Prepaid phone users may face tax

Published 5:00 am Wednesday, May 30, 2012

Oregon could soon require prepaid cellphone users to pay the same tax as other phone users to support 911 dispatch centers.

The state Department of Revenue is preparing to change a tax rule to apply the tax to all phone users. A hearing on the rule change is scheduled for June 25 in Salem.

The Department of Revenue and the systems manager for Deschutes County 911 say it’s a question of equity, because people with land-line telephones and cellphone contracts already pay the 911 tax.

“The problem is that currently, every time somebody gets those prepaid cards for their cellphones, there’s no 911 tax,” said Rick Silbaugh, public safety systems manager for Deschutes County’s 911 district. “They should have been doing it all along. … Folks who use prepaid … basically don’t give anything into the system.”

The cellphone industry has argued that collecting the tax on prepaid phones would be difficult and expensive for retailers and phone service providers.

Richard Kosesan, a lobbyist who represents Verizon, questioned whether the Department of Revenue has the authority to change the tax rule on prepaid phones.

“I think many people would contend there is a specific exemption of prepaid from the statutory framework we have,” Kosesan said. The cellphone industry is working on its own solution for prepaid phones, but Kosesan declined to provide specifics and said the issue requires more discussions.

The tax is 75 cents per line, per month.

The Deschutes County 911 district received approximately $778,400 in taxes on other phone lines last year.

It’s unclear how much that would increase if prepaid cellphones were taxed.

Employees at the Department of Revenue do not know how many prepaid cellphones there are in Oregon, so they have no way of calculating how much money the tax would raise, according to Derrick Gasperini, a spokesman for the department.

“It’s one of those things because the tax is not applied to those folks, we do not have the exact numbers,” Gasperini said.

In recent years, two bills were introduced in the Legislature that would have extended the 911 tax to prepaid phones, Kosesan said.

However, they never made it out of committees.