1-5: Cellular devices and services

Effective: October 29, 2021
Revised: October 15, 2025
Approved by: Van Christensen
References: IRS Publication 15-B, IRS Notice 2011-72, The IRS Internal Revenue Manual: 4.23.5

Purpose

This policy outlines the requirements for providing employees with cellular devices and services, payment options, taxability, and coding. This policy is written to comply with IRS regulations and related sections of Administrative Code.

This policy does not cover proper usage, security, or state-provided laptops or allowances for the business use of an employee’s personal computer or laptop.

This policy may not address the specific way to make a payment or the system to use. See policy 1-1: Employee payments general policies and procedures.

Definitions

Agency – Any agency, board, bureau, commission, office, department, or other administrative subunit of the executive branch of state government.

Cellular device – A portable telephone that uses wireless cellular technology to send and receive phone signals, including but not limited to iPhones and smartphones. Tablet devices, such as iPads, are also considered cell phones for purposes of this policy.

Credit – Discounts applied to a bill as part of a promotion or device financing plan. For example, amounts given for a device trade-in.

Designee – The person who has written permission from the division director to act on the division director’s behalf.

Division director – The executive leader of a division within the agency.

GovOps – This refers to the Department of Government Operations.

Vantage Financial – The financial management system used by the state for accounting, budget control, and reporting.

Policy

A – Cellular devices and services may be provided for business reasons

1 – Agencies may pay for employee cellular devices and services if they are primarily provided for noncompensatory business reasons.

1a –For example, the agency needs to be able to contact the employee at all times for work-related emergencies, or the employee must be available to speak with clients when away from the office.

1b – Agencies may only pay for cellular device coverage that is reasonably related to the business needs. For example, agencies should pay for basic coverage and not international coverage because most employees and agencies don’t have a business need for international coverage.

2 – Agencies must not provide cellular devices and service for compensatory reasons.

3 – Employees may use state-paid cellular devices and services for both business and personal use as long as the cellular devices and services are provided primarily for noncompensatory business reasons.

3a –Employees do not need to keep a record of business use.

B – Cellular device and service agreements are required

1 – Agencies and employees must complete an agreement to document:

the business reason;
what is provided (device and service or just service);
how the cellular device and service will be provided and used;
how the cellular device and services will be paid;
the actual cost, net of any credits, of the device and/or service if the employee is using their own cellular device; and
the amount of any reimbursement or allowance.

2 – The agreement must be approved by the employee, their supervisor, and the division director (or agency equivalent) or designee.

3 – New agreements must be completed every two years or when business needs change or an employee’s plan changes.

C – Agencies may choose the method of payment

1 – Agencies may determine the method of payment for providing employees with cellular devices and services.

2 – Agencies may pay for employee cellular devices and services directly to the state contracted vendor.

3 – Agencies may reimburse the employee through Vantage Financial.

3a –Employees may be reimbursed the actual cost of cellular devices up to $1,040 every two years.

3b – Employees may be reimbursed the actual cost of cellular services up to the state contracted amount.

4 – Agencies may pay employees an allowance to cover both the cellular device and services through payroll.

4a –Employees may receive a maximum device allowance of $20 per pay period ($43 per month over two years) not to exceed the employee’s actual device costs, net of any credits. The maximum amount is based on the maximum device amount in C3a.

4b –Employees may receive a maximum service allowance of $25 per pay period ($54 per month) not to exceed the employee’s actual costs of cellular services, net of any credits. The maximum allowance is based on the current state contracted rate.

4c –The maximum allowance for both cellular devices and services is $45 per pay period.

5 –Payments for cellular devices and services must never exceed the employee’s actual costs or the state contracted rate, whichever is lower.

D – Cellular devices and services are nontaxable

1 – Payments for cellular devices and services are nontaxable if provided primarily for noncompensatory business purposes.

E – Payment codes and wage types must be properly entered

1 – Purchases of cellular devices are coded to object code 6189.

2 – Employee reimbursements for cellular service are coded to object code 6126.

3 – Employee allowances for cellular service are paid through wage type 1182.

See DTS 5000-0003 for more information on device usage and security policies.