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HB 3480

Relating to transportation.

2025 Regular Session

HB 3480 narrows tax on prepaid phone recharges: from Jan 1, 2026, only recharges tied to a tangible preloaded item (phone/card) are taxed; digital recharges become non-taxable.

In committee upon adjournment.
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WeVote Research Nonpartisan
Bill Summary · HB 3480

Summary — HB 3480 (Will Guzzardi) — Relating to transportation (tax changes)

Status: Introduced Feb 18, 2025; filed Feb 27, 2025. Last recorded status: In committee upon adjournment (June 28, 2025). Referred to multiple committees (Rules, Revenue & Finance, Tax Policy subcommittee, State Affairs). Companion bills: HB 1715, HB 3430.

Purpose / Intent

HB 3480 amends several Illinois tax statutes to change how “prepaid telephone calling arrangements” are defined for taxation. The bill narrows the circumstances under which prepaid phone/service recharges are subject to state sales/use taxes — generally limiting taxation to prepaid arrangements purchased together with a tangible, preloaded item (for example, a preloaded phone or calling card).

Key provisions

  • Amends these statutes: Use Tax Act; Service Use Tax Act; Service Occupation Tax Act; Retailers' Occupation Tax Act; Telecommunications Excise Tax Act (multiple ILCS sections cited, e.g., 35 ILCS 105/3, 110/3, 115/3, 120/2, and 630/2).

  • Defines and modifies “prepaid telephone calling arrangements”:

    • Previously (through Dec 31, 2025) prepaid arrangements were taxable regardless of the form in which they were embodied or transmitted.
    • Effective Jan 1, 2026, prepaid telephone calling arrangements (and recharges) are taxable under the amended Acts only if the telephone/telecommunications services and any recharge are obtained through the purchase of a preloaded phone, calling card, or other tangible personal property.
    • “Recharge” is defined to mean the purchase of additional prepaid telephone or telecommunications services, whether or not a new access number or authorization code is issued.
    • Recharges that are not purchased through acquiring a tangible preloaded item are excluded from the definition (and thus not taxable under these Acts beginning Jan 1, 2026).
    • The bill also clarifies that arrangements that operate as a credit on an existing subscription account are not “prepaid telephone calling arrangements.”

  • Also includes language about inclusion of leased tangible personal property in the Use Tax Act effective Jan 1, 2025 (reflecting related amendments already in statute).

Who is affected

  • Consumers: People who buy prepaid phone services via purely electronic/digital recharges (not tied to a physical preloaded product) likely would not pay the state sales/use tax on those recharges after Jan 1, 2026.
  • Retailers & sellers: Physical retailers selling preloaded phones, calling cards, or other tangible items that include prepaid service would continue to have those sales/recharges taxed.
  • Telecom service providers and digital merchants: Changes billing/tax treatment for digital recharges and may affect how offers/purchases are structured and how tax is collected.
  • State and local tax administration: Potential revenue and compliance impacts related to narrowing the taxable base for prepaid recharges.

Timing & procedural notes

  • Effective date for the main change limiting taxation of prepaid recharges: January 1, 2026.
  • The bill was introduced and referred to multiple committees in early 2025 and remained in committee upon adjournment (June 28, 2025).
  • Further legislative action (committee votes, floor consideration) would be required for enactment.

Potential impacts (practical)

  • Likely reduces taxable transactions for non‑tangible/digital prepaid recharges, shifting tax incidence toward purchases tied to tangible preloaded items.
  • Could lower state and local tax receipts from prepaid telecommunications sales unless collection rules or other taxes are applied.
  • May require administrative updates by sellers and tax authorities to distinguish taxable vs. non-taxable recharges beginning Jan 1, 2026.

Compiled from official sources — confirm details with the bill’s official record.

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