HomeMy WebLinkAbout2010/06/08 Item 13
CITY COUNCIL
AGENDA STATEMENT
~ \ f? CITY OF
~ (HUlA VISTA
ITEM TITLE:
SUBMITTED BY:
REVIEWED BY:
JUNE 8, 2010, Item /3
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA CALLING AND GIVING NOTICE OF A
SPECIAL ELECTION TO BE HELD IN SAID CITY ON
TUESDAY, NOVEIVlBER 2, 2010, FOR THE PURPOSE OF
SUBMITTING TO THE QUALIFIED ELECTORS OF THE
CITY, A MEASURE RELATING TO THE CITY'S
TELECOMMUNICATIONS USERS' TAX;
CONSOLlDA TING THE ELECTION WITH THE
STATEWIDE ELECTION; REQUESTING THE BOARD OF
SUPERVISORS OF THE COUNTY OF SAN DIEGO PERMIT
THE REGISTRAR OF VOTERS TO CONDUCT SUCI-I
ELECTION; AUTHORIZING THE CITY CLERK OR HER
DUL Y AUTHORIZED AGENTS TO CARRY OUT THE
NECESSARY PROCEDURES FOR SUCH ELECTION; AND
DIRECTING THE CITY ATTORNEY TO PREPARE AN
IMPARTIAL ANALYSIS OF THE MEASURE
DIRECTOR OF FINAN E/TREASURER~1-K-
CITY MANAGER
ASSIST ANT CITY; 1 ANAGER ~"J
4/5THS VOTE: YES 0 NO D
SUMMARY
Chula Vista's Utility Users' Tax (UUT) was first adopted in 1970 as a means to help tlUld
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 2008-09, the total UUT received was approximately $7.8 million,
representing 5.6% of General Fund revenues. The current 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, generating an estimated $2 billion annually for city and county
governments throughout the state. City staff is recommending that the UUT on
telecommunications be updated due to a recent IRS decision, pending legal challenges, a
perceived loophole in the current ordinance and changes in technology, which have put
this tlmding at risk. The legal challenges pose the most serious and immediate threats to
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JUNE 8, 20 I 0, Item ~
Page 20f9
cxisting UUT ordinances for cities taxing telecommunication services due to references
to the Federal Excise Tax. An adverse ruling in any of these pending actions may further
jeopardize the City's cunent UUT ordinance.
As a result of these existing and imminent threats to the telecommunications portion of
the City's UUT ordinance, City staff is recommending that the Council approve submittal
of a new ordinance to the voters at the November 2, 20 I 0 special election as a general
tax.
The resolution presented for the Council's consideration would approve an ordinance to
be submitted to the voters for this purpose.
ENVIRONMENT AL 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 and 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 the State CEQA Guidelines because it will not result in a
physical change to the environment; therefore, pursuant to Section 15060(c)(3) of the
State CEQA Guidelincs the actions proposed are not subject to CEQA.
RECOMMENDATION
That Council:
1. Adopt a resolution submitting the Telecommunications Users' Tax measure to the
electors at the regularly scheduled special municipal election to be held
November 2,2010; and
2. Consider submittal of an argument and rebuttal argument, if any, for the measure
and authorize a member or members of the City Council to write and submit the
argument(s) to the City Clerk.
BOARDS/COMMISSION RECOMMENDATION
Not Applicable
DISCUSSION
In 1970, the City first adopted a Utility Users' Tax (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 reflect recent changes in Federal tax law and to modemize the
detinition of telecommunications so that it is technology neutral. Presently, the City's
UUT is imposed at a rate of 5% of the charges billed for telephone communications
services. No change to this rate is recommended. No changes are proposed to the
ordinance for natural gas and electricity.
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1'2
JUNE 8, 2010, Item~
Page 3 of9
Legal Challen\':e
The 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 vary 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 wireless" (mobile) calls, they arc
based on a flat month I y rate.
On May 25, 2006, the I RS issued a Notice 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 Caine following many federal court losses involving the
outdated definition of "toll telephone service" (or long distance) contained in the FIT.
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' request of many years ago to do so to achieve administrative ease.
The Treasury Department's May 25th Notice reversed its prior Revenue Rulings and
interpretation of the FET. In addition, legislation (H.R. 1521) has been introduced in the
United States Congress. which would impose a five-year moratorium on ncw 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.
Teehnolo\':ical Challen\':es
The proposed ordinance is an updated version of the telecommunications portion of the
City's existing UUT ordinance. It is intended to supercede those portions of the existing
ordinance that apply to telecommunications. The new ordinance would modernize the
telecommunications tax detlnitions and other 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-I lines); paging;
and VoTP and toll free numbers. Importantly, the new definitions are technology-neutral
and anticipate additional changes in technology, reflecting the modern use of
telecommunications. Telecommunication services do not include cable or video
programming services that are subject to a cable or video service franchise fee.
This updating of definitions closes "technology" loopholes, and ensures that all taxpaycrs
will be treated equitably, regardless of the technology used.
The updated ordinance proposes to explicitly ajlply the tax for the first time to interstate
and international services for wirclcss and land linc telecommunication customers. As a
consequence of service "bundling", and the resultant inability to assess utility taxes on
discreet service components, some telecommunications companies already apply the
UUT to these services. Other cities that have eliminated this loophole have experienced a
small increase ranging from 5% to 10% in UUT revenues under the modernized
deflnitions.
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JUNE 8, 2010, ltem~
Page 4 of9
The language of the proposed ordinance follows "model" definitions 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 clear as to their
responsibilities in collecting the tax. This will ease the burden for the telecommunication
companies and ensure that within municipal authority, the UUT is applied as fairly and
consistently as possible to all applicable service providers as technology continues to
evolve. Uniformity 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 fiscal year 2008-09
UUT revenue received was
approximately $7.8 million for
the General Fund, representing
approximately 5.6% of Gencral
Fund revenues. The
telecommunications related
portion of the UUT revenue is
approxim'ately $5.3 million.
An estimated 75%, or $4.0
million, of these revenues are
derived from wireless
telecommunications. The loss
of these revenues would have a substantial
essential services, including public safety.
Gas
Wireless
$4.0 M
Electric
$2.IM
Telecomm
$5.31'\'1
Wired
$I.3M
impact on the City's ability to provide
Local Challenges
A T&T and Yerizon, the state's two primary telecommunication service providers, have
recently announced to the Public Utilities Commission that they intend to suspend
traditional land line service within seven (7) years. That would otlicially eliminate the
service that existed when Chula Vista's current code and definitions were established.
Staff estimates that 5% to 10% of thc City's telecommunications customers arc not
paying the UUT, or are not paying at the level they would pay in the majority of other
California cities that have the modernized ordinance. Additionally, without the
modernized ordinance the City cannot enforce non-payment of the taxes or verify if the
minimal taxes enforceable under the existing ordinance are actually being paid.
Modernizing the ordinance will allow the City to stabilize and protect approximately $5.3
million in revenue currently generated from telecommunication UUT sources and will
level the playing field for all telecommunication providers. A level playing field treats
all telecommunication customers equitably, removes the financial incentive for carriers to
not pay their fair share and provides the City with the authority to verify, stabilize and
enforce a revenue source that is critical to maintaining the current levels of public
service.
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JUNE 8, 2010, Item /:;[;'
Page 5 of9
Staff estimates that equitably applying the modernized ordinance to all carriers and their
respective customers would generate approximately $265,000 in additional revenue. This
projection is based on comparing the list of telecommunication carriers paying state fees
to the local list of telecommunication carriers. The projection assumes no immediate
changes by carriers to stop collecting UUT on specific components of their business, nor
changcs in state or federal regulation which have overwhelmingly trended towards
reducing state and local governments' ability to apply UUT or similar taxes.
Modernizing the ordinance and generating additional revenue will partially offset the
$500,000 in annual UUT revenue the City lost last year when one line of
telecommunication business was dropped from UUT rolls. Growth in the industry with
the modernized ordinance and this increase will also help offset the loss in rcvenue that
will occur as customers drop their traditional land line services and do not replace with
UUT eligible alternatives, as well as the revenue losses that will occur as large service
providers eliminatc land line services in the future. Adopting a modernized ordinance
that is legally consistcnt with the ordinances adopted by other California cities that
collect UUT is critical to stabilizing the revenue the City currently generates from
telecommunications UUT.
The City has attempted to collect UlJT 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 $4.0 million annually related to wireless communication.
Eventually, with the continued tcchnological changes and migration to wireless
telecommunications services, the City is at risk of losing 100% of telecommunications
UUT revenues. This represents up to approximately $5.3 million annually in General
Fund revenues, which would have a substantial impact on the City's ability to maintain
current programs and provide essential services, including public safety. The loss of
UUT revenues, coupled with an ongoing structural imbalance, would be catastrophic to
City operations.
Statewide Election Results
Between June 2002 and June 2008, 83 utility user tax measures (81 cities, 2 counties)
were placed before the voters. Measures modifying existing utility taxcs generally have a
higher success rate than proposals for new or increased UUTs. Of the 23 measures
proposed to modernize a telecommunications UUT to assure applicability to new
technologies, only one measure failed to pass. The results of the 2002 through 2008
elections are summarized in the following table.
,";"'ffij' .;~
Modernize Ordinance/Reduce Rate
Modernize Ordinance/Maintain Rate
Ratify Existing Ordinance
Continue/Extend Tax
New/Increased Special Tax
Ncw/lncrcascd General Tax w/ Companion Advisory Measure
New/lncreased General Tax
,'~ ,:;'~;~.;\iTdJful
]5 0 15
7 I 8
11 0 I]
16 3 19
1 3 4
347
2 17 19
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JUNE 8, 2010, Item /3
Page 60f9
1 Total
55
28
83
Summarv of Proposed Ordinance Amendments/Updates
If approved by the voters, the proposed ordinance would add Chapter 3.42
(Telecommunication Users' Tax) to the Chub Vista Municipal Code. Approval of the
ordinance would not modify the existing UUT ordinance (Chapter 3.44 of the Municipal
Code).
The following is a brief summary of the proposed amendments/updates to the City's
UUT relative to tclecommunication services:
. Applies the tax to interstate and international calls for "cellular" (wireless) and land
line customers so that all taxpayers are treated the same.
. Includes a modern, tlmctional definition of telecommunication services that is
technology-neutral and adds or specitically identities the following services:
interstate and international calls; wireless (mobile); VoIP; paging; private
communication services (e.g., T-Ilines for providing data, video and voice services):
and toll free and public service numbers.
. Incorporates definitions of "ancillary telecommunication services" that are commonly
recognized by the industry as being part of such services.
. Anticipates the possibility of new technologies and services to provide
telecommunication and video services, so that rates and rcvenues are stabilized and
all taxpayers will be treated the same.
. Provides other administrative tools for addressing telecommunication taxation issues
including administrative rulings and sourcing, bundling, and nexus guidelines.
. Updates the local Municipal Code to be consistent with currcnt Federal and State
laws and makes Chub Vista's ordinance consistent with other California cities with
UUT.
D The UUT tax does not apply to:
o Email or other internet services provided by internet service providers
(ISPs);
o Free Wi-Fi;
o Internet services, including broadband scrviccs uscd for internet scrvices
(taxation prohibited by current federal law); or
o Cable or video programming services that are subject to a cable or video
service franchise fee (not considered telecommunication services).
Proposition 218 Requirements
The proposed ordinance amends the tax base by updating the detinition of
"telecommunications" to account for the vast technological changes that have taken place
since the City adopted the UUT ordinance nearly forty years ago. Due to this update,
certain services that are not currently taxed would be taxed if the new ordinance is
approved. Because this tax would be imposed on additional services, the City must
comply with the requirements of Article XITTC of the California Constitution, which was
adopted by the voters in 1996 as a part of Proposition 218.
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JUNE 8, 2010, Item 13
Page 7 01'9
Proposition 218 requires voter approval before a local government may impose, extend,
or increase any tax. The tax may be a general tax, or a special tax. A general tax,
requiring a simple majority vote of the electorate for approval, is one that is imposed for
general government purposes. A special tax is one that is imposed for a specific purpose,
with the tax revenues earmarked for that purpose; such special taxes require approval by
2/3 of the electorate. To place a general tax on a special election ballot, the City Council
must declare, by unanimous vote, that a fiscal emergency exists. Following a unanimous
vote deelaring a fiscal emergency, placement of a general tax on a special election hallot
requires a 2/3rds vote of the City Council, A special tax can be placed on the ballot at
any election with a 2/3rds vote of the City Councillno declaration of fiscal emergency is
required).
The next general election in Chula Vista will be held in June 2012. November 2, 2010 is
the next special election date, as determined by the California State Elections Codc. In
order to update the ordinance before adverse judicial decision is rendered, consideration
of a general tax on the November 2, 20 I 0 special election is recommended. To place the
proposed ordinance on the November ballot as a general tax measure, the Council must
unanimously deelare a fiscal emergency. An item recommending declaration of a .fiscal
emergency has been prescnted to Council at tonight's meeting in conjunction with the 5-
Year Financial Forecast. If approved by the voters the earliest implementation date will
be February 1, 2011.
Proposed Ballot LanguaQc
The ballot language to bc presented to the voters is as follows:
Shall the ordinance to modernize the City's 1978 Telephonc Users' Tax
(renamcd the Telecommunications Users' Tax). with no rate increase:
maintain exemptiuns for !U1V income senh)}~ citizens: ensure Tax proceed'}
continue to be availahle jor general municipal purposes, including police,
fire. streets. libraries, and parks; revise the method for calculating and
collecting the Tax to reflect technological and legal changes; and amend the
tax base to c'luitably include all applicable telecommunications services he
adopted?
Ballot Arguments
California Elections Code Sections 9282 allows the legislative body, any member or
members of the legislative body authorized by that body, any individual voter who is
cligible to vote on the measure, or bona fide association of citizens, or any combination
of voters and associations, to submit an argument for or against a measure placed on the
ballot by the legislative body. Arguments may not exceed 300 works in length, and must
be submitted to the City Clerk no later than Wednesday, August 18,2010.
Pursuant to a resolution previously adopted by the Council allowing rebuttal arguments,
rebuttal arguments will be allowed, in accordance with Elections Code Section 9285.
Rebuttal arguments may not exceed 250 words, and must be submitted to the City Clerk
no later than Thursday, August 26, 20 I 0
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JUNE 8, 2010, Item /3
Page 8 01'9
Staff recommenus that Council consider submittal of an argument and rebuttal argument,
if any, for the measure and authorize a member or members of the City Council to write
anu submit the argument(s) to the City Clerk.
DF:CISTON MAKER CONFLICT
Stan has reviewed the decision contemplated by this action and has determined that it is
not site specilic and consequently the 500 foot rule found in California Code of
Regulations section I 8704.2(a)(1 ) is not applicable to this decision.
CURRENT YEAR FISCAL IMP ACT
If approved for placement on the November 20 I 0 special municipal election ballot, the
UUT increase would not go into effect until liseal year 2010-11, resulting in no net
impact in the currentliscal year.
ONGOING FISCAl" IMPACT
The total fiscal year 2008-09 UUT revenue receiveu was approximately $7.8 million for
the General Fund, representing approximately 5.6% of total General Fund revenues. The
telecommunications relateu portion of the UUT revenue is approximately $5.3 million.
At immediate risk is 100%, or $4.0 million, of existing wireless telecommunication
revenues. In the long term, the remaining $1.3 million in telecommunication UUT
revenues arc at risk due to changes in technology and the continued migration from wired
to wireless telecommunications. The loss of these revenues would have a substantial
impact on the City's ability to provide essential services, including public safety.
The updating of delinitions closes "technology" loopholes and ensures that all taxpayers
will be treateu equitably. regardless of the technology used. This more equitable
application broadens the tax base. Other cities that have eliminated this loophole have
experienced a small increase ranging from 5% to 10% in their revenues under the
modernized definition. With 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 patterns of the consumer and evolving technology.
The objective of the ballot measure is to secure the existing UUT revenue source at
current revenue generating levels on an ongoing basis in order to preserve municipal
services but not realize a signitieant revenue windfall.
Due to recent significant declines in revenue growth, the City has undergone significant
budgetary cuts in order to balance the fiscal year 2010-11 General Fund operating budget,
which assumes the continued collection of Utility Users Tax. The Five Year Forecast
(Fiscal Year 2010-11 through Fiscal Year 2014-15) projects a $12.5 million budgetary
gap in fiscal year 2011-12, which would be exacerbated by any loss in UUT revenue.
The cost to include the proposed ordinance on the November 2, 2010 special election
ballot is estimated at $70,000 to $75,000. Funds for this purpose have been budgeted in
13-8
.')
JUNE 8, 20 I 0, Item /_)
Page 90f9
the City's operating budget for fiscal year 2010-11 (also presented for Council
consideration at tonight's meeting).
ATTACHMENTS
1. Proposed Ordinance - Attached as "Exhibit N' to Resolution.
Prepared by: iV/aria Kachadooria!/, Direc1()r (!fFinance/Treasllrer, Finance Department.
