HomeMy WebLinkAbout2008/07/23 Item 1
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CITY COUNCIL
AGENDA STATEMENT
~\~ CITY OF
~ (HULA VISTA
ITEM TITLE:
SUBMITTED BY:
REYIEWED BY:
JUL Y 23, 2008 Item
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA ORDERING THE SUBMISSION TO THE
QUALIFIED ELECTORS OF THE CITY OF A MEASURE
RELATING TO TI-IE CITY'S TELECOMMUNICATIONS USERS'
TAX AT THE SPECIAL MUNICIPAL ELECTION TO BE HELD
ON TUESDAY, NOVEMBER 4, 2008; DECLARING TI-IE
EXISTENCE OF AN EMERGENCY NECESSITATING SUCH
ACTION; AND DIRECTING THE CITY ATTORNEY TO
PREPARE AN IMPARTIAL ANALYSIS OF THE MEASURE
(UNANIMOUS VOTE REQUIRED)
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA APPROPRIATING $105,000 FROM THE
AVAILABLE BALANCE OF THE GENERAL FUND TO THE
CITY CLERK'S AND NON-DEPARTMENTAL BUDGET TO
COVER ANTICIPATED COSTS AND EXPENSES RELATED TO
ELECTION COSTS, AND PRINTING AND MAILING COSTS
(4/5THS VOTE REQUIRED)
DIRECTOR OF FINANC /TR:11!7;fl1(
CITY MANAGER 'f'-/..J.----'
4/5THS VOTE: YES 0 NO D
SUMMARY
Chula Vista's Utility Users' Tax (UUT) was adopted in 1970 as a means to help fund public
services and capital improvement projects through the City's General Fund. The City receives
UUT based on the usage of natural gas, electricity and telecommunications. In fiscal year 2006-
07, the total UUT reccived was approximately $7.0 million, which represents 4.3% of General
Fund revenues. The CUlTcnt rates charged are .00919 per therm, .0025 per kilowatt, and 5% on
telephone. There are over 150 cities in California with a Utility Users Tax. City staff is
recommending that the UUT on telecommunications be updated. The resolutions presented for
the Council's consideration would (i) approve an ordinance to be submitted to the voters for this
purpose; and (ii) appropriate the funds necessary to cover the related costs.
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ENVIRONMENTAL REVIEW
The Environmental Review Coordinator has reviewed the proposed activity for compliance with
the California Environmental Quality Act (CEQA) and has determined that the activity of calling
atld giving notice of a special election for the purpose of updating the Utility Users Tax (UTT)
on telecommunications is not a "Project" as defined under Section 15378 of thc State CEQA
Guidelines because it will not result in a physical change to the environment; therefore, pursuant
to Section 15060(e)(3) of the State CEQA Guidelines the actions proposcd are not subject to
CEQA.
RECOMMENDATION
That Council adopts the resolutions.
BOARDS/COMMISSION RECOMMENDA nON
Not applicable.
DISCUSSION
In 1970, the City first adopted a UUT that is applied to usage of natural gas, electricity and
telecommunications. The City's UUT ordinance (Chula Vista Municipal Code Chapter 3.44) is
outdated as it applies to telecommunications and needs to be amended to ref1ect recent changes
in Federal tax law and to modernize the definition of telecommunications so that it is technology
neutral. Presently, the City's UUT is imposed at a rate of 5% of the charges billcd for telephone
communications services. No changes are proposed to the ordinance for natural gas and
electricity.
Thc City's tax has been applied historically in a similar manner as the application of the Federal
Excise Tax (FET) upon local and long distance telecommunication services as the Internal
Revenue Service (IRS) interprets the FET. The FET statute defines long distance or "toll" calls
as those for which charges varied according to both the elapsed time of the call and the distance
between the persons on the call. Today, long distance calls are based on time only, or in the case
of "cellular or wirclcss" (Mobile) calls, they are bascd on a f1at monthly rate.
On May 25, 2006, the IRS issued a Noticc that it intended to stop applying the FET to nearly all
telephone communication services, except local exchange services, which leaves only
approximately 25% of all the telecommunication services as federally taxable. This IRS action
camc following many federal court losses involving the outdated definition of "toll telcphone
service" (or long distance) contail1ed in the FET. Like the vast majority of California cities that
have a UUT ordinance, Chula Vista's UUT ordinance refers to the FET and some of its many
exemptions, in response to the telephone companies rcqucst of many years ago to do so to
achicve administrative ease. The Treasury Department's May 25th Notice reversed its prior
Revenue Rulings and interprctation of the FET. In addition, legislation (H.R. 5793) has been
introduced in the United States Congress, which would impose a five-year moratorium on new
local wireless taxes, and could limit the ability of the City to respond to possible future adverse
court rulings regarding the City's existing utility users' tax on Mobile communications.
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The proposed Ordinance is an updated version of the telecommunications portion of the City's
existing UUT ordinance, It is intended to replace those p0l1ions of the existing ordinance that
apply to telecommunications. The new ordinance would modernize the telecommunications tax
definitions and othcr provisions by, among other things, eliminating the reference to the FET and
broadening the scope of telecommunication services that already tax intrastate services but will
now tax: interstate, and international telecommunication services; private communication
services (e.g., T-l lines); paging; 'and VolP and toll free numbers. Importantly, thc new
definitions are technology-neutral and anticipate additional changes in technology, retlecting the
modern use of telecommunications. Telecommunication services do not inelude cable or video
programming services that are subject to a cable or video service ti'anchise fee.
This updating of definitions closes "technology" loopholes, and ensures that all taxpayers will bc
treated equitably, regardless of the technology used. This more equitable application broadens
thc tax base and allows the City to reduce the tax rate on current taxpayers that makc up
approximately 80% of all Mobile telecommunication customers with no net loss of revenue
anticipated. The loss in revenues related to the reduction of the tax rate of 5% to 4.75% for
intrastate services is anticipated to be recovered through the 20% of Mobile customers who
currently do not pay the tax and the application of the reduced tax rate to interstate and
international calls.
The updated ordinance proposes to apply the tax for the first time to interstate and international
services for Mobile and land line telecommunication customers. Other cities that have
eliminated this loophole have experienced a small increase ranging from 5% to 10% in UUT
revenues under the modernized definitions. The increase in revenue resulti'ng from the
broadening of the tax base to include international and interstate has been offset by the reduction
in the tax rates also ranging from 5% to 10%.
The language of the proposed Ordinance follows "model" definitions that are widely used in
other states and by California cities that wish to modernize their ordinance. It is also written
with the input of the telecommunication companies and is intended to standardize the language
for uniform applications so that the companies are elear as to their responsibilities in collecting
the tax. This will ease the burden for the telecommunication companies and ensure that within
municipal authority, UUT is applied as fairly and consistently as possible to all applicable.
service providers as technology continues to evolve. Unifol111ity can otTer protection against
preemptive state or federal law attacks on individual ordinances, and will provide for centralized
payment methods and coordinated audits.
The total tIscal year 2006/07 UUT
revenue received was approximately
$7.0 million for the General Fund,
representing approximately 4.3% of total
General Fund revenue. The
telecommunications related portion of
thc lJUT revenue is approximately $4.6
million. An estimated 75% or $3.4
million of these revenues are derived
Electric
30%
Wired
25%
Wireless
75%
$3.4M
Telecom m
65%
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JULY 23, 2008, Item L
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from Mobile telecommunications. The loss of these revenues would have a substantial impact
on the City's ability to provide essential services, ineluding public safety.
Over twcnty cities/counties throughout the state havc rcccntly gone to ballot and successfully
adopted a modern UUT ordinance (see Attachment A - Proposcd Ordinance) with only one
tailing to pass their ballot measurc. Information about each city's ballot rcsults is provided in
Attachment B. Recently in June 2008, four more cities and 1 county successfully passed their
UUT baJlotmeasures.
The information below summarizes the data from Attachment B which ineludes thc results
through the .Junc 2008 election:
o Number of Cities/Counties that went to Ballot
o Number of Successful UUT Elections
. Number of Cities/Counties that Reduced Rate
. Number of Cities/Counties that Maintained Rate
o Number of Cities/Countics that lncrcased Ratc
o Number of Cities/Counties that Failed (New Tax)
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An estimated twenty more cities are scheduled to go to ballot in November as there is predicted
to be a historic voter turnout for the presidential election. UUT cities also view this coming
election as a "window of opportunity" to updatc their ordinances before adverse judicial
decisions might be rendered. The following is a brief summary of the proposed
amendments/updates to the City's UUT relative to telecommunication services:
o Reduces the current tax rate on telecommunications and video services from 5% to 4.75% for
approximately 80% of Chula Vista's Mobile telecommunications customers and all land line
customcrs.
o Applies the reduced tax rate to interstate and international calls for "cellular," (Mobile) and
land line customers so that all taxpayers are treated the same.
