.

May
Issued at Des Moines, Iowa this _
2026.
5th day of ______,

​

IOWA DEPARTMENT OF REVENUE

​
​

By ______
​ ​
Mary Mosiman, Director

8