RPVCCA_CC_SR_2014_08_05_02_UUT_Rate_Reduction_OrdinanceCITY OF RANCHO PALOS VERDES
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
CAROL W. LYNCH, CITY ATTORNEY AND ~
DENNIS MCLEAN, DIRECTOR OF FINANCE 'tf)l/:::J
AUGUST 5, 2014
ORDINANCE REDUCING THE UTILITY USER TAX RATE FROM
3% TO 2.75% AND MODERNIZING THE CITY'S UTILITY USER
TAX AND EMERGENCY RESOLUTION AUTHORIZING THE CITY
COUNCIL TO CALL AN ELECTION ON NOVEMBER 4, 2014 TO
REQUEST THE VOTERS TO APPROVE THE ORDINANCE
REVIEWED: CAROLYNN PETRU, ACTING CITY MANAGE~
RECOMMENDATIONS:
1) ADOPT RESOLUTION NO. 2014-: A RESOLUTION OF THE
CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES
UNANIMOUSLY DECLARING AN EMERGENCY IN CONNECTION
WITH THE PLACEMENT OF A MEASURE THAT DECREASES THE
RATE OF THE CITY'S UTILITY USER TAX FROM 3% TO 2.75%
AND MODERNIZES THE TAX ON THE BALLOT FOR A SPECIAL
MUNICIPAL ELECTION TO BE CONSOLIDATED WITH THE
NOVEMBER 4, 2014 ELECTION, AND
2) INTRODUCE ORDINANCE NO _: AN ORDINANCE OF THE
PEOPLE OF THE CITY OF RANCHO PALOS VERDES REDUCING
THE RATE OF THE CITY'S UTILITY USER TAX FROM 3% TO
2.75% AND MODERNIZING THE CITY'S UTILITY USER TAX.
2-1
INTRODUCTION:
The purpose of this report is to augment the reports that were provided to the City
Council on July 15, 2014 and July 29, 2014, based on the discussion that occurred
at both meetings. Copies of both reports are attached to this report for ease of
reference. Although time was limited since the Council meeting conducted on July
29, 2014, and publishing the report forth is meeting, staff has provided the following
additional information requested by Council member Campbell:
./ A red-line version of the proposed Ordinance comparing it to the current
provisions in the Municipal Code;
./ The complaint in the litigation involving Chula Vista's UUT;
./ Sample UUT modernization ballot measures and ordinances of other
California cities; and
./ Recent UUT modernization ballot results.
BACKGROUND:
The following Background was included in the Staff Report to the City Council,
dated July 29, 2014:
> In 1993, the City Council adopted the City's Utility Users Tax ("Tax" or
"UUT"). The amount of the Tax is 3%. It is imposed on City residents who
use telephone service, electricity, co-generated electricity, natural gas, and
water.
> Subsequently, the voters of the State of California adopted Proposition 218.
> To comply with Proposition 218, in 2004, the City Council placed the Tax
on the ballot, and the voters ratified the existing Tax at the same 3% rate.
> The City's Tax originally was imposed upon all telephone services that were
subject to the Federal Excise Tax ("FET"). In response to litigation, in 2006,
the Internal Revenue Service issued a ruling stating that the FET does not
apply to most common telephone billing plans. This invalidated the basis for
the City's Tax as applied to telephone service.
> In response to these events, some cities, including Rancho Palos Verdes,
amended their ordinances without voter approval to delete the reference to
the FET and replaced it with other terms to cover telephone services that
had been subject to the FET.
> Since 2006, many changes have occurred with respect to telephone
services that have caused the definitions in the UUT to become outdated.
Some types of telephone services currently are not subject to the tax, while
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others are. This inequity cannot be corrected without placing revisions to
the Tax on the ballot for approval by the voters.
> Recently, new legal challenges and claims have been filed against other
cities that did not place their amended utility user taxes on the ballot.
Attorneys in those cases have claimed damages and substantial attorney's
fees. (We understand that Chula Vista paid $2 million in attorneys' fees to
the attorneys who filed a lawsuit challenging that city's utility user tax.)
> Staff proposes placing an ordinance on the November 2014 ballot, to
protect future UUT revenues from legal challenge and to modernize the
UUT so that it will apply to new and formerly undefined types of telephone
services, such as prepaid mobile telephones.
> The proposed ordinance does not increase the UUT or expand the Tax to
other types of utilities, and does not afford the City Council ability to do so
in the future. Thus, video, cable and trash services, for example, still would
not be subject to the City's UUT.
> Staff recommends that the City Council include a reduction of the rate of the
UUT from 3% to 2.75% in the ordinance that is presented to the voters
because that reduction will benefit the residents while still preserving the
majority of the current revenue stream from the UUT to the City to fund City
services.
> If the Ordinance is approved by the City Council and the City's voters,
pursuant to the State Constitution, the Tax cannot be increased, and the
utilities and services that are subject to the Tax cannot be expanded without
voter approval of those changes.
DISCUSSION:
Recommended Action -Unanimously Adopt a Resolution Setting Forth an
Emergency That Justifies the Election in November 2014
The recommended action and the proposed Resolution are identical to the
recommendation and Resolution presented to the City Council on July 29, 2014.
By placing the proposed measure on the ballot at the earliest possible election
date, which is November 2014, any dispute about the City's ability to collect the
UUT on telecommunication services will be resolved a year earlier than if the City
waits to place such a measure on the ballot in November 2015, when the next
regular City Municipal election will occur. In other words, if approved by the City
Council and the voters, the ordinance will protect future UUT revenues from a
successful legal challenge.
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In addition, if the voters were to approve an ordinance that modernizes the City's
UUT at the reduced rate of 2.75%, the residents will receive the monetary benefit
of the reduction of the rate of the UUT a year earlier. In addition, by modernizing
the UUT, newer types of telephone-related services will be treated the same, so
that telephone users in the City are treated alike.
If the City Council wishes to place the UUT on the November 2014 ballot, the City
Council must unanimously adopt a resolution setting forth an emergency that
justifies the election being held prior to an election date that is different from the
date of the City's regular municipal elections in November of odd numbered years.
In its Staff Report, dated July 29, 2014 (copy attached), Staff outlined the facts
upon which the City Council may rely in declaring an emergency and calling the
election in November 2014, instead of waiting until November 2015. Those facts
are set forth in the attached resolution and are reiterated here:
1. Litigation and claims have been filed against other cities that have not
placed their UUT ordinances on the ballot for voter approval, specifically
addressing the elimination of the Federal Excise Tax on telephone services,
causing the loss of that important revenue stream and the payment of a
significant amount of attorney's fees. The City of Rancho Palos Verdes
seeks to protect future revenues from its UUT from such claims and lawsuits
and avoid unnecessary legal expenses and exposure.
2. On May 28, 2014, the City received a Public Records Act request from a
law firm seeking records relating to the City's Utility User Tax.