13-9
RESOLUTTONNO.2010-
RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF CHULA VISTA CALlING AND GIVING NOTICE
OF A SPECIAL ELECTION TO BE HELD IN SAID
CITY ON TUESDAY, NOVEMBER 2, 2010, FOR THE
PURPOSE OF SUBMITTING TO THE QUALIFIED
ELECTORS OF THE CITY, A MEASURE RELATING
TO THE CITY'S TELECOMMUNICATIONS USERS'
TAX: CONSOLIDATING THE ELECTION WITH THE
STATEWIDE ELECTION; REQUESTING THE BOARD
OF SUPERVISORS OF THE COUNTY OF SAN DIEGO
PERMIT THE REGISTRAR OF VOTERS TO
CONDUCT SUCH ELECTION; AUTHORIZING THE
CITY CLERK OR HER DUL Y AUTHORIZED AGENTS
TO CARRY OUT THE NECESSARY PROCEDURES
FOR SUCH ELECTION; AND DIRECTING THE CITY
ATTORNEY TO PREPARE AN IMPARTIAL
ANAL YSIS or THE MEASURE
WHEREAS, pursuant to Chula Vista Municipal Code Chapter 3.44, the City
currently levies a Utility Users' Tax CUUT"); and
WHEREAS, the City Council desires to rename the Telephone 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 the tax to reflect technological advances in telecommunications
services, and changes in fedcrallaw; and
WHEREAS, the City currently receives $5.3 million a year in UUT proceeds
from telecommunication services, and such tax revenues are 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; and
WHEREAS, lawsuits have been filed against other jurisdictions challenging the
application of the utility users tax to certain telecommunication services based upon
definitions contained in the ordinances governing such taxes and/or references to
allegedly inapplicable federal laws; and
WHEREAS, legislation (H.R. 1521) 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 wireless communications; and
13-10
Resolution No. 2010-
Page 2
WHEREAS, Section 2(b) of Article xm C of the California Constitution, added
by Proposition 21 S effective November 1996, requires that a measure proposing a general
tax be submitted to the voters at an election consolidated with the regularly scheduled
general election for members of the governing body of the local government, unless a
fiscal emergency is declared by unanimous votc of the governing body; and
WHEREAS, by its Resolution No.
City Council has declared a fiscal emergency; and
adopted on June 8, 20 I 0, the
WHEREAS, the proposed ordinance, attached hereto and incorporated herein as
Exhibit "A" would implement these proposed revisions to the tax (the "Ordinance"), and
if approvcd by voters the earliest implementation date will be February I, 20 II; and
WHEREAS, pursuant to Government Code Section 53724 and California
Elections Code Section 9222, thc City Council desires to submit the Ordinance to thc
electoratc at the Special Municipal Election to be held on Tuesday, November 2,2010.
WHEREAS, Section 439.1 of the Administrative Code of the County of San
Diego authorizes thc Registrar ..of Voters of the county of San Diego to render specified
services relating to the conduct of an election to any city or district which has by
resolution requested the Board of Supervisors to permit the Registrar to render the
scrvices, subject to requirements set forth in that section; and
WHEREAS, it is desirable that the County of San Diego Registrar of Voters
conduct the election and canvass the returns of said Special Municipal Election, and that
the City Clerk be authorized to carry out all other necessary procedures for such election;
and
WHEREAS, sufficient funding is anticipated to be allocated in the fiscal year
20 I 0-11 General Fund budget for the payment of costs relating to the placement of the
measure on the ballot.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Chula Vista as follows:
SECTION 1. All of the foregoing recitals are true and correct.
SECTION 2. That the City Council, pursuant to its right and authority, does
order submitted to the voters at the Special Municipal Election on November 2, 2010, the
following question:
1 3-11
Resolution No. 2010-
Page 3
Shall the ordinance to modernize the City's 1978
Telephone Users' Tax (renamed the Telecommunications YES
Users' Tax), with no rate increase; maintain exemptions
for low mcome semor citizens; ens ure Tax proceeds
continue to be available for general municipal purposes,
including police, fire, streets, libraries, and parks; revise
the method for calculating and collecting the Tax to relleet NO
technological and legal changes; and amend the tax base to
equitably inclmle all applicable telecommunications
services be adopted?
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. Pursuant to California Elections Code Section 9282, the City
Council hereby acknowledges its authority, and the authority of any individual voter who
is eligible to vote on the measure, or bona fide association of citizens, or any combination
of voters and associations, to submit a written argument, not to exceed 300 words, for or
against the measure. Arguments must be submitted to the City Clerk, and may be
changed until and including the date fixed by the City Clerk, after which no arguments
for or against the measure may be submitted, withdrawn or changed.
SECTION 6. Pursuant Elections Code section 9285, rebuttal arguments will be
allowed. The rebuttal arguments may not exceed 250 words. Rebuttal arguments must
be submitted to the City Clerk, and may be changed until and including the date fixed by
the City Clerk, after which no rebuttal arguments for or against the proposed measure
may bc submitted to the City Clerk.
SECTION 7. Pursuant to California Elections Code Section 9280, 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 effect of the measure on the existing law and the operation of the
measure, and transmit such impartial analysis to the City Clerk by the date fixed by the
City Clerk.
SECTION 8. Pursuant to Elections Code section 10403, the Board of Supervisors
of the County of San Diego is hereby requested to permit the Registrar of Voters to
pcrform and rendcr all services and proceedings, and to procure and furnish any and all
official ballots, notices, printed matter and all supplies and equipment and paraphernalia
incidental to and connected with the conduct of the election of the City of Chula Vista, in
order to propcrly and lawfully conduct the election.
1 3-1 2
Resolution No. 2010-
Page 4
SECTION 9. The Board of Supervisors of the County of San Diego is hereby
requested to consolidate this election with the statewide election to be held on the same
day, in the same territory. Pursuant to Section 10411 and Section 10418 of the Elections
Code, (a) the election shall be held in all respects as if there were only one election; (b)
only one form of the ballot shall be used; and (c) the Registrar of Voters of the County of
San Diego shall canvass the returns of the subject election as pmi of the canvass of
returns of the election consolidated hereby.
SECTION 10. Pursuant to Section 10410 and Section 10418 of the Elections
Code within the territories affected by this consolidation, the elections precincts, polling
places, voting booths and polling hours shall, in every case, be the same, and there shall
be only one set of elections officers in each set of the precincts.
SECTION 11. The County of San Diego shall be reimbursed in full for the
services performed by the Registrar of Voters for the City of Chula Vista upon
presentation of a bill therefor, and this City agrees to indemnify and savc free and
harmless the County, its officers, agents and employees from expense or liability,
including reasonable attorneys' fees, as a result of an election contest ansmg after
conduct ofthis election.
SECTION 12. The City Clerk is hereby directed to forthwith file a certified copy
of this resolution with the Board of Supervisors and the Registrar ol'Voters of the County
of San Diego and to issue instructions to the Registrar of Voters to take any ami all steps
necessary for the holding of the election.
SECTION 13. That the ballots to be used at said election shall be, both as to form
and matter contained therein, such as may be required by law to be used therefor.
SECTION 14. That in all particulars not recited in this resolution, the election
shall be held and conducted as provided by law for holding municipal elections in said
City.
SECTION 15. That notice of the time and place of holding the election is hereby
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 16. That the City Clerk shall certify to the passage and adoption of
this resolution, and file it with the City's original resolutions.
Presented by
Approved as to form by
Maria Kachadoorian
Director of Finance/Treasurer
~~~1 . ~
Bart C. Miesfeld'
City Attorney
13-13
E-,rjib/T /T
ORDINANCE NO.
AN ORDINANCE OF THE CITY OF CHULA VISTA ADDING CHAPTER
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 Chub Vista Municipal Code,
and it shall read as follows:
Chapter 3.42
TELECOMMUNICATION USEHS' TAX
3.42.010 Definitions.
3.42.020 Constitutional, Statutory, and Other Excmptions.
3.42.030 Exemptions - Senior Citizens
3.42.040 Telecommnnication Users' Tax.
3.42.050 Bundling Taxable Items with Non-taxable Items.
3.42.060 Substantial Nexus / Minimum Contacts.
3.42.070 Duty to eolleet--Proeedures.
3.42.080 Collection Penalties - Service Snppliers.
3.42.090 Actions to Collect.
3.42.100 Deficiency Determination and Assessment - Tax Application Errors.
3.42.110 Administrative Remedy - Non-Paying Service Users.
3.42.120 Additional powers and duties of the Tax Administrator.
3.42.130 Records.
3.42.140 Refnnds.
3.42.150 Appeals.
3.42.160 Notice No Injunction/Writ of Mandate.
3.42.170 Notice of Changes to Ordinance.
3.42.180 Effect of State and Federal Reference/Authorization.
3.42.190 Independent Audit of Tax Collection, Exemption, Remittance, and
Expenditure.
3.42.200 Interaction with Prior Tax.
3.42.210 Remedies Cumulative.
3.42.220 Violations deemed infractions.
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3.42.010 Definitions.
The following words and phrases whenever used in this Chapter shall he construed as
defined in this section.
(a) "Ancillary telecommunication services means services that arc associated with or
incidental to the provision, use or enjoyment oftelecoml11unieations services, including hut
not limited to the following services:
(1) "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 include
the telecommunications services used to reach the conference bridge.
(2) "Detailed telecommunications billing service" means an ancillary scrvice of
separately stating information pertaining to individual calls on a customer's hilling
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, including conference bridging services.
(5) "Voice mail service" means an ancillary service that enables the customer to
store, send or receive recorded messages. "Voice mail service" docs not include
any vertical services that the customer may be required to have in order to utilize
the voicc mail service.
(b) "Billing Address" shall mean the mailing address ofthc service user where thc service
supplier submits invoices or bills for payment by the customer.
(c) "City" shall mean the City ofChula Vista.
(d) "Mohile Telecommunications Service" has thc meaning and usage as set forth in the
Mobile Telecommunications Sourcing Act (4 U.s.e. Section 124) ancl the regulations
thereunder.
(e) "Month" shall mean a calendar month.
(t) "Paging service" means a "telecommunications service" that provides transmission of
coded radio signals for the purpose of activating specific pagers; SLlch 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, club, joint stock company,
joint venture, limited liability company, corporation (including foreign, domestic, and non-
profit), municipal district or municipal corporation (other than the City) cooperative,
receiver, trustee, guardian, or other representative appointed by order of any court,
(h) "Place of Primary Use" means the street address representative of where the customer's
use of the telecommunications service primarily occurs, which must be the residential street
addrcss or the primary business street address of the customer.
(i) "Post-paid telecommunication service" means the telecommunication service obtained
by making a payment on a telecommunication-by-telecommunication basis cithcr through
the usc of a credit card or payment mechanism such as a bank card, travel card, credit card,
or dehit card, or by charge made to a service number which is not associated with the
origination or termination of the telecommunication service,
U) "Prepaid tclecomm'unication service" means the right to access telecommunication
services, which must be paid for in advance and which cnahles the origination of
telecommunications using an access number or authorization code, whether manually or
electronically dialed, and that is sold in predetermined units or dollars of which the number
decl ines with use in a known amount
(k) "Private telecommunication service" means a telecommunication service that entitles
the customer to exclusive or priority usc of a telecommunications channel or group of
channels hetween or among termination points, regardless of the manner in which such
channel or channels are connected, and includes switching capacity, extension lines,
stations, and any other associated services that are 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" the location where the customer either inputs or receives
the telecommunications),
(I) "Service Address" means either:
(I) Thc location of the service user's telecommunication equipment trom which the
telecommunication originates or terminates, regardless of where the
telecommunication is billed or paid; or,
(2) If the location in subsection (I) of this definition is unknown (e.g" mobile
telecommunications service or VolP service), the service address means the
location of the service user's place of primary use,
(3) For prepaid telecommunication service, "service address" means the location
associated with the service number, ifnot known, the point of sale of the service,
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(01) "Service Supplier" shall mean any entity or person, including the City, that provides
telecommunication service to a user of such scrvice within the City.
(n) "Service Uscr" shallmcan a person required to pay a tax imposed under thc provisions
of this Chaptcr.
(0) "State" shall mean the State of California.
(p) "Streamlined Sales and Use Tax Agreement" shall mean the multi-state agreement
commonly known and referred to as thc Streamlined Sales and Use Tax Agreemcnt, and as
it is amended from time to time.
(q) "Tax Administrator" mcans the Director of Finance of the City or his or her designce.
(r) "Telecommunications services" means thc 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"
includes slIch transmission, conveyance, or routing in \vhich computer processing
applications are used to act on the form, code or protocol of the content for purposes of
transmission, conveyance or routing without regard to whether such services are referred to
as voice over internet protocol (VoIP) services or are classified by the Federal
Telecommunications Commission as enhanced or value added, and includes video and/or
data services that is functionally integrated with "telecommunication scrvices"
"Telecommunications services" include, but are not limited (0 the following services,
regardless of the manncr or basis on which such serviccs are 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 service (or any other similar numbers designated by the Federal
Telecommunications Commission for services whereby subscribers call in to pre-recorded
or live service). "Telecommunication services" docs not include cable or video
programming services that are subject to a cable or video service li'anchise fee.
(s) "VoIP" (voice ovcr 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-
trce number without incurring a charge for the call. The service is typically marketed
under the name "800," "855," "866," "877," and "888" toll-free 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 service" does not include the charge l'or: 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 subsequent 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 [rom the tax imposed by this Chaptcr pursuant to
subsection (a) of this section shall tile an application with the Tax Administrator [or an
exemption: provided, however, this re'luirement shall not apply to a service user that is a
statc or federal agency or subdivision with a commonly recognized name for such service.
Said application shall be made upon a form approved by the Tax Administrator and shall
state those L~cts, declared under 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 decmed 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 notify the new telecommunication
service supplier oflhe service user's tax exempt status. A service user that fails to comply
with this section shall not be entitled to a refund of telecommunication users' taxes
collected and remitted to the Tax Administrator from such service user as a result 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 prerequisite to a suit thereon.
(c) The City Council may, by resolution, establish one or more classes of persons or one or
more classes of utility service otherwise subject to payment of a tax imposed by this
Chapter and provide that such classes of persons or service shall be exempt, in whole or in
part from such tax for a specified period of time.
3.42.030 Exemptions - Senior citizens.
Any individual who qualities for an exemption under Section 3.44.02\ of Chapter 3.44
shall be exempt from the tax imposed by Section 3.42.040. The procedures tor obtaining
such an exemption shall be followed as set fOlih in Section 3.44.021.
3.42.040 Telecommunication Users' Tax.
(a). There is hereby imposed a tax upon every person in the City using telecommunication
services. The tax imposed by this section shall be at the rate o[ five percent (5.00 'Yo) of the
char(!:es made for such services and shall be collected from the service user by the
telecommunication serviccs supplier or its billing agent. There is a rebuttable presumption
that telecommunication services, which are billed to a billing or service address in the City,
are used, in whole or in part, within the City's boundaries, and such services are subject to
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taxation under this Chapter. There is also a rebuttable pt'esumption that prepaid
telecommunication services sold within the city are uscd, in whole or in part, within the
City and are therefore subject to taxation under Ihis Chapter. If the billing address of thc
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 every kind or
nature, or other consideration provided by the service user in exchange for the
telecommunication services.
(b) "Mobile Telecommunications Service" shall be sourced in accordance with the
sourcing rules set forth in the i\.fohile Telecommunications Sourcing Act (4 u.s.e Scction
124). The Tax Administrator may issue and disseminate to telecommunication 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 telecommunication services, VoIP, and
private telecommunication services, provided that such rules arc based upon custom and
common practice that further administrative efficiency and minimize multi-jurisdictional
taxation (e.g., Streamline Sales and Use Tax Agreement),
(c) The Tax Administrator may issue and disseminate to telecommunication service
suppliers, which are subject to the tax collection requirements of this Chapter, an
administrative ruling identifying those telecommunication services, or charges therefor,
that arc subject to or not subject to the tax of subsection (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 services; late payment fees; detailed billing; central office and custom
calling features (including but not limited to call waiting, call forwarding, caller
identitication and three-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 services" shall not include digital downloads that are not
"ancillary telecommunication services" such as, music, ringtones, games, and similar
digital products.
(e) To prevent aetualmulti-jurisdictional taxation oftelccommunication services suhjectto
tax under this section, any service user, upon proof to the Tax Administrator that the
service user has previously paid the same tax in another state or local jurisdiction on such
tclecommunication services, shall be allowed a credit against the tax imposed to the extent
of the amount of such tax legally imposed on, and paid by. the service user in such other
slate or local jurisdiction; provided, however, the amount of credit shall not exceed the tax
owed to the City under this section.
(t) The tax on telecommunication services imposed by this section shall be collected from
the service user by the service supplier. The amount of tax collectcd in one (I) month shall
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be remitted to the Tax Administrator, and must be received by the Tax Administrator on or
before the twentieth (20th) day of the following month.
3.42.05U Bundling Taxable Items with Non-Taxable Items.
