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Old 08-04-2010, 04:44 PM   #12
travis has learned how to buy an e-book online
Posts: 40
Karma: 86
Join Date: Jan 2007
Location: USA, Philippines, Colombia, Mexico
Device: Ipod Touch 3G, 10" Acer Netbook, Kindle 3
There is the additional complication of complicated state tax rules. I moved my domicile to Texas, and was surprised to learn that I was charged sales tax on my prepaid mobile phone minute purchases. These are not taxed in California. I am also taxed on application purchases from Apple's App Store for application downloads to my Ipod Touch.

Texas law:

The taxability of prepaid phone cards is specifically addressed in Texas Tax Code Sections 151.009 and 151.01032. Prepaid phone cards, whether landline, cellular, or rechargeable, are considered tangible personal property and are subject to Texas state and local sales and use tax at the time of purchase. “Telephone prepaid calling card" means a card or other item, including an access code, that represents the right to make one or more
telephone calls for which payment is made in incremental amounts and before the call is initiated. The term "telephone prepaid calling card" does not include a card sold by mechanical means for consideration of one dollar or less.”
In California, the prepaid card is not taxed.

In general, sales of prepaid telephone debit cards are not subject to tax (see exception below). You are considered to be selling a future telephone service rather than selling tangible personal property. Exception. If you sell a prepaid telephone card for its value as a collectible item rather than for future telephone service, the sale is subject to tax. For example, if you sell an expired card with a picture of a famous person or “classic” automobile, you are selling a collectible item, and the sale is subject to tax.
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