3. Continuous State takeaways over the last few years, including the state's
recent elimination of redevelopment agencies, have resulted in significant
reductions in revenues that the City intended to be used to repay the City
for loans made previously to the Rancho Palos Verdes Redevelopment
Agency for expenditures to address landslide damage and increase land
stability within former Redevelopment Project Area No. 1.
4. The Portuguese Bend Landslide is a large active landslide that continues to
move and adversely affects public infrastructure, including Palos Verdes
Drive South, a major arterial street in the City. The constant damage
caused by the landslide requires constant and increased City expenditures
of more than $500,000 annually to maintain PVDS as a viable arterial street.
5. During the recession, the State took monies that previously were allocated
to cities to reduce the State's budget deficit. It is expected that similar
actions will likely occur again in the future in response to downturns in the
economy.
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6. The cost to the City of complying with state and federal clean water rules
continues to increase significantly each year.
7. The City has many unfunded important infrastructure projects, which are
discussed above, totaling more than $28 million, including unfunded
projects to improve City streets ($4.7 million), and storm drains ($9.4
million).
8. The City of Rancho Palos Verdes seeks to maintain current levels of public
safety and police services within the City, even though the cost of such
services continues to increase, including the City's contribution to the
County liability trust fund for law enforcement services, which the City has
been notified will increase again in FY15-16.
9. The City has made cost reductions to the City's Capital Improvement
(infrastructure) Program in recent years in order to maintain a balanced
budget. However, similar cost reductions alone will not be sufficient to avoid
future cuts to services if future revenue from the UUT is lost due to legal
challenges. Therefore, the loss of significant future revenue from UUT
would have a negative impact upon public safety and the character of the
community in Rancho Palos Verdes.
Several Questions and/or Ideas Regarding Staff's Recommended Action
Discussion Regarding the Conduct of an Election in March 2015 or June 2015
Election
At the City Council meeting on July 29, 2014, the City Council discussed the
possibility of conducting a municipal election in March 2015, or June 2015, to
enable the voters to decide whether to approve the proposed reduction of the rate
of the UUT, as well the modernization of the UUT ordinance, as an alternative to
the proposed November 2014 election.
In response to an inquiry made by staff, the County responded that it will not be
conducting an election in either March or June of 2015. However, the City of Los
Angeles will conduct an election in March 2015. Although the City could utilize the
election resources of the City of Los Angeles, the cost of conducting a special
election in March 2015 would be approximately $20,000 more than the cost
estimated by the County to conduct the consolidated election in November 2014.
Furthermore, the March 2015 election relates to open seats on the LAUSD and El
Camino College District Boards. If broad voter participation is desired,
unfortunately, voter turn-out is typically very low city-wide for this election.
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Discussion Regarding the Conduct of an Election to Modernize the Utility User Tax
Ordinance While Maintaining the Current 3% Utility User Tax Rate
Several Council Members questioned whether the proposed ballot measure
should only modernize the UUT ordinance and continue to maintain the 3% UUT
rate. Staff subsequently discussed this alternative with Tim Mclarney of True-
North, the City's polling advisor, who expressed a caution about the possibility of
failure of the ballot measure without a reduction of the UUT rate.
Only one recent UUT modernization ballot measure with a rate reduction failed
before voters. As of June 2013, four other modernization ballot measures that
attempted to maintain the same UUT rate failed over the last several years. During
the most recent election cycle that included UUT modernization ballot measures
(November 2013), the ballot measure that included a rate reduction passed, and
the modernization ballot measure that attempted to maintain the same UUT rate
failed. Staff has attached a report prepared by Michael Coleman a/k/a
CaliforniaCityFinance.com, the League of California Cities expert, titled UUT
Facts, the source of recent UUT ballot results. The voters' decision is more
straightforward when asked about a rate reduction, rather than focusing solely
upon the legalistic terms and conditions of the modernization of the
telecommunication provisions of the ordinance.
Questions Regarding Tax Administrator's Powers Included in Current and
Proposed Modernization UUT Ordinance
To the best of Staff's knowledge, neither the current Director of Finance, nor any
of his predecessors, (acting as the Tax Administrator), have ever made any
administrative tax rulings. None would be made without the knowledge of the City
Manager, City Attorney, or the City Council. Likewise, there have never been any
appeals to the City Council of a determination by the Tax Administrator.
Alternatives -If the Resolution to Declare Emergency Not Adopted by City
Council
Alternative 1 -Continue Collection of UUT by Telecommunication Providers -
Escrow Such Collections -Reconsider UUT Modernization Ballot Measure in
November 2015
If the City Council does not place the ballot measure on the November 2014 ballot,
it could direct Staff to prepare a resolution whereby the future UUT that is collected
by telecommunication service providers would be segregated ("escrowed") from
all other UUT revenues and other unrestricted General Fund monies, into a
"Committed" Reserve of the General Fund (or a similar restriction), thus prohibiting
the use, encumbrance or appropriation of such collections without further action of
the City Council. Such future collections of UUT by telecommunication providers
would be set-aside for payment of any future claims, or cost thereof. Alternative 1
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is intended to include reconsideration of placing a UUT modernization ballot
measure before the voters as early as November 2015.
Alternative 2 -Temporarily Suspend Collection of UUT by Telecommunications
Providers -Reconsider UUT Modernization Ballot Measure in November 2015
Instead of "escrowing" UUT funds collected going forward, the City Council could
immediately suspend the collection of the UUT from telecommunication services
(a "tax holiday") until an election to modernize the UUT ordinance is conducted in
November 2015, while maintaining the current 3% UUT rate. However, based
upon a discussion with the City's polling advisor, the voters would likely consider
the "tax holiday" as a tax reduction, and if soon followed by a ballot measure to
approve the modernization of the UUT tax for telecommunications (possibly
November 2015), to allow the City resume collection of the tax, it would be
perceived as a tax increase and would likely fail.
Alternative 3 -Indefinitely Suspend Collection of UUT by Telecommunications
Providers
Suspend the collection of the UUT on telecommunication services indefinitely.
Alternative 3 provides the City's UUT taxpayers with a tax decrease, but would
likely lead to a significant, permanent loss of about $700,000 of UUT revenue to
the General Fund annually -about 3-4% of the total annual General Fund
operating budget.
Alternatives 1-3 Require FY14-15 Budget Decreases
Alternatives 1-3 would require Staff to promptly develop revisions to the FY14-15
Budget in lieu of the proposed "escrow of' or suspension of the City's UUT
collected from telecommunication services to restore a balanced budget for FY14-
15 in accordance with City Council Policy No. 45 -Balanced Operating Budget.
If adopted, any of the three Alternatives 1-3 would have an impact on the future
structural budget and will necessitate the City Council to make decisions regarding
what immediate adjustments should be made to FY14-15 General fund budget for
on-going programs, services and operating expenditures. There are two City
Council policies to consider when making the adjustments.
