The purchase or sale of a prepaid phone card is generally a taxable sale in Colorado because the telephone service being provided is subject to sales tax. The only exceptions where a prepaid phone card is not subject to sales tax are:
· The telephone service will be provided by a telephone company registered to collect Colorado sales tax and the card is denominated in dollar amounts rather than call time. In this case using the card is like putting coins in a pay phone; the sales tax will be taken from the amount of the card received by the phone company at the time a taxable telephone call is placed.
· The prepaid phone card cannot be used to make calls originating and terminating within Colorado. (At this time, cards that meet these criteria are not available for sale in Colorado.)
· Prepaid wireless service denominated in dollars is not subject to sales tax because the sales tax will be taken from the amount when the wireless service is used. There is a 1.4% " 911 surcharge" on wireless services.
Regarding the sale of a prepaid phone card that is subject to sales tax, the state and local tax rate where the sale takes place must be collected.
Back to Common
Back to Taxation Web site