If any non-taxable charges arc combined with and not separately stated from taxable
service charges on the customer bill or invoice of a service supplier, thc combined charge is
subject to tax unless the service supplier identifIes, by reasonable and verifiable standards,
the portions of the combined charge that are non-taxable and taxable through the service
supplier's books and records kept in the regular course of business, and in accordance with
gencrally accepted accounting principles, and not created and maintained for tax purposes.
The scrvice supplier has the burden of proving the proper apponionment 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 purposcs, the
values assigncd the taxable and non-taxahle services shall be bascd on its 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 valuation of the taxable and non-taxable
servIces.
3.42.060 Substantial Nexus / Minimum Coutacts.
For purposes of imposing a tax or establishing a duty to collect and remit a tax under this
Chapter, "substantial nexus" and "minimum contads" shall be construed broadly in favor
of the imposition, collection and/or remittance of the telecommunication users' tax to the
!llllest extent permitted by state and federal law, and as it may changc from time to time by
judicial interpretation or by statutory enactment. Any telecommunication 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 tclephone 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 sufficient 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 advertising 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.
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3.42.070 Duty to Collect--Procedures.
(a) Collection by Service Suppliers. The duty of service suppliers to collect and remit the
taxes imposed by the provisions of this Chapter shall be performed as follows:
(I) The tax shall be collected by service suppliers insotar as practicable at the same
time as. and along with, the collection of the charges madc in accordance with the
reglllar 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. Tn those cases where a service uSCr 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 are subject
to the provisions of this Chapter. Where a service user receives marc than one
billing, one or more being for different periods than another, the duty to collect
shall arise 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 tor any reason. Pursuant to Revenue and Tax Code Seetioll :'2846,
such filing returns are confidential information and are exempt from the disclosure
provisions of the Public Records Act.
3.42.080 Collection Penalties - Service Suppliers.
(a) Taxes collected from a service user are dclinquent if not received by the Tax
Administrator on or before the due date. Should the due date occur on a weekend or legal
holiday, the return must be received 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, made by a service supplier in satisfaction of its obligations under this subsection
shall be considered timelv 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 deficiencies at the rate of ten
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(10%) percent of the total tax that is delinquent or deficient in the remittance, and shall pay
interest at the rate of one and 50/l00ths (1,50%) percent per month, or any fraction thereoC
on the amount of the tax, exclusive of penalties, from the date on which the remittance first
became delinquent, until paid,
(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 ten (IO'Yo) percent of the
amount of the tax collected and/or required to be remitted, or as recomputed by the Tax
AdministratoL
(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 thc tax herein required to be
paid,
(c) 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 mechanism,
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 service 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 useI', Any person owing money to the City under the provisions of this Chapter
sball be liable to an action brought in the name oftbe 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 unsecured priority excise (ax
obligation under J J USCA, Section 507(o)(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 Cbapter 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 the Tax Administrator institute proceedings
under this Section 3,42, 10Q,
(b) The Tax Administrator shall mail a notice of such deficiency determination to the
person or entity allegedly owing the tax, which notice sball refer briefly to the amount of
the taxes owed, plus interest at the rate of one and 5011 OOths (1,50%) percent per month, or
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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 notice, the person or entity allegedly owing the tax may request in writing to the Tax
Administralor for a hearing on the matter.
(c) If the person or entity allegedly owing the tax fails to request a hearing within the
prescribed time period, the amount of the ddieiency dctermination shall become a final
assessment, and shall immediately be due and owing to the City. If such person or entity
requests a hearing. the Tax Administrator shall cause the matter to be set for hearing, which
shall be scheduled within thirty (30) days after receipt of the written request for hearing.
Notice of the time and place of the hearing shall be mailed hy the Tax Administrator to
such person at least ten (l 0) calendar days prior to the hearing, and, if the Tax
Administrator desires said person to produce specilie records at such hearing, such notice
may designate the records requested to be produced.
(d) At the time fixed for the hearing, the Tax Administrator shall hear all relevant
testimony and evidence, including that of any other interested parties. At the discretion of
the Tax Administrator, the hearing may be continued li'om time to time for the purpose of
allmving the presentation of additional evidence. Within a reasonable time following the
conclusion of the hearing, the Tax Administrator shall issue a linal assessment (or non-
assessment), thereafter, by confirming, modifying or rejecting the original deficiency
determination, and shall mail a copy of such final assessment to the person or entity owing
the tax. The decision of the Tax Administrator may he appealed pursuant to Section
3.42.1 SO of this Chapter. Filing an application with the Tax Administrator and appeal to
the City Manager pursuant to Section 3.42.1 SO of this Chapter is a prerequisite to a suit
thereon.
(c) Payment of the final assessment shall hecome delinquent if not received by the Tax
Administrator on or before the thirtieth (30th) day following the date of receipt of the
notice of final assessment. The penalty for delinquency shall be ten percent (10%) on the
total amount of the assessment, along with interest at the rate of one and SO/lOOths (l.SO%)
percent per month, or any fraction thereof:, on the amount of the tax, exclusive 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 under this Chapter 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 deliherately
withheld the amount of the tax owed by the service user from 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
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due under this Chapter from certain named service users for specific billing periods. To the
extent the service user has failed 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 service supplier shall provide the City with the names and addresses of such
service users and the amounts oftaxes owed under the provisions of this Chapter. Nothing
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 ten percent ( 10%) of the total tax that is owed, and shall pay interest at the rate of one
and 50/ I OOths (1.50%) percent pcr month, or any fraction thcreof, 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 per'son required to collect the tax; or, should the scrvice user have a
change of address, to his or her last known address.
(d) If the service user fails to remit the tax to thc Tax Administrator within thirty (30) days
from the date of the service of the notice upon him or her, the Tax Administrator may
impose an additional penalty of ten percent (10%) 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. clarifying, carrying out and
enforcing the payment. collection and remittance of the taxes herein imposcd. 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, exccpt as allowed by
California Government Code Section 53750(h)(2). A copy o[such administrative rules and
regulations shall be on filc in the Tax Administrator's office. To the extent that the Tax
Administrator detcrmines that the tax imposed under this Chapter shall not be collected in
full for any period of time from any particular service supplier or service user, that
determination shall be considered an cxercise of the Tax Administrator's discretion to scttle
disputes and shall not constitute a change in taxing methodology for purposes of
Government Code Section 53750 Or otherwise. The Tax Administrator is not authorized to
amend the City's methodology for purposes of Government Code Section 53750 and the
City does not waive or abrogate its ability to impose the communication users' tax in full as
a result of promulgating administrative rulings or entering into agreements.
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(c) Upon a proper showing of good cause, the Tax Administrator may make administrative
agreements, with appropriate conditions, to vary from the strict requiremcnts of this
Chapter and thereby: (I) conform to the billing procedures of a particular service supplicr
so long as said agreements result in the collection of the tax in conformance with the
general purpose and scope of this Chapter; or, (2) to avoid a hardship where the
administrative costs of collcction and remittance greatly outweigh the tax benefic A copy
of each such agreement shall be on file in the Tax Administrator's office, and are voidable
by thc 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 Chapler, 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. In the absence of fraud or other intentional misconduct, the audit period of
review shall not exceed a period of threc (3) years immediately preceding the datc of
receipt of tile written notice by said person from the Tax Administrator. Upon completion
of the audit, the Tax Administrator may make a dcIiciency determination pursuant to
Section 3.42.l00(d) of this Chapter for all taxes (and applicablc penalties and intcrest)
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 make a reasonable estimate of the deficiency. Said reasonable estimate shall
be entitled to a rcbuttable 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-live (45) days, provided that the time for filing
the required statcment has not already passed when the request is received. No penalty 1'01'
delinquent payment shall accrue by rcason of such extension. Interest shall accrue during
.said extension at the rate of one and 50/1 OOths (1.50%) percent per month, prorated for any
portion thereof.
(f) The Tax Administrator shall determine the eligibility of any pcrson who asserts a right
to exemption from, or a refund of, thc 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 collcct and/or remit
for failure to collect the (ax imposed by this chapter if the non-collection occurred in good
faith. In determining whether the non-collection was in good faith, the Tax Administrator
shall take into consideration the uniqueness of the product or service, industry practice or
other precedence. The Tax Administrator may also pat1icipate with other UUT public
agencies in conducting coordinated compliance reviews \vith the goal of achieving
administrative eftieiency and uniform tax application determinations, where )2ossible. To
encourage full disclosure and on-going cooperation on annual compliance reviews, the Tax
Administrator, and its agents, may enter into agreements with the tax-collecting service
providers and grant prospective only effect on any changes regarding the taxation of
12
13-25
services or charges that were previously deemed by the service provider, in good faith and
without gross negligence, to be non-taxable, In determining whether the non-collection
was in good faith and without gross negligence, the Tax Administrator shall take into
consideration the uniqueness of the product or service, industry practice 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 kecp and preserve, for a period of at least three (3) years, all
records as may be nccessary 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 administrativc subpocna to compel a pcrson to deliver, to the
Tax Administrator, copics of all records deemed necessary by thc Tax Administrator to
establish compliance with this Chapter, 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 coursc of business. As an alternative to delivering the
subpocnaed 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
reasonahle travel expenses incurred by the City to inspect those records, including travel,
lodging, meals, and other similar expcnses, 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 agrecment approved
by the City Attorney to protect the confidentiality of customer information pursuant to
California Revenue and l'IX Code Sectiuns 7284.6 alld 7284. 7.
(d) If a service supplier uscs a billing agent or billing aggregator to bill, collect, and/or
remit 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 unreasonably denies the Tax
Administrator access to such records, or fails to produce the information requested in an
administrativc subpoena within the time specitied, then the Tax Administrator may impose
a penalty of $500 on such person t,)r each day following: ;) the initial date that the person
retllses 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.
13
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3.42.140 Refunds.
\Vhenever the amount of any tax has been overpaid or paid more than once or has bcen
elToneously 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 Irom a person or scrvicc supplier, 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 overpayment or erroneous 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 filing of a claim on behalf of a class or group of
taxpayers unless each membcr 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 Governmel11 Code Section 935 is a prerequisite
to any suit thercon. Any action brought against the City pursuant to this section shall be
subject to the provisions of Governmcnt Code Sections 945.6 and 946. The Tax
Administrator, or the City Council where the claim is in cxcess of five thousand dollars
($5,000), shall act upon the refund claim within the time pcriod sct fcH1h in Governmen/
Code See/ion 9/2.4. If the Tax Administrator/City Council fails or refuses to act on a
refund claim within the time prescribcd by Governmcnt Section Y /2.4, 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 Governmen/
Code Section 912.4 The Tax Administrator shall give notice of the action in a form which
substantially complies with that set forth in Governmen/ Code See/ion 913.
(c). Notwithstanding the notice provisions of subsection (a) 0'1' 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 satistied 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, thc Tax Administrator has received proot~ to his or her satisfaction, that the
overpayment has been refunded by the service supplier to the service user in an amount
equal to the requested credit.
14
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3.42.150 Appeals.
(a) The provisions of this section apply to any decision (other than a decision relating 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 relating to a refund pursuant to Scction 3.42. ]40 of this Chapter),
deficiency determination, assessment, or administrative ruling of the Tax Administrator,
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 Governmenl Code See/ion
935(b).] Nothing herein shall permil the filing of a claim 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 Scction 3.42.140 of this Chapter), deficiency 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 orticer selected
by the City Manager, no more than thirty (30) days from the receipt of the appeal. The
appellant shall be served with notice of the time and place of thc hearing, as well as any
relevant materials, at least five (5) calendar days prior to the hearing. The hearing may be
continued from 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 files, the
hearing officer shal] issue a written notice and order upholding, modifying or reversing thc
determination jj'om 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 final ancl that any petition for judicial review
shall be filed within ninety (90) days from the clate of the decision in accordance with Code
oICivi! Procedure See/ion 1094.6. In the.event the hearing ofticer's decision is in favor of
the City, all costs ofthc hearing shall be bornc by the appellant.
(e) All notices under this section may be scnt by regular mail, postage prcpaid, and shall be
deemed received on the third calendar day following the date of mailing, as established by
a proof ofmailing.
15
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3.42.160 No Injunction/Writ of Mandate.
No injunction or writ of mandate or other Iega] or equitablc process shall issue in any suit,
action, or proceeding in any court against this City or against any ofticer of the City to
prevent or enjoin the collection under this Chapter of any tax or any amount ol'tax required
to be collected and/or remitted.
3.42.170 Notice of Changcs to Ordinance.
If a tax under this Chapter is added repealed, increased, reduced, or the tax base is changed,
the Tax Administrator shall fol]ow the notice requirements of Calif()l'I1ia Public Utililies
Code Sectioll 799.
3.42.180 Effcct of State and Fedcral Rcference/Authorization.
Unless specifically provided otherwise, any reference to a state or federal statute in this
Chapter shall mean such statute as it may be amended from time to time, provided that such
reference to a statute herein shall not include any subsequent amendment thereto, or to any
subsequent change of interpretation thercto by a state or federal agency or court of law with
the duty to interpret sueh law, to the extent that such amendment or change of
interpretation would require voter approval under California law, or to the extent that such
change would result in a tax decrease (as a result of excluding al] or a part of a
communication service, or charge therefor, from taxation). Only to the extcnt voter
approval would otherwise be required or a tax decrease would result, the prior version of
the statute (or interpretation) shall remain applicable; 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 interpretation) shall be applicable to the maximum possible extent..
To the extent that the City's authorization to collect or impose any tax imposed under this
Chapter 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
the tax shall be imposed and collected to the full extent of the authorization up to the full
amount ofthe tax imposed under this Chapter.
3.42.190 Independent Andit of Tax Collcction, Excmption, Remittance, and
Expenditure.
The City may periodically verify that the taxes owed under this Chapter have been properly
applied, exempted, collected, and remitted in accordance with this Chapter, and properly
expended according to app]icable municipal law. The annual verification shall be
performed by a qualified independent third party and the review shall cmploy reasonable,
cost-effective steps to assure 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.
16
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3.42.200 Intcraetion with }'rior Tax.
(a) Satisfaction 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 charge for a
telecommunication service shall be 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 1,2011, any person who pays the tax levied pursuant to Section 3.44.030 of
this Code with respect to any charge for a service subject to taxation pursuant to this
Chapter shall be deemed to have satis1ied 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 taxes upon a single utility charge during
the transition period from the prior telecommunication users' tax to the new
telecommunication users' tax (which transition period ends April J, 2011) 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 Sec/iun 799 uf/he California Public Utilities 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 respect to any service for which the tax
levied pursuant to this Chapter has been determined to be invalid. Such automatic
continuation shall be effective beginning as of the first date of service (or billing date) lor
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 final court order is published.
3.42.210 Rcmedies 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 Calijornia False Claims
Act (Guvernmen/ Code Section 11650 et seq.) and the CalijiJrnia Un}'7i,. Practices Act
(Business and Professiuns Code See/ion /7000 et se'l.), 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 lnfraetions. 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,
17
13-30
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.
SECTION 2. Effective Date. This Chapter shall become effective immcdiately upon the
date that this Ordinance is confirmed and approved by the voters of Chula Vista at the
Municipal Election of November 2, 20 I O. Service Suppliers will not be required to
implement the provisions of this ordinance prior to February 1,20 II.
SECTION 3. Amcndment or Repeal. Chapter 3.42 of Alticle XUI of the Chula Vista
Municipal Code may be repcaled or amended by the City Council without a vote of the
people. However, as required by Chapter XIlIC of the California Constitution, voter
approval is required for any amcndment provision that would increase the rate of any tax
levied 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:
1. 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 definition
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 Ordinancc.
3. The establishment of a class of person that is exempt or excepted from the tax or
the discontinuation of any such exemption or exception (other than the
discontinuation of an exemption or exception specifically set forth 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. Senrability. If any section, subsection, sentencc, 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. Ratification of Prior Tax. The People of the City of Chula Vista hereby
ratify and approve the past collection of the Telephone Users Tax under Chapter 3.44 of the
Chula Vista Municipal Code as it existed prior to the effective date of this Ordinance.
SECTION 6. 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.
18
13-31
I hereby certify that the foregoing Ordinance was PASSED, APPROVED ancl ADOPTED
by the people ofthc City ofChula Vista voting on the day of ,2010.
Mayor
A TrEST:
City Clerk
APPROVED AS TO FORM:
City Attorney
APPROVED AS TO FORM:
19
13-32
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Page 1 of ~
Donna Norris
From:
Sent:
To:
Sheree Kansas
Monday, June 07, 2010 503 PM
Donna Norris
Subject: FW: Request for Continuance - Council Item #13 - Utility Users Tax
Attachments: Cox Response to City of CV UUT.PDF; AT&T letter to City of CV.pdf
In case you didn't get this.... Lily forwarded it to me.. FYI
-----Original Message-----
From: Lilia Cesena
Sent: Monday, June 07, 2010 4:26 PM
To: Rudy Ramirez; Mitch Thompson; Pamela Bensoussan; Steve Castaneda
Cc: Sheree Kansas; Aaron Allen; Ana Baiz-Torres; Susan Johnson; Jonathan Goetz; Linda Wagner
Subject: FW: Request for Continuance - Council Item #13 - Utility Users Tax
Importance: High
Hello Honorable Councilmembers,
Please refer to the email below from Ileana Ovalle, Cox Communications. She asked me to share this email
with you.