1. Policy No. 41 -Reserve Policies requires Transient Occupancy Tax (TOT,
a recurring revenue) be transferred to the Capital Improvement Projects
(CIP) Fund. Policy No. 41 also requires the prior year General Fund
expenditure variance be transferred to the CIP Fund. Therefore, General
Fund money that has been transferred to the CIP Fund pursuant to this
policy and has been used to fund one-time FY14-15 appropriations should
not be considered to balance the structural budget. However, these
resources, as well as the General Fund Reserve (rainy day fund) may be
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considered by the City Council to provide a one-time emergency stop-gap
for either a temporary loss of UUT or claims for past collections of UUT.
2. Policy No. 45 -Balanced Operating Budget requires that recurring
expenditures do not exceed recurring revenues. Therefore, reducing one-
time FY14-15 appropriations should not be considered to balance the
structural budget. Again, these one-time resources may be considered to
provide a one-time emergency stop-gap.
The City Council could elect to set-aside City Council Policy No. 45. However, the
City's Financial Advisor previously expressed caution that setting aside newly
established fiscal policies could be viewed unfavorably by municipal debt rating
agencies, if and when the City's initial debt rating is pursued.
With City Council direction, Staff will prepare a list of potential FY14-15
appropriations to adjust. The list may include one-time items to allow for an
emergency stop-gap, as well as recurring items to allow for a rebalancing of the
structural budget. Items for consideration may include:
Y The one-time general liability insurance refund in the amount of
$231,306 that was transferred to the CIP Fund (and may be
transferred back to the General Fund);
Y Recurring budget programs and services (e.g. dewatering well
rehabilitation, park and facility maintenance);
Y Recurring new services that were added to the FY14-15 budget,
including the City Council Liaison employee position, and additional
part-time Recreation hours to staff park sites such as Abalone Cove
Beach and the open gym program at Miraleste Intermediate School;
and
Y Potential proposals to increase facility-use fees, such as temporary-
use parking at Point Vicente Park/Civic Center and park-site rentals.
As reported with the 2014 Five-Year Financial Model and on July 15, 2014, Staff
anticipates a number of challenges associated with balancing the structural budget
in the future. The challenges include increasing costs to comply with clean water
law, increasing costs of residential street rehabilitation, anticipated subsidies for
right-of-way maintenance, sunset of the storm drain user fee, and the increased
contribution to the Los Angeles County Sheriff's liability trust fund. Finally, nothing
has been included in the structural budget for any future adjustments to employee
compensation and benefits.
Additionally, the City has considered other programs and services as a part of the
2014 City Council Goals and the FY14-15 budget process that are not funded in
the FY14-15 budget for the General Fund, including:
Y Creation of a joint powers agency for emergency management for
the Peninsula;
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> Placement of surveillance cameras at City entrances and/or
purchase of additional Automated License Plate Recognition
(ALPR) technology;
> Programmed maintenance and rehabilitation of dewatering wells for
Portuguese Bend and Abalone Cove Landslide areas;
> Community workshops for issues such as safe school routes, cross-
walks, updates to the Parks Master Plan & Coast Vision Plan,
park/preserve improvements, etc.; and
> Expansion of public outreach programs to familiarize residents and
businesses about City services, etc. (citizen survey, town hall
meetings, leadership academy, etc.).
In summary, a loss of approximately $700,000 of UUT revenue annually, either in
the short term or long term, will have a significant impact on the City's ability to
provide a desired level of service and maintain a structurally balanced budget.
CONCLUSION:
If the City Council concurs with the above findings and that the ordinance reducing
the rate of the UUT from 3% to 2.75% and modernizing its provisions should be
placed on the ballot for the upcoming election in November 2014, then the City
Council should adopt the attached resolution calling for the special election in
November 2014 and vote to approve the ordinance. The adoption of the resolution
requires a unanimous vote by the Members of the City Council, and the proposed
ordinance requires an affirmative vote by four Members of the City Council.
If the City Council does not adopt the resolution placing the measure decreasing
the rate of the City's Utility User Tax from 3% to 2.75% and modernizing the tax
on the November 4, 2014 ballot, then the City Council should decide whether to
select among Alternatives 1-3 and direct Staff to promptly return with proposed
adjustments should be made to the FY14-15 General fund budget and/or on-going
programs, services and operating expenditures.
Attachments:
Draft Resolution
Draft Ordinance
Redline of Draft Ordinance revision
July 15, 2014 Staff report
July 29, 2014 Staff report
Public Correspondence
Utility Users Tax Facts by CaliforniaCityFinance.com, August 2013
Sample UUT modernization ballot measures of other California cities
Chula Vista complaint
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RESOLUTION NO. --
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS
VERDES UNANIMOUSLY DECLARING AN EMERGENCY IN CONNECTION
WITH THE PLACEMENT OF A MEASURE THAT DECREASES THE RATE OF
THE CITY'S UTILITY USER TAX AND MODERNIZES THE TAX ON THE
BALLOT FOR THE NOVEMBER 4, 2014 ELECTION
WHEREAS, the City of Rancho Palos Verdes has historically operated with fiscal
prudence and caution and without spending more than the amount allowed by the City's
General Fund reserve policy. As a result, the City has been very fiscally responsible;
and
WHEREAS, in 1993, the Rancho Palos Verdes City Council adopted a utility user
tax ("UUT") in the amount of 3% to provide a source of income to the City, which could
not be diverted by the State of California to balance the State's budget, to fund
important City services; and
WHEREAS, following the adoption of Proposition 218, the City Council placed
the City's UUT on the ballot for approval, and in 2004, the City's voters ratified the City's
UUT at the same rate of 3%; and
WHEREAS, the UUT continues to be an important source of revenue to the City
to fund important public services that are funded by revenues in the City's general fund;
and
WHEREAS, the City's Tax originally was imposed upon telephone services that
were subject to the Federal Excise Tax ("FET"). In response to litigation, in 2006, the
Internal Revenue Service issued a ruling stating that the FET does not apply to most
common telephone billing plans. This invalidated the basis for the City's Tax as applied
to telephone service; and
WHEREAS, in response to the change in the law regarding the FET, the City of
Rancho Palos Verdes amended Chapter 3.30 without voter approval to delete the
reference to the FET and replaced it with other terms to cover telephone services that
had been subject to the FET; and
WHEREAS, since 2006, many changes have occurred with respect to telephone
services that have caused the definitions in the UUT to become outdated so that some
types of telephone services currently are not subject to the tax, while others are; this
inequity cannot be corrected without placing revisions to the Tax on the ballot for
approval by the City's voters; and
WHEREAS, recently, new legal challenges and claims have been filed against
other cities that did not place their amended utility user taxes on the ballot, and
attorneys in those cases have claimed damages and substantial attorney's fees; and
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WHEREAS, on May 28, 2014, the City received a Public Records Act request
