Carrier Directives for Mobile Telephony Service Surcharge for 2018

"The Prepaid Mobile Telephony Services Surcharge Collection Act" (The Act) was enacted by Assembly Bill 1717, (Chapter 885, Statutes 2014, Perea).

The Act creates an entirely new point-of-sale mechanism for the collection and remittance of the taxes and fees assessed on prepaid wireless telephone service. The Act also aggregates the surcharges, taxes, and fees that are assessed on telephone services and creates the new prepaid MTS surcharge that is imposed on prepaid wireless telephone services in lieu of the individual fees.

• CPUC Public Purpose Program Surcharges
• CPUC User Fee
• Emergency Telephone Users (911) Surcharge and
• Local Utility User Taxes (UUT)

MTS surcharge rates will be posted annually between October 1st and October 8th and will be effective for the entirety of the following year. The current MTS surcharge rates are applied to any and all customers who purchase prepaid wireless telephone service in California from January 1, 2018, through December 31, 2018. The Act became effective January 1, 2016, and remains in effect until January 1, 2020.

The new MTS surcharge is assessed on prepaid wireless intrastate telephone services sold in California. 

The Act does not apply to the sale of wireline, VOIP, post-paid wireless, or any other type of telecommunications services sold in California.

"Intrastate" means a telecommunications service that originates and terminates within California. Generally, services subject to tariff (or formerly tariffed) with the CPUC are subject to California surcharges, whereas Interstate services, taxes and surcharges, and financial charges and fees, are not. Intrastate wireless services that are subject to the MTS surcharges include, but are not limited to voice, text, and any associated services.

CPUC has determined the intrastate factor by compiling and analyzing data submitted by both prepaid and postpaid carriers. The intrastate factor will be applied to the Total Sales Price of prepaid services.

At the point of purchase, the current State MTS surcharge amount of 5.90% plus the applicable local Utility User Tax rate (reference: Prepaid Mobile Telephony Services (MTS) Surcharge Rates) is multiplied by the total sales price to arrive at the MTS surcharge amount due.

(CPUC + 911+UUT) x Total Sales Price = MTS Surcharge

1. CPUC surcharges and user fee adopted in T-17579= 5.55%
2. Emergency 9-1-1 surcharge= 0.75%
3. Local Utility User Tax= 0%-9% (where applicable)

A single line item charge must then be displayed identifying the amount of the total MTS surcharge due. 

"MTS Surcharge" 

The law requires telephone corporations to collect from the customer and remit to the CPUC the MTS surcharge assessed on intrastate telecommunications services. The CPUC does not define the method by which a carrier collects the surcharges due.A seller can include this MTS surcharge in the total price of the prepaid wireless service, or can add it to the price, however, in both cases; the amount must be identified and labeled as the "MTS surcharge" on the customer's bill or receipt.  

Pursuant to Revenue and Taxation Code Section 42010(i)  

How: the amount of the combined prepaid MTS surcharge and local charges shall be separately stated; on an invoice, receipt, or other similar document that is provided to the prepaid consumer of mobile telephony services by the seller, or otherwise disclosed electronically to the prepaid consumer;

When: …at the time of the retail transaction.

Further Clarification: We interpret this code to mean that disclosure of the prepaid MTS surcharge/taxes/fees by a prepaid wireless telephone corporation must occur at the time payment is received for any prepaid wireless service sold in California that is subject to the MTS surcharge. In other words, each purchase by the customer constitutes a prepaid mobile telephony service "retail transaction" because it is when the customer has paid in advance for the right to utilize a particular prepaid wireless service plan.

Assembly Bill 1717 (the Act) requires carriers to report direct prepaid wireless intrastate revenue subject to surcharge and remit the accompanying fees and to report total prepaid wireless service revenue. It also provides the Commission with authority to require any other reporting it determines is necessary.

Wireless carriers are required to report the following intrastate revenues:

• total non-prepaid wireless revenue
• total direct prepaid wireless revenue
• total indirect prepaid wireless revenue

Carriers are required to report and remit the surcharges and fees due for:

• non-prepaid wireless revenue
• direct prepaid wireless revenue

Carriers do not remit surcharges and fees on total indirect prepaid wireless revenue, but are still required to report the revenue to the CPUC.

A direct sale is one made by the provider, or its agent, to the end user. This would include online sales, sales through a telephone corporation or VoIP provider's Interactive Voice Response or customer service channel, sales over an enabled handset, or sales at a retail location owned or controlled by the telephone corporation or VoIP provider, or the agent of same. 

Indirect sales are sales transacted by a third party retailer. For these sales, the MTS surcharge must be collected at the point of sale by the third party retailer, and remitted to the Board of Equalization, less 2% of the MTS surcharge revenue for retailer compensation. 

The MTS surcharge is due to the CPUC in accordance with the existing CPUC surcharge and user fee reporting and remittance timeframes that apply to the six Public Purpose Programs and the CPUC User Fee.

In accordance with Commission Decision 98-01‐023 and General Order 153 (11.4), Public Purpose Program surcharge monies be reported and remitted no later than 40 days following the close of the reporting period.

The CPUC User Fee follows the schedule outlined in PUC Code Section 432, which requires quarterly reporting and remitting, by the 15th of April, July, October, and January.  

Carriers that report and/or remit the surcharge after the due date will be assessed a penalty based on the existing penalties of the six Public Purpose Programs and the User Fee.

The Public Purpose Program portion of the MTS surcharge is subject to a penalty equal to an annual interest rate of 10%. The penalty is assessed on the surcharge amount due, including any adjustments, starting from the 41st day after the close of the reporting period.

The CPUC User Fee portion of the MTS surcharge is subject to a 25% penalty, assessed on the 46th day after the close of the reporting period. 

Carriers are required to use the CPUC's Telecommunications and User Fee Filing System (TUFFS) to report and remit the portion of the MTS surcharge due to the Commission.

Instructions regarding how to use the online system to report and remit payments can be found in the TUFFS and EFT payment system user guides on the CPUC's website. 

Pursuant to Public Utilities Code (PUC) §§ 274 and 314.5, all reporting and remittances are subject to audit verification by the Commission or Commission designee(s). In accordance to General Order 153, §13.8, carriers are expected to maintain records including, but not limited to, those pertaining to intrastate billings and collections for at least five (5) calendar years, unless specifically authorized otherwise by a CPUC order or a director's letter. Carriers must retain sufficient supporting documentation to substantiate their intrastate MTS portion subject to the MTS surcharge for audit purposes.  

Carriers that are 90 days or more in arrears in reporting and remitting surcharges, or 30 days for user fees, may be subject to administrative or judicial collection actions and/or revocation of their authority to operate in California. 

The current MTS surcharge is effective January 1, 2018 through December 31, 2018. The CPUC will start the calculation of the new MTS surcharge rates by October 1st and post notice by October 8th of subsequent years, until the Act sunsets in 2020. Each change to the MTS rate will be effective January 1st.