Sincerely,
Lilia Cesena
Office Specialist
Mayor & Council Offices
City of Chula Vista
(619) 691-5044 - Office
(619) 476-5379 - Fax
From: I1eana.Ovall~.,"""''fl [mailto:lleana.Ovall<l!..'[("''''':'~
Sent: Monday, June 07, 2010 4:22 PM
To: Cheryl Cox; Bart Miesfeld; Cheryl Cox; Lilia Cesena; Jim Sandoval
Cc: Sam.Attishd'~'''''~'''IlJ\,''''i :,"".""..";.''''''''~; Christine Moore; Ileana.Oval"'i'H"....'#\; Michael Meacham; Maria Kachadoorian;
Simon Silva; Scott Tulloch
Subject: Request for Continuance - Council Item #13 - Utility Users Tax
Importance: High
City of Chula Vista
27 6 Fourth A venue
Chula Vista, CA 91910
Rc: Proposed Utility Users Tax Ballot Measure
Honorable Mayor Cheryl Cox and City Council Members,
This afternoon, Cox received your notification below of the June 8th City Council Agenda Item #13 -- Utility Uses Tax
(UUT) and we respectfully request an eight week continuance of this item.
This item has a significant impact to our business. A twenty-six hour notification from the City and absolutely no prior
communication on this issue between city staff and the telecommunications industry is sufficient grounds for a
6/7/20] 0
Page 2 of c
continuance. We believe it is imperative to allow the appropriate time to review. Additionally, we have no record of the
elty of Chula Vista having formally responded to the attached correspondence submitted for the July 2008 UUT Agenda
Item. Before this item can be heard, an official letter of acknowledgement of resolution or non-resolution to these
concerns is merited.
Although an eight week continuance is far less than the time city staff has had to prepare. your consideration of this
continuance will allow a fair review of this item by Cox and will give us at least a small window oftime to work with city
staff to address any issues towards resolution.
We thank you in advance for your attention and response to this urgent matter.
Cc: Bart Meisfeld, City Attorney
Jim Sandoval, City Manager
Scott Tulloch, Assistant City Manager
Michael Meacham, Director of Conservation & Environmental Services
Maria Kachadorian, Director of Finance
Someone in your community has been nominated as a Cox Conserves Hero! Vote now through June 19.
COX
Ileana Ovalle I Senior Manager, External Affairs
619.266.526101619.266.5600 f 1619.~~;7:i;f.1"~C I CoxSanDiego.com
350 Tenth Avenue, Ste. 600, San Diego, CA 921 01IiJe;ll}a.9YaJJ~.t'iC,"~~~}',"~
From: Michael Meacham [mailto:mmeacham@ci.chula-vista.ca.us]
Sent: Monday, June 07, 2010 12:47 PM
To: Attisha, Sam (If~"""-;""""~); id935-tl,"f6tir4:;'>'<~
Cc: Ovalle, Ileana ~); Christine Moore
Subject: Council Agenda Item
Importance: High
~,
.' I,"
~;.
f." '-I'll'
Sorry I have not gotten this to you sooner but I have been out of town for about a week and just returned
today. Please do not hesitate to call if you have any questions.
..... ,~ . IIl'lIII1t ..... ~.....
409-5870 direct
t:;;'''.;l.'''',,-., mobile
:Mich.aef T. :MeaCh.am, 'Director
Conservation & Environmental Services Department
City of Chula Vista
276 Fourth Avenue
Chula Vista, CA 91910
Ph (619) 407-3545 Fax (619) 476-5310
rTlrD~".ch"m@(Oi..clwJa-vista...(O"._us
'Tiiank: you for yractieing sustaina6iuty and for suyyorting cliuta \lista 6usinesses 6y sfiayying {aea{{y.
"We cannot seek achievement for ourselves and forget about progress and prosperity for our community... Our ambitions
must be broad enough to include the aspirations and needs of others, for their sakes and for our own."
CESAR CHAVEZ
6/7/2010
.'
'~ ,t--
c.....'.'~
.' {,~.
350 10th Avenue, Suite 600
San Diego, CA 92101
Jt1I't '("I Z-OO~
Honorable Mayor Cox
. City Councilmembers
City of Chula Vista
276 Fonrth Avenue
Chula Vista, CA 91910
Re: Prooosed Changes To Utility Users Tax
Dear Mayor Cox and City Councilmembers:
On Wednesday, July 2, 2008, Cox received a copy of a staff report and ordinance outlining the
City of Chula Vista's proposed changes to its existing Utility User's Tax ("UUT"). 1bis letter
provides comments on behalf of Cox Commuillcations ("Cox") on the proposed changes, Cox
recognizes that telecommunications service has changed significantly since the initial adoption of
the UUT. While new communications technologies are pnt forth as a reason why the tax should
now be re-written, they are also a reason why the City must tread carefully when proposing
changes. The changes must be as clear as possible to allow voters to know the impact the
changes will have and to allow companies like Cox to know to whom and how the tax must be
charged.
Specifically, Cox's comments and concerns on the proposed changes to the UUT include:
I. Application of the Tax to Video Services
The definition of "telecommunications services" in the proposed ordinance includes "the
transmission...of...video...to a point, or between or among points." Cox is concerned that this
language encompasses cable television services that are already subjcct to franchise fees paid to
the City. Although the staffs report on the proposed ordinance states on page 3 that the
ordinance is "designed to not collect both video/cable franchise fees and UUT from a single
telecommuillcation customer for the same service," the proposed ordinance contains no
exemptions for cable or video services that are also subject to franchise fees. Thus, customers
receiving cable or video services would be subject to existing franchise fees as well as the new,
revised UUT.
Contrast this to customers of direct broadcast satellite providers such as DirecTV or DISH.
Under Federal law, such satellite providers arc exempt from' local taxes on satellite television
services. Thus, under the proposed ordinance, a Cox cable subscriber would pay approximately
10% in total City taxes and fees, while a satellite customer would pay no such taxes or fees. This
puts cable providers such as Cox at a competitive disadvantage and drives customers away from
local cable providers to the satellite companies, resulting in a loss of franchise fee and PEG
revenues to the City.
Cox has invested. substantial1y in Chula Vista for decades as a telecommunications leader. Cox,
along with City residents and businesses using Cox's services, are already among the largest
contributors to the tax base ofthis City. As reflected in Attachment A, just in tlle last year, Cox
paid nearly $460,000 dollars in Utility User Taxes, $2,400,000 in franchise fees, and fulfilled a
multitude of city and community requests as part of our franchise. In addition, Cox and its
jJ~ Mixed Sources
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[Ill flilrrllOllY with the Cox COrlscrves eeo-friendly progralll. w'" arc
prQud to print on Forest 5tewaJdship CounCIl-certified paper
wllvut Ilnd potenti3l-wmpe~a-A+&T, all have plans to iny@st in expanfling
video services in this City as well as other parts of the County. As currently proposed, the revised
U1JT would punish the same companies that have invested in Chula Vista by taxing the valuable
telecommunications services we provide while leaving the satellite providers untouched. This
discriminatory approach is neither fair to the members of the California Cable &
Telecommunications Association, nor helpful to California consumers or its economy. The City
of Chula Vista is the only City in the County of San Diego that would add new taxes to video
services as described in the proposed definition of "telecommunications services." If this
definition is adopted, it would likely steer investment dollars to other parts of the County where
higher taxes would not discourage use of these new services. Not only would City residents miss
out on the opportunity for better services, but the City itself would miss out on franchise fee
revenue from these new and e:"'panded services.
In other communities, including the City of Los Angeles, cities made it clear that they did not
intend to apply their revised Utility User's Tax to video services that are already heavily taxed
through franchise fees. We hope that Chula Vista will follow the lead of these communities and
continue to limit its utility taxes to traditional utility services. Specifically, Cox asks that the
definition of "telecommunications services" in the proposed ordinance be modified by adding the
following language to the definition:
"Telecommunications services do not include cable or video television services that are subject
to a cable or video telel'ision franchise fee. "
This language is similar to language found in the recently enacted City of Los Angeles
Communications Users Tax (see Attachment B). Adopting this language is consistent with the
intent expressed in the staffs report and would ensure that cable customers are not unduly
discriminated against by being assessed both the UUT and franchise fees.
II. Effective Date
The proposed ordinance siguificantly increases the amount of services that will be subject to the
UUT. In the event that the vote on the proposed ordinance is successful, it will be critical that the
City provide adequate time to allow service providers to update' their billing systems to
accommodate the changes. As currently written, the proposed ordinance calls for the tax to go
into effect immediately upon voter approval. However, Cox will require at least 90 days from the
date of approval to create and implement billing system changes necessary to collect the newly
expanded tax. Thus, we respectfully request that the current language in "SECTION 2. Effective
Date" be replaced with the following:
SECTION 2. Effective Date. This Chapter shall become effective February 1, 2009.
Ill. Voter Approval
Currently, Chula Vista's UUT only applies to intrastate telephone services. The proposal would
expand the tax to interstate and international services, as well as to private line and related
services. These changes go beyond "clarifying" the existing tax by applying the tax to services
that have not been taxed iu the past. The staff's report recognizes this and acknowledges that thc
ordinance must be submitted to voters for approval.
In submitting the proposed ordinance for voter approval, it is paramount that voters have an
accnrate understanding of the proposed changes. For example, the staff report states on page 3
tn::lt thp. rrf'\rn<:::p.n nrnin~nce-:.:.{rJeduce5 the C'll'Tent.....:ta.x..-per-cent.agc.-Gll-teleCGmlll1l1l-i~ns--and
video sen~ces from 5% to 4.75% for approximately 80% of Chula Vista's telecommunicatious
customers." TIlls statement is misleading. While the rate for intrastate telephone semces would
decrease from 5% to 4.75%, the rate on interstate telephone services (among others) would
effectively increase from 0% to 4.75%. Since most if not all of the "80% of Chula Vista"
customers referenced in the staff report are also interstate phone customers, the net result would
be a tax rate increase for all customers.
To ensure that voters have accurate and reliable information upon which to base their decision,
Cox requests that any information presented to public clearly list, in plain language, the services
that will be subject to a new or modified tax as proposed under the UUT ordinance.
We appreciate the opportunity to comment on this proposal. If you have any questions about
Cox's concerns, do not hesitate to contact me at 619-266-5653.
S{7relY,
~!: A-ikL
Vice President, Business Developmeut & EJ."ternal Affairs
Cox Communicatious
enclosures
Altachment A
Taxes Paid to the City of Chula Vista bv Cox Communications in 2007
Franchise Fees $2,400,000
Utility Users Tax $457,328
Cable ProperlY Taxes $515,902
Telecom Property Taxes $120,000
Attachment B
City of Los Anl!eles Commnnications Users Tax
LOS ANGELES MUNICIPAL CODE CHAPTER It ARTICLE 1.1
SEC. 21.1.1. DEFINITIONS.
The following words and phrases whenever used in this article shall be construed as
defined in this section:
(a) "Ancillary Telecommunications Services" shall mean services that are associated
with or incidental to tbe provision, use or enjoyment of Communications Services.
(b) "Conununications Services" shall mean the transmission, conveyance, or routing
of voice, audio, video communications, data or any other conununications information or signals
to a point, or between or among points, whatever the technology used, and whether or not that
information is transmitted through interconnected service with the public switched network, or
through fiber optic, coaxial cable, power line transmission, broadband, digital subscriber line or
other wireless transmission. The term "Communications Services" includes transmission,
conveyance, or routing in which computer processing applications are used to act on the fonn,
code or protocol of the content for purposes of transmission, conveyance or routing without
regard to whether those services are referred to as voice over internet protocol (VoIP) services or
are classified by the Federal Communications Commission as enhanced or value added, and
includes video and/or data services that are functionally integrated witb "Conununications
Services." "Communications Services" include, but are not limited to the following services,
regardless of the manner or basis on which those services are calculated or billed: central office
and custom calling features (including but not limited to call waiting, call forwarding, caller
identification and three-way calling); local number portability; text messaging; instant
messaging; Ancillary Telecommunications Services; prepaid and post-paid telecommunications
services (including but not limited to prepaid calling cards); mobile telecommunications
services; Private Communications Services; paging services; and 800 services (or any other toll-
free numbers designated by the Federal Communications Commission). "Communications
Services" does not include either digital downloads, such as downloads of books, music,
ringtones, games and similar digital products, or that portion of cable or video television services
subject to a cable or video television franchise fee.
(c) "Month" shall mean a calendar month.
(d) "Person" shall mean all individuals, domestic and foreign corporations,
associations, syndicates, joint stock companies, partnerships of every kind, joint ventures, clubs,
Massacbusetts busmesses or common law trusts, societies, and, shall include municipal
corporations.
(e) "Private Communications Services" shall mean any dedicated Communications
Services that entitle the user to the exclusive or priority use of communications channels.
(f) "Service User" shall mean a Person required to pay a tax imposed under the-
o provisions ofthis article.
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SEC. 21.1.2. CONSTITUTIONAL EXEMPTIONS.
Nothing in this article shall be construed as imposing a tax upon any person when
imposition of such tax upon that person would be in violation of the Constitution ofllie United
States or that of the State of California.
SEC. 21.1.3. COMMUNICATIONS USERS TAX.
(a) There is hereby imposed a tax upon every Person with a billing or service address
in the City of Los Angeles who uses Communications Services, including services for intrastate,
interstate or international Communications Services, to the extent permitted by state and federal
law. The tax imposed by this section shall be at the rate of nine percent of the charges made for
those Communications Services and shall be paid by the Person paying for those services.
However, as to the charges made for services to any independent telemarketing agency, as
defined in Section 21.47(b) of this Code, incurred solely in performing the functions of an
independent telemarketing agency, the tax imposed by this section shall be at the rate of five
percent of the charges made for those services.
(b) The tax imposed in this section sball be collected from the Service User by the
Person providing the Communications Services. The amount of tax collected from the 26th day
of each Month through the 25th day of the following Month shall be remitted to the Director of
Finance on or before the26th day of the following Month, or, at the option of the Person
required to collect and remit the tax, an estimated amount of tax collected, measured by the
billings of the previous Month, shall be remitted to the Director of Finance on or before the 20th
day of each Month.
(c) Charges subject to t11e Communications Users Tax include, but are not limited to,
the following: connection, reconnection, termination, movement, or change of
telecommunications services; late payment fces; detailed billing; voice mail and other messaging
services; directory assistance; access and line charges; universal service charges; and regulatory,
administrative and other cost recovery charges.
(d) Exemptions. Except as otherwise provided in this article, Communications
Services shall include all Communications Services for which there is a charge, regardless of the
means or technology used to provide those services. Notwithstanding the provisions of
Subsection (a), the tax inlposed under this section shall-not be imposed upon any Person for
using Communications Services under the circumstances set forth below:
I. News services. No tax shall be imposed under this section, except wiili respect to
local telephone service, on any payment received from any Person for services used in the
collection of news for the public press, or a news ticker service furnishing a general news service
similar to that of ilie public press, or radio broadcasting, or in ilie dissemination of news through
ilie public press, or a news ticker service furnishing a general news service similar to that of the
public press, or by means ofradio broadcasting, if the charge for iliat service is billed in writing
to iliat Person.
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2. International, etc., organizations. No tax shall be imposed under this section on
any payment received for services furnished to a public international organization in which the
United States participates pursuant to treaty or Act of Congress, or to the American National Red
Cross.
3. Servicemen in combat zone. No tax shall be imposed under this section on any
payment received for any toll telephone service, which originates within a combat zone, as
defmed in Section 112 of Title 26 of the Unitcd States Code, from a member of the Anned
Forces of the United States performing service in the combat zone, as determined under Section
112 of Title 26 of the United States Code.
4. Items otherwise taxed. Only one payment of tax under this section shall be
required with respect to the tax on any service.
5. Common carriers and communications companies. No tax shall be imposed under
this section on the amount paid for any Communications Services to the extent that the amount
so paid is for use by a common carrier, telephone or telegraph company, or radio broadcasting
station or network in the conduct of its business.
6. Installation charges. No tax shall be imposed under this section on any amount
paid for the installation of any instrument, wire, pole, switchboard, apparatus, or equipment as is
properly attributable to the installation.
7. Nonprofit hospitals. No tax shall be imposed under this section on any amount
paid by a nonprofit hospital for services furnished to that organization. For purposes of this
exemption, the term "nonprofit hospital" means a hospital referred to in Section 170(b )(l)(A)(iii)
ofTitle 26 of the United States Code, which is exempt from federal income tax under Section
501 (a) of Title 26 of the United States Code.
8. State and local governments. No tax shall be imposed under this section upon any
payment received for services or facilities furnished to the government of any State, or any of its
political subdivisions, or tlle District of Columbia.