from a law firm seeking records relating to the City's Utility User Tax; and
WHEREAS, the City of Rancho Palos Verdes seeks to protect future revenues
from its UUT from such claims and lawsuits and avoid unnecessary legal expenses and
exposure; and
WHEREAS, the continuous State takeaways in the last few years, including the
state's recent elimination of redevelopment agencies, have resulted in significant
reductions in revenues that the City intended to be used to repay the City for loans
made previously to the Rancho Palos Verdes Redevelopment Agency for expenditures
to address landslide damage and increase land stability within former Redevelopment
Project Area No. 1; and
WHEREAS, the Portuguese Bend Landslide is a large active landslide that
continues to move and adversely affects public infrastructure, including Palos Verdes
Drive South, a major arterial street in the City; the constant damage caused by the
landslide requires constant and increased City expenditures exceeding $500,000
annually to maintain it as a viable arterial street; and
WHEREAS, during the recession, the State took money monies that previously
were allocated to cities to reduce the State's budget deficit, and it is expected that
similar actions will occur again in the future in response to downturns in the economy;
and
WHEREAS, the cost to the City of complying with state and federal clean water
rules continues to increase significantly each year; and
WHEREAS, the City has many unfunded important infrastructure projects within
the City totaling more than $28 million, including unfunded projects to improve City
streets ($4.7 million), and storm drains ($9.4 million); and
WHEREAS, the City of Rancho Palos Verdes seeks to maintain current levels of
public safety and police services within the City, even though the cost of such services
continues to increase, including the City's contribution to the County liability trust fund for
law enforcement services, which the City has been notified will increase again in fiscal
year 15-16; and
WHEREAS, If future revenue from the UUT is lost due to legal challenges, the cost
reductions the City has made to the City's Capital Improvement (infrastructure) Program
in recent years in order to maintain a balanced budget will not be sufficient to avoid future
cuts to services and would have a negative impact upon public safety and the character
of the community in Rancho Palos Verdes; and
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WHEREAS, due to changes in technology the City Council wishes to update the
City's UUT ordinance so that it is applied fairly and uniformly to users of gas, water,
electricity and telephone services in the City and to correspondingly reduce the tax rate
of the UUT from 3% to 2. 75%, which will benefit the City's residents; and
WHEREAS, without further action to modernize the provisions of the UUT that is
based on telephone services, it is possible that someone could challenge the City's
UUT on those services; any unexpected loss of utility users' tax on telephone services
would have a detrimental impact on the City's budget, including future reductions to
infrastructure maintenance; and
WHEREAS, without Council action to place these revisions on the ballot at the
earliest possible time, which is the November 4, 2014 election, there will be an
unnecessary delay before the City's residents will be able to determine if the City's UUT
ordinance should be modernized and if the residents' tax rate should be reduced;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF RANCHO PALOS VERDES AS FOLLOWS:
Section 1. The City Council finds that the recitals are true and correct.
Section 2. The City Council unanimously finds and declares the existence of
this emergency, based upon the facts and findings stated in the recitals of this
Resolution, and accordingly orders that the election on the City's Utility User Tax should
occur at the November 4, 2014 election, so that the tax rate will be reduced from 3% to
2.75%; the provisions of the Utility User Tax will be modernized, and this important
source of revenue can be preserved.
Section 3. That the City Clerk shall certify to the adoption of this resolution and
enter it into the book of resolutions.
PASSED, APPROVED and ADOPTED, this 29th day of July, 2014.
Mayor
Attest:
City Clerk
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) ss
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CITY OF RANCHO PALOS VERDES
I, Carla Morreale, City Clerk of the City of Rancho Palos Verdes, certify that the
foregoing resolution was adopted by the Council of the City of Rancho Palos Verdes at a
regular meeting held on the July 29, 2014.
City Clerk
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ORDINANCE NO.
AN ORDINANCE OF THE PEOPLE OF THE CITY OF RANCHO PALOS VERDES
REDUCING THE RATE OF THE CITY'S UTILITY USER TAX FROM 3% TO 2.75%
AND MODERNIZING THE CITY'S UTILITY USER TAX
WHEREAS, the Rancho Palos Verdes City Council unanimously declared on
August 5, 2014, that an emergency exists in the City; and
WHEREAS, the Rancho Palos Verdes City Council introduced this Ordinance on
August 5, 2014, by the following vote: ; and
WHEREAS, the City Council submitted this ordinance to the voters at the
November 4, 2014, election;
NOW, THEREFORE, THE PEOPLE OF THE CITY OF RANCHO PALOS
VERDES DO ORDAIN AS FOLLOWS:
Section 1. Chapter 3.30 of the Rancho Palos Verdes Municipal Code ("Code")
entitled "Utility User Tax," which applies a tax on all telephone, electric, co-generated
electric, water and gas charges in the City of Rancho Palos Verdes, is hereby amended
to reduce the rate of the tax from 3% to 2.75% and to include the other amendments
that are set forth in Exhibit "A," which is attached hereto and incorporated herein by this
reference.
Section 2. In no event may the City Council alter the provisions of sections
3.30.050, 3.30.060, 3.30.070, 3.30.080 and 3.30.100 to increase the two and three
quarter percent (2.75%) tax rate on telecommunication, electric, co-generated electric,
water and gas charges, or alter any other provisions of Chapter 3.30 to impose the Utility
User Tax upon additional utilities and services without the approval of a majority of voters
of the City.
Section 3. If any section, subsection, subdivision, paragraph, sentence, clause
or phrase of this Chapter 3.30 or of this ordinance or any part thereof is for any reason
held to be invalid, unlawful or unconstitutional, such decision, and the decision not to
enforce such, shall not affect the validity of the remaining portion of Chapter 3.30 or this
ordinance or any part thereof. The City Council and the voters hereby declare that they
would have passed each section, subsection, subdivision, paragraph, sentence, clause
or phrase thereof, irrespective of the fact that any one or more sections, subsections,
subdivisions, paragraphs, sentences, clauses or phrases be declared invalid, unlawful
or unconstitutional.
Section 4. Effective Date. This Ordinance shall be effective only if approved
by a majority of voters voting thereon and shall go into effect ten (10) days after the vote
is declared by the City Council.
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2-14
Section 5. Ratification of Prior Tax. The voters of the City of Rancho Palos
Verdes hereby ratify and approve the past collection of the Utility Users Tax as imposed
by Chapter 3.30 of the Rancho Palos Verdes Municipal Code as it existed prior to the
effective date of this Ordinance.
ADOPTED AT A SPECIAL ELECTION OF THE CITY OF RANCHO PALOS
VERDES held on the 4th day of November, 2014.
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2-15
EXHIBIT "A"
"Chapter 3.30 -UTILITY USER TAX
Sections:
3.30.010 -Short title.
3.30.020 -Purpose.
3.30.030 -Definitions.
3.30.040 -Constitutional, statutory and other exemptions.
3.30.050 -Telecommunications user tax.
3.30.060 -Electricity user tax.
3.30.070 -Cogenerated electricity user tax.
3.30.080 -Gas user tax.
3.30.090 -Collection of tax from service users receiving direct purchase of gas or
electricity.
3.30.100 -Water user tax.
3.30.110 -Bundling taxable items with nontaxable items.
