Are prepaid paging cards and bundled pager packages taxed as tangible personal property or as telecommunications services in Kansas?

Plain-English summary

A company that "sells pagers and provides one-way airtime services" asked how Kansas sales tax applies to two new product forms: prepaid paging cards (credits for paging service sold in monthly increments, sold to retail stores and resold to customers, who must call the company to activate) and bundled packages (a pager plus prepaid service sold in one lump sum at retail stores). The recurring question was whether these are taxed as tangible personal property (TPP) at the store, or as telecommunications services.

Prepaid paging cards — taxed as a service, not as property. The Department ruled that "[p]repaid paging cards are not taxable as tangible personal property." Instead, "[t]hey are subject to sales tax pursuant to K.S.A. 79-3603(t) which imposes tax on, 'the gross receipts received for telephone answering services, including mobile phone services, beeper services and other similar services.'" That statute is interpreted by K.A.R. 92-19-71, which addresses "mobile phone, cellular phone, beeper and similar services."

Bundled packages — same treatment. For the bundled pager-plus-service packages, the Department simply pointed back to its answer on prepaid cards ("See Answer A1"): they too are taxed as telecommunications services under K.S.A. 79-3603(t).

Who collects the tax. Because these are taxed as telecommunications services, "[t]he tax would be collected and reported by" the paging-service company — not by the outside retail store that sells the card or package.

Bottom line: the taxable object is the paging (beeper) service, not a piece of property. Whether sold as a prepaid card or bundled with a pager, the charge is a taxable telecommunications service under K.S.A. 79-3603(t), and the airtime provider is responsible for collecting and remitting the tax.

What this means for you

Paging and telecommunications providers

Treat prepaid paging cards and bundled service packages as taxable telecommunications (beeper) services under K.S.A. 79-3603(t), not as sales of property. You — the provider that furnishes the airtime — are responsible for collecting and reporting the tax, even when the card or package is sold through third-party retail stores.

Retail stores selling pagers and paging cards

When you sell a prepaid paging card or a bundled package on behalf of the airtime provider, the service tax is the provider's responsibility to collect and remit, not yours. Coordinate with the provider so the tax is handled correctly and not double-charged.

Customers buying prepaid paging

Expect the tax on your paging service to be handled by the airtime provider (typically on your regular bill), rather than being charged as a property sale at the store checkout.

Common questions

Q: Are prepaid paging cards taxed as property or as a service in Kansas?
A: As a service. The Department ruled they are not taxable as tangible personal property but are subject to sales tax as beeper/telecommunications services under K.S.A. 79-3603(t).

Q: How are bundled pager-plus-service packages taxed?
A: The same way — as telecommunications services under K.S.A. 79-3603(t), per the Department's answer applying the prepaid-card treatment to bundled packages.

Q: Who collects and reports the tax — the retail store or the paging company?
A: The paging-service company collects and reports the tax, not the outside retail store.

Citations and references

• K.S.A. 79-3603(t) — imposes sales tax on the gross receipts from telephone answering services, including mobile phone services, beeper services, and other similar services; the basis for taxing prepaid paging cards and bundled packages as services rather than property.
• K.A.R. 92-19-71 — the regulation interpreting K.S.A. 79-3603(t) for mobile phone, cellular phone, beeper, and similar services; enclosed with the ruling and applied to the paging products.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-231

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

October 22, 1999

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

Re: Kansas Sales Tax

Dear XXXXX:

Your correspondence of September 29, 1999, has been referred to me for response. Thank you for your inquiry.

By your letter you inquire as to the Kansas sales tax treatment of certain pager services. Your letter provides the following facts:

XXXXXXXXXXX sells pagers and provides one-way airtime services for subscribers. The pagers are sold through outside retail stores (XXXX, XXXX, etc.) and then the paging services are provided by your company when customers call to set up the services. XXXXX is adding prepaid paging cards and bundled packages to its sales. Prepaid paging cards are credits of paging services sold in monthly increments and priced according to the level of service. They are primarily sold to outside retail stores by XXXXX and resold to the customers. The customer is required to call XXXXX to set up their prepaid services.

Bundled packages are pagers and prepaid services sold in one lump sum amount primarily through outside retail stores. When the customer calls in to set up the services through XXXXX, they have prepaid for the services at the retail store. XXXXX sets them up to be billed on a regular quarterly or annual cycle billing. When the customer receives their first bill, they are given a credit for the amount of service that was prepaid which equates to about one month of service.

Based on this information, you ask that we respond to several questions. Your questions, and our responses, are set forth below:

Q1. Are the prepaid paging cards taxable as TPP at the retail stores or are they taxable as telecommunications services?
A1. Prepaid paging cards are not taxable as tangible personal property. They are subject to sales tax pursuant to K.S.A. 79-3603(t) which imposes tax on, “the gross receipts received for telephone answering services, including mobile phone services, beeper services and other similar services.” The statute is interpreted by Kansas Administrative Regulation (K.A.R.) 92-19-71 which deals with mobile phone, cellular phone, beeper and similar services. A copy of the regulation is enclosed.

Q2. Are the bundled packages taxable as TPP at the retail stores or are they taxable as telecommunication services?
A2. See Answer A1.

Q3. If they are taxable as telecommunication services, would the tax be collected and reported by the retail store or by XXXXXX?
A3. The tax would be collected and reported by XXXXXXX.

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

I trust this information is of assistance. If I can be of further service, please feel free to contact me.

Sincerely,

Jim Weisgerber
Attorney
Tax Specialist

JW:jw

Enclosure: K.A.R. 92-19-71

Date Composed: 10/25/1999 Date Modified: 10/11/2001

Table 1

Table 2