Functional Characterization of Prepaid Wireless Products and Stored‑Value Cards under North Carolina Sales and Use Tax Law

Functional Characterization of Prepaid Wireless Products and Stored‑Value Cards under North Carolina Sales and Use Tax Law

I. Introduction

In North Carolina Department of Revenue v. Wireless Center of NC, Inc., No. 272A23 (N.C. Dec. 12, 2025), the Supreme Court of North Carolina issued a significant opinion clarifying:

  • When a seller of prepaid wireless products is a “retailer” under the North Carolina Sales and Use Tax Act (the “Tax Act”), and
  • How the tax treatment of such products turns on their functional character at the time of sale—specifically distinguishing prepaid wireless calling service from stored‑value or gift cards.

The dispute arose from a Department of Revenue (the “Department”) audit of Wireless Center of NC, Inc. (“Wireless Center”), which operated several Boost Mobile (“Boost”) branded stores in North Carolina. The Department assessed over $500,000 in tax, penalties, and interest on Wireless Center’s sales of “real‑time replenishments” (“Replenishments”) between January 2016 and December 2018.

The Court divided the audit into two distinct periods:

  • Period I: January 1, 2016 – September 7, 2017
  • Period II: September 8, 2017 – December 31, 2018

This division reflected a fundamental change in how Replenishments functioned:

  • In Period I, they operated as pure prepaid wireless airtime on the Sprint network.
  • In Period II, they functioned as stored‑value cards that could be used to purchase a broader range of Boost products and services (not just wireless telecommunication services).

The central legal questions were:

  1. Was Wireless Center a “retailer” of Replenishments under the Tax Act?
  2. Were the Replenishments in each period taxable as “prepaid wireless calling service” at the point of sale, or only upon redemption like gift cards?
  3. Did Wireless Center rebut the statutory presumption that the Department’s tax assessment was correct?
  4. Was an Internet Tax Freedom Act challenge properly preserved?

The Court’s opinion clarifies the boundaries of the statutory definition of prepaid wireless calling service, the responsibilities of intermediary sellers, and the evidentiary standards governing tax disputes before administrative tribunals and the Business Court.

II. Summary of the Opinion

A. Disposition

The Supreme Court:

  • Affirmed the Business Court’s ruling that Wireless Center was liable for sales tax on Replenishments sold in Period I, because those Replenishments were “prepaid wireless calling services” taxable at the point of sale.
  • Reversed the Business Court as to Period II, holding that Replenishments then functioned as stored‑value cards/gift cards, not prepaid wireless calling services at the time of sale. Wireless Center was therefore not responsible for sales tax at the point of sale in Period II; Boost was responsible for collecting and remitting tax upon redemption, depending on what was ultimately purchased.
  • Affirmed the Business Court’s conclusion that the Department’s assessment, as to Period I, properly credited Wireless Center for taxes it had already remitted and therefore retained its presumption of correctness.
  • Remanded for recalculation of Wireless Center’s tax liability to remove tax on Period II Replenishments.
  • Refused to consider a newly raised argument under the federal Internet Tax Freedom Act because it had not been preserved before the ALJ or the Business Court.