3.30.120 -Substantial nexus-Minimum contacts.
3.30.130 -Duty to collect-Procedures.
3.30.140 -Collection penalties-Service suppliers.
3.30.150 -Actions to collect.
3.30.160 -Deficiency determination and assessment-Tax application errors.
3.30.170 -Administrative remedy-Non-paying service users.
3.30.180 -Additional powers and duties of the tax administrator.
3.30.190 -Records.
3.30.200 -Refunds.
3.30.210 -Appeals.
3.30.220 -No injunction-Writ of mandate.
3.30.230 -Notice of changes to chapter.
3.30.240 -Effect of state and federal reference/authorization.
3.30.250 -No increase in tax percentage or change in methodology without voter
approval-Amendment or repeal.
3.30.260 -Independent audit of tax collection, exemption, remittance and
expenditure.
3.30.270 -Remedies cumulative.
3.30.280 -Validity of prior ordinance.
3.30.290 -Legislative review.
3.30.300-Violations--Misdemeanor
3.30.010 -Short title.
The ordinance codified in this chapter shall be known as the "Utility User Tax Ordinance
of the City of Rancho Palos Verdes."
3.30.020 -Purpose.
1727464v3 2-16
The taxes imposed by this chapter are established solely to raise revenue for the general
governmental purposes of the city. The revenues generated thereby shall be deposited
in the general fund of the city and may be expended for any proper municipal purpose at
the discretion of the city council.
3.30.020 -Definitions.
The following words and phrases, whenever used in this chapter, shall be construed as
defined in this section, except where the context clearly requires otherwise:
A. "Ancillary telecommunication services" means services that are associated with or
incidental to the provision, use or enjoyment of telecommunications services including,
but not limited to, the following services:
1. "Conference bridging service" means an ancillary service that links two (2) or more
participants of an audio or video conference call and may include the provision of
a telephone number. Conference bridging service does not include the
telecommunications services used to reach the conference bridge.
2. "Detailed telecommunications billing service" means an ancillary service of
separately stating information pertaining to individual calls on a customer's billing
statement.
3. "Directory assistance" means an ancillary service of providing telephone number
information, and/or address information.
4. "Vertical service" means an ancillary service that is offered in connection with one
or more telecommunications services, which offers advanced calling features that
allow customers to identify callers and to manage multiple calls and call
connections, 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 does not include any
vertical services that the customer may be required to have in order to utilize the
voice mail service
B. "Billing address" means the mailing address of the service user where the service
supplier submits invoices or bills for payment by the customer.
C. "City" means the City of Rancho Palos Verdes.
D. "Cogeneration electrical energy" means the use for the generation of electricity of
exhaust steam, waste steam, heat, or resultant energy from an industrial, commercial
or manufacturing plant or process, or the use of exhaust steam, waste steam, or heat
from a thermal power plant for an industrial, commercial, or manufacturing plant or
process.
E. "Gas" means natural or manufactured gas or any alternative hydrocarbon fuel which
may be substituted therefor.
1727464v3 2-17
F. "Mobile telecommunications service" means commercial mobile radio service, as
defined in Section 20.3 of Title 47 of the Code of Federal Regulations and as set forth
in the Mobile Telecommunications Sourcing Act (4 U.S.C. § 124) and the regulations
there under.
G. "Month" means a calendar month.
H. "Non-utility service supplier" means:
1. A service supplier, other than a supplier of electric distribution services to all or a
significant portion of the city, which generates electricity for sale to others, and
shall include but is not limited to any publicly-owned electric utility, investor-owned
utility, cogenerator, distributed generation provider, exempt wholesale generator,
municipal utility district, federal power marketing agency, electric rural cooperative,
or other supplier or seller of electricity;
2. An electric service provider (ESP), electricity broker, marketer, aggregator
(including a community choice aggregator), pool operator, or other electricity
supplier other than a supplier of electric distribution services to all or a significant
portion of the city, which sells or supplies electricity or supplemental services to
electricity users within the city; or
3. A gas service supplier, aggregator, marketer or broker, other than a supplier of gas
distribution services to all or a significant portion of the city, which sells or supplies
gas or supplemental services to gas users within the city.
I. "Paging service" means a telecommunications service that provides transmission of
coded radio signals for the purpose of activating specific pagers; such transmissions
may include messages and/or sounds.
J. "Person" means, 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.
K. "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 address or the primary business street address of the customer.
L. "Post-paid telecommunication service" means the telecommunications service
obtained by making a payment on a communication-by-communication basis either
through the use of a credit card or payment mechanism such as a bank card, travel
card, credit card, or debit card, or by charge made to a service number which is not
associated with the origination or termination of the telecommunications service.
M. "Prepaid telecommunication service" (including, but not limited to, prepaid mobile
telecommunication service) means the right to access telecommunications services,
1727464v3 2-18
which must be paid for in advance and which enables the origination of
communications using an access number or authorization code, whether manually or
electronically dialed.
N. "Private telecommunication service" means a telecommunications service that entitles
the customer to exclusive or priority use of a communications channel or group of
channels between 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 communications channel is a physical or virtual
path of communications over which signals are transmitted between or among
customer channel termination points (i. e., the location where the customer either
inputs or receives the communications).
0. "Service address" means the residential street address or the business street address
of the service user. For a telecommunications service user, "service address" means
either:
1. The location of the service user's telecommunications equipment from which the
telecommunication originates or terminates, regardless of where the
telecommunications is billed or paid; or,
2. If the location in subsection (0)(1) of this section is unknown (e.g., mobile
telecommunications service or VoIP 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 point of sale
of the services where the point of sale is within the city, or if unknown, the known
address of the service user (e.g., billing address or location associated with the
service number), which locations shall be presumed to be the place of primary use.
P. "Service supplier" means any entity or person, including the city, which provides or
sells utility service to a user of such service within the city. The term shall include any
person required to collect, or self-collect under Section 3.30.090 hereof, and remit a
tax as imposed by this chapter, including its billing agent in the case of electric or gas
suppliers.
Q. "Service user" means a person required to pay a tax imposed under the provisions of
this chapter.
R. "State" means the State of California.
S. "Tax administrator" means the director of finance of the city or other person designated
by the city manager to administer the provisions of this chapter.
T. "Telecommunications service" means the transmission, conveyance, or routing of
voice, data, audio, video, or any other information or signals to a point, or between or
among points, whatever the technology used, and includes broadband service (e.g.,
1727464v3 2-19
digital subscriber line (DSL), fiber optic, coaxial cable, and wireless broadband,
including Wi-Fi, WiMAX, and Wireless MESH) to the extent Federal and/or State law
permits taxation of such broadband services, now or in the future. The term
"telecommunications services" includes such 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 such 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 with
telecommunications services. "Telecommunications services" include, but are not
limited to, the following services, regardless of the manner or basis on which such
services are calculated or billed: ancillary telecommunication services; intrastate,
interstate, and international telecommunication services; mobile telecommunications
service; prepaid telecommunication service; post-paid telecommunication service;
private telecommunication service; paging service; 800 service (or any other toll-free
numbers designated by the Federal Communications Commission); 900 service (or
any other similar numbers designated by the Federal Communications Commission
for services whereby subscribers who call in to pre-recorded or live service).