. Includes a modern, ti.mctional definition of telecommunication services that is technology-
neutral, and now adds or spccifically identifies thc following services: interstate and
international calls; Mobile; VoIP, paging, private communication services (e.g., T-I lines for
providing data, video and voice serviccs), toll free and public service numbers.
o Incorporates detinitions of "ancillary telecommunication services" that arc commonly
recognized by the industry as being part of such services.
o Anticipates the possibility of new technologies and services to provide telecommunication
and video services, so that rates and revenues are stabilized and all taxpayers will be treated
the samc.
o Provides other administrative tools for addressing telecommunication taxation issues
ineluding administrativc rulings and sourcing, bundling and nexus guidelines.
o Updates the local Municipal Code to be consistent with current Federal and State laws and
makcs Chula Vista's ordinance consistent with the direction of othcr Califol11ia cities with
UUT.
o The UUT tax does not apply to:
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o Email or other intcrnet services provided by internet servicc providers (lSPs)
o Free Wi-PI
o Current federal laws prohibits taxation of intcrnet services, including broadband
services used for internet serviccs.
o Telecommunication services do not include cable or video programming services
that are subject to a cable or video service fi'anchise fee.
The City has attempted to collect UUT from telecommunication companies who currently do not
pay. Failure to modernize the UUT ordinance could perpetuate an inequity that encourages other
providers who currently are paying to cease collections resulting in a loss of $3.4 million related
to Mobile communication. Eventually with the continued technological changes and migration
to Mobile the_City is at risk of losing 100% of UUT rcvenues representing up to approximately
$4.6 million in the General Fund whieh would have a substantial impact on the City's ability to
maintain CUlTent programs and provide essential services, including public safety.
Stat I recommends that the City Council adopt the attachcd Rcsolution calling for a measure to be
placed on thc November 2008 ballot. This resolution requires a unanimous votc of the City
Council. In order to pass, the measure would need to be approved by a simple majority of
voters. The matter could also be addressed as a "special tax" which would require approval by
2/3rds of the votcrs to pass. If approved by voters the earliest implementation date will be
February 1,2009
To ensure that residents of the City are aware of the ballot measure receive factual and accurate
information about the measure, staff proposes to conduct an informational program with respect
to the measure. In order to minimize costs, it is proposed to use internal resources, rather than a
consultant, to conduct' the program. The infol1national program will consist primarily of
speaking to various civic organizations in the city and sending out informational brochures to the
registered voters of Chula Vista. These informational brochures will also be made available at
the public counters and facilities of the City.
DECISION MAKER CONFLiCT
Staff has reviewed the decision contemplated by this action and has determined that it is not site
specific and consequently the 500 foot rule found in California Code of Regulations section
18704.2(a)(1) is not applicable to this decision.
FISCAL IMPACT
The total fiscal year 2006/07 UUT revenue received was approximately $7.0 million for the
General Fund, representing approximately 4.3% of total General Fund revenue. The
telecommunications related portion of the UUT revenue is approximately $4.6 million. At
immcdiatc risk is 100% or $3.4 million of existing Mobile telecommunication revenucs. In the
long term, the remaining telecommunications revenues are at risk due to continued changes in
technology and the continued migration limn wired to Mobile telecommunications. The loss of
thesc revenues would have a substantial impact on the City's ability to provide essential services,
ineluding public safety.
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The updating of definitions eloses "technology" loopholes, and ensures that all taxpayers wiIl be
treated equitably, regardless of the technology used. This more equitable application broadens
the tax base and aIlows the City to reduce the tax rate on current taxpayers that make up
approximately 80% of all Mobile telecommunication customers with no net loss of revenue
anticipated. The reduction from a tax rate of 5% to 4.75% for intrastate services is anticipated to
be recovered through the application of the tax to interstate and international caIls, and the 20%
of Mobile customers who currently do not pay the tax. Other cities who have eliminated this
loophole have experienced a small increase ranging from 5% to 10% in their revenues under the
modernized definition. The increase has bccn otlset by the reduction in the tax rates also ranging
fi'om 5% to 10%. With the reduction of the tax rate and the broadening of the tax base to now
tax interstate and international, the exact net impact to the General Fund in unknown due to
unpredictable calling pattems of the consumer and evolving technology. The obiective of the
ballot measure is to secure the existing UUT revenue base on an ongoing basis in order to
preserve municipal services.
Due to a significant, and unexpected, decline in revenue growth over the past] 8 months, the
City has undergone significant budgetary cuts in order to balance the Fiscal Y car 2008-09
general fund operating budget, which assumes the continued collection of Utility Users Tax. Thc
Five Year Forecast projects a $3.1 million budgetary gap in fiscal year 2009-]0, which would be
exacerbated by any loss in UUT revenue.
Approval of the appropriation will impact General Fund reserves by $105,000. In an effmi to
minimize costs, staff proposes to manage the informational program internally and would request
an appropriation of $105,000 to cover the election costs (City Clerk $35,000) and printing and
mailing costs (Non-Departmental $70,000).
ATTACHMENTS
Attachment A Proposed Ordinance
Attachment B Election Results trom Other Cities
Prepared by: Phillip Davis, Assistant D;,'ector. Finance Department
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ORDINANCE NO.
AN ORDINANCE OF nm CITY OF CHULA VISTA ADDING CHAI'TER
3.42 TO TITLE 3 OF THE CHULA VISTA MUNICIPAL CODE
REGARDING A TELECOMMUNICATION USERS' TAX
THE PEOPLE OF THE CITY OF CHULA VISTA DO ORDAIN AS FOLLOWS:
SECTION 1: Chapter 3.42 is hereby added to Title 3 of the Chula Vista Municipal
Code, and it shall read as follows:
Chapter 3.42
TELECOMMUNICATION USlcRS' TAX
3.42.010 Definitions.
3.42.020 Constitutional, Statutory, and Other Exemptions.
3.42.030 Exemptions - Scnior Citizens
3.42.040 Telecommunication Users' Tax.
3.42.050 Bundling Taxable Items with Non-taxable Itcms.
3.42.060 Substantial Nexus / Minimum Contacts.
3.42.070 Dul)' to collcct--Procedures.
3.42.080 Collection Penalties - Servicc Suppliers.
3.42.090 Actions to Collect.
3.42.100 Deficiency Dctermination and Assessment - Tax Application Errors.
3.42.1 to Administrative Remedy - Non-Paying Service Users.
3.42.120 Additional powers and duties of the Tax Administrator.
3.42.130 Rccords.
3.42.140 Refunds.
3.42.150 Appeals.
3.42.160 Noticc No Injunction/Writ of Mandate.
3.42.170 Noticc of Changes to Ordinance.
3.42.180 Effect of State and Federal Rcfcrence/Authorization.
3.42.190 Indepcndent Audit of Tax Collcction, Exemption, Remittance, and
Expenditure.
3.42.200 Interaction with Prior Tax.
3.42.210 Rcmedics Cumulativc.
3.42.220 Violations dccmed infractions.
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3.42.010 Definitions.
The following words and phrases whenever used in this Chapter shall be construed as
defined in this section.
(a) "Ancillary telecommunication services means services that arc associated with or
incidental to the provision, use or enjoyment of telecommunications services, including but
not limited to the following services:
(I) "Conference bridging service" means an ancillary service that links two or
more participants of an audio or video conference call and may include the
provision of a telephone number. "Conference bridging service" docs not includc
the telecommunications services used to reach thc conference bridge.
(2) "Detailed tclecommunieations billing service" means an ancillary service of
separately stating information pertaining to individual calls on a customcr's billing
statement.
(3) "Directory assistance" means an ancillary servIce of providing telephone
number information, and/or address information.
(4) "Vertical service" means an ancillary service that is offered in connection with
one or more telecommunications services, which offers advanced calling features
that allow customers to identify callers and to manage multiple calls and call
connections, ineluding conference bridging services.
(5) "Voice mail service" means an ancillary service that enables the customer to
store, send or receive recorded messages. "V oicemail service" docs not inelude
any vertical serviccs that the customer may be required to have in order to utilize
the voice mail service.
(b) "Billing Address" shall mean the mailing address of the service user where the service
supplier submits invoices or bills for payment by the customer.
(c) "City" shall mcan the City ofChula Vista.
(d) "Mobile Telecommunications Service" has the meaning and usage as set forth in the
Mobile Telecommunications Sourcing Act (4 U.S.c. Section 124) and the regulations
thereunder.
(c) "Month" shall mean a .calendar month.