B. Core Legal Holdings

  1. Retailer Status: Wireless Center was a “retailer” of Replenishments under N.C.G.S. § 105‑164.3(35), even though it acted as an agent for Boost and did not hold title to the underlying wireless services.
  2. Period I – Prepaid Wireless Calling Service:
    • Replenishments during Period I could only be redeemed for prepaid wireless service on the Sprint network.
    • They therefore met the statutory definition of “prepaid wireless calling service” in N.C.G.S. § 105‑164.3(27a).
    • Under § 105‑164.4(a)(4d), such service is taxable at the point of sale.
    • Wireless Center was liable for collecting and remitting sales tax on those sales.
  3. Period II – Stored‑Value Cards / Gift Cards:
    • After September 8, 2017, the Boost Agreement and related communications converted Replenishments into a stored‑value card that could be used for wireless service, ringtones, games, internet access, equipment insurance, and other Boost products.
    • Because a customer could now use a Replenishment without buying telecommunications service, Period II Replenishments did not meet § 105‑164.3(27a)’s definition of prepaid wireless calling service at the time of sale.
    • They instead functioned like gift cards, which, under 17 N.C. Admin. Code 7B .3804, are generally not taxable at initial sale; tax attaches upon redemption, depending on the item purchased.
    • Thus, Wireless Center had no obligation to collect sales tax at point of sale in Period II. Boost had the obligation to collect tax when the stored value was redeemed for taxable Boost services or products.
  4. Standard of Review and Evidence:
    • The Business Court correctly applied de novo review to questions of law (statutory definitions; retailer status) and the whole record test to factual and evidentiary issues (correctness of the assessment).
    • However, it erred by treating the Boost Notice, Sprint Letter, and Whalen Affidavit as not credible or persuasive when reviewing under the whole record test. At that stage, the question is whether OAH’s decision has a rational basis in the evidence, not whether the appellate court would weigh the evidence differently.
    • The Supreme Court held that the ALJ properly considered these documents, even if characterized as hearsay, under N.C.G.S. § 150B‑29 and long‑standing North Carolina administrative law principles allowing use of the most reliable reasonably available evidence.
  5. Presumption of Correctness:
    • Under N.C.G.S. § 105‑241.9(a), the Department’s assessment is presumed correct if based on the “best information available.”
    • Wireless Center did not show that the Department failed to credit taxes it had already remitted on equipment sales during Period I.
    • The Department’s updated assessment, which incorporated Wireless Center’s own reported taxable sales data, satisfied the “best information available” requirement for Period I.
    • However, because the assessment incorrectly treated Period II Replenishments as taxable at sale, that portion must be removed on remand.
  6. Unpreserved Federal Issue: Wireless Center’s Internet Tax Freedom Act argument was raised for the first time in the Supreme Court and was therefore not considered, under N.C. R. App. P. 10(a)(1) and related precedent.

III. Key Doctrinal and Precedential Foundations

A. Definition of “Retailer” and Sale Without Title

The Court’s conclusion that Wireless Center was a “retailer” builds on both the statutory definition and long‑standing case law.

1. Statutory Definition – N.C.G.S. § 105‑164.3(35)

At the relevant time, “retailer” was defined as:

“[A] person engaged in business of making sales at retail, offering to make sales at retail, or soliciting sales at retail of tangible personal property, digital property for storage, use or consumption in this State, or services sourced to this State.”

A “sale” included the “transfer for consideration of title, license to use or consume, or possession of” tangible or digital property or performance of a service. N.C.G.S. § 105‑164.3(36).

By:

  • Offering and consummating transactions in Replenishments,
  • Transferring to customers a license/right to use Boost’s services, and
  • Receiving a commission from Boost,

Wireless Center plainly “engaged in the business of making sales at retail” of digital property and services, even if legal title remained with Boost.

2. Case Law: Retailer Need Not Hold Title

The Court relied on earlier precedents confirming that a business can be a retailer for tax purposes even when it acts essentially as a commission‑based agent:

  • Johnston v. Gill, 224 N.C. 638 (1944):
    • A plaintiff who took orders and measurements for custom clothing and forwarded them to a tailoring company, receiving a commission, was treated as a retailer.
  • Handley Motor Co. v. Wood, 238 N.C. 468 (1953):
    • A party exchanging property on behalf of the titleholder for consideration still undertook a taxable “sale.”

These authorities confirm that for sales‑tax purposes, functionality and economic reality matter more than formal title: an intermediary that markets, sells, and receives consideration for items is a retailer, even if the underlying principal owns and provides the service.

B. Interpretation of “Prepaid Wireless Calling Service”

Central to the Court’s decision is the interpretation of N.C.G.S. § 105‑164.3(27a), which defines “prepaid wireless calling service” as a right that:

  1. “Authorizes the purchase of mobile telecommunications service, either exclusively or in conjunction with other services.”
  2. “Must be paid for in advance.”
  3. “Is sold in predetermined units or dollars whose number or dollar value declines with use and is known on a continuous basis.”

The Court viewed this language as clear and unambiguous under Wiggs v. Edgecombe County, 361 N.C. 318, 322 (2007): if the statute’s words are plain, courts apply their ordinary meaning and avoid rewriting them.

Two interpretive moves are pivotal:

  1. Period I – Replenishments Fit the Definition
    In Period I, the Replenishments:
    • Could only be redeemed for wireless airtime/data on the Sprint network;
    • Were paid for in advance; and
    • Loaded preset “units” into the customer’s Boost account, which then declined as used.
    They therefore squarely met all three elements of § 105‑164.3(27a).
  2. Period II – Broad Redemption Options Break the Definition
    The Boost modification in 2017 allowed a Replenishment to be used for:
    • Wireless voice services,
    • Internet access,
    • Ringtones, games, apps,
    • Equipment insurance, and various other products and services.
    Critically, a customer could redeem a Replenishment for non‑telecommunications purchases only, i.e., without ever obtaining wireless service. In the Court’s reading, such a product at the time of sale is no longer a right that “authorizes the purchase of mobile telecommunications service either exclusively or in conjunction with other services.” It may allow telecom service as one option, but does not necessarily or exclusively (or jointly) authorize such service.