9. Nonprofit educational organizations. No tax shall be imposed under this section
on any amount paid by a nonprofit educational organization for services or facilities furnished to
that organization. For purposes of this exemption, the tenn "nonprofit educational organization"
means an educational organization described in Section 170(b)(I)(A)(ii) of Title 26 of the United
States Code, which is exempt from federal income tax under Section 501 (a) of Title 26 of the
United States Code. The term also includes a school operated as an activity of an organization
described in Section 501(c)(3) of Title 26 of the United States Code, which is exempt from
federal income tax under Section 501(a) of Title 26 of the United States Code, if that school
normally maintains a regular facility and curriculum and normally has a regularly emolled body
of pupils or students in attendance at the place where its educational activities are regularly
carried on.
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(e) To prevent actual multiple taxation of any Communications Services that are
subject to tax under Subsection (a) of this section, any Service User, upon proof that the Service
User owed and has paid a tax in another taxing jurisdiction on the Communications Services,
shall be allowed a credit against the tax imposed in Subsection (a) to the extent of the amount of
the tax properly due and paid in the other taxing jurisdiction. However, no crcdit may be allowed
for any tax paid to another taxing jurisdiction on any call to the extent that the call may not,
under the Constitution and statutes of the United States, be made the subject of taxation by the
other taxing jurisdiction. Nor shall the amount of credit exceed the tax owed to the City under
this section.
(f) Any person claiming to be an independent telemarketing agency, which has
charges subject to tax at the five percent rate, shall file an application for rate adjustment with the
Director of Finance. This application shall be made on forms provided by the Director of Finance
and shall recite facts under oath which qualifY the applicant for the five percent tax rate.
Notwithstanding any other provision of tlus article, the five percent rate shall apply only to
charges for services that were necessarily incurred solely and exclusively for telemarketing
activities. The burden of maintaining records and establishing that this charge is subject to tax at
the five percent rate shall be on the applicant. Charges for all other services shall be subject to
. tax at the nine percent rate.
(g) For purposes of imposing a tax or establishing a duty to collect and remit a tax
under tllls section, "substantial nexus" and "minimum contacts" shall be construed broadly in
favor oftlle imposition, collection and/or renuttance of the communications 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 Communications Services used by a
Person with a service or billing address in the City 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 relnit a tax, under this section. For communications services for which there
is no billing address or primary physieallocation for the provision of services, the service
address shall mean the point of sale of the services.
(h) If a non-taxable service and a taxable service are billed together under a single
charge, the entire charge shall be deemed taxable unless the service supplier or taxpayer
reasonably identifies actual charges for services not subject to the tax. The service supplier or
taxpayer seeking a reduction has the burden of proving the proper valuation and apportionment
of taxable and non-taxable charges based upon books and records that are kept in the regular
course of business and in a manner consistent with generally accepted accounting principles.
SEC. 21.1.4. ELECTRlCITY USERS TAX.
(a) There is hereby imposed a tax upon every person in the City of Los Angeles using
electrical energy in the City of Los Angeles. The tax imposed by this section shall be at the rate
of 10 percent of the charges made for such energy and shall be paid by the person paying for
such energy, provided, however, that commercial or industrial users of elcctrical energy shall be
subject to tax and a tax is hereby imposed upon them at the rate of 12.5 percent of the charges
made' for such energy, but as to any non-profit cducational institution, as defmed in Subdivision
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3 of Subsection (c) of Section 21.190 of this Code, the tax imposed hy this section shall be at the
rate of 10 percent of the charges made for such energy. "Charges" as used in this section, shall
include charges made for (I) metered energy, and (2) minimum charges for service, including
customer charges, service charges, demand charges, standby charges, and annual and monthly
charges.
The term "commercial or industrial users" as used in tillS section, is intended to include,
but shall not be linlited to, any person who qualifies as a "commercial or industrial" consumer of
electrical energy within the electric rate schedules of the Department of Water and Power ofthe
City of Los Angeles or the tariff schedules of the Southern California Ediso'n company, provided
however, a user of electrical energy shall not be considered a "commercial or industrial user" of
any electrical energy supplied to a single family accommodation separately metered or for
energy to two or more individual family accommodations supplied as a unit, upon application
under the provisions of the Department's Domestic Service Schedule D-I, devoted primarily to
domestic, residential, household and related purposes, as distinguished from cormnereial,
professional, and industrial purposes.
(b) As used in this section, the telm "using electrical energy" shall not be construed
to mean that storage of such energy by a person in a battery owned or possessed by him for use
in an automobile or other machinery or device apart from the premises upon which the energy
was received, provided however, that the term shall include the receiving of such energy for the
purpose of using it in the charging of batteries, nor shall the term include the mere receiving of
such energy by an electric public utility or government agency at a point within the City of Los
Angeles for resale.
(c) The tax imposed in this section shall be collected from the service user by the
person supplying such energy. The amount of tax collected from the 26th day of each month
through the 25th day of the following month shall be remitted to the Director of Finance on or
before tile 26th day of such following month, or, at the option of the person required to collcct
and remit the tax, an estimated amount of tax collected in each month shall be reritted to the
Director of Finance on or before the 26th day of such month.
SEe. 21.1.5. GAS USER TAX.
(a) There is hereby imposed a tax upon evcry person in the City of Los Angeles using
in the City gas which is delivered through mains or pipes. The tax imposed by this section shall
be at the rate of 10 percent ofthe charges made for such gas and shall be paid by the person
paying for such gas, provided, however, that as to any non-profit educational institution, as
defined in subdivision 3 of Subsection (c) of Section 21.190 of this Code, the tax imposed by this
section shall be at tile rate of 5 percent of the charges made for such gas. (When gas is
transported by, but not purchased from, a transporter, the charges subject to tax shall be
measured by (1) the transportation cost and (2) the cost of the transported gas, which shall be
based on the volume of gas transported multiplied by the core subscription weighted average cost
of gas for the calendar month immediately preceding the calendar month in which the billing
period terminates.
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Notwithstanding the foregoing, the tax on the cost of transported gas may be detemlined
by applying the tax rate to the actual pnrchase cost, either by the service user applying to the
Director of Finance for a refund or the Director of Finance billing the service user, for 111e
amount which represents the difference between the tax paid by the service user to the
transporter and the tax determined by the actual purchase cost of the gas. In a claim for refund,
the service user shall provide the Director of Finance with satisfactory evidence of111C qnantity
and cost of the gas purchased from a party other than the transporter. When the Director of
Finance believes that direct collection of the tax from the service user is in the best interest of the
City, as provided in Subsection (b) of Section 21.1.1 0 of this Code, the transporter, upon request
from the Director of Finance, shall furnish 111e Director of Finance, with respect to each service
user for whom gas is transported, the name, mailing address, service address, gas meter number,
transportation cost, volume of gas transported and the core subscription weighted average cost of
gas for the calendar month inunediately preceding the calendar month in which the billing period
terminates. This infonnation shall be confidential and shall be used only for the purpose of
administering the tax.
(b) There shall be excluded from the base on which 111e tax imposed in this section is
computed charges made for gas which is to be resold and delivered through main or pipes,
charges made for gas sold for use in the generation of electrical energy by" a public utility or a
govermnental agency; and charges made by a gas public utility for gas used and consumed in the
conduct of the business of as public utilities.
(c) The tax inlposed in this section shall be collected from 111e service user by the
person selling gas or, when gas is purchased from and transported by separate persons, the tax
shall be collected by the transporter. The amount of tax collected from the 26th day of each
month through the 25th day of the following month shall be remitted to the Director of Finance
on or before the 26th day of such following month, or, at the option of the person required to
collect and remit the tax, an estimated amount of tax collected, measured by the billings of the
previous month, shall be remitted to the Director of Finance on or before the 26th day of each
month.
(d) There shall be exempt from the base on which the tax imposed in this section is
computed charges made for gas used for non-utility purposes. For the purposes ofthis
subsection, the term "gas used for non-utility purposes" shall mean gas used as a raw material in
a manufactured product, and shall exclude gas used to produce light, heat or power. Any service
user claiming an exemption under this subsection shall tile an application with the Director of
Finance for such exemption. Such application shall be made upon forms supplied by the
Director of Finance and shall recite under oath facts which qualify the applicant for an
exemption. The Director of Finance shall review each such application, certify as exempt such
service determined to qualify therefor and notify each affected service supplier that such
exemption has been approved, stating the name of the applicant, the address to which such
exempt service is being supplied, the account number, if any, and such other information as may
be necessary for the service supplier to remove the exempt servicc from the tax billing
procedure. Upon receipt of such notice, the service supplier shall not be required to continue to
bill any further tax imposed by this section for such exempt service until given further nolice by
the Director of Finance.
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( e) Notwithstanding the provisions of Subsection (a) of this section and Section
21.1.8(b) of this article, the collection rate of the tax imposed in Subsection (a) of this section at
the rate of I 0 percent shall be reduced temporarily for residential users to 6 percent for the fIrst
four regular billing periods ending on or after December I, 2001, and on or before AprillS,
2002. For all subsequent regular billing periods, the collection rate for residential users shall
revert to the JO percent rate imposed in Subsection (a) of this section.
SEe. 21.1.6. INTEREST M\'D PENALTY.
(a) Taxes collected from a service user which are not remitted to the Director of
Finance on or before the due dates provided in this article are delinquent.
(b) Interest and penalties for delinquency in remittance of any tax collected, or any
defIciency determination shall attach and be paid by the person required to collect and remit at
the rates and in the same manner as is provided in Sec. 21.05 of this chapter for delinquency in
payment of Business Tax.
(c) The Director of Finance shall have power to impose additional penalties upon
persons required to collect and remit taxes under the provisions ofthis article article for fraud
311d negligence in reporting and remitting in the same manner and at the same rates as are
provided in Sec. 21.05 of this chapter for such penalties upon persons required to pay Business
Tax.
(d) For collection purposes only, every penalty imposed and such interest as accrues
under the provisions ofthis section shall become a part of the tax herein required to be remitted.
SEe.21.J.7. ACTIONS TO COLLECT.
Any tax required to be paid by a Service User under the provisions of this article shall be
deemed a debt owed by the Service User to the City. Any such tax collected from a Service User,
which has not been remitted to the Director of Finance, shall be deemed a debt owed to the City
by the Person required to collect and remit. Any Person owing money to the City under the
provisions of this article shall be liable to an action brought in the name of the City for the
recovery of that amount. In the event that a service supplier required to collect and remit a tax
. under the provisions of this article fails to do so in whole or in part, the amount of the unremitted
tax shall be deemed a debt owed by the service supplier to the City.
SEe.21.1.8. DUTY TO COLLECT - PROCEDURES.
The duty to collect and remit the taxes imposed by this article shall be performed as set
forth in this section.
(a) The tax shall be collected insofar as practicable at the same time as and along
with the charges made in accordance with the regular billing practice. If the amount paid by a
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87410.1
Service User is less than the full amount of the charge and tax that has accrued for the billing
period, a proportionate share of both the charge and the tax shall be deemed to have been paid.
(b) The duty to collect tax from a Service User shall commence with the beginning of
the fITst regular billing period applicable to that Person, which starts on or after the operative
date ofthis article. W11cn the rate of the tax is increased or decreased, the duty to collect at the
new rate shall commence with the beginning of the first regular billing periods applicable to that
Person, which starts on or after the effective date of the new rate. Where a Person receives mOre
than one billing, one or more being for different periods than another, the duty to collect shall
arise separately for each billing period.
SEe. 21.1.9. ADDITIONAL POWERS AND DUTIES OF DIRECTOR OF FINANCE, ETC.
(a) The Director of Finance shall have the power alld duty, alld is hereby directed to
enforce all of the provisions of this article.
(b) In administering and enforcing the provisions of this article, the Director of
Finallce shall have the same powers and duties with respect to collecting the tax provided in this
article as he or she has under Section 21.15 of this chapter with respect to collecting the Business
Tax.
(c) The provisions of Sections 21.17, 21.20 and 21.21 of this chapter shall apply to
the administration and collection of the tax imposed nnder the provisions of this article in the
same manner as they apply to the administration and collection of the Business Tax.
(d) The Director of Finance may, from time to time, issue and disseminate
administrative agreements or rulings identifying those services or Persons that are subject to the
reqnirements imposed by this article, deferring implementation or enforcement ofrequirements
inlposed by this article or interpreting the provisions of this article. These administrative rulings
shall be consistent with federal, state and local law. To the extent that tlie Director of Finance, or
the City Attorney pursuant to Section 21.31, determines that the tax imposed under this article
shall not be collected in full for any period oftime from any particular. service suppliers or
Service Users, that determination shall be considered an exercise of the Director's discretion to
settle disputes and shall not constitute a change in taxing methodology for pUll'oses of
Government Code section 53750 or otherwise. Neitller the Director of Finance nor the City
Attorney is authorized to amend the City's methodology for purposes of Government Code
section 53750 and the City does not waive or abrogate its ability to impose the communications
users tax in full as a result of promulgating administrative rulings or entering into agreements.
SEC. 21.1.10. ASSESSMENT - ADMINISTRATIVE REMEDY.
(a) The Director of Finance may make an assessment for taxes not remitted by a
person required to remit for any reason specified in Sec. 2 I .16 of this chapter for making an
assessment for unpaid Business. Tax. The manner of making and providing notice of such
assessment; the right to a hearing and the conduct of such hearing; the preparation and service of
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findings; filing exceptions; and passing upon exceptions shall be the same as provided in Sec.
21.16 ofthis chapter.
(b) Whenever the Director of Finance determines that a service user has deliberately
withheld the amount of the tax owed by him from the amounts remitted to a person required to
collect the tax, or that a service user has failed to pay the amount of the tax to such person for a
period of two or more billing periods, or whenever the Director of Finance deems it in the best
interests of the City, he may relieve such person of the obligation to collect taxes due under this
article from certain named service users for specified billing periods. The Office of Finance shall
notifY the service user that he has assumed responsibility to collect the taxes due for the stated
periods and demand payment of such taxes. The notice shall be served on the service user by
handing it to him personally or by deposit of the notice in the United States mail, postage prepaid
thereon, addressed to the service user at the address to which billing was made by the person
required to collect the tax; or, should the service user have changed his address, to his last known
address. If a service user fails to remit the tax to the Director of Finance within fifteen days from
the date of the service of the notice upon him, which shall be the date of mailing if service is not
accomplished in person, a penalty of twenty-five percent of the amount of the tax set forth in the
notice shall be imposed, but not less than $5.00. The penalty shall become part of the tax herein
required to be paid.
SEe. 21.1.11. RECORDS.
It shall be the duty of every person required to collect and remit to the City any tax
imposed by this article to keep and preserve, for a period of three years, all records as may be
necessary to determine the amount of such tax as he may have been liable for the collectiou of
and remitt~ee to the Director of Finance, which records the Clerk shall have the right to inspect
at all reasonable times.
SEe. 21.1.12. EXEMPTIONS AND REFUNDS.
(a) The tax imposed by this article shall not apply to any individnal 62 years of age or
older or any disabled individual who uses Communications Services, electric, or gas services in
or upon any premises occupied by that individual, provided the combined adjusted gross income
(as used for purposes of the California Personal Income Tax Law) of all members of the
household in which the individual resided was less than the figure in effect on the preceding first
day of April as the "very low income" limitation for a family of two persons in the City of Los
Angeles under the Section 8 housing programs ofthe United States Housing Act of 1937, as
amended, as published by the United States Department of Housing and Urban Development.
For the purposes ofthis section, an individual shall be considered to be disabled ifhe or
she is unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment, which can be expected to result in death, or to be of
long-continued and indefinite duration.
The exemption granted by this section shall not eliminate the duty of the service supplier
from collecting taxes from the exempt individuals or the duty of the exempt individuals from
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87410.1
paying those taxes to the service supplier unless the Service User applies for an exemption and
the Director of Finance grants the exemption in accordance with the provisions of Subsection
(b).
For each fiscal year, the Director of Finance is directcd to determine, and utilize as the
prior calendar year's adjusted gross income limitation, the figure in effect on the preceding first
day of April as the "very low income" limitation for a family of two persons in the City of Los
Angeles under the Section 8 housing programs of the United States Housing Act of 1937, as
amended, as published by the United States Department of Housing and Urban Development.
(b) Any Service User exempt from the taxes imposed by this article because ofthe
provisions of Subsection (a) above or any other applicable exemption, may file an application
with the Director of Finance for an exemption. The applications shall be made upon forms
supplied by the Director of Finance and shall recite facts under oath, which qualifY the applicant
for an exemption. The Director of Finance shall review all applications and certifY as exempt
those applicants determined to qualifY and shall notifY all service suppliers affected that the
exemption has been approved, stating the name of the applicant, the address to which the exempt
service is being supplied, the account number, if any, and any other information as may be
necessary for the service supplier to remove the exempt Service User from its tax billing
procedure. Upon receipt of this notice, the service supplier shall not be required to continue to
bill any further tax imposed by this article from the exempt Servjce User until further notice by
the Director of Finance is given. The service supplier shall eliminate the exempt Service User
from its tax billing procedure no later than 60 days after the receipt of the notice from the
Director of Finance.