(I) "Paging service" means a "telecommunications service" that provides transmission of
coded radio signals for the purpose of activating specilic pagers; such transmissions may
include messages and/or sounds.
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(g) "Person" shall mean, without limitation, any natural individual, firm, trust, common
law trust, estate, partnership of any kind, association, syndicate, elub, joint stock company,
joint venture, limited liability company, corporation (including foreign, domcstic, and non-
prollt), municipal district or municipal corporation (other than the City) cooperativc,
receiver, trustee, guardian, or other represcntativc appointed by order of any court.
(h) "Place of Primary Use" means the street address reprcsentative of where the customcr's
use of the telecommunications scrvice primarily occurs, which must be the residential street
address or the primary business strcet address of the customer.
(i) "Post-paid telecommunication service" means the telecommunication scrvice obtained
by making a payment on a telccommunieation-by-telecommunication basis cither through
thc use of a credit card or paymcnt mechanism such as a bank card, travel card, credit card,
or debit card, or by charge made to a service number which is not associated with the
origination or termination of the telecommunication service.
(j) "Prepaid telecommunication service" means the right to access telecommunication
services, which must be paid for in advance and which enables the origination of
telecommunications using an aeecss number or authorization code, whether manually or
electronically dialed, and that is sold in predetermined units or dollars of which the number
declines with use in a known amount.
(k) "Private telecommunication service" means a telecommunication service that entitles
the customer to exclusive or priority use of a telecommunications channel or group of
channels bctween or among tcrmination points, regardless of the manncr in which such
channel or channcls are connectcd, and includcs switching capacity, extension lincs,
stations, and any other associated services that arc provided in connection with the use of
such channel or channels. A telecommunications channel is a physical or virtual path of
telecommunications over which signals are transmitted between or among customer
channel termination points (i.e., thc location whcre the customer either inputs or rcceives
the telecommunications).
(I) "Service Address" means either:
(I) The location of the service user's telecommunication equipment 11'om whieh the
telecommunication originates or terminates, regardless of where the
telecommunication is billed or paid; or,
(2) If the location in subsection (1) of this definition is unknown (e.g., mobilc
telecommunications service or Voll' service), the servicc addrcss means the
location of the service uscr's place of primary use.
(3) For prepaid telecommunication servicc, "service address" means the location
associated with the service number.
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(m) "Service Supplier" shall mean any entity or person, ineluding the City, that provides
telecommunication service to a user of such service within the City.
(n) "Service User" shall mean a person required to pay a tax imposed under the provisions
of this Chapter.
(0) "State" shall mean the State of California.
(p) "Streamlined Sales and Use Tax Agreement" shall mean the multi-state agreement
commonly known and rererred to as the Streamlined Sales and Use Tax Agreement, and as
it is amended from time to time.
(q) "Tax Administrator" means the Finance Director of the City or his or her designee.
(r) "Telecommunications services" means the transmission, conveyance, or routing of
voice, data, audio, video, or any other information or signals to a point, or between or
among points, whatever the technology used. The term "telecommunications services"
ineludes such transmission, conveyance, or routing in which computer processing
applications arc used to act on the form, code or protocol of the content for purposes of
transmission, conveyance or routing without regard (0 whether such scrvices are referred to
as voice over internet protocol (VoIl') services or arc e1assified by the Federal
Telecommunications Commission as enhanced or value added, and ineludes video and/or
data services that is functionally intcgratcd with "telecommunication scrvices.
'Telecommunications services" inelude, but arc not limited to the following services,
regardlcss of the manner or basis on which such services arc calculated or billed: intrastate,
interstate, and international telecommunication services; ancillary telecommunication
services; mobile telecommunications service; pre-paid telecommunication service; post-
paid telecommunication service; private telecommunication service; paging service; 800
service (or any other toll-free numbers designated by the Federal Telecommunications
Commission); 900 scrvicc (or any othcr similar numbers designated by the Federal
Telecommunications Commission for services whercby subscribers call in to pre-recorded
or live service). "Telecommunication services" does not include cable or video
programming services that are subject to a cable or video service franchise fee.
(s) "VoIl''' (voice over internet protocol) means the digital process of making and
receiving real-time voice transmissions over any Internet Protocol network.
(t) "800 service" means a "telecommunications service" that allows a caller to dial a toll-
free number without incurring a charge for the call. The service is typically marketed
under the name "800," "855," "866," "877," and "888" toll-fi'ee calling, and any
subsequent numbers designated by the Federal Communications Commission.
(u) "900 service" means an inbound toll "telecommunications service" purchased by a
subscriber that allows the subscriber's customers to call in to the subscriber's prerecorded
announcement or live service. "900 serviec" docs not inelude the charge for: collection
services provided by the seller of the "telecommunications services" to the subscriber, or
service or product sold by the subscriber to the subscriber's customer. The service is
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typically marketed under the name "900" service, and any subscquent numbers
designated by the Federal Communications Commission.
3.42.020 Constitutional, statutory, and other exemptions.
(a) Nothing in this Chapter shall be construed as imposing a tax upon any person or service
when the imposition of such tax upon such person or service would be in violation of a
federal or state statute, the Constitution of the United States or the Constitution of the State.
(b) Any service user that is exempt from the tax imposed by this Chapter pursuant to
subsection (a) of this section shall file an application with the Tax Administrator for an
excmption; providcd, howevcr, this requirement shall not apply to a service user that is a
state or federal agency or subdivision with a commonly recognized name for such service.
Said application shall be made upon a form approvcd by thc Tax Administrator and shall
state those facts, declared undcr penalty of perjury, which qualify the applicant for an
exemption, and shall include the names of all telecommunication service suppliers serving
that service user. If deemed exempt by the Tax Administrator, such service user shall give
the Tax Administrator timely written notice of any change in telecommunication service
suppliers so that the Tax Administrator can properly norify the new telecommunication
scrvice supplier of the service user's tax exempt status. A service user that fails to comply
with this scction shall not be entitlcd to a refund of tclecommunication users' taxes
collccted and remitted to the Tax Administrator It'om shch service user as a rcsult of such
noncompliancc. The decision of the Tax Administrator regarding an application may be
appealed pursuant to Section 3.42.150 of this Chapter. Filing an application with the Tax
Administrator and appeal to the City Administrator pursuant to Section 3.42.150 of this
Chapter is a prerequisitc to a suit thereon.
(c) Thc City Council may, by resolution, cstablish one or more classes of persons or onc or
more classes of utility service othcrwisc subject to paymcnt of a tax imposed by this
Chaptcr and provide that such classes of persons or service shall be cxempt, in whole or in
part from such tax for a spccified period oftimc.
3.42.030 Exemptions - Senior citizens.
Any individual who qualifies for an exemption under Scction 3.44.021 of Chapter 3.44
shall be excmpt from the tax imposed by Section 3.42.040. The procedures for obtaining
such an excmption shall be followed as sct forth in Section 3.44.021.
3.42.040 Telecommunication Users' Tax.
(a). Thcrc is hereby imposed a tax upon every person in the City using telecommunication
services. The tax imposcd by this section shall be at the rate of four and 75/1 00 percent
(4.75 %) of the chargcs madc for such serviccs and shall be collected from the service user
by the telecommunication services supplier or its billing agent. There is a rcbuttable
presumption that telecommunication services, which are billed to a billing or scrviee
address in the City, are used, in whole or in pm1, within the City's boundaries, and such
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services are subject to taxation under this Chapter. If the billing address of the service user
is different from the service address, the service address of the service user shall be used
for purposes of imposing the tax. As used in this Section, the term "charges" shall include
the value of any other services, credits, property of evcry kind or nature, or other
consideration provided by the service user in exchange for thc telecommunication services.
(b) "Mobilc Telecommunications Service" shall be sourced in accordance with the
sourcing rules set forth in the Mobile Telecommunications Sourcing Act (4 US.c. Section
124). The Tax Administrator may issue and disseminate to tclecommunication service
suppliers, which are subject to the tax collection requirements of this Chapter, sourcing
rules for the taxation of other telecommunication services, including but not limited to
post-paid telecommunication services, prepaid telccommunication services, and private
telecommunication services, provided that such rules arc based upon custom and common
practicc that ILuiher administrative efficiency and minimize multi-jurisdictional taxation
(e.g., Streamline Sales and Use Tax Agrcement).
(c) The Tax Administrator may issuc and disseminate to telecommunication scrvice
suppliers, which are subject to thc tax collection requirements of this Chapter, an
administrative ruling identifying those tclccommunieation scrvices, or chargcs therefor,
that arc subjcct to or not subject to the tax of subscction (a) above.