The Department’s contrary reading—that anything which can be used toward wireless service is “prepaid wireless calling service”—would effectively ignore the statutory limit that the right must authorize telecom service “either exclusively or in conjunction with other services.” The Court invoked the canon against surplusage (see Porsh Builders, Inc. v. City of Winston‑Salem, 302 N.C. 550, 556 (1981)) to reject that interpretation: statutes should not be read in ways that render specific phrases meaningless.

C. Tax Timing: Point of Sale vs. Point of Redemption

1. Prepaid Wireless Calling Service – Point of Sale Taxation

Under N.C.G.S. § 105‑164.4(a)(4d), “prepaid telephone calling service is taxable at the point of sale instead of at the point of use.” Because Period I Replenishments were deemed prepaid wireless calling services, they were taxed immediately when sold by Wireless Center, regardless of when or where the airtime was actually used.

2. Gift Cards / Stored‑Value Cards – Tax on Redemption

In contrast, the Tax Act does not define “gift cards,” but the North Carolina Administrative Code provides that:

“Charges for gift certificates or gift cards are not subject to sales and use tax, pursuant to G.S. 105‑164.4, at the time of initial sale for the gift certificate or gift card. The transaction is subject to sales and use taxes applicable to the item as if it were purchased without a gift certificate or gift card.”

17 N.C. Admin. Code 7B .3804

The Court treated Period II Replenishments as gift cards/stored‑value cards because the evidence showed:

  • Boost itself labeled them “stored‑value cards” in the Boost Notice,
  • The Whalen Affidavit described them as functioning like gift cards or stored‑value cards (i.e., an “intangible right” usable for a range of products and services, not limited to telecom), and
  • The consumer could redeem them solely for non‑telecommunications products.

Accordingly, tax does not attach at the initial sale by Wireless Center. Instead, Boost incurs the obligation to collect and remit tax upon redemption, and only to the extent that the stored value is applied to taxable goods or services.

D. Standards of Review and the Role of the Business Court

The case followed the typical North Carolina path for contested tax matters:

  1. Department audit and Notice of Final Determination;
  2. Contested tax case before the Office of Administrative Hearings (OAH) and decision by an ALJ;
  3. Appeal to the North Carolina Business Court acting in an appellate capacity; and
  4. Appeal to the Supreme Court of North Carolina.

Under Holly Ridge Assocs. LLC v. NCDENR, 361 N.C. 531 (2007), and Midrex Techs., Inc. v. NCDOR, 369 N.C. 250 (2016), the Supreme Court reviewed whether the Business Court:

  • Applied the appropriate standard of review; and
  • Applied that standard properly.

The standards are:

  • De novo review for questions of law (e.g., statutory interpretation, definitions of “retailer” and “prepaid wireless calling service”). See Mann Media, Inc. v. Randolph Cnty. Planning Board, 356 N.C. 1 (2002); ACT‑UP Triangle v. Comm’n for Health Servs., 345 N.C. 699 (1997).
  • The whole record test for challenges to factual findings, evidentiary support, or claims that a decision is arbitrary or capricious. Under this test, the court must:
    • Review all the evidence in the record,
    • Consider conflicting evidence and inferences, but
    • Limit itself to deciding whether the agency decision has a rational basis in the evidence, without re‑weighing or substituting its judgment. See In re Greens of Pine Glen Ltd. P’ship, 356 N.C. 642 (2003); In re Appeal of McElwee, 304 N.C. 68 (1981); Thompson v. Wake Cnty. Bd. of Educ., 292 N.C. 406 (1977).

The Supreme Court agreed that the Business Court formally used the correct standards but faulted it for:

  • Effectively re‑weighing the evidence by declaring the Boost Notice and Whalen Affidavit “not credible or persuasive,” rather than asking whether OAH’s reliance on them had a rational evidentiary basis.
  • Failing to integrate statutory analysis of § 105‑164.3(27a) into its review of OAH’s classification of Period II Replenishments.