All applications for exemption for any given fiscal year shall be filed with the Director of
Finance on or before the 30th day of April preceding the fiscal year. All exemptions shall
continue and be renewed automatically by the Director of Finance so long as the prerequisite
facts supporting the initial qualification for exemption shall continue. Upon any change in the
service address or residence of the exempt individual, the service supplier, at its option, may
either terminate the exemption imrnediatelyor continue the exemption until notified by the
Director of Finance that the exempt individual has not filed an application for continuation of
exemption within 90 days after the change in the service address or residence. Each individual
exempt from the tax may apply to the Director of Finance for a new or continued exemption with
each change of address or residence. Any individual exempt from the tax shall notifY the
Director of Finance within ten days of any change of fact or circumstance, whicb might
disqualifY tbe individual from receiving tbe exemption. 1t shall be a misdemeanor for any Person
to knowingly receive the benefits of the exemption provided by this section when the basis for
the exemption does not exist or ceases to exist.
Notwithstanding any of the provisions of this subsection, however, any service supplier
who determines by any means that a new or nonexempt Service User is receiving service through
a meter or connection exe1l1pt by viItue of an exemption issued to a previous user or exempt user
of the same meter or connection, that service supplier sball inmlediately notify the Director of
Finance of that fact and the Director of Finance shall conduct an investigation to ascertain
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87410.1
whether or not the provisions of this section have been complied with, and where appropriate,
order the service supplier to commence collecting the tax from the nonexempt Service User.
Applications for exemptions may be filed during any given fiscal year, for the remainina
. 0
portion ofthe fiscal year, provided the application is filed not later than the 60th day prior to the
commencement of the billing period for the affected utility companies for which the exemption
is to commence and shall be valid through the remainder of that fiscal year, as set forth above.
(c) Individuals 62 years of age or older and disabled individuals, any individual
entitled to be exempt from the taxes imposed by this article pursuant to Subsection (a) who used
telephone, electric or gas services and paid more tllan $3.00 in those taxes may, within 12
Months of the date of payment, apply for a refund on forms provided by the Director of Finance.
The refund application shall contain a declaration ofthose facts, under oath that qualify the
applicant for a refund, and shall also be accompanied by the customer's original bills showing the
anlount of the taxes billed by service suppliers during the preceding year. Likewise, refund
clainls may be filed by an individual who used telephone, electric and gas service and paid the
taxes prescribed by this atiicle either directly or indirectly to the Service User rather than the
service supplier.
In tlle event fue applicant has lost or destroyed any relevant billings or statements
showing the amount of tax paid, or ifthe applicant indirectly paid the taxes in conjunction with
the occupation of any premises without receiviug a specific billing from the Service User, or if
fue applicant has been granted an exemption during the year preceding the filing of the refund
clainl, the maximum refund shall be $18.00, or $1.50 for each full Month of service received by
fue applicant, whichever is less.
(d) Except as otherwise provided in this section, refunds of overpaid taxes shall be
made in the same manner as is provided in Section 21.07 of this chapter for refunds of
overpayments in Business Taxes.
(e) A Person required to collect and remit taxes imposed under this article may claim
a refund or take as credit against taxes collected and remitted the amounts overpaid, paid more
than once or erroneously or illegally collected or received when it is established in a manner
prescribed by fue Director of Finance that the Service User from whom the tax has been
collected did not owe the tax; provided, however, that neither a refund nor a credit shall be
allowed unless the amount of the tax so collected has either been refunded to the Service User or
credited to charges subsequently payable by the Service User to the Person required to collect
and remit.
.
(f) If any application for an exemption or refund as permitted to be filed by this
section is determined to be deficient by the Director of Finance for failure to set forth the facts
necessary to qualify the applicant for an exemption or refund or if the Director of Finance has
reason to believe the applicant has failed to truthfully set forth those facts, the Director may deny
fue application by giving written notice of the denial and by stating in the notice the grounds for
the denial and mailing tbe notice in a sealed envelope, postage prepaid, addressed to the
applicant at the address shown upon the application. The applicant shall thereafter have a right to
11
874]0.1
a hearing with the Director of Finance in accordance with a hearing procedure to be established
by .the Director.
(g) No exemption or refund shall be granted pursuant to this section with respect to
any tax imposed by this mticle, which is or has been paid by a public agency or where the
applicant receives funds from a public agency specifically for the payment of the tax.
(h) If an individual is delinquent in the payment of any utility users tax at the time his
claim for refund is filed, the Director of Finance shall apply the refund or as much of the refund
as may be necessary to satisfy the delinquency.
(i) The tax imposed by this article shall not apply to communication, electric and gas
services acquired by any nonprofit corporation for the use of its tenants in any housing project in
which at least 80 percent of the dwelling units are occupied by a person meeting the
requirements for exemption under Subsection (a) of this section.
(j) Upon request of the Director of Finance, a service supplier shall provide a list of
the names and addresses of those customers that, according to its billing records, are exempt
from a tax in1posed by this article.
(k) To the extent that the City's authorization to in1pose or collect the tax imposed in
this article is expanded or limited as a result of changes in state or federal law, no amendment or
modification ofthis article shall be required to conform the tax to those changes, and the tax
shall be imposed and collected to the full extent of the City's authorization up to the full amount
of the tax imposed by the terms of this article.
SEC.21.1.l3. AMENDMENT OR REPEAL.
This Communications Users Tax imposed by this article may be decreased, repealed or
amended by the City Council, but may not be increased without a vote of the people as required
in California Constitution Article XIIIC and California Government Code Section 53750(h).
SEC.21.1.14. AUDIT OF COMMUNICATIONS USERS TAX.
The City shall 31IDually verify that the Communications Users Tax imposed by this article
has been properly collected and remitted in accordance with this article, and properly expended
according to applicable law. The ammal verification shall be perforn1ed under the direction ofthe
Director of Finance by a qualified independent third party employing reasonable, cost-effective
procedures.
SEC. 21.1.15. SEVERABILITY.
If any 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 remain in effect.
The people of the City of Los Angeles hereby declare that they would have adopted each portion
12
874101
of this ordinance, notwithstanding the fact that anyone or more portions of this ordinance is
declared invalid or unenforceable and, to that end, the provisions of this ordinance are severable.
13
87410.1
fR!q/to
A::1t{;'+i01'La..Q LvdVrVYL~
He,m \ 3 Page I of.
.,
,'0
Donna Norris
From:
Sent:
To:
Sheree Kansas
Monday, June 07, 2010 5:03 PM
Donna Norris
Subject: FW: Request for Continuance - Council Item #13 - Utility Users Tax
Attachments: Cox Response to City of CV UUT.PDF; AT&T letter to City of CV.pdf
In case you didn't get this.... Lily forwarded it to me.. FYI
--mOriginal Message-----
From: Lilia Cesena
Sent: Monday, June 07, 2010 4:26 PM
To: Rudy Ramirez; Mitch Thompson; Pamela Bensoussan; Steve Castaneda
Cc: Sheree Kansas; Aaron Allen; Ana Baiz-Torres; Susan Johnson; Jonathan Goetz; Linda Wagner
Subject: FW: Request for Continuance - Council Item # 13 - Utility Users Tax
Importance: High
Hello Honorable Councilmembers,
Please refer to the email below from Ileana Ovalle, Cox Communications. She asked me to share this email
with you.
Sincerely,
Lilia Cesena
Office Sp'ecialist
Mayor & Council Offices
City of Chula Vista
(619) 691-5044 - Office
(619) 476-5379 - Fax
From: I1eana.Ovall..""t",,-"I" [mailto:lleana.Ovall,_ .
Sent: Monday, June 07, 2010 4:22 PM .
To: Cheryl Cox; Bart Miesfeld; Cheryl Cox; Lilia Cesena; Jim Sandoval
Cc: Sam.Attish.~ ''''''1>- t~...~; Christine Moore; Ileana.Ova',"",
Simon Silva; Scott Tulloch
Subject: Request for Continuance - Council Item #13 - Utility Users Tax
Importance: High
....'
,; Michael Meacham; Maria Kachadoorian;
City of Chula Vista
276 Fourth Avenue
Chula Vista, CA 91910
Re: Rroposed Utility Users Tax Ballot Measure
Honorable Mayor Cheryl Cox and City Council Members,
This afternoon, Cox received your notification below of the June 8th City Council Agenda Item #13 -- Utility Uses Tax
(UUT) and we respectfully request an eight week continuance of this item.
This item has a significant impact to our business. A twenty-six hour notification from the City and absolutely no prior
communication on this issue between city staff and the telecommunications industlY is sufficient grounds for a
r...J'7!"')(I1(\
Page 2 of:
ccintinuance. Vie believe it is imperative to allow the appropriate time to review. Additionally, we have no record of the
City of Chula Vista having formally responded to the attached correspondence submitted for the July 2008 UUT Agenda
Item. Before this item can be heard, an official letter of acknowledgement of resolution or non-resolution to these
concerns is merited.
Although an eight week continuance is far less than the time city staff has had to prepare, your consideration of this
continuance will allow a fair review of this item by Cox and ",~1I give us at least a small window of time to work with cit)
staff to address any issues towards resolution.
We thank you in advance for your attention and response to this urgent matter.
Cc: Bart MeisfeJd, City Attorney
Jim Sandoval, City Manager
Scott Tulloch, Assistant City Manager
Michael Meacham, Director of Conservation & Environmental Services
Maria Kachadorian, Director of Finance
Someone in your community has been nominated os 0 Cox Conserves Hero! Vote now through June 19.
COX
---------------------------------------------------------------------------------------------------------------------------------
Ileana Ovalle I Senior Manager, External Affairs .
619.266.526101619.266.5600 f 1619.~c I CoxSanDiego.com
350 Tenth Avenue, Ste. 600, San Diego, CA 921011 jll;t,ma.ovall~~r~
From: Michael Meacham [mailto:mmeacham@ci,chula-vista.ca.us]
Sent: Monday, June 07, 2010 12:47 PM
To: Attisha, Sam (~r""'''''"'~'q<l); id93S~~";ll
Cc: Ovalle, Ileana ('il;!"'-"1:r ",,!l); Christine Moore
Subject: Council Agenda Item
Importance: High
't." '
.. .,-
.... ".. 11 \
Sorry I have not gotten this to you sooner but I have been out of town for about a week and just returned
today. Please do not hesitate to call if you have any questions.
.. .., 1" ,"~ .'. "...
409-5870 direct
114''''''''''{J mobile
Micfiaef'1. Meacfiam 'Director
Conservation & Environmental Services Department
City of Chula Vista
276 Fourth Avenue
Chula Vista, CA 91910
Ph (619) 407-3545 Fax (619) 476-5310
[11m(O"gb_am@ci. chgl.:e::,:lst'Lca. u~
'11i.anfi. youfor yracticing sustaina6iaty anafor suyyorting Cfiu.Ut 'Vista businesses 6y sfioyyi11g [oea[[y.
"We cannot seek achievement for ourselves and forget about progress and prosperity for our community... Our ambitions
must be broad enough to include the aspirations and needs of others, for their sakes and for our own."
CESAR CHAVEZ
"
'.,:
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;~"'~~;":-:":":-:,, ',>:
'rt'- '_ ,.-,?~".-_
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I
350 10th Avenue, Suite 600
San Diego, CA 92101
Jt.>l'f ~I Z-DoR
Honorable Mayor Cox
City Councilmembers
. CityofChula Vista
276 Fourth Avenue
Chula Vista, CA 91910
Re: Prooosed Changes To Utility Users Tax
Dear Mayor Cox and City Councilmembers:
On Wednesday, July 2, 2008, Cox received a copy of a staff report and ordinance outlining the
City of Chula Vista's proposed changes to its existing Utility User's Tax ("UUT"). 1bis letter
provides comments on behalf of Cox Communications ("Cox") on the proposed changes. Cox
recognizes that telecommunications service has changed significantly since the initial adoption of
the UUT. While new communications technologies are put forth as a reason why the tax should
now be re-written, they are also a reason why the City must tread carefully when proposing
changes. The changes must be as clear as possible to allow voters to know the impact the
changes will have and to allow companies like Cox to know to whom and how the tax must be
charged.
Specifically, Cox's comments and concerns on the proposed changes to the UUT include:
I. Application of the Tax to Video Services
The definition of "telecommunications services" in the proposed ordinance includes "the
transmission...of...video...to a point, or between or among points." Cox is concerned that this
language encompasses cable television services that are already subjcct to franchise fees paid to
the City. Although the staff's report on the proposed ordinance states on page 3 that the
ordinance is "designed to not collect both video/cable franchise fees and UUT from a single
telecommunication customer for the same service," the proposed ordinance contains no
exemptions for cable or video services that are also subject to franchise fees. Thus, customers
receiving cable or video services would be subject to existing franchise fees as well as the new,
revised UUT.
Contrast this to customers of direct broadcast satellite providers such as DirecTV or DISH.
Under Federal law, such satellite providers are exempt from local taxes on satellite television
services. Thus, undcr the proposed ordinance, a Cox cable subscriber would pay approximately
10% in total City taxes and fees, while a satellite customer would pay no such taxes or fees. This
puts cable providers such as Cox at a competitive disadvantage and drives customers away from
local cable providers to the satellite companies, resulting in a loss of franchise fee and PEG
revenues to the City.
Cox has invested. substantially in Chula Vista for decades as a telecommunications leader. Cox,
along with City residents and businesses using Cox's services, are already among the largest
contributors to the tax base of this City. As reflected in Attachment A, just in the last year, Cox
paid nearly $460,000 dollars in Utility User Taxes, $2,400,000 in franchise fees, and fulfilled a
multitude of city and community requests as part of our franchise. In addition, Cox and its
JJc MixedSources
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[In harmony with 1h" Cox Cons"rvps eCG-frlpndly program, we are
proud 10 print on Forest Stewardship Council certified paper.
Gwl~ut and poteJ'lti3f--eempetiters, NcxHooWlHlfld--A+&T, all have plans to llv.'est in expanding
video se"~ces in this City as well as other parts of the County. As currently proposed., the revised
UUT would punish the same companies that have invested in Chula Vista by taxing the valuable
telecommunications services we provide while leaving the satellite providers untouched. This
discriminatory approach is neither fair to the members of the California Cable &
Telecommunications Association, nor helpful to California consumers or its economy. The City
of Chula Vista is the ouly City in the County of San Diego that would add new taxes to video
services as described in the proposed definition of "telecommunications services." If this
definition is adopted, it would likely steer investment dollars to other parts of the County where
higher taxes would not discourage use of these new services. Not ouly would City residents miss
out on the opportunity for better services, but the City itself would miss out on franchise fee
revenue from these new and e"-"panded services.
In other communities, including the City of Los Angeles, cities made it clear that they did not
intend to apply their revised Utility User's Tax to video services that are already heavily taxed
through franchise fees. We hope that Chula Vista will follow the lead of these communities and
continue to limit its utility taxes to traditional utility services. Specifically, Cox asks that the
definition of "telecommunications services" in the proposed ordinance be modified by adding the
following language to the definition:
"Telecommunications ser,.;ces do not include cable or "ideo tele"ision se,."ices that are subject
to a cable or "ideo telepision franchise fee. "
This language is similar to language found in the recently enacted City of Los Angeles
Communications Users Tax (see Attachment B). Adopting this language is consistent with the
intent expressed in the staffs report and would ensure that cable customers are not unduly
discriminated against by being assessed both the UUT and franchise fees.
II. Effective Date
The proposed ordinance significantly increases the amount of services that will be subject to the
UUT. In the event that the vote on the proposed ordinance is successful, it will be critical that the
City provide adequate time to allow service providers to update. their billing systems to
accommodate the changes. As currently written, the proposed ordinance calls for the tax to go
into effect immediately upon voter approval. However, Cox ,,'ill require at least 90 days from the
date of approval to create and implement billing system changes necessary to collect the newly
expanded tax. Thus, we respectfully request that the current language in "SECTION 2. Effective
Date" be replaced with the following:
SECTION 2. Effective Date. This Chapter shall become effective February I, 2009.
III. Voter Approval
Currently, Chula Vista's UUT ouly applies to intrastate telephone services. The proposal would
expand the tax to interstate and international services, as well as to private line and related
services. These changes go beyond "clarifying" the existing tax by applying the tax to services
that have not been taxed in the past. The staffs report recognizes this and acknowledges that the
ordinance must be submitted to voters for approval.
In submitting the proposed ordinance for voter approval, it is paramount that voters have an
accurate understanding of the proposed changes. For example, the staff report states on page 3
th~t thp: proposen ()rnin~n(':f" "[r].educes fhe cprp~nt tax perC'ent3g~ oU-telecoI1U1lYIliGatiGns-and
video services from 5% to 4.75% for approximately 80% of Chula Vista's telecommunications
customers." This statement is misleading. While the rate for intrastate telephone services would
decrease from 5% to 4.75%, the rate on interstate telephone services (among others) would
effectively increase from 0% to 4.75%. Since most if not all of the "80% of Chula Vista"
customers referenced in the staff report are also interstate phone customers, the net result would
be a tax rate increase for all customers.