(d) As used in this section, the term "telecommunication services" shall include, but is not
limited to charges for: connection, reconnection, termination, movement, or change of
telecommunication serviccs; late payment fees; dctailed billing; ccntral officc and custom
calling features (including but not limited to call waiting, call forwarding, caller
identillcation and thrce-way calling); voice mail and other messaging services; directory
assistance; access and line charges; universal service charges; regulatory, administrative
and other cost recovery charges; local number portability charges; and text and instant
messaging. "Telecommunication serviccs" shall not include digital downloads that are not
"ancillary telccommunication scrvices" such as, music, ringtones, games, and similar
digital products.
(e) To prcvent actual multi-jurisdictional taxation of telecommunication services subjcct to
tax under this section, any service uscr, upon proof to the Tax Administrator that the
scrvice user has prcviously paid the samc tax in another statc or local jurisdiction on such
telccommunication services, shall be allowed a crcdit against the tax imposed to the extent
of the amount of such tax legally imposed on, and paid by, the servicc user in such other
state or local jurisdiction; provided, however, the amount of credit shall not exceed the tax
owed to the City under this section.
(I) The tax on telecommunication services imposed by this section shall be collccted from
the service user by the service supplier. The amount of tax collected in one (I) month shall
be rcmitted to the Tax Administrator, and must be received by the Tax Administrator on or
beforc the twentieth (20th) day of thc following month.
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3.42.050 Bundling Taxahle Items with Non-Taxahle Items.
If any non-taxable charges arc combined with and not separately stated fi'OI11 taxable
service charges on the customer bill or invoice of a service supplier, the combined charge is
subject to tax unless the service supplier identities, by reasonable and verifiable standards,
the portions of the combined charge that arc non-taxable and taxable through the service
supplier's books and records kept in the regular course of business, and in accordance with
generally accepted accounting principles, and not created and maintained for tax purposes.
The service supplier has the burden of proving the proper apportionment of taxable and
non-taxable charges. If the service supplier offers a combination of taxable and non-
taxable services, and the charges are separately stated, then for taxation purposes, the
values assigned the taxable and non-taxable services shall be based on its books and
records kept in the regular course 01' business and in accordance with generally accepted
accounting principles, and not created and maintained for tax purposes. The service
supplier has the burden 01' proving the proper valuation of the taxable and non-taxable
servIces.
3.42.060 Substantial Nexus / Minimum Contacts.
For purposes 01' imposing a tax or establishing a duty to collect and remit a tax under this
Chapter, "substantial nexus" and "minimum contacts" shall be construed broadly in favor
01' the imposition, collection and/or remittance of the telecommunication users' tax to the
fullest extent permitted by state and federal law, and as it may change from time to time by
judicial interpretation or by statutory enactment. Any telccommunication service
(including voIP) used by a person with a service address in the City, which service is
capable of terminating a call to another person on the general telephone network, shall be
subject to a rebuttable presumption that "substantial nexus/minimum contacts" exists for
purposes of imposing a tax, or establishing a duty to collect and remit a tax, under this
Chapter. A service supplier shall be deemed to have suflieient activity in the City for tax
collection and remittance purposes if its activities include, but are not limited to, any of the
following: maintains or has within the City, directly or through an agent or subsidiary, a
place of business of any nature; solicits business in the City by employees, independent
contractors, resellers, agents or other representatives; solicits business in the City on a
continuous, regular, seasonal or systematic basis by means of adveliising that is broadcast
or relayed from a transmitter with the City or distributed from a location within the City; or
advertises in newspapers or other periodicals printed and published within the City or
through materials distributed in the City by means other than the United States mail; or if
there are activities performed in the City on behalf of the service supplier that arc
significantly associated with the service supplier's ability to establish and maintain a
market in the City for the provision of services that are subject to a tax under this Chapter.
3.42.070 Duty to Collcct--I'rocedures.
(a) Collection by Service Suppliers. The duty of service suppliers to collect and remit the
taxes imposed by the provisions or this Chapter shall be performed as follows:
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(1) The tax shall be collected by service suppliers insofar as practicable at the same
time as, and along with, the collection of the charges made in accordance with thc
regular billing practice of the service supplier. Where the amount paid by a service
user to a service supplier is less than the full amount of the charge and tax which
was accrued for the billing period, a proportionate share of both the charge and the
tax shall be deemed to have been paid. In those cases where a service user has
notified the service supplier of refusal to pay the tax imposed on said charges,
Section 3.42.110 shall apply.
(2) The duty of a service supplier to collect the tax from a service user shall
commence with the beginning of the first regular billing period applicable to the
service user where all charges normally included in such regular billing arc subje.ct
to the provisions of this Chapter. Where a service user receivcs more than one
billing, one or more being for different periods than another, the duty to collect
shall arisc separately for each billing period.
(b) Filing Return and Payment. Each person required by this Chapter to remit a tax shall
file a return to the Tax Administrator, on forms approved by the Tax Administrator, on or
before the due date. The full amount of the tax collected shall be included with the return
and filed with the Tax Administrator. The Tax Administrator is authorized to require such
additional information as he or she deems necessary to determine if the tax is being levied,
collected, and remitted in accordance with this Chapter. Returns are due immediately upon
cessation of business for any reason. Pursuant to Revenue and Tax Code Section 7284.6,
such filing returns are confidential information and are exempt from the disclosure
provisions of the Public Recordl. Act.
3.42.080 Collection Penalties - Service Suppliers.
(a) Taxes collected from a service user are delinquent if not received by the Tax
Administrator on or before the due date. Should the due date occur on a weekend or legal
holiday, thc return must be rcceived by the Tax Administrator on the first regular working
day following the weekend or legal holiday. A direct deposit, including electronic fund
transfers and other similar methods of electronically exchanging monies between financial
accounts, madc by a service supplier in satisfaction of its obligations under this subsection
shall be considered timcly if the transfer is initiated on or before the due date, and the
transfer settles into the City's account on the following business day.
(b) If the person required to collect and/or remit the telecommunication users' tax fails to
collect the tax (by failing to properly assess the tax on one or more services or charges on
the customer's billing) or fails to remit the tax collected on or before the due date, the Tax
Administrator shall attach a penalty for such delinquencies or dcticiencies at the rate of
fifteen (15%) percent of the total tax that is delinquent or deficient in the remittance, and
shall pay interest at the rate of and 751100ths (0.75%) percent per month, or any fraction
thereof; on the amount of the tax, exclusive of penalties, from the date on which the
remittance first became delinquent, until paid.
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(c) The Tax Administrator shall have the power to impose additional penalties upon
persons required to collect and remit taxes pursuant to the provisions of this Chapter for
fraud or gross negligence in reporting or remitting at the rate of fifteen (15%) percent of the
amount of the tax collected and/or required to be remitted, or as recomputed by the Tax
Administrator.
(d) For collection purposes only, every penalty imposed and such interest that is accrued
under the provisions of this section shall become a part of the tax herein required to bc
paid.
(e) Notwithstanding the foregoing, the Tax Administrator may, in his or her discretion,
modify the due dates of this Chapter to be consistent with any uniform standards or
procedures that are mutually agreed upon by other public agencies imposing a utility users'
tax, or otherwise legally established, to create a central payment location or mcchanism.
3.42.090 Actions to Collect.
Any tax required to be paid by a service user under the provisions of this Chapter shall be
deemed a debt owed by the serviee user to the City. Any such tax collected from a service
user which has not been remitted to the Tax Administrator shall be deemed a debt owed to
the City by the person required to collect and remit and shall no longer be a debt of the
service user. Any person owing money to the City under the provisions of this Chapter
shall be liable to an action brought in the name of the City for the recovery of such amount,
including penalties and interest as provided for in this Chapter, along with any collection
costs incurred by the City as a result of the person's noncompliance with this Chapter,
including, but not limited to, reasonable attorneys' fees. Any tax required to be collected
by a service supplier or owed by a service user is an unseeured priority excise tax
obligation under II US CA. Section 507(a)(8)(C).
3.42.100 Deficiency Determination and Assessment - Tax Application Errors.
(a) The Tax Administrator shall make a deficiency determination if he or she determines
that any service user or service supplier required to payor collect taxes pursuant to the
provisions of this Chapter has failed to pay, collect, and/or remit the proper amount of tax
by improperly applying, or failing to apply, the tax to one or more taxable services or
charges. Nothing herein shall require that thc Tax Administrator institute proceedings
under this Section 3.42.100.
(b) The Tax Administrator shall mail a notice of such deficiency determination to the
person or entity allegedly owing the tax, which notice shall refer briel1y to the amount of
the taxes owed, plus interest at thc rate of 75/1 OOths (0.75%) percent per month, or any
fraction thereot~ on the amount of the tax from the date on which the tax should have been
received by the City. Within fourteen (14) calendar days after the date of service of such
notiee, the person or entity allegedly owing the tax may request in writing to the Tax
Administrator for a hearing on the matter.
