Department of Taxation and Finance


Skip to Content

Login   Subscribe   Site Index   Contact Us   Google Translate™

NYS Comptroller


Taxpayers' Guide to State and Local Audits

Department of Taxation and Finance
Controls Over the Collection of the Public Safety Communications Surcharge

Issued: October 04, 2017
Link to full audit report 2016-S-84
Link to 90-Day Response

To determine if the Department of Taxation and Finance (Department) has adequate controls to ensure that all wireless telecommunication service providers (Providers) and devices subject to the Public Safety Communications Surcharge (Surcharge) are being identified; if Providers are billing, collecting, and remitting the appropriate amount of Surcharges to which the State is entitled; and if the Department acquires the names and contact information for, and appropriately pursues payment from, customers who have not paid the Surcharge to Providers. The audit covered the period from April 1, 2014 through January 31, 2017.

The Department administers more than 40 State and local taxes and fees, including the Surcharge, which is imposed on wireless communications services provided to customers whose primary place of use is within New York State. Surcharge revenue is used to: support emergency operations, make improvements to 911 call centers, and enhance the capabilities of first responders at both the local level and the Division of State Police. Revenue is also used to fund Department of Homeland Security and Emergency Services grants to counties to meet the demands of new technology and implement required upgrades to call centers, such as the federal mandate for Next Generation 911 systems.

The current Surcharge applies to any two-way voice or data service that is interconnected with the public switched telephone network (i.e., landline) or otherwise provides access to emergency 911 communications, with the exception of prepaid wireless telephone services. The Surcharge is levied at a rate of $1.20 per device per month. As part of the 2017-2018 State budget, the Legislature added a surcharge of $0.90 to be imposed on prepaid cell phones at the point of sale. This surcharge becomes effective in December 2017. Examples of devices subject to the Surcharge include cell phones, two-way beepers, and tablets. A separate Enhanced 911 (E-911) Surcharge is imposed at the county level on a broader range of devices and services, but not all counties charge a separate surcharge. These funds are paid directly to the counties, not the State, and are not included in the scope of this audit. The Department responded it is in the process of developing new internal procedures and guidance to inform vendors about their new collection and reporting responsibilities, which will take effect December 1, 2017.

Each Provider that supplies qualifying wireless communications services in New York State is required to act as a State collection agent for the Surcharge. Providers are responsible for adding the Surcharge to customers’ monthly bills and sending collected Surcharges to the Department’s Tax Processing Center quarterly. Providers use a Public Safety Communication Surcharge (WCS-1) tax return to report the amounts collected and the amount of administrative allowance retained. Both the return and Surcharges must be remitted by March 15, June 15, September 15, and December 15 for the three preceding months. In addition, Providers are required to maintain a list of customers who refuse to pay the Surcharge, along with their contact information and the cumulative amount of Surcharge unpaid, and to provide this information to the Department upon request. Providers can retain an administrative allowance equal to 1.166 percent of Surcharges collected to cover their administrative costs, contingent on their timely reporting and remitting of Surcharges.

Seventeen Providers account for the majority of wireless services (about 98 percent) in New York State, with the remaining 2 percent comprised of hundreds of smaller Providers. In fiscal years 2014 and 2015, Providers remitted Surcharges totaling $183.9 million and $185.3 million, respectively, to the Department, and retained administration allowances totaling about $2.2 million annually during our audit period. 

Key Findings

  • The Department has not established policies and systems to sufficiently ensure that Providers comply with the Tax Law and that the State receives all monies to which it is entitled. In particular, the Department does not have adequate controls to ensure that all eligible Providers supplying services in New York State collect, report, and remit the Surcharges for all eligible devices to the Department.
  • The Department’s database of Providers is incomplete, as it is based only on WCS-1 returns received. We compiled a list of Providers that remit the County E-911 Surcharge from the 41 counties that impose this charge. We compared this list to the Department’s list of Providers from which it received Surcharge revenue during the audit period. Of 241 Providers identified through the counties, four were not on the Department’s list. For the remaining 237 Providers, we could not readily discern if the services provided were wireless and therefore also subject to the state Surcharge.
  • Providers are required to maintain a list of any customers who refuse to pay the Surcharge, along with their contact information and the cumulative amount of Surcharge unpaid, and to provide this information to the Department upon request. However, the Department has not requested customer information from the Providers and thus has limited knowledge of the fiscal impact related to non-compliance.

Key Recommendations

  • Implement effective internal controls over the administration of Surcharges to ensure Providers are collecting and remitting the amounts to which the State is entitled, including (but not limited to):
    • Routinely analyzing WCS-1 returns for anomalies, investigating significant fluctuations, and following through with corrective actions as appropriate;
    • Performing routine audits on the accuracy and completeness of remittances reported on WCS-1 tax returns;
    • Monitoring Providers’ WCS-1 returns for timeliness, for penalties and interest owed to the State for late filings, and recovering any improper administrative allowances; and
    • Requesting the names and contact information of customers who have not paid the Surcharge to determine if the fiscal risk is material.
  • Establish proactive methods of communication with Providers to ensure they are aware of current Surcharge collection and remittance requirements and that their customer service policies are consistent and compliant with the Tax Law.

Other Related Audits/Reports of Interest

Division of State Police: Cellular Surcharge Revenues (2001-S-27)
Department of State: Oversight of the Enhanced Wireless 911 Program (2005-S-68)

State Government Accountability Contact Information:
Audit Director: Steve Goss
Phone: (518) 474-3271; Email:
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236