To ensure that voters have accurate and reliable information upon which to base their decision,
Cox requests that any information presented to public clearly list, in plain language, the services
that will be subject to a new or modified tax as proposed under the UUT ordinance.
We appreciate the opportunity to comment on this proposal. If you have any questions about
Cox's concerns, do not hesitate to contact me at 619-266-5653.
Sp":, Ajj(L
~sha
Vice President, Business Development & E}.:ternal Affairs
Cox Communications
enclosures
Auat:hment-A
Taxes Paid to the Citv of ChuJa Vista bv Cox Communications in 2007
Franchise Fees $2,400,000
Utility Users Tax $457,328
Cable Property Taxes $515,902
Telecom Property Taxes $120,000
Attachment B
City of Los An~e1es Communications Users Tax
-~
LOS ANGELES MUNICIPAL CODE CHAPTER It ARTICLE I. I
SEC. 21.1.1. DEFINITIONS.
The following words and phrases whenever used in this article shall be construed as
defined in this section:
(a) "Ancillary Telecommunications Services" shall mean services that are associated
with or incidental to the provision, use or enjoyment of Communications Services.
(b) "Communications Services" shall mean the transmission, conveyance, or routing
of voice, audio, video communications, data or any other communications information or signals
to a point, or between or among points, whatever the technology used, and whether or not that
information is transmitted through interconnected service with the public switched network, or
through fiber optic, coaxial cable, power line transmission, broadband, digital subscriber line or
other wireless transmission. The term "Communications Services" includes transmission,
conveyance, or routing in which computer processing applications are used to act on the form,
code or protocol of the content for purposes of transmission, conveyance or routing without
regard to whether those services are referred to as voice over internet protocol (V oIP) services or
are classified by the Federal Communications Commission as enhanced or value added, and
includes video andlor data services that are functionally integrated with "Communications
Services." ,iCommunications Services" include, but are not limited to the following services,
regardless of the manner or basis on which those services are calculated or billed: central office
and custom calling features (including but not limited to call waiting, call forwarding, caller
identification and three-way calling); local number portability; text messaging; instant
messaging; Ancillary Telecommunications Services; prepaid and post-paid teleconununications
services (including but not limited to prepaid calling cards);-mobile telecommunications
services; Private Communications Services; paging services; and 800 services (or any other toll-
free numbers designated by the Federal Communications Commission). "Communications
Services" does not include either digital downloads, such as downloads of books, music,
ringtones, games and similar digital products, or that portion of cable or video television services
subject to a cable or video television franchise fee.
(c) "Month" shall mean a calendar month.
(d) "Person" shall mean all individuals, domestic and foreign corporations,
associations, syndicates, joint stock companies, partnerships of every kind, joint ventures, clubs,
Massachusetts businesses or common law trusts, societies, and, shall include municipal
corporations.
(e) "Private Conununications Services" shall mean any dedicated Communications
Services that entitle the user to the exclusive or priority Use of communications channels.
(f) "Service User" shall mean a Person required to pay a tax imposed under the-
- provisions of this article.
I
87410.1
SEC. 21.1.2. CONSTITUTlONAL EXEMPTIONS.
Nothing in this article shall be construed as imposing a tax upon any person when
imposition of such tax upon that person would be in violation of the Constitution of the United
States or that of the Stale of California.
SEe. 21.1.3. COMMUNICATIONS USERS TAX.
(il) There is hereby imposed a lax upon every Person with a billing or service address
in the City of Los Angeles who uses Communications Services, including services for intrastale,
interstate or international Communications Services, to the extent permitted by state and federal
law. The tax imposed by this section shall be at the rate of nine percent of the charges made for
those Communications Services and shall be paid by the Person paying for those services.
However, as to the charges made for services to any independent telemarketing agency, as
defined in Section 21.47(b) of this Code, incurred solely in performing the functions of an
independent telemarketing agency, the tax imposed by this section shall be at the rate of five
percent of the charges made for those services.
(b) The tax imposed in this section shall be collected from the Service User by the
Person providing the Communications Services. The amount of tax collected from the 26th day
of each Month through the 25th day of the following Month shall be remitted to the Director of
Finance on or before the26th day of the following Month, or, at the option of the Person
required to collect and remit the tax, an estimated amount of tax collected, measured by the
billings of the previous Month, shall be remitted to the Director of Finance on or before the 20th
day of each Month.
(c) Charges subject to the Communications Users Tax include, but are not limited 10,
the following: cOllilection, recolli1ection, termination, movement, or change of
telecommunications services; late payment fees; detailed billing; voice mail and other messaging
services; directory assistance; access and line charges; universal service charges; and regulatory,
administrative and other cost recovery charges.
(d) Exemptions. Except as otherwise provided in this article, Communications
Services shall include all Communications Services for which there is a charge, regardless of the
means or technology used to provide those services. Notwithstanding the provisions of
Subsection (a), the tax inlposed under this section shan not be imposed upon any Person for
usin" Communications Services under the circumstances set forth below:
<>
1. News services. No tax shall be imposed under this section, except with respect to
local telephone service, on any payment received from any Person for services used in the
collection of news for the public press, or a news ticker service furnishing a general news service
similar to that of the public press, or radio broadcasting, or in the dissemination of news through
the public press, or a news ticker service furnishing a general news service similar to that of the
public press, or by means of radio broadcasting, if the charge for that service is billed in writing
to that Person.
2
87410.1
2. International, etc., organizations. No tax shall be imposed under this section on
any payment received for services furnished to a public international organization in which the
United States participates pursuant to treaty or Act of Congress, or to the American National Red
Cross.
3. Servicemen in combat zone. No tax shall be imposed under this section on any
payment received for any toll telephone service, which originates within a combat zone, as
defmed in Section 112 of Title 26 of the United States Code, from a member of the Armed
Forces of the United States performing service in the combat zone, as determined under Section
112 of Title 26 of the United States Code.
4. Items otherwise taxed. Only one payment of tax under this section shall be
required with respect to the tax on any service.
5. Common carriers and communications companies. No tax shall be imposed under
this section on the amount paid for any Communications Services to the extent that the amount
so paid is for use by a common carrier, telephone or telegraph company, or radio broadcasting
station or network in the conduct of its business.
6. Installation charges. No tax shall be imposed under this section on any amount
paid for the installation of any instrument, wire, pole, switchboard, apparatus, or equipment as is
properly attributable to the installation.
7. Nonprofit hospitals. No tax shall be imposed under this section on any amount
paid by a nonprofit hospital for services furnished to that organization. For purposes of this
exemption, the term "nonprofit hospital" means a hospital referred to in Section 170(b)(I)(A)(iii)
ofTitle 26 of the United States Code, which is exempt from federal income tax under Section
50l(a) of Title 26 of the United States Code.
8. State and local governments. No tax shall be imposed under this section upon any
payment received for services or facilities furnished to the government of any State, or any of its
political subdivisions, or the District of Columbia.
9. Nonprofit educational organizations. No tax shall be imposed under this section
on any amount paid by a nonprofit educational organization for services or facilities furnished to
that organization. For purposes of this exemption, the term "nonprofit educational organization"
means an educational organization described in Section l70(b)(I)(A)(ii) of TitJe 26 of the United
States Code, which is exempt from federal income tax under Section SOl (a) ofTit!e 26 ofthe
United States Code. The term also includes a school operated as an activity of an organization
described in Section 501 (c )(3) of Title 26 of the United States Code, which is exempt from
federal income tax under Section SOl(a) of Title 26 of the United States Code, if that school
normally maintains a regular facility and curriculum and normally has a regularly emolled body
of pupils or students in attendance at the place where its educational activities are regularly
carried on.
3
87410.1
(e) To prevent actual multiple taxation of any Communications Services that are
subject to tax under Subsection (a) of this section, any Service User, upon proof that the Service
User owed and has paid a tax in another taxing jurisdiction on the Communications Services,
shall be allowed a credit against the tax imposed in Subsection (a) to the extent of the amount of
the tax properly due and paid in the other taxing jurisdiction. However, no credit may be allowed
for any tax paid to another taxing jurisdiction on any call to the extent that the call may not,
under the Constitution and statutes of the United States, be made the subject oftaxalion by the
other taxing jurisdiction. Nor shall the amount of credit exceed the tax owed to the City under
this section.
(f) Any person claiming to be an independent telemarketing agency, which has
charges subject to tax at the five percent rate, shall file an application for rate adjustment with tbe
Director of Finance. This application shall be made on forms provided by the Director of Finance
and shall recite facts under oath which qualify the applicant for the five percent tax rate.
Notwithstanding any other provision of tins article, the five percent rate shall apply only to
charges for services that were necessarily incurred solely and exclusively for telemarketing
activities. The burden of maintaining records and establishing that this charge is subject to tax at
the five percent rate shall be on the applicant. Charges for all other services shall be subject to
tax at the nine percent rate.
(g) For purposes of imposing a tax or establishing a duty to collect and remit a tax
under this section, "substantial nexus" and "minimum contacts" shall be construed broadly in
favor of the imposition, collection and/or renrittance of the communications 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 Communications Services used by a
Person with a service or billing address in the City 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 renrit a tax, under this section. For communications services for which there
is no billing address or primary physical location for tile provision of services, the service
address shall mean the point of sale of the services.
(h) If a non-taxable service and a taxable service are billed together under a single
charge, the entire charge shall be deemed taxable unless the service supplier or taxpayer
reasonably identifies actual charges for services not subject to the tax. The service supplier or
taxpayer seeking a reduction has the burden of proving the proper valuation and apportionment
oftaxable and non-ta;;:able charges based upon booles and records that are leept in the regular
course .ofbusiness and in a manner consistent with generally accepted accounting principles.
SEC. 21.1.4. ELECTRICITY USERS TAX.
(a) There is hereby imposed a tax upon every person in the City of Los Angeles using
electrical energy in the City of Los Angeles. The tax imposed by this section shall be at tbe rate
of 10 percent ofthe charges made for such energy and shall be paid by the person paying for
such energy, provided, however, that commercial or industrial users of electrical energy shall be
subject to tax and a tax is hereby imposed upon them at the rate of 12.5 percent of the charges
made. for such energy, but as to any non-profit educational institution, as defmed in Subdivision
4
87410.1
3 of Subsection (c) of Section 21.190 of this Code, the tax imposed by this section shall be at the
rate of 10 percent of the charges made for such energy. "Charges" as used in this section, shall
include charges made for (I) metered energy, and (2) minimum charges for service, including
customer charges, service charges, demand charges, standby charges, and annual and monthly
charges.
The term "commercial or industrial users" as used in this section, is intended to include,
but shall not be limited to, any person who qualifies as a "commercial or industrial" consumer of
electrical energy within the electric rate schedules of the Department of Water and Power of the
City of Los Angeles or the tariff schedules of the Southern California Edison company, provided
however, a user of electrical energy shall not be considered a "commercial or industrial user" of
any electrical energy supplied to a single family accommodation separately metered or for
energy to two or more individual family accommodations supplied as a unit, upon application
under the provisions of the Department's Domestic Service Schedule D-I, devoted primarily to
domestic, residential, hou~ehold and related purposes, as distinguished from commercial,
professional, and industrial purposes.
(b) As used in this section, the term "using electrical energy" shall not be construed
to mean that storage of such energy by a person in a battery owned or possessed by him for use
in an automobile or other machinery or device apart from the premises upon which the energy
was received, provided however, that the term shall include the receiving of such energy for the
purpose of using it in the charging of batteries, nor shall the term include the mere receiving of
such energy by an electric public utility or government agency at a point within the City of Los
Angeles for resale.
(c) The tax imposed in this section shall be collected from the service user by the
person supplying such energy. The amount of tax collected from the 26th day of each month
through the 25th day of the following month shaJJ be remitted to the Director of Finance on or
before the 26th day of such following month, or, at the option ofthe person required to collect
and remit the tax, an estimated amount oftax collected in each month shall be remitted to the
Director of Finance on or before the 26th day of such month.
SEC. 21.1.5. GAS USER TAX.
(a) There is hereby imposed a tax upon every person in the City of Los Angeles using
in the City gas which is delivered through mains or pipes. The tax imposed by this section shall
be at the rate of 10 percent ofthe charges made for such gas and shall be paid by the person
paying for such gas, provided, however, that as to any non-profit educational institution, as
defined in subdivision 3 of Subsection (c) of Section 21.190 of this Code, the tax imposed by this
section shall be at the rate of 5 percent of the charges made for such gas. (When gas is
transported by, but not purchased from, a transporter, the charges subject to tax shall be
measured by (I) the transportation cost and (2) the cost of the transported gas, which shall be
based on the volume of gas transported multiplied by the core subscription weighted average cost
of gas for the calendar month immediately preceding the calendar month in which the billing
period terminates.
5
R74]0.1
Notwithstanding the foregoing, the tax on the cost of transported gas may be determined
by applying the tax rate to the actual purchase cost, either by the service user applying to the
Director of Finance for a refund or the Director of Finance billing the service user, for the
amount which represents the difference between the tax paid by the service user to the
transporter and the tax determined by the actual purchase cost ofthe gas. In a claim for refund,
the service user shall provide the Director of Finance with satisfactory evidence of the quantity
and cost of the gas purchased from a party other than the transporter. "When the Director of
Finance believes that direct collection of the tax from the service user is in the best interest of the
City, as provided in Subsection (b) of Section 21.1.10 of this Code, the transporter, upon request
from the Director of Finance, shall furnish the Director of Finance, with respect to each service
user for whom gas is transported, the name, mailing address, service address, gas meter number,
transportation cost, volume of gas transported and the core subscription weighted average cost of
gas for the calendar month inunediately preceding the calendar month in which the billing period
terminates. This information shall be confidential and shall be used only for the purpose of
administering the tax.
(b) There shall be excluded from the base on which the tax imposed in this section is
computed charges made for gas which is to be resold and delivered through main or pipes,
charges made for gas sold for use in the generation of electrical energy by a public utility or a
govermnental agency; and charges made by a gas public utility for gas used and consumed in the
conduct ofthe business of as public utilities.
(c) The tax imposed in this section shall be collected from the service user by the
person selling gas or, when gas is purchased from and transported by separate persons, the tax
shall be collected by the transporter. The amount of tax collected from the 26th day of each
month through the 25th day of the following month shall be remitted to the Director of Finance
on or before the 26th day of such following month, or, at the option ofthe person required to
collect and remit the tax, an estimated amount of tax collected, measured by the billings of the
previous month, shall be remitted to the Director of Finance on or before the 26th day of each
month.
(d) There shall be exempt from the base on which the tax imposed in this section is
computed cbarges made for gas used for non-utility purposes. For the purposes ofthis
subsection, the term "gas used for non-utility purposes" shall mean gas used as a raw material in
a manufactured product, and shall exclude gas used to produce light, heat or power. Any service
user claiming an exemption under this subsection shall file an application with the Director of
Finance for such exemption. Such application shall be made upon forms supplied by the
Director of Finance and shall recite under oath facts which qualify the applicant for an
exemption. The Director of Finance shall review each such application, certify as exempt such
service determined to qualify therefor and notify each affected service supplier that such
exemption bas been approved, stating the name of the applicant, the address to which such
exempt service is being supplied, the account number, if any, and such other information as may
be necessary for the service supplier to remove the exempt service from the tax billing
procedure. Upon receipt of such notice, the service supplier shall not be required to continue to
bill any further tax imposed by this section for such exempt service until given further notice by
the Director of Finance.
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(e) Notwithstanding the provisions of Subsection (a) of this section and Section
21.1.8(b) of this anicle, the collection rate of the tax imposed in Subsection (a) of this section at
the rate of 10 percent shall be reduced temporarily for residential users to 6 percent for the fIrst
four regular billing periods ending on or after December 1, 2001, and on or before April 15,
2002. For all subsequent regular billing periods, the collection rate for residential users shall
revert to the 10 percent rate imposed in Subsection (a) of this section.
SEC 21.1.6. INTEREST AND PENALTY.
(a) Taxes collected from a service user which are not remitted to the Director of
Finance on or before the due dates provided in this article are delinquent.
(b) Interest and penalties for delinquency in remittance of any tax collected, or any
defIciency determination shall attach and be. paid by the person required to collect and remit at
the rates and in the same manner as is provided in Sec. 21.05 of this chapter for delinquency in
payment of Business Tax.
(c) The Director of Finance shall have power to impose additional penalties upon
persons required to collect and remit taxes under the provisions of this article article for fraud
and negligence in reporting and remitting in the same manner and at the same rates as arc
provided in Sec. 21.05 of this chapter for such penalties upon persons required to pay Business
Tax.
(d) For collection purposes only, every penalty imposed and such interest as accrues
under the provisions of this section shall become a part of the tax herein required to be remitted.
SEC.21. L7. ACTIONS TO COLLECT.
Any tax required to be paid by a Service User under the provisions of this article shall be
deemed a debt owed by the Service User to the City. Any such tax collected from a Service User,
which has not been remitted to the Director of Finance, shall be deemed a debt owed to the City
by the Person required to collect and remit. Any Person owing money to the City under the
provisions of this article shall be liable to an action brought in the name of the City for the
recovery of that amount. In tbe event that a service supplier required to collect andremit a tax
under the provisions of this article fails to do so in wbole or in part, the amount of the unremitted
tax shall be deemed a debt owed by the service 'supplier to the City.