U. "VoIP (Voice Over Internet Protocol)" means the digital process of making and
receiving real-time voice transmissions over any Internet Protocol network.
V. "800 service" means a telecommunications service that allows a caller to dial a toll-
free number without incurring a charge for the call. The service is typically marketed
under the name "800," "855," "866," "877," and "888" toll-free calling, and any
subsequent numbers designated by the Federal Communications Commission.
W. "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
for: collection services provided by the seller of the telecommunications services to
the subscriber, or service or product sold by the subscriber to the subscriber's
customer. The service is typically marketed under the name "900" service, and any
subsequent numbers designated by the Federal Communications Commission.
3.30.040 -Constitutional, statutory and other exemptions.
A. Nothing in this chapter shall be construed as imposing a tax upon any person when
the imposition of such tax upon that person would be in violation of the Constitution of
the United States or the Constitution of the State of California, or any federal or
California statute.
B. The city council may, by resolution, establish one or more classes of persons or one
or more classes of utility services otherwise subject to payment of the tax imposed by
this chapter and to provide that such classes of persons shall be exempt, in whole or
in part from the payment of the tax imposed by this chapter.
1727464v3 2-20
C. Charges made for energy used in the propulsion of a low emission motor vehicle, as
defined in the Vehicle Code of the State of California, shall be exempt, provided that
the owner of such vehicle installs and maintains a separate metering system for the
energy provided to the vehicle.
D. Notwithstanding the foregoing, the exemptions provided by subsections (B) and (C)
of this section shall not be applicable unless and until applied for by the service user
and granted in accordance with the provisions of subsections (E) and (F) of this
section.
E. Any service user who becomes eligible for an exemption from the taxes imposed by
this chapter because of the provisions of subsections (B) and (C) of this section, may
file an application with the tax administrator for an exemption. Such application shall
be made upon forms supplied by the tax administrator and shall recite facts under
penalty of perjury which qualify the applicant for an exemption. The tax administrator
shall review all such applications and shall certify as exempt those applicants
determined to qualify therefor and shall notify all service suppliers 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
service user from its 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 chapter
from such exempt service user until further notice is given by the tax administrator.
The service supplier shall eliminate such exempt service user from its tax billing
procedure not later than sixty (60) calendar days after receipt of such notice from the
tax administrator.
F. All exemptions certified by the tax administrator shall be effective for a period of two
(2) years and may thereafter be renewed by the tax administrator upon application to
the tax administrator showing that the prerequisite facts supporting the initial
qualification for exemption still continue; provided, however, that the exemption shall
automatically terminate with any change in the service address or residence of the
exempt individual. If the new address or residence is still within the city, such
individual may apply for a new exemption with each change of address or residence.
Any individual exempt from the tax shall notify the tax administrator within ten (10)
days of any change in fact or circumstance which might disqualify said individual from
receiving such 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 such
exemption either does not exist or ceases to exist.
G. Every service supplier is authorized to bill the tax imposed by this chapter to any new
service user or to any account on which the service user's name has been changed
(excluding changes attributable to spelling errors or other clerical errors) until such
time as the service supplier receives notification from the tax administrator that an
exemption has been granted pursuant to this section.
1727464v3 2-21
H. Notwithstanding any of the prov1s1ons of this section, any service supplier who
determines by any means that a new or nonexempt service user is receiving service
through a meter or connection exempt by virtue of an exemption issued to a previous
user or exempt user of the same meter or connection shall immediately notify the tax
administrator of such fact and the tax administrator shall conduct an investigation to
ascertain 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.
I. "Telephone corporations," "electrical corporations," "gas corporations" and "water
corporations," as defined in Sections 234, 218, 222 and 241, respectively, of the
California Public Utilities Code, or any successor statute, shall be exempt from this
tax.
3.30.050 -Telecommunications user tax.
A. There is hereby imposed a tax upon every person in the city using telecommunications
services. The tax imposed by this section shall be at the rate of two and three quarter
percent (2.75%) of the charges made for such services and shall be collected from
the service user by the telecommunications services supplier or its billing agent, or as
otherwise provided by law. There is a rebuttable presumption that telecommunications
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 taxation under
this section. There is also a rebuttable presumption that prepaid telecommunications
services sold within the city are used, in whole or in part, within the city and are
therefore subject to taxation under this section. If the billing address of the service
user is different from the service address, the service address of the service user shall
be used for purposes of imposing the tax. As used in this section, the term "charges"
shall include the value of any other services, credits, property of every kind or nature,
or other consideration provided by the service user in exchange for the
telecommunications services.
B. Mobile telecommunications service shall be sourced in accordance with the sourcing
rules set forth in the Mobile Telecommunications Sourcing Act (4 U.S.C. § 116 et seq.).
The tax administrator may issue and disseminate to telecommunications service
suppliers, which are subject to the tax collection requirements of this chapter, sourcing
rules for the taxation of other telecommunications services, including but not limited
to post-paid telecommunications services, prepaid telecommunications services,
VoIP, and private communication services, provided that such rules are based upon
custom and common practice that further administrative efficiency and minimize multi-
jurisdictional taxation .
C. The tax administrator may issue and disseminate to telecommunications service
suppliers, which are subject to the tax collection requirements of this chapter, an
administrative ruling identifying those telecommunications services, or charges
therefor, that are subject to the tax of paragraph A above. This administrative ruling
1727464v3 2-22
shall not impose a new tax, revise an existing tax methodology as stated in this
Section, or increase an existing tax.
D. As used in this section, the term "telecommunications services" shall include, but is
not limited to, charges for: connection, reconnection, termination, movement, or
change of telecommunications services; late payment fees; detailed billing; central
office and custom calling features (including but not limited to call waiting, call
forwarding, caller identification and three-way calling); voice mail and other messaging
services; directory assistance; access and line charges; universal service charges;
regulatory or administrative fees, charges or surcharges, including charges or
surcharges for programs imposed by state or federal law (whether such charges or
surcharges are imposed on the service supplier or the customer); local number
portability charges; and text and instant messaging. "Telecommunications services"
shall not include digital downloads that are not ancillary telecommunication services,
such as music, ringtones, games, and similar digital products.
E. To prevent actual multi jurisdictional taxation of telecommunications services subject
to 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 city on such
telecommunications services, shall be allowed a credit against the tax imposed to the
extent of the amount of such tax legally imposed in such other state or city; provided,
however, the amount of credit shall not exceed the tax owed to the city under this
section.
F. The tax on telecommunications services imposed by this section shall be collected
from the service user by the service supplier. The amount of tax collected in one month
shall 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.
3.30.060 -Electricity user tax.
