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Taxation of Prepaid Calling Cards

This notice is to advise the public of an amendment to the Sales and Use Tax Act affecting the taxation of prepaid telephone calling arrangements, including the sale of prepaid telephone cards. PL 1999, c.248.

At the present time, the telecommunications service provider remits sales tax each time a consumer uses that arrangement or a prepaid card to make a telephone call subject to sales tax. The sale of the arrangement or the card itself is not subject to tax. N.J.S.A. 54:32B-3(f).

Under the new law, effective for transactions occurring on or after January 1, 2000, the retailer of that arrangement or a prepaid card will be required to collect sales tax upon its sale and upon its recharge, if any. N.J.S.A. 54:32B-3(g). The new law also imposes a compensating use tax on the use of that arrangement within New Jersey when the sale or recharge was not subject to sales tax.

Last Updated: Wednesday, 08/20/14

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