E. Admissibility and Use of Hearsay‑Type Evidence in Administrative Hearings

The Department argued that the Boost Notice and Whalen Affidavit were uncorroborated hearsay and should not have been relied upon. The Supreme Court rejected that position, emphasizing:

  • Statutory framework: N.C.G.S. § 150B‑29 allows ALJs to admit and consider evidence that might be inadmissible under normal trial rules if it is the most reliable information reasonably available and useful to ascertain the relevant facts.
  • Prior cases:
    • In re McLean Trucking Co., 281 N.C. 375, 387 (1972): Use of industry Blue Book values in tax proceedings, despite hearsay character, was permitted.
    • In re N.C. Fire Ins. Rating Bureau, 275 N.C. 15, 35 (1969): Hearsay projections of future replacement costs could be relied upon in ratemaking.
    • NCDPS v. Ledford, 247 N.C. App. 266, 290 (2016): Recognized the ALJ’s broad discretion to admit probative hearsay in administrative hearings.

Given:

  • Boost’s direct role as the underlying service provider and tax remitter,
  • The lack of more detailed transactional breakdowns in the record, and
  • The sworn nature and specificity of the Whalen Affidavit,

the Supreme Court held that OAH could rationally treat these materials as the best reasonably available evidence of how Replenishments functioned in Period II and how Boost treated them for tax purposes.

F. Presumption of Correctness and “Best Information Available”

N.C.G.S. § 105‑241.9(a) creates a strong presumption:

“A proposed assessment of the Secretary is presumed to be correct.”

But that presumption attaches only if the assessment is “based on the best information available” and only for “tax due from the taxpayer.” If a taxpayer proves that tax is not due—from that taxpayer—because the transaction is exempt or the wrong party was assessed, the presumption can be overcome. See, generally, Olin Mathieson Chemical Corp. v. Johnson, 257 N.C. 666 (1962).

Here:

  • Wireless Center argued that the Department overstated tax due for the audit period because it used gross receipts without fully excluding:
    • Equipment sales for which Wireless Center already paid tax, and
    • Replenishments supposedly taxed through Boost.
  • The ALJ initially agreed that the Department had failed to show the tax was still “owing,” emphasizing the Department’s refusal (citing confidentiality) to confirm whether Boost had paid tax for Period II Replenishments.
  • The Business Court, reviewing the record, concluded:
    • The final Notice of Final Determination (July 7, 2021) showed the Department had adjusted the proposed assessment to account for Wireless Center’s self‑reported taxable sales (i.e., it had credited Wireless Center for tax on equipment and other items already taxed).
    • The assessment therefore reflected the “best information available,” including Wireless Center’s own reported data.
  • The Supreme Court agreed that, as to Period I, Wireless Center failed to rebut the presumption by showing that the Department ignored taxes already remitted.

However, once the Supreme Court held that Period II Replenishments were not taxable at the point of sale, the assessment’s inclusion of those transactions became legally unsustainable. The presumption of correctness cannot preserve an assessment that taxes non‑taxable transactions. Accordingly, the case is remanded for recalculation excluding Period II Replenishments.

G. Preservation of Issues – Internet Tax Freedom Act

Wireless Center attempted, for the first time in the Supreme Court, to argue that taxing Replenishments at the point of sale violated the federal Internet Tax Freedom Act, to the extent Replenishments could be used for internet access services.

The Department objected that this was a new issue not raised before OAH or the Business Court. The Supreme Court agreed and, applying N.C. R. App. P. 10(a)(1) and cases such as M.E. v. T.J., 380 N.C. 539 (2022), declined to consider it. This outcome reinforces a basic procedural rule: new legal theories, including federal preemption or federal statutory defenses, must be presented at the administrative and trial‑court levels to be preserved on appeal.

IV. Complex Concepts Explained in Plain Terms

A. Retailer vs. Agent: Why Wireless Center Qualified as a Retailer

Businesses often try to characterize themselves as mere “agents” or “intermediaries” to avoid tax responsibilities. This case underscores that:

  • If a business:
    • Markets a product,
    • Takes payment from the customer,
    • Facilitates the transfer of a right to use goods or services, and
    • Is compensated (e.g., via commission),
  • Then it is very likely a retailer for sales‑tax purposes, regardless of whether title to the underlying service formally passes through it.

“Retailer” is about function in the transaction, not formal ownership.