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(c) If the person or entity allegedly owing the tax fails to request a hearing within the
prescribed time pcriod, thc amount of the dcficicncy dctermination shall bccome a linal
assessmcnt, and shall immcdiately bc due and owing to the City. If such pcrson or cntity
requests a hearing, the Tax Administrator shall causc thc matter to be sct for hearing, which
shall be scheduled within thirty (30) days aftcr receipt of the written request for hearing.
Notice of the time and place of thc hearing shall be mailed by the Tax Administrator to
such person at Icast ten (10) calendar days prior to the hearing, and, if the Tax
Administrator dcsires said person to produce specific records at such hearing, such notice
may designate the records requcsted to be produced.
(d) At the time fixed for the hearing, the Tax Administrator shall hear all relevant
testimony and evidence, ineluding that of any othcr intcrested parties. At the discretion of
the Tax Administrator, the hearing may be continued from time to time for thc purpose of
allowing the presentation of additional evidcnce. Within a reasonable time following the
conclusion of the hearing, the Tax Administrator shall issue a final assessment (or non-
assessment), therealler, by confinning, modifying or rejecting the original deficiency
detcrmination, and shall mail a copy of sueh final assessment to the person or entity owing
the tax. The decision of the Tax Administrator may be appealed pursuant to Section
3.42.150 of this Chapter. Filing an application with the Tax Administrator and appeal to
the City Manager pursuant to Section 3.42. I 50 of this Chapter is a prerequisitc to a suit
thereon.
(e) Payment of the final assessment shall become delinquent if not received by the Tax
Administrator on or before thc thirtieth (30th) day following the date of receipt of the
notice of final assessmcnt. The penalty for delinquency shall be filleen percent (15%) on
the total amount of the assessmcnt, along with interest at the rate of 75/I OOths (0.75%)
percent per month, or any fraction thereof, on the amount of the tax, exelusive of penalties,
from the date of delinquency, until paid. The applicable statute of limitations regarding a
claim by the City seeking payment of a tax assessed undcr this Chaptcr shall commence
from the date of delinquency as provided in this subsection (e).
(f) All notices under this section may be sent by regular mail, postage prepaid, and shall be
deemed received on the third calendar day following the date of mailing, as established by
a proof of mailing.
3.42.110 Administrative Remedy - Non-Paying Service Users.
(a) Whenever the Tax Administrator determines that a service user has deliberately
withheld the amount of the tax owed by the service user li'om the amounts remitted to a
person required to collect the tax, or whenever the Tax Administrator deems it in the best
interest of the City, he or she may relieve such person of the obligation to collect the taxes
due under this Chapter from certain named service users for specific billing periods. To the
extent the service user has Lliled to pay the amount of tax owed for a period of two (2) or
more billing periods, the service supplier shall be relieved of the obligation to collect taxes
due. The servicc supplicr shall provide the City with the namcs and addresses of such
servicc users and the amounts of taxes owed under the provisions of this Chapter. Nothing
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herein shall reqUire that the Tax Administrator institute proceedings under this Section
3.42.110.
(b) In addition to the tax owed, the service user shall pay a delinquency penalty at the rate
of fifteen percent (15%) of the total tax that is owed, and shall pay interest at the rate of
751100ths (0.75%) percent per month, or any li.aetion thereof, on the amount of the tax,
exclusive of penalties, from the due date, until paid.
(c) The Tax Administrator shall notify the non-paying service user that the Tax
Administrator has assumed the responsibility to collect the taxes due for the stated periods
and demand payment of such taxes, including penalties and interest. The notice shall be
served on the service user by personal delivery or by deposit of the notice in the United
States mail, postage prepaid, addressed to the service user at the address to which billing
was made by the person required to collect thc tax; or, should the service user havc a
changc of address, to his or hcr last known address.
(d) If the service user fails to remit the tax to the Tax Administrator within thirty (30) days
from the datc of thc service of the notice upon him or hcr, the Tax Administrator may
impose an additional penalty of fiftecn percent (15%) of the amount of the total tax that is
owed.
3.42.120 Additional Powers and Duties of the Tax Administrator.
(a) The Tax Administrator shall have the power and duty to enforce each and all of the
provisions of this Chapter.
(b) The Tax Administrator may adopt administrative rules and regulations consistent with
provisions of this Chapter for the purpose of interpreting, c1ari fying, carrying out and
enforcing the payment, collection and remittance of the taxes hercin imposed. The
administrative rules and regulations shall not impose a new tax, revise an existing tax
methodology as stated in this Section, or increase an existing tax, except as allowed by
California Government Code Section 53750(h)(2). A copy of such administrative rules and
regulations shall be on file in the Tax Administrator's of1ice. To the cxtent that the Tax
Administrator determines that the tax imposed under this Chapter shall not be collccted in
full for any period of time from any particular service supplier or service user, that
determination shall be eonsidercd an exercise of the Tax Administrator's discretion to settle
disputes and shall not constitute a ehangc in taxing methodology for purposcs of
Governmcnt Code Section 53750 or otherwise. The Tax Administrator is not authorized to
amend the City's mcthodology for purposes of Government Code Section 53750 and the
City does not waive oj. abrogate its ability to impose the communication users' tax in full as
a result of promulgating administrative rulings or entering into agreements.
(c) Upon a proper showing of good cause, the Tax Administrator may make administrative
agreements, with appropriate conditions, to vary from the strict requirements of this
Chapter and thereby: (I) conform to the billing procedures of a particular service supplier
so long as said agreements result in the collection of the tax in conformance with the
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general purpose and seope of this Chapter; or, (2) to avoid a hardship where the
administrative costs of collection and remittance greatly outweigh the tax benefit. A copy
of each such agreement shall be on file in the Tax Administrator's office, and arc voidable
by the Tax Administrator or the City at any time.
(d) The Tax Administrator may conduct an audit, to ensure proper compliance with the
requirements of this Chaptcr, of any person required to collect and/or remit a tax pursuant
to this Chapter. The Tax Administrator shall notify said person of the initiation of an audit
in writing. [n thc abscnce of fi-aud or other intentional misconduct, the audit period of
review shall not exceed a period of three (3) years immediately preceding the date of
receipt of the written notice by said pcrson from the Tax Administrator. Upon completion
of the audit, the Tax Administrator may make a deficicncy determination pursuant to
Section 3.42.100(d) of this Chapter for all taxes (and applicable penalties and interest)
owed and not paid, as evidenced by information provided by such person to the Tax
Administrator. If said person is unable or unwilling to provide sufficient records to enable
the Tax Administrator to verify compliance with this Chapter, the Tax Administrator is
authorized to makc a reasonable cstimatc of the deficiency. Said reasonable estimate shall
be entitled to a rebuttable presumption of correctness.
(e) Upon receipt of a written request of a taxpayer, and for good cause, the Tax
Administrator may extend the time for filing any statement required pursuant to this
Chapter for a period of not to exceed forty-five (45) days, provided that the time for filing
the required statement has not already passed when the request is received. No penalty for
delinquent payment shall accrue by reason of such extension. Interest shall accrue during
said extension at the rate of 75/1 OOths (0.75%) percent per month, prorated for any portion
thereof.
(I) The Tax Administrator shall determine the eligibility of any person who asserts a right
to exemption from, or a refund ot; the tax imposed by this Chapter.
(g) Notwithstanding any provision in this Chapter to the contrary, the Tax Administrator
may waive any penalty or interest imposed upon a person required to collect and/or remit
for failure to collect the tax imposed by this Chaptcr if the non-collection oceurrcd in good
faith. In determining whether the non-collection was in good I~lith, the Tax Administrator
shall take into consideration industry praetiee or other precedence.
3.42.130 Records.
(a) It shall be the duty of every person required to collect and/or remit to the City any tax
imposed by this Chapter to kcep and preserve, for a period of at least three (3) years, all
records as may be necessary to determine the amount of such tax as he/she may have been
liable for the collection of and remittance to the Tax Administrator, which records the Tax
Administrator shall have the right to inspect at a reasonable time.
(b) The City may issue an administrative subpoena to compel a person to deliver, to the
Tax Administrator, copies of all records deemed necessary by the Tax Administrator to
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establish compliance with this Chaptcr, including the delivery of records in a common
electronic format on readily available media if such records are kept electronically by the
person in the usual and ordinary eourse of business. As an alternative to dclivering the
subpoenaed records to the Tax Administrator on or before the due date provided in the
administrative subpoena, such person may provide access to such records outside the City
on or before the due date, provided that such person shall reimburse the City for all
reasonable travcl expenses incurred by the City to inspect those records, including travel,
lodging, meals, and other similar expenses, but excluding the normal salary or hourly
wages of those persons designated by the City to conduct the inspection.