A. There is hereby imposed a tax upon every person using electricity in the city. The tax
imposed by this section shall be at the rate of two and three quarter percent (2.75%)
of the charges made for such electricity, and for any supplemental services or other
associated activities directly related to and/or necessary for the provision of electricity
to the service user, which are provided by a service supplier or non-utility service
supplier to a service user. The tax shall be collected from the service user by the
service supplier or non-utility service supplier, or its billing agent.
B. As used in this section, the term "charges" shall apply to all services, components and
items that are: i) necessary for or common to the receipt, use or enjoyment of electric
service; or, ii) currently are or historically have been included in a single or bundled
rate for electric service by a local distribution company to a class of retail customers.
The term "charges" shall include, but is not limited to, the following charges:
1. Energy charges;
2. Distribution or transmission charges;
1727464v3 2-23
3. Metering charges;
4. Standby, reserves, firming, ramping, voltage support, regulation, emergency, or
other similar charges for supplemental services to self-generation service users;
5. Customer charges, late charges, service establishment or reestablishment
charges, demand charges, fuel or other cost adjustments, power exchange
charges, independent system operator (ISO) charges, stranded investment or
competitive transition charges (CTC), public purpose program charges, nuclear
decommissioning charges, trust transfer amounts (bond financing charges),
franchise fees, franchise surcharges, annual and monthly charges, and other
charges, fees or surcharges which are necessary for or common to the receipt,
use or enjoyment of electric service; and
6. Charges, fees, or surcharges for electricity services or programs which are
mandated by the California Public Utilities Commission or the Federal Energy
Regulatory Commission, or by any state or federal law, whether or not such
charges, fees, or surcharges appear on a bundled or line item basis on the
customer billing, or whether they are imposed on the service provider or the
customer.
C. 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 electricity or services related to the provision of
such electricity.
D. The tax administrator, from time to time, may survey the electric service suppliers to
identify the various unbundled billing components of electric retail service that they
commonly provide to residential and commercial/industrial customers in the city, and
the charges therefor, including those items that are mandated by state or federal
regulatory agencies as a condition of providing such electric service. The tax
administrator, thereafter, may issue and disseminate to such electric service suppliers
an administrative ruling identifying those components and items which are: i)
necessary for or common to the receipt, use or enjoyment of electric service; or, ii)
currently are or historically have been included in a single or bundled rate for electric
service by a local distribution company to a class of retail customers. Charges for
such components and items shall be subject to the tax of subsection (A) of this section.
E. As used in this section, the term "using electricity" shall not include the mere receiving
of such electricity by an electrical corporation or governmental agency at a point within
the city for resale.
F. The tax on electricity provided by self-production or by a non-utility service supplier
not under the jurisdiction of this chapter shall be collected and remitted in the manner
set forth in Section 3.30.090 of this chapter. All other taxes on charges for electricity
imposed by this section shall be collected from the service user by the electric service
supplier or its billing agent. The amount of tax collected in one (1) month shall be
1727464v3 2-24
remitted to the tax administrator, and must be received by the tax administrator on or
before the twentieth (20 1h) day of the following month; or, at the option of the person
required to collect and/or remit the tax, such person shall remit an estimated amount
of tax measured by the tax billed in the previous month or upon the payment pattern
of the service user, which must be received by the tax administrator on or before the
twentieth (20 1h) day of the following month, provided that such person shall submit an
adjusted payment or request for credit, as appropriate, within sixty (60) calendar days
following each calendar quarter. The credit, if approved by the tax administrator, may
be applied against any subsequent remittance that becomes due.
3.30.070 -Cogenerated electricity user tax.
A There is imposed a tax upon every person using cogenerated electrical energy in the
city at the rate specified in Section 3.30.060. The tax applicable to cogenerated
electrical energy used on site shall be determined by applying the tax rate to the
equivalent charges the cogenerator would have incurred if the energy used had been
provided to the service user by an electrical corporation franchised by the city.
B. The cogenerator shall install and maintain an appropriate metering system that will
enable compliance with this section.
C. If the cogenerator sells the energy for consumption in the city, the tax will be imposed
by applying the tax rate to the equivalent charges for such service the service user
would have incurred if the energy used had been provided by the electrical corporation
franchised by the city and shall be collected from the service user by the service
supplier.
3.30.080 -Gas user tax.
A There is hereby imposed a tax upon every person using gas in the city, which is
transported and delivered through a pipeline or by mobile transport. The tax imposed
by this section shall be at the rate of two and three quarter percent (2.75%) of the
charges made for such gas, including all services related to the storage, transportation
and delivery of such gas. The tax shall be collected from the service user by the
service supplier or non-utility service supplier, or its billing agent, and shall apply to all
uses of gas, including but not limited to, heating, electricity generation by a non-public
utility, and the use of gas as a component of a manufactured product.
B. As used in this section, the term "charges" shall apply to all services, components and
items for gas service that are: i) necessary for or common to the receipt, use or
enjoyment of gas service; or, ii) currently are or historically have been included in a
single or bundled rate for gas service by a local distribution company to a class of
retail customers. The term "charges" shall include, but is not limited to, the following
charges:
1. The commodity charges for purchased gas, or the cost of gas owned by the service
user (including the actual costs attributed to drilling, production, lifting, storage,
gathering, trunkline, pipeline, and other operating costs associated with the
1727464v3 2-25
production and delivery of such gas), which is delivered through a gas pipeline
distribution system;
2. Gas transportation charges (including interstate charges to the extent not included
in commodity charges);
3. Storage charges; provided, however, that the service supplier shall not be required
to apply the tax to any charges for gas storage services when the service supplier
cannot, as a practical matter, determine the jurisdiction where such stored gas is
ultimately used; but it shall be the obligation of the service user to self-collect the
amount of tax not applied to any charge for gas storage by the service supplier
and to remit the tax to the appropriate jurisdiction;
4. Capacity or demand charges, late charges, service establishment or
reestablishment charges, transition charges, customer charges, minimum
charges, annual and monthly charges, and any other charges which are necessary
for or common to the receipt, use or enjoyment of gas service; and,
5. Charges, fees, or surcharges for gas services or programs which are mandated by
the California Public Utilities Commission or the Federal Energy Regulatory
Commission, whether or not such charges, fees, or surcharges appear on a
bundled or line item basis on the customer billing, or whether they are imposed on
the service provider or the customer.
C. 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 gas or services related to the delivery of such
gas.
D. The tax administrator, from time to time, may survey the gas service suppliers to
identify the various unbundled billing components of gas retail service that they
commonly provide to residential and commercial/industrial customers in the city, and
the charges therefor, including those items that are mandated by state or federal
regulatory agencies as a condition of providing such gas service. The tax
administrator, thereafter, may issue and disseminate to such gas service suppliers an
administrative ruling identifying those components and items which are: i) necessary
for or common to the receipt, use or enjoyment of gas service; or, ii) currently are or
historically have been included in a single or bundled rate for gas service by a local
distribution company to a class of retail customers. Charges for such components
and items shall be subject to the tax of subsection (A) of this section.
