What the New E-988 Surcharge Means for Tax Compliance

In sales tax, ideas spread fast. In the new E-988 surcharge, we may be seeing the very beginning stages of what ultimately might become a new and expansive tax compliance requirement for sellers of prepaid wireless products and services.

It all started in July 2020 when the Federal Communication Commission (FCC) adopted regulations designating the three-digit phone number of 988 as a national crisis response number for suicide prevention and mental health – a worthy cause to be sure. The new phone number acts in a similar manner to 911 for emergency response, but the 988 number is specifically designed to handle calls involving mental health crises. A call placed to 988 would connect a person with the National Suicide Prevention Lifeline. The new FCC regulations recognized that funding this hotline fell outside their jurisdiction but were confident stakeholders (including the states), would explore appropriate funding options.

The funding mechanism chosen by some states has been the introduction of an “E-988 surcharge.” The surcharge is a fee charged on retail transactions of postpaid or prepaid wireless telecommunications service and it is the responsibility of the seller/provider to collect and remit. This idea of a surcharge for funding a hotline is nothing new. Many states already impose a similar E-911 surcharge to fund emergency services hotlines around the United States. Virginia and Colorado have been the first states to actively impose such surcharges.

Source: SOVOS

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