(c) The Tax Administrator is authorized to execute a non-disclosure agrcement approved
by the City Attorncy to protect the confidentiality of customer information pursuant to
California Revenue and Tax Code Seclions 7284.6 and 7284.7.
(d) If a servicc supplier uses a billing agent or billing aggrcgator to bill, eollcet, and/or
rcmit the tax, the service supplier shall: i) provide to the Tax Administrator the name,
address and telephone number of each billing agent and billing aggregator currently
authorized by the service supplier to bill, collect, and/or remit the tax to the City; and, ii)
upon request of the Tax Administrator, deliver, or effect the delivery of, any information or
records in the possession of such billing agent or billing aggregator that, in the opinion of
the Tax Administrator, is necessary to verify the proper application, calculation, collection
and/or remittance of such tax to the City.
(e) If any person subject to record-keeping under this section unrcasonably dcnies the Tax
Administrator access to such records, or fails to produce the information requested in an
administrative subpoena within the time speeiIied, then the Tax Administrator may impose
a penalty of $500 on such person for each day following: i) the initial date that the person
refuses to provide such access; or, ii) the due date for production of records as set forth in
the administrative subpoena. This penalty shall be in addition to any other penalty imposed
under this Chapter.
3.42.]40 Refunds.
Whenever the amount of any tax has been overpaid or paid more than once or has been
erroneously or illegally collected or received by the Tax Administrator under this Chapter
from a person or service supplier, it may be refunded as provided in this section:
(a) The Tax Administrator may refund any tax that has been overpaid or paid more than
once or has been erroneously or illegally collected or received by the Tax Administrator
under this Chapter from a person or service suppl ier, provided that no refund shall be paid
under the provisions of this section unless the claimant or his or her guardian, conservator,
executor, or administrator has submitted a written claim to the Tax Administrator within
one year of the ovcrpaymcnt or erroncous or illegal collection of said tax. Such claim must
clearly establish claimant's right to the refund by written records showing entitlement
thereto. Nothing herein shall permit the liling of a claim on behalf of a class or group of
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taxpayers unless each member of the class has submitted a written claim under penalty of
perjury as provided by this subsection.
(b) The filing of a written claim pursuant to Government Code Section 935 is a prerequisite
to any suit thereon. Any action brought against the City pursuant to this section shall be
subject to the provisions of Government Code Sections 945.6 and 946. The Tax
Administrator, or the City Council where the claim is in excess of five thousand dollars
($5,000), shall act upon the refund claim within the time period set forth in Government
Code Section 912.4. If the Tax Administrator/City Council fails or refuses to act on a
refund claim within the time prescribed by Government Section 912. 4, the claim shall be
deemed to have been rejected by the City Council on the last day of the period within
which the City Council was required to act upon the claim as provided in Government
Code Section 912.4. The Tax Administrator shall give notice of the action in a form which
substantially complies with that set forth in Government Code Section 913.
(c). Notwithstanding the notice provisions of subsection (a) of this Section, the Tax
Administrator may, at his or her discretion, give written permission to a service supplier,
who has collected and remitted any amount of tax in excess of the amount of tax imposed
by this Chapter, to claim credit for such overpayment against the amount of tax which is
due the City upon a subsequent monthly return(s) to the Tax Administrator, provided that:
i) such credit is claimed in a return dated no later than one year from the date of
overpayment or erroneous collection of said tax; ii) the Tax Administrator is satisfied that
the underlying basis and amount of such credit has been reasonably established; and, iii) in
the case of an overpayment by a service user to the service supplier that has been remitted
to the City, the Tax Administrator has received proof, to his or her satisfilction, that the
overpayment has been refunded by the scrvice supplier to the service user in an amount
equal to the requested credit.
(d) Notwithstanding subsections (a) through (c) above, a service supplier shall be entitled
to take any overpayment as a credit against an underpayment whenever such overpayment
has been received by the City within the three (3) years immediately preceding a deficiency
determination or assessment by the Tax Administrator in connection with an audit
instituted by the Tax Administrator pursuant to Section 3.42.120(d). A service supplier
shall not be entitled to said credit unless it first clearly establishes, to the satisfaction of the
Tax Administrator, the right to the credit by written records showing entitlement thereto.
Under no circumstances shall an overpayment taken as a credit against an underpayment
pursuant to this subsection qualify a service supplier for a refund to which it would not
otherwise be entitled under the one-year written claim requirement of this section.
3.42.150 Appeals.
(a) The provisions of this section apply to any decision (other than a decision rclating to a
refund pursuant to Section 3.42.140 of this Chapter), deficiency determination, assessment,
or administrative ruling of the Tax Administrator. Any person aggrieved by any decision
(other than a decision rclating to a refund pursuant to Section 3.42.140 of this Chapter),
deficiency determination, assessment, or administrative ruling of the Tax Administrator,
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shall be required to comply with the appeals procedure of this section. Compliance with
this section shall be a prerequisite to a suit thereon. [See Government Code Section
935(b).1 Nothing herein shall permit thc liling of a elaim or action on behalf of a class or
group of taxpayers.
(b) If any person is aggrieved by any decision (other than a decision relating to a refund
pursuant to Section 3.42.140 of this Chapter), dclieieney determination, assessment, or
administrative ruling of the Tax Administrator; he or she may appeal to the City Manager
by filing a notice of appeal with the City Clerk within fourteen (14) days of the date of the
decision, deficiency determination, assessment, or administrative ruling of the Tax
Administrator which aggrieved the service user or service supplier.
(c) The matter shall be scheduled for hearing before an independent hearing officer selected
by the City Manager, no more than thirty (30) days li.om the reecipt of the appeal. The
appellant shall be served with notice of the time and place of the hearing, as well as any
relevant materials, at least live (5) calendar days prior to the hearing. The hearing may be
continued li.om time to time upon mutual consent. At the time of the hearing, the appealing
party, the Tax Administrator, and any other interested person may present such relevant
evidence as he or she may have relating to the determination from which the appeal is
taken.
(d) Based upon the submission of such evidence and the review of the City's liles, the
hearing ofjicer shall issue a written notice and order upholding, modifying or reversing the
determination from which the appeal is taken. The notice shall be given within fourteen
(14) days after the conclusion of the hearing and shall state the reasons for the decision.
The notice shall specify that the decision is linal and that any petition for judicial review
shall be tiled within ninety (90) days from the date of the decision in accordance with Code
or Civil Procedure See/ion 1094.6. In the event the hearing officer's decision is in favor of
the City, all costs of the hearing shall be borne by the appellant.
(e) All notices under this section may be sent by regular mail, postage prepaid, and shall be
deemed received on the third calendar day following the date of mailing, as established by
a proof of mailing.
3.42.160 No In.junction/Writ of Mandate.
No injunction or writ of mandate or other legal or equitable process shall issue in any suit,
action, or proceeding in any court against this City or against any officer of the City to
prevent or enjoin the collection under this Chapter of any tax or any amount of tax required
to be collected and/or rcmittcd.
3.42.170 Notice of Changes to Ordinance.
If a tax under this Chapter is added repealed, increased, reduced, or the tax base is changed,
the Tax Administrator shall follow the notice requirements of California Public U/ili/ies
Code See/ion 799.
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3.42.180 Effect of State and Federal Reference/Authorization.
Unless specifically provided otherwise, any refcrence to a state or federal statute in this
Chapter shall mean such sta(ute as it may be amended from time to time, provided that sueh
referencc to a statute herein shall not include any subscquent amendment thereto, or to any
subsequent change of interpretation thereto by a state or federal agency or court of law with
the duty (0 interpret such law, to thc extent that such amendment or change of
interpretation would requirc voter approval under California law, or to the extent that such
change would result in a tax decrease (as a result of cxcluding all or a part of a
communication service, or charge therefor, from taxation). Only to the extent voter
approval would otherwise be requircd or a tax dccrease would rcsult. the prior version of
the statute (or interpretation) shall rcmain applieablc; for any application or situation that
would not require voter approval or result in a decrease of a tax, provisions of the amended
statute (or new interprctation) shall be applicablc to the maximum possible cxtcnt.
To the extent that the City's authorization to collcct or impose any (ax imposed under this
Chaptcr is expanded or limited as a result of changes in state or federal law, no amendment
or modification of this Chapter shall be required to conform the tax to those changes, and
thc tax shall be imposcd and colleetcd to the full extent of the authorization up to the full
amount of the tax imposed under this Chapter.
