Cell phone data charges

Does sales tax apply on separate cell phone data charges?  

No. Sales tax does not apply to separate charges for cell phone data. These charges are exempt from sales tax as charges for internet access.

The seller owes service and other activities business and occupation (B&O) tax on this income.

Example

A cell phone provider charges a flat $50 fee per month for bundled telecommunication and internet services. The services include:

• Unlimited voice.
• Unlimited text.
• Limited data (2 gigabytes).

When a customer uses more than 2 gigabytes of data during the month, they owe an additional charge of $25 per gigabyte. In this example, the customer uses 3 gigabytes of data during a month.

If the seller cannot identify what portion of the $50 charge is for cell phone data, then the seller must charge the customer sales tax on the entire $50 charge. 

However, the customer does not owe sales tax on the $25 charge for additional data usage.

References

• RCW 82.04.297 - Internet access—Definitions.

• RCW 82.080.190 - Bundled transactions—Definitions.

• RCW 82.08.195 - Bundled transactions—Tax imposed.

• WAC 458-20-245 - Taxation of competitive telephone service, telecommunications service, and ancillary service.