SEC2 1 .1.8. DUTY TO COLLECT - PROCEDURES.
The duty to collect and remit the taxes imposed by this article shall be performed as set
forth in this section.
(a) The tax shall be collected insofar as practicable at the same time as and along
with the charges made in accordance with the regular billing practice. If the amount paid by a
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874!0.1
Service User is less than the full amount of the charge and tax that has accrued for the billing
period, a proportionate share of both tbe charge and the tax shall be deemed to have been paid.
(b) The duty to collect tax from a Service User shall commence with the beginning of
the fIrst regular billing period applicable to that Person, whicb starts on or after the operative
date of this article. When the rate of the tax is increased or decreased, the duty to collect at the
new rate shall commence with the beginning ofthe fIrst regular billing periods applicable to that
Person, which starts on or after the effective date of the new rate. Where a Person receives more
than one billing, one or more being for different periods than another, the duty to collect shall
arise separately for each billing period.
SEC. 21.1.9. ADDITIONAL POWERS AND DUTIES OF DIRECTOR OF FINANCE, ETC.
(a) The Director of Finance Bball have the power and duty, and is hereby directed to
enforce all ofthe provisions ofthis article.
(b) In administering and enforcing the provisions of this article, the Director of
Finance shall have the same powers and duties with respect to collecting the tax provided in this
article as he or she has under Section 21.15 of this chapter with respect to collecting the Business
Tax.
(c) The provisions of Sections 21.17, 21.20 and 21.21 ofthis chapter shall apply to
the administration and collection of the tax imposed under the provisions of this article in the
same manner as they apply to the administration and collection of the Business Tax.
(d) The Director of Finance may, from time to time, issue and disseminate
administrative agreements or rulings identifying those services or Persons that are subject to the
requirements imposed by this article, deferring implementation Or enforcement of requirements
imposed by this article or interpreting the provisions ofthis article. These administrative rulings
sball be consistent with federal, state and local Jaw. To the extent that the Director of Finance, or
the City Attorney pursuant to Section 21.31, determines that the tax imposed under this article
shall not be collected in full for any period oftinle from any particular service suppliers or
Service Users, that determination shall be considered an exercise of the Director's discretion to
settle disputes and sball not constitnte a change in taxing methodology for purposes of
Gove=ent Code section 53750 or otherwise. Neither the Director of Finance nor the City
Attorney is authorized to amend the City's methodology for purposes of Gov~.rnment Code
section 53750 and the City does not waive or abrogate its ability to impose the communications
users tax in full as a result of promulgating administrative rulings or entering into agreements.
SEC. 21.1.10. ASSESSMENT - ADMINISTRATIVE REMEDY
(a) The Director of Finance may make an assessment for taxes not remitted by a
person required to remit for any reason specified in Sec. 21.16 afthis chapter for making an
assessment far unpaid Business. Tax. The manner of making and providing notice of such
assessment; the right to a hearing and tbe conduct of such hearing; the preparation and service of
8
f:7410.]
findings; filing exceptions; and passing upon exceptions shall be the same as provided in Sec.
21.16 of this chapter.
(b) Whenever the Director of Finance determines that a service user has deliberately
withheld the amount of the tax owed by him from the amounts remitted to a person required to
collect the tax, or that a service user has failed to pay the amount of the tax to such person for a
period of two or more billing periods, or whenever the Director of Finance deems it in the best
interests of the City, he may relieve such person of the obligation to collect taxes due under this
article from certain named service users for specified billing periods. The Office of Finance shall
notify the service user that he has assumed responsibility to collect the taxes due for the stated
periods and demand payment of such taxes. The notice shall be served on the service user by
handing it to him personally or by deposit of the notice in the United States mail, postage prepaid
thereon, addressed to the service user at the address to which billing was lllilde by the person
required to collect the tax; or, should the service user have changed his address, to his last known
address. If a service user fails to remit the tax to the Director of Finance within fifteen days from
the date of the service of the notice upon him, which shall be the date of mailing if service is not
accomplished in person, a penalty of twenty-five percent of the amount of the tax set forth in the
notice shall be imposed, but not less than $5.00. The peualty shall become part of the tax herein
required to be paid.
SEe. 21.1.11. RECORDS.
It shall be the duty of every person required to collect and remit to the City any tax
imposed by this article to keep and preserve, for a period of three years, all records as may be
necessary to determine the amount of such tax as he may have been liable for the collection of
and remittance to the Director of Finance, which records the Clerk shall have the right to inspect
at all reason~ble times.
SEe. 21.1.12. EXEMPTIONS AND REFUNDS.
(a) The tax imposed by this article shall not apply to any individual 62 years of age or
older or any disabled individual who uses Communications Services, electric, or gas services in
or upon any premises occupied by that individual, provided the combined adjusted gross income
(as used for purposes of the California Personal Income Tax Law) of all members of the
household in which the individual resided was less than the figure in effect on the preceding first
day of April as the "very low income" limitation for a fancily of two persons in the City of Los
Angeles under the Section 8 housing programs of the United States Housing Act of 1937, as
amended, as published by the United States Department of Housing and Urban Development.
For the purposes of this section, an individual shall be considered to be disabled ifhe or
she is unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment, which can be expected to result in death, or to be of
long-continued and indefinite duration.
The exemption granted by this section shall not eliminate the duty of the service supplier
from collecting taxes from the exempt individuals or the duty of the exempt individuals from
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paying those taxes to the service supplier unless the Service User applies for an exemption and
the Director of Finanee grants the exemption in accordance with the provisions of Subsection
(b).
For each fiscal year, the Director of Finance is directed to determine, and utilize as the
prior calendar year's adjusted gross income limitation, the figure in effect on the preceding first
day of April as the "very low income" limitation for a family of two persons in the City of Los
Angeles under the Section 8 housing programs of the United States Housing Act of 1 937, as
amended, as publisbed by the United States Department of Housing and Urban Development.
(b) Any Service User exempt from tbe taxes imposed by this article because of the
provisions of Subsection (a) above or any other applicable exemption, may file an application
witb the Director of Finance for an exemption. The applications shall be made upon forms
supplied by the Director of Finance and shall recite facts under oath, which qualify the applicant
for an exemption. The Director of Finance shall review all applications and certify as exempt
those applicants determined to qualify and shall notify all service suppliers affected that the
exemption has been approved, stating the name ofthe applicant, the address to which the exempt
service is being supplied, the account number, if any, and any other information as may be
necessary for the service supplier to remove the exempt Service User from its tax billing
procedme. Upon receipt of this notice, the service supplier shall not be required to continue to
bill any further tax imposed by this article from the exempt Service User until further notice by
the Director of Finance is given. The service supplier shall eliminate the exempt Service User
from its tax billing procedure no later than 60 days after the receipt of the notice from the
Director of Finance.
All applications for exemption for any given fiscal year shall be filed with the Director of
Financ.e on or before the 30th day of April preceding the fiscal year. All exemptions shall
continue and be renewed automatically by the Director of Finance so long as the prerequisite
facts supporting the initial qualification for exemption shall continue. Upon any change in the
service address or residence of the exempt individual, the service supplier, at its option, may
either terminate the exemption immediately or continue the exemption until notified by the
Director of Finance that the exempt individual has not filed an application for continuation of
exemption within 90 days after the change in the service address or residence. Each individual
exempt from the tax may apply to the Director of Finance for a new or continued exemption with
each change of addressor residence. Any individual exempt from the tax shall notify the
Director of Finance within ten days of any change of fact or circumstance, which might
disqualify the individual from receiving the exemption. It shall be a misdemeanor for any Person
to knowingly receive the benefits of the exemption provided by this section when the basis for
the exemption does not exist or ceases to exist.
Notwithstanding any of the provisions of this subsection, however, any service supplier
who determines by any means that a new or nonexempt Service User is receiving service through
a meter or cOlmection exempt by virtue of an exemption issued to a previous user or exempt user
of the same meter or cOlmection, that service supplier shall immediately notify the Director of
Finance of that fact and the Director of Finance shall conduct an investigation to ascertain
10
87410.1
whether or not the provisions of this section have been complied with, and where appropriate,
order the service supplier to commence collecting the tax from the nonexempt Service User.
Applications for exemptions may be filed during any given fiscal year, for the remaining
portion of the fiscal year, provided the application is filed not later than the 60th day prior to the
commencement of the billing period for the affected utility companies for which tbe exemption
is to commence and shall be valid through the remainder of that fiscal year, as set forth above.
( c) Individuals 62 years of age or older and disabled individuals, any individual
entitled to be exempt from the taxes imposed by this article pursuant to Subsection (a) who used
telephone, electric or gas services and paid more than $3.00 in those taxes may, within 12
Months ofihe date of payment, apply for a refund on forms provided by the Director of Finance.
The refund application shall contain a declaration of those facts, under oath .that qualify the
applicant for a refund, and shall also be accompanied by the customer's original bills showing the
amount ofihe taxes billed by service suppliers during tbe preceding year. Lilcewise, refund
claims may be filed by an individual who used telephone, electric and gas service and paid the
taxes prescribed by this article either directly or indirectly to the Service User rather than the
service supplier.
In the event the applicant has lost or destroyed any relevant billings or statements
showing the amount of tax paid, or if the applicant indirectly paid the taxes in conjunction with
the occupation of any premises without receiving a specific billing from the Service User, or if
the applicant has been granted an exemption during the year preceding the filing of the refund
claim, the maximum refund shall be $18.00, or $1.50 for each full Month of service received by
the applicant, whichever is less.
(d) Except as otherwise provided in this section, refunds of overpaid taxes shall be
made in the same manner as is provided in Section 21.07 of this chapter for refunds of
overpayments in Business Taxes.
(e) A Person required to collect and remit taxes imposed under this article may claim
a refund or take as credit against taxes collected and remitted the amounts overpaid, paid more
than once or erroneously or illegally collected or received when it is established in a manner
prescribed by the Director of Finance that the Service User from whom the tax has been
collected did not owe the tax; provided, however, that neither a refund nor a credit shall be
allowed unless the amount of the tax so collected has either been refunded to the Service User or
credited to charges subsequently payable by the Service User to the Person required to collect
and remit.
(f) If any application for an exemption or refund as permitted to be filed by this
section is determined to be deficient by the Director of Finance for failure to set forth the facts
necessary to qualify the applicant for an exemption or refund or if the Director of Finance has
reason to believe the applicant has failed to truthfully set fOlth those facts, the Director may deny
the application by giving written notice of the denial and by stating in the notice the grounds for
the denial and mailing the notice in a sealed envelope, postage prepaid, addressed to the
applicant at the address shown upon the application. The applicant shall thereafter have a right to
11
87410.1
a hearing with the Director of Finance in accordance with a hearing procedure to be established
by the Director.
(g) No exemption or refund shall be granted pursuant to this section with respect to
any tax imposed by this article, which is Or has been paid by a public agency or where the
applicant receives funds from a public agency specifically for the payment of the tax.
(h) If an individual is delinquent in the payment of any utility users tax at the time his
claim for refund is filed, the Director of Finance shall apply the refund or as much of the refund
as may be necessary to satisfy the delinquency.
(i) The tax imposed by this article shall not apply to communication, electric and gas
services acquired by any nonprofit corporation for the use of its tenants in any housing project in
which at least 80 percent of the dwelling units are occupied by a person meeting the
requirements for exemption under Subsection (a) of this section.
(j) Upon request of the Director of Finance, a service supplier shall provide a list of
the nanles and addresses of those customers that, according to its billing records, are exempt
from a tax imposed by this article.
(k) To the extent that the City's authorization to impose or collect the tax imposed in
this article is expanded or limited as a result of changes in state or federal law, no amendment or
modification ofthis article shall be required to confonn the tax to those changes, and the tax
shall be imposed and collected to the full extent of the City's authorization up to the full amount
of the tax in1posed by the terms of this article.
SEC. 21.1.13. AMENDMENT OR REPEAL.
This Communications Users Tax imposed by this article may be decreased, repealed or
amended by the City Council, but may not be increased without a vote of the people as required
in California Constitution Article XIIIC and California Government Code Section 53750(h).
SEC.21.1.14. AUDIT OF COMMUNICATIONS USERS TAX.
The City shall annually verify that the Communications Users Tax imposed by this article
has been properly collected and remitted in accordance with this article, and properly expended
according to applicable law. The annual verification shall be perfornled under the direction of the
Director of Finance by a qualified independent third party employing reasonable, cost-effective
procedures.
SEC. 21.1.15. SEVERABILITY.
If any 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 remain in effect.
The people of the City of Los Angeles hereby declare that they would have adopted each portion
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of this ordinance, notwithstanding the fact that anyone or more portions of this ordinance is
declared invalid or unenforceable and, to that end, tbe provisions of this ordinance are severable.
13
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cox
350 10th Avenue, Suite 600
San Diego, CA 92101
(619) 263-9251
(619) 266-5600 fax
June 8, 2010
The Honorable Mayor Cox and City Councilmembers
City of Chula Vista
276 Fourth Avenue
Chula Vista, CA 91910
Re: Proposed Chances To Utilitv Users Tax
Dear Mayor Cox and City Councilmembers:
One hour ago, I received City Manager Sandovai's letter attempting to address our issues raised in
2008. Yesterday afternoon was the first time Cox received a copy of a staff report and ordinance
outlining the City of Chula Vista's proposed changes to its Utility Users Tax (UUT). This was also our
first notice that this issue is on tonight's City Council Agenda. We are incredibly disappointed that the
City would spring this issue on Cox and the voters without an opportunity to sufficiently review what
exactly is being proposed. As a valued community business and one of Chula Vista's largest providers
of tax revenue a simple call from staff providing us ample time to discuss this and provide input would
be expected.
After a preliminary review of the proposed ordinance, Cox still has many concerns. Cox disagrees with
the staff report that the proposed changes are just an "update" of the existing tax. The City is not trying
to simply close "technology loopholes," it appears the City is planning to vastly expand the scope of the
tax. The Staff estimates that 5-10% of telecommunications customers are not covered by the current
UUT. In order to cover this gap, Staff proposes expanding the definition of "telecommunications
services" to include intrastate, interstate and internationallandline and wireless calls. In doing this, Staff
fails to note that the majority of constituents affected by the change in definition are those in the 90-95%
it cites as already paying the UUT. Additionally, these proposed changes fail to cover telephone
services over the Internet, such as Vonage, Skype or Google. These services that still are not covered
by the proposed ordinance most likely constitute the majority of the 5-10% of customers not covered by
the current UUT.
Staff expects only a small, 5-10% increase in the City's revenue through the broadened scope of the
UUT. This estimate is based on other cities who have similarly broadened their UUTs. Staff fails to
note, and it is important to clarify, whether these cities also lowered the rate of the UUT Since the
majority of cities in California that broadened the scope of their UUTs also lowered their tax rate, it may
be wrong to think the City will only experience a small increase in revenue. With a vastly expanded
scope of the UUT, the City may very well experience a windfall in tax revenue on the shoulders of its
taxpayers, our customers. Cox thinks that this proposal will result in a significant rate increase for our
customers, many of whom are already paying the UUT. If the City is trying to protect future revenues
from legal challenges, there are ways to do this without vastly expanding the tax base. If the City had
reached out to Cox, we would have proposed that the City could exclude interstate and international
calls from the proposal or include these services, but provide a rate decrease. Either of these options
would result in the protection of this future revenue without a significant impact to customers. As it is
The Honorable Mayor Cox and City Councilmembers
Page 2 of 2
written, this proposal does not simply preserve this source of revenue for the future, it expands the tax
base. A quick calculation by Cox estimates that this expanded service definition would result in an
estimated $255,000 rate increase for our customers. And this is just for Cox alone.
Additionally, Cox maintains concerns over the proposed ballot language provided. If this measure is to
go before the voters, it must accurately reflect what is being proposed. The bailot language says that
there is no rate increase. This is incorrect and misleading. This is not the case for intrastate wireless,
interstate and international land line and wireless, and ancillary service customers. Each of these
customers wiil experience a rate increase from 0% to 5% because of these new taxes. To ensure that
voters have accurate and reliable information upon which to base their decision, Cox requests that any
information presented to the public clearly list, in plain language, the services that will be subject to a
new tax as proposed under the UUT ordinance.
Currently, without sufficient time to review the proposed changes or meet with staff, Cox cannot support
this proposal. We are requesting an 8-week continuance to meet with City staff to discuss our
concerns.
We would very much like the opportunity to meet with staff and share our thoughts and concerns on
this issue with the City. At this point, we must request that the City Council wait to vote on this issue
until there is a possibility to address our concerns.
Sincerely,
() .
~K,
/ .
I/~
Sam Attisha
Vice President, Business Development & External Affairs
Cox Communications
cc: Jim Sandoval
Bart Miesfeld
Maria Kachadoorian
Michael Meacham
Scott Tulloch
Donna Toledo
Simon Silva