SECTION 6. PREPAID TELEPHONE

CARDS (PTC)

(a) In general —(1) Prepaid telephone cards . Section 4251(d) and § 49.4251–4

of the Facilities and Services Excise Taxes Regulations provide rules for prepaid telephone cards (PTC). Section 49.4251–4(b) defines PTC as a card or similar arrangement that permits its holder to obtain a fixed amount of communications services by means of a code (such as a personal identification number (PIN)) or other access device provided by the carrier and to pay for those services in advance. The amount paid for PTCs is determined under the rules of §§ 4251(d)(1) and (2) and § 49.4251–4(c). Under this notice, the PTC will be treated as nontaxable service unless a PTC expressly states it is for local-only service.

(2) Other cards . This section does not address cards that permit the holder to purchase various services in addition to telecommunications services. Such services include, but are not limited to, ring tone downloads, music downloads, text messaging, picture messaging, web browsing, game downloads, or screen saver downloads.

(b) Application of the tax —(1) Defi- nitions . Section 49.4251–4(b) provides that—

(i) Carrier means a telecommunications carrier as defined in 47 U.S.C. 153.

(ii) Holder means a person that purchases other than for resale.

(iii) Transferee means the first person that is not a carrier to whom a PTC is transferred by a carrier.

(2) Imposition, liability, and collection . Section 4251(d) provides that the § 4251 tax is imposed on the transfer of a PTC to a transferee; § 49.4251–4(d)(1) provides that the person liable for the tax is the transferee and that the person responsible for collecting the tax generally is the carrier transferring the PTC to the transferee. Section 49.4251–4(d)(1) further provides that if a holder purchases a PTC from a transferee reseller, the amount the holder pays for the PTC is not treated as an amount paid for communications services and thus tax is not imposed on that payment.

(c) Person eligible to request credit or refund . The transferee is the person liable for the tax paid on a PTC and thus generally is the person eligible to request a credit or refund of the tax it paid. The carrier is eligible to request a credit or refund only if it meets the conditions of section 5(d)(4) of Notice 2006–50. The holder is not li

2007–5 I.R.B. 406 January 29, 2007