B. Prepaid Wireless Calling Service vs. Stored‑Value Card

Think of the difference as follows:

  • Prepaid wireless calling service:
    • You pay up front for a defined amount of calling/data time on a specific network.
    • Your balance is measured in minutes/dollars that go down as you use the service.
    • The right you buy is unambiguously about telecom service (even if it comes with ancillary services).
    • Tax is charged when you buy the prepaid service (point of sale).
  • Stored‑value or gift card:
    • You buy a dollar amount of generic store credit, like a $50 gift card.
    • That credit can be used on many different products or services: some taxable, some not.
    • The seller cannot know, at time of sale, how the credit will ultimately be used.
    • Tax is charged (if at all) when you use the card to buy specific taxable products or services.

In Period I, Replenishments functioned like the first category. In Period II, they functioned like the second.

C. Point of Sale vs. Point of Use Taxation

  • Point of sale taxation:
    • Tax is added as soon as the product or service is purchased, regardless of when the buyer actually uses it.
    • Example: buying a prepaid phone card or prepaid wireless plan with a fixed number of minutes.
  • Point of redemption/use taxation:
    • No tax at the time the stored‑value card is sold.
    • Tax is calculated when the stored value is used to buy a specific item.
    • Example: using a $50 gift card partly on clothes (taxable) and partly on food items that may be taxed at different rates or exempt.

D. Presumption of Correctness and Burden of Proof

In North Carolina, the Department starts with a built‑in advantage:

  • The Department’s assessment is presumed correct.
  • The taxpayer bears the burden to show:
    • That the assessment includes non‑taxable transactions, or
    • That it does not properly credit taxes already paid, or
    • That the Department failed to base its assessment on the “best information available.”

This case shows that:

  • The taxpayer’s own records are often the most critical evidence; and
  • When those records are incomplete or unclear, the taxpayer may fail to overcome the presumption—even if a portion of the Department’s legal theory is later rejected (as with Period II here).

E. Whole Record Test vs. De Novo Review

  • De novo review:
    • The appellate or trial court looks at a legal issue independently, with no deference to the agency’s view.
    • Appropriate for statutory interpretation and pure questions of law.
  • Whole record test:
    • The reviewing court:
      • Examines all evidence presented to the agency, including conflicting evidence;
      • Asks whether the agency’s decision has a rational basis in that evidence; but
      • Does not re‑weigh the evidence or make its own factual findings.
    • Applied to factual determinations and mixed questions where reasonableness of agency’s decision is at issue.

The Supreme Court’s criticism of the Business Court underscores that appellate courts must respect the ALJ’s role as fact‑finder and avoid substituting their own evaluation of witness credibility or documentary persuasiveness.

F. Concurring Opinion: Recordkeeping and Double Taxation Concerns

Justice Barringer’s concurrence, joined by Chief Justice Newby, highlights two practical concerns:

  1. Inadequate Recordkeeping by Wireless Center
    The concurrence emphasizes:
    • Business tax records should be verifiable, meaning independent observers should be able to reach consensus that reported taxes were actually collected and remitted.
    • Wireless Center relied on broad assertions that Boost had paid the taxes, backed only by letters and an affidavit—not by detailed accounting records tracing specific transactions.
    • This level of documentation is inadequate and risky; had the Court ruled differently on the legal classification of Period II Replenishments, Wireless Center’s poor records could have caused serious liability.
    The concurrence cites the Financial Accounting Standards Board (FASB) and GAAP principles of verifiability to underscore best practices.
  2. Risk of Double Taxation and the Department’s Approach
    The concurrence notes:
    • There is concern that the Department might seek to collect the same tax twice—once from Wireless Center and once from Boost—which would be impermissible.
    • Societally, regulators are not presumed infallible; the Department’s approach requires scrutiny, especially when documentation is inadequate.
    • The concurrence hints the Department may be using an “alternative liability”‑like posture: pursuing multiple potentially liable parties where records are insufficient, with the understanding that tax can ultimately only be collected once.
    • Both Wireless Center and Boost must maintain proper records to avoid such entanglements and to ensure only one party pays any given tax.

V. Impact and Future Implications

A. For Wireless and Digital Service Retailers

The opinion has immediate implications for wireless carriers, branded retailers, and other intermediaries selling digital products in North Carolina:

  • Classification matters. How a product actually functions—what the customer can do with it at the time of sale—governs when and by whom tax must be collected.
  • Contract changes can shift tax liability mid‑stream. Here, a 2017 change in the Boost agreement and the associated functionality caused Replenishments to move from:
    • Retailer‑taxable prepaid telecom in Period I, to
    • Provider‑taxable stored‑value/gift cards upon redemption in Period II.
  • Intermediaries cannot easily claim to be non‑retailers. Agency or contractor labels are insufficient where the intermediary advertises, sells, and receives consideration for the product.