3.42.190 Independent Audit of Tax Collection, Exemption, Remittance, and
Expenditure.
Thc City may periodically verify that the taxes owed under this Chapter havc been properly
applied, exempted, collected, and remitted in accordance with this Chapter, and properly
expended according to applicable municipal law. The annual verification shall be
performed by a qualificd independent third party and the review shall employ reasonable,
cost-effective steps to assurc compliance, including the use of sampling audits. The
verification shall not be required of tax remitters where the cost of the verification may
exceed the tax revenues to be reviewed.
3.42.200 I nteraction with Prior Tax.
(a) Satisf~letion of Tax Obligation by Service Users. Any person who pays the tax levied
pursuant to Section 3.42.040 of this Chapter with respect to any chargc for a
tclecommunication service shall bc deemed to have satisfied his or her obligation to pay the
tax levied pursuant to Section 3.44.030 of this Code with respect to that charge. Likewise,
prior to April 1, 2009, any person who pays the tax levied pursuant to Scction 3.44.030 of
this Codc with respect to any charge for a service subject to taxation pursuant to this
Chapter shall bc deemed to have satisfied his or her obligation to pay the tax levied
pursuant to Section 3.42.040 of this Chapter with respect to that charge. The intent of this
paragraph is to prevent the imposition of multiple taxcs upon a single utility charge during
the transition period from the prior telecommunication uscrs' tax to the new
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telecommunication users' tax (which transition period ends April 1, 2009) and to permit
telecommunication service providers, during that transition period, to satisfy their
collection obligations by collecting either tax.
(b) Collection of Tax by Service Providers. Service providers shall begin to collect the tax
imposed by this Chapter as soon as feasible after the effective date of the Chapter, but in no
event later than permitted by Seclion 799 ol1he California Public Ulililies Code.
(c) In the event that a final court order should determine that the election enacting this
Chapter 3.42 is invalid for whatever reason, or that any tax imposed under this Chapter
3.42 is invalid in whole or in part, then the tax imposed under Sections 3.44.030 (unless
repealed) shall automatically continue to apply with respeet to any service for which the tax
levied pursuant to this Chapter has been determined to be invalid. Such automatic
continuation shall bc effective beginning as of the first date of service (or billing date) for
which the tax imposed by this Chapter is not valid. However, in the event of an
invalidation, any tax (other than a tax that is ordered refunded by the court or is otherwise
refunded by the City) paid by a person with respect to a service and calculated pursuant to
this Chapter shall be deemed to satisfy the tax imposed under Section 3.44.030 on that
service, so long as the tax is paid with respect to a service provided no later than six months
subsequent to the date on which the linal court order is published.
3.42.210 Remedies Cumulative.
All remedies and penalties prescribed by this Chapter or which are available under any
other provision of law or equity, including but not limited to the Califhrnia False Claims
AeI (Governmenl Code Seclion 12650 el seq.) and the Calijim1ia Un/air Praclices /leI
(Business and Professions Code Seclion f7000 el seq.), are cumulative. The use of one or
more remedies by the City shall not bar the use of any other remedy for the purpose of
enforcing the provisions of this Chapter.
3.42.220 Violations Deemed Infractions. Any person who willfully attempts in any
manner to avoid or defeat the tax imposed by this Chapter or the payment of all or any part
thereof; or any person required by this Chapter to pay the tax, to make a return, to keep any
records, or to supply any information who willfully fails to pay all or any part of such tax,
make such return, keep such records, or supply such information at the time or times
required by this Chapter, shall be guilty of an infraction.
3.42.230
Annual Review.
(a) As part of the annual budget process, the City Council shall annually rcvicw the
amount of revenues derived by the City from the Telecommunications Users' Tax
imposed by this Chapter. The first review shall oeeur no later than June 30, 2010, and
each subsequent review shall occur no later than June 30 of cach fiscal year. . Prior to
the review, the Finance Director shall provide the City Council with the following
information:
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I (i) the total tax revenue received by the City as proceeds of the
Telccommunications Users' Tax, as of December 31 st of the calendar year preceding the
date of the meeting; and .
(ii) the Finance Director's recommendation as to whether an adjustment to the
rate of thc tax imposcd by this Chapter is indicated in light of the linancial condition of
th6City.
,
(b) Following its review, thc City Council may adopt an ordinancc modifying (cither
inClelinitely or for a fixed period) the rate of the tax imposed by the Chapter or
tefminating or suspending imposition of the tax. Thc City Council may reduce, maintain
orlmodify the rate in existence at the time ofthc annual review, but in no event shall the
ratc be increased to exceed 4.75%. .
I
(c) If the City Council adopts an ordinance terminating the tax" that termination
sh~lll not affect the obligation to pay taxes levied on services used prior to the datc of
tefmination. Taxes levied prior to that date shall remain a debt payable to the City. All
prSvisions in this Chapter, except those relating to the levy of taxes, shall continue with
,
full force and effect afler such date.
r
(d~ Nothing in this Chapter is intended to constitute an extension or an increase in a tax
re8uiring votcr approval under California Cons/iltI/ion Ar/icle Xl/IC; and to the extent that
this Section 3.42.230 is found to invoke such a requirement. this Section 3.42.230 shall be
ddemed null and void ab initio. .
I
SECTION 2. Effective Date. This Chapter shall become eflective immediately upon the
ddte that this Ordinance is confirmed and approved by the voters of Chula Vista at the
,
Municipal Election of November 4, 2008. Service Suppliers will not be required to
inrPlement the provisions of this ordinance prior to February 1,2009.
SECTION 3. Amendment or Repeal. Chapter 3.42 of Article XIII of the Chula Vista
,
Municipal Code may be repealed or amended by the City Council without a vote of the
pdople. However, as required by Chapter XlIlC of the California Constitution, voter
approval is required for any amendment provision that would increase the rate of any tax
leried pursuant to this Ordinance. The People of the City of Chula Vista aflirm that the
following actions shall not constitute an increase of the rate ofa tax:
I. The restoration of the rate of the tax to a rate that is no higher than that set by this
Ordinance, if the City Council has acted to reduce the rate of the tax;
2. An action that interprets or clarifies the methodology of the tax, or any delinition
applicable to the tax, so long as interpretation or clarification (even if contrary to
some prior interpretation or clarification) is not inconsistent with the language of
this Ordinance.
3. The establishment of a class of person that is exempt or excepted Irom the tax or
the discontinuation of any such exemption or exception (other than the
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discontinuation of an exemption or exception spccitically set fOlth In this
Ordinance); and
4. The collection of the tax imposed by this Ordinance, even if the City had, for
some period of time, failed to collect the tax.
SECTION 4. Severability. If any section, subsection, sentence, clause, phrase, or portion
of this Ordinance is for any reason held to be invalid or unenforceable by a court of
competent jurisdiction, the remaining portions of this Ordinance shall nonetheless remain
in full force and effect. The people hereby declares that they would have adopted each
section, subsection, sentence, clause, phrase, or portion of this Ordinance, irrespective of
the fact that anyone or more sections, subsections, sentences, clauses, phrases, or portions
of this Ordinance be declared invalid or unenforceable.
SECTION 5. Execution. The Mayor is hereby authorized to attest to the adoption of this
Ordinance by the voters of the City by signing where indicated below.
I hereby certify that the foregoing Ordinance was PASSED, APPROVED and ADOPTED
by the people of the City of Chula Vista voting on the day of , 2008.
Mayor
ATTEST:
City Clerk
APPROVED AS TO FORM:
City Attorney
APPROVED AS TO fORM:
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~gency_
Summary of UUT Election Results
June 2008
Oakland
Winters
Covina
County of Alameda
Torrance
*McFarland
February 2008
San Bernardino
Huntington Park
Richmond
Los Angeles
Pasadena
November 2007
Emeryville
Los Altos
Redwood City
Hermosa Beach
Benecia
Gilroy
El Monte
Ventura
June 2007
Tulare
February 2007
**Covina
November 2006
Compton
Daly City
Eureka
Menlo Park
.
Attachment B
._ _Res~ _~~~c~~:e______~at~~-puctionj
Passed 79%
Passed 70%
Passed 65%
Passed 65%
Passed 56%
Failed 25%
Passed 80%
Passed 79%
Passed 74%
Passed 65%
Passed 58%
Passed 86%
Passed 84%
Passed 81%
Passed 72%
Passed 70%
Passed 64%
Passed 63%
Passed 63%
Passed 86%
Failed 41%
Passed 89%
Passed 72%
Passed 51%
Passed 51%
no change (7.5%)
5 to 4.75%
no change (6%)
no change (6.5%)
no change (6%)
new 15%
7.83 to 7.75%
7 to 6.5%
10 to 9.5%
10t09%
no change (8.3%)
no change (5.5%)
3.5 to 3.2%
5t04%
6 to 5.5%
4 to 3.5%
5 to 4.5%
7 to 6.5%
5 to 4.5%
7t06%
no change (6%)
10 to 8.5%
no change (5%)
no change (3%)
new 2.5%
Total Jurisdictions gone to ballot since November 2006
Total that passed
Percent that passed
24
23
96%
*McFarland proposed new UUT tax at 15% rate and failed.