B. For Multi‑Use Stored‑Value and Gift Card Programs

The decision reinforces a policy line:

  • Single‑purpose prepaid products that necessarily involve taxable services (like prepaid telecom) are taxed at sale.
  • Multi‑use stored‑value products (gift cards) with indeterminate future use are not taxed until redemption, and tax is imposed only to the extent the value is used to acquire taxable items.

Firms designing loyalty programs, app wallets, or other stored‑value ecosystems should expect North Carolina to:

  • Look closely at the of redemption rights at the time of sale;
  • Classify the product accordingly; and
  • Allocate tax collection responsibility either:
    • To the front‑end retailer (for prepaid telecom‑like products), or
    • To the platform/provider upon redemption (for gift card‑like products).

C. Administrative Law Practice and Business Court Review

For administrative and tax litigators, the opinion:

  • Affirms ALJs’ ability to rely on documentary evidence even if hearsay, where it is the best available;
  • Reiterates that the Business Court, when reviewing OAH, functions as an appellate court and must respect the whole record test, not re‑trying the case; and
  • Encourages more precise preservation of issues (including federal statutory arguments) at the OAH and superior court levels.

D. Potential Legislative or Regulatory Responses

The General Assembly already amended § 105‑164.4 in 2019 to clarify that certain digital property is taxable “regardless of whether the purchaser of the property has a right to use it permanently or to use it without making continued payments.” Although that clarification post‑dates the audit period, the Court notes it as consistent with its reading of the statute.

Given this decision, the legislature or the Department might:

  • Further clarify the treatment of complex digital wallets, platform credits, or mixed‑use prepaid products;
  • Issue guidance to distinguish:
    • Products that must be treated as prepaid telecommunications, from
    • Those that should be treated as stored‑value cards/gift cards; and
    • Reinforce recordkeeping duties for intermediaries and platform providers in multi‑party payment ecosystems.

    E. Open Questions

    Some questions remain open or outside the holding of this case:

    • Internet Tax Freedom Act (ITFA): The Court expressly declined to reach whether taxing a product that can fund internet access at the point of sale conflicts with ITFA. That issue could be litigated in a future case properly preserving the argument.
    • Apportionment and tracking of tax on redemption: Because Boost was “agnostic” about the point of origination of stored‑value, and does not track taxes by which retailer sold the Replenishment, future disputes could arise concerning proof that tax was actually collected and remitted on redemption.
    • Multi‑jurisdictional implications: While this decision is grounded in North Carolina law, its reasoning may influence other states considering similar questions about prepaid wireless products and stored‑value cards.

    VI. Conclusion

    N.C. Dep’t of Revenue v. Wireless Center of NC, Inc. provides a clear and instructive framework for analyzing:

    • When an intermediary is a “retailer” under North Carolina’s Sales and Use Tax Act;
    • How to distinguish prepaid wireless calling services from stored‑value/gift cards based on the scope of redemption rights at the time of sale;
    • Which party bears tax collection and remittance responsibilities, and at what point in the transaction (sale vs. redemption); and
    • How administrative tribunals, the Business Court, and the Supreme Court should handle evidentiary questions and standards of review in contested tax cases.

    Doctrinally, the decision:

    • Reaffirms traditional retailer concepts even for agency‑like arrangements;
    • Anchors the meaning of “prepaid wireless calling service” to the statutory text and rejects expansive interpretations that would erase textual limits;
    • Embraces the gift card framework in 17 N.C. Admin. Code 7B .3804 for multi‑use stored‑value instruments; and
    • Enforces procedural discipline in issue preservation and appellate review of administrative decisions.

    Practically, the case stands as a warning and a guide:

    • A warning that poor recordkeeping can jeopardize a taxpayer’s ability to rebut an assessment and may prompt the Department to pursue multiple parties; and
    • A guide to structuring and documenting prepaid and stored‑value products so that tax responsibilities are clear, consistent with law, and defensible in an audit or contested case.

    By affirming liability for Period I and rejecting liability for Period II, the Court draws a bright line grounded in statutory text: if a prepaid product at the time of sale necessarily authorizes mobile telecommunications service (alone or with other services), it is taxed at the point of sale; if it is a general stored‑value right redeemable for a mix of telecom and non‑telecom goods, it is treated as a gift card and taxed on redemption. That functional characterization is the central precedent emerging from this opinion and is likely to guide North Carolina tax administration in the digital and wireless sectors for years to come.

Case Details

Year: 2025
Court: Supreme Court of North Carolina

Comments