**Covina failed first time out but was eventually approved by the voters.
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RESOLUTION NO. 2008-
RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF CHULA VISTA ORDERING THE SUBMISSION TO
THE QUALIFIED ELECTORS OF THE CITY OF A
MEASURE RELATING TO TI-IE CITY'S
TELECOMMUNICATIONS USERS' TAX AT THE
SPECIAL MUNICIPAL ELECTION TO BE HELD ON
TUESDA Y, NOVEMBER 4, 2008; DECLARING TI-IE
EXISTENCE OF AN EMERGENCY NECESSITATING
SUCH ACTION; AND DIRECTING THE CITY
ATTORNEY TO PREPARE AN IMPARTIAL
ANAL YSIS OF THE MEASURE
WHEREAS, pursuant to Chula Vista Municipal Codc Chapter 3.44, the City
currently levies a Utility Uscrs' Tax CUUT"); and
WHEREAS, thc City Council desircs to adjust the ratc of the Telephone Users'
Tax (a componcnt ofthc Utility Users' Tax) from 5% to 4.75%; to rename thc Tclephonc
Users' Tax as the Telecommunications Users' Tax; to modernize the tax base so that
different telecommunications technologies are treated similarly; to apply the tax to
interstate and international calls for all customers; and to make other revisions to the
method of calculating and collecting thc tax to reflect tcchnological advances in
tclecommunications scrvices, and changes in fedcrallaw; and
WHEREAS, thc proposed ordinance, attached hereto and incorporated herein as
Exhibit "A" would implement these proposed revisions to the tax (the "Ordinance"), and
ifapproved by voters the earliest implementation date will be February 1,2009; and
WHEREAS, by its Resolution No. 2008-016, adopted on January 15, 2008, the
City Council has called a Special Municipal Election for Tuesday, November 4, 2008;
and
WHEREAS, pursuant to Government Code section 53724 and California
Elections Code section 9222, the City Council desires to submit the Ordinance to the
electorate at the Special Municipal Election.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Chula Vista as lollows:
SECTION I. All of the foregoing recitals arc true and correct.
SECTION 2. That the City Council, pursuant to its right and authority, docs
order submitted to the voters at the Special Municipal Election on November 4, 2008, the
loll owing question:
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Shall an ordinance be adopted to: reduce the rate of the
City of Chula Vista's Telecommunications Users' Tax YES
(currently the Telephone Users' Tax) from 5% to 4.75%;
ensure that Tax proceeds continue to be avai lable for
general municipal purposes, such as policc, fire, strccts and
parks; revisc the method for calculating and collccting the
Tax to rctlect technological advanccs and changes 111 NO
federal law; and amcnd the tax base to inelude additional
telecommunications services?
SECTION 3. That the proposed Ordinance to be submitted to the voters IS
attached as Exhibit "A."
SECTION 4. That notice of the time and place of holding the election is given
and the City Clerk is authorized, instructed, and directed to give further or additional
notice of the election, in time, form and manner as required by law.
SECTION 5. That pursuant to California Elections Code 1i9280, the City Clerk
is directed to transmit a copy of the measure to the City Attorney. The City Attorney is
directed to prepare an impartial analysis of the measure, not to exceed 500 words in
length, showing the efleet of the measure on the existing law and the operation of the
measure, and transmit such impartial analysis to the City Clerk within ten days of the
adoption of this Resolution.
SECTION 6. That pursuant to California Constitution Artiele XlllC 1i2(b), the
City Council declares, by a unanimous vote of its membership, that a fiscal emergency
exists necessitating that the Ordinance be submitted to the voters at the November 4,
2008 Special Election. The circumstances giving rise to this emergency are as follows:
A. The City currently receives $4.6 million a year in UUT proceeds from
telecommunication services, and such tax revenues arc critical to the public welfare and
the City's financial ability to provide essential municipal services such as police, fire,
street repair, parks and libraries.
B. Lawsuits have been tiled against other jurisdictions challenging the
application of the utility users tax to certain telecommunication services based upon
dclinitions contained in the ordinances governing such taxes and/or relCrenccs to
allegedly inapplicable federal laws.
C. Legislation (H.R. 5793) has been introduced in the Unitcd States
Congress, which would impose a live-year moratorium on new local wireless taxes, and
could limit the ability of the City to respond to possible future adverse court rulings
regarding the City's existing utility users' tax on wireless communications.
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D. Due to a significant, and unexpected, decline in revenue growth over the
past 18 months, the City has undergone significant budgetary cuts in order to balance the
Fiscal Year 2008-09 general fund operating budget, which assumes the continued
collection of Utility Users Tax. The Fiscal Year 2009-10 budgetary gap is projected to be
$3.1 million; this gap would be exacerbated by any loss in UUT revenue.
E. General fund operating reserves arc projected at 4.8% for the liscal year
ending June 30, 2008. This is below the 8% reserve goal established by the City Council,
and makes the City finances especially sensitive to a loss of substantial expected
revenues.
F. Additional budgetary cuts resulting from a loss of the Utility Users Tax
would likely have a significant impact upon the City's ability to provide essential public
services including public safety.
G.
to red uce
stream.
Therefore, it is urgently important that the City amend its DUT ordinance
the legal and legislative risks that currently endanger this critical funding
H. These circumstances are such that it would be imprudent to delay the
revision of the UUT ordinance until June 8, 2010, which is the date of the next Municipal
General Municipal Election.
SECTION 7. That the City Clerk shall certify to the adoption of this resolution,
and file it with the City's original resolutions.
Presented by
Approved as to form by
Maria Kaehadoorian
Finance Dircctor
lcsfel
Intt m City 1\ltorncy
/;
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RESOLUTION NO. 2008-
RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF CHULA VISTA APPROPRIATING $105,000 FROM
THE AVAILABLE BALANCE OF THE GENERAL
FUND TO THE CITY CLERK'S AND NON-
DEPARTMENTAL BUDGET TO COVER
ANTICIPATED COSTS AND EXPENSES RELATED TO
ELECTION COSTS, AND PRINTING AND MAILING
COSTS
WHEREAS, ChuIa Vista's Utility Users' Tax (UUT) was adopted in 1970 as a
means to help fund public services and capital improvement projects through the City's
General Fund; and
WHEREAS, the City receives UUT based on the usage of natural gas, electricity
and telecommunications; and
WHEREAS, in fiscal year 2006-2007, the total UUT received was approximately
$7.0 million, which represents 4.3% of General Fund revenues; and
WHEREAS, the current rates charged arc .009 I 9 per thenn, .0025 per kilowatt,
and 5% on telephone; and
WHEREAS, there are over 150 cities in California with a UUT; and
WHEREAS, eity staff is recommending that the City's UUT ordinance, as it
applies to telecommunications, be updated to reflect recent changes in Federal tax law
and to modernize the definition of "telecommunications" to make it technology neutral;
and
WHEREAS, the City Council desires to adjust the rate of the Utility Users' Tax
from 5% to 4.75%, apply the tax to interstate and international calls for all customers;
and to make other revisions to the method of calculating and collecting the tax to retleet
technological advances and changes in state and federal law; and
WHEREAS, failure to modernize the City's UUT ordinance relative to
telecommunication services could result in a loss of 75% to 100% of the
telecommunications related portion of the UUT, or upwards to approximately $4.6
million ti'om the General Fund, which would have a substantial impact 011 the City's
ability to maintain current programs and provide essential services, including public
safety; and
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WHEREAS, updating the UUT ordinance requires a measure be placed on the
ballot and approval by a majority of the voters; and
WHEREAS, City staff is recommending that the proposed UUT ordinance
relating to telecommunications be placed on the November 2008 ballot; and
WHEREAS, in an effort to minimize costs, staff proposes to manage the
informational program internally and requests an appropriation of $105,000 to cover the
election costs (City Clerk $35,000) and printing and mailing costs (Non-Depat1mental
$70,000).
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of
Chula Vista appropriates $105,000 from the available balance of the General Fund to the
City Clerk's and non-departmental budgets to cover anticipated costs and expenses
related to election costs, and printing and mailing costs.
Presented by
Approved as to form by
c9~kJW
~ Inte/hll City Attorney
Maria Kachadoorian
Finance Director
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