E. There shall be excluded from the calculation of the tax imposed in this section, charges
made for gas that is to be resold and delivered through a pipeline distribution system.
F. The tax on gas provided by self-production or by a non-utility service supplier not
under the jurisdiction of this chapter shall be collected and remitted in the manner set
forth in Section 3.30.090. All other taxes on charges for gas imposed by this section
shall be collected from the service user by the gas service supplier or its billing agent.
1727464v3 2-26
The amount of tax collected in one (1) month shall 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; or, at the option of the person required to collect and/or remit the
tax, such person shall remit an estimated amount of tax measured by the tax billed in
the previous month or upon the payment pattern of the service user, which must be
received by the tax administrator on or before the twentieth (20th) day of the following
month, provided that such person shall submit an adjusted payment or request for
credit, as appropriate, within sixty (60) calendar days following each calendar quarter.
The credit, if approved by the tax administrator, may be applied against any
subsequent remittance that becomes due.
3.30.090 -Collection of tax from service users receiving direct purchase of gas or
electricity.
A. Any service user subject to the tax imposed by Section 3.30.060 or by Section
3.30.080 of this chapter, which produces gas or electricity for self-use; which receives
gas or electricity, including any related supplemental services, directly from a non-
utility service supplier not under the jurisdiction of this chapter; or which, for any other
reason, is not having the full tax collected and remitted by its service supplier, a non-
utility service supplier, or its billing agent on the use of gas or electricity in the city,
including any related supplemental services, shall report said fact to the tax
administrator and shall remit the tax due directly to the tax administrator within thirty
(30) calendar days of such use, based on the charges for, or value of, such gas or
electricity, or supplemental services, as provided in subsection (B) of this section. In
lieu of paying said actual tax, the service user may, at its option, remit to the tax
administrator within thirty (30) calendar days of such use an estimated amount of tax
measured by the tax billed in the previous month, or upon the payment pattern of
similar customers of the service supplier using similar amounts of gas or electricity,
provided that the service user shall submit an adjusted payment or request for credit,
as appropriate, within sixty (60) calendar days following each calendar quarter. The
credit, if approved by the tax administrator in writing, may be applied against any
subsequent tax bill that becomes due.
B. The tax administrator may require said service user to identify its non-utility service
supplier, and otherwise provide, subject to audit: invoices; books of account; or other
satisfactory evidence documenting the quantity of gas or electricity used, including
any related supplemental services, and the cost or price thereof. If the service user
is unable to provide such satisfactory evidence, or if the administrative cost of
calculating the tax in the opinion of the tax administrator is excessive, the tax
administrator may determine the tax by applying the tax rate to the equivalent charges
the service user would have incurred if the gas or electricity used, including any related
supplemental services, had been provided by the service supplier that is the primary
supplier of gas or electricity within the city. Rate schedules for this purpose shall be
available from the city.
3.30.100 -Water user tax.
1727464v3 2-27
A. There is imposed a tax upon every person using water in the city which is delivered
through mains or pipes. The tax imposed by this section shall be at the rate of two
and three quarter percent (2.75%) of the charges made for such water and shall be
paid by the person paying for such water.
B. "Charges," as used in this section, shall include charges made for (1) metered water;
and (2) minimum charges for service, including customer charges, ready to serve
charges, standby charges and annual and monthly charges and any other charges,
fees and surcharges that are necessary to or common for the receipt, use or
enjoyment of water service, whether or not such charges, fees or surcharges appeal
on a bundled or line item basis on the customer billing.
C. There shall be excluded from the bases on which the tax imposed by this section is
computed charges for water that is to be resold and that is delivered through mains or
pipes.
3.30.11 O -Bundling taxable items with nontaxable items.
If any nontaxable charges are combined with and not separately stated from taxable
service charges on the customer bill or invoice of a service supplier, the combined charge
is subject to tax unless the service supplier identifies, by reasonable and verifiable
standards, the portions of the combined charge that are nontaxable and taxable through
the service supplier's books and records kept in the regular course of business, and in
accordance with generally accepted accounting principles, and not created and
maintained for tax purposes. If the service supplier offers a combination of taxable and
non-taxable services, and the charges are separately stated, then for taxation purposes,
the values assigned the taxable and non-taxable services shall be based on its books
and records kept in the regular course 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 and apportionment of
taxable and non-taxable charges.
3.30.120 -Substantial nexus-Minimum contacts.
For purposes of imposing a tax or establishing a duty to collect and remit a tax under this
chapter, "substantial nexus," "substantial economic presence" and "minimum contacts"
shall be construed broadly in favor of the imposition, collection and/or remittance of the
utility 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
telecommunications service (including VoIP) used by a person with a service address in
the city, which service is capable of terminating a call to another person on the general
telephone network, shall be subject to a rebuttable presumption that "substantial
nexus/minimum contacts" exists for purposes of imposing a tax, or establishing a duty to
collect and remit a tax, under this chapter. A service supplier shall be deemed to have
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, affiliate or subsidiary, a place of business of any nature; solicits
1727464v3 2-28
business in the city by employees, independent contractors, resellers, agents, affiliates
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 with 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 are significantly associated with the service
supplier's ability to establish and maintain a market in the city for the provision of utility
services that are subject to a tax under this chapter (e.g., an affiliated person engaging in
activities in the city that inure to the benefit of the service supplier in its development or
maintenance of a market for its services in the city).
3.30.130 -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:
1. The tax shall be collected by service suppliers insofar as practicable at the same
time as, and along with, the collection of the charges made in accordance with the
regular billing practice of the service supplier. Where the amount paid by a service
user to a service supplier is less than the full amount of the charge and tax which
was accrued for the billing period, a proportionate share of both the charge and
the tax shall be deemed to have been paid. In those cases where a service user
has notified the service supplier of refusal to pay the tax imposed on said charges,
Section 3.30.170 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 more than one billing,
one or more being for different periods than another, the duty to collect shall arise
separately for each billing period.
8. Filing Return and Payment. Each person required by this chapter to remit a tax shall
file a return to the tax administrator, on forms approved by the tax administrator, on or
before the due date. The full amount of the tax collected shall be included with the
return and filed with the tax administrator. The tax administrator is authorized to
require such additional information as he or she deems necessary to determine if the
tax is being levied, collected, and remitted in accordance with this chapter. Returns
are due immediately upon cessation of business for any reason. Pursuant to Revenue
and Taxation Code Section 7284.6, the tax administrator, and its agents, shall
maintain such filing returns as confidential information that is exempt from the
disclosure provisions of the Public Records Act.
3.30.140 -Collection penalties-Service suppliers.
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A. Taxes collected from a service user, or owed by a service user subject to Section
3.30.090 hereof, are delinquent if not received by the tax administrator on or before
the due date. Should the due date occur on a weekend or legal holiday, 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
chapter shall be considered timely 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 utility 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, or, in
the case of a service user that fails to properly self-collect and remit the tax under
Section 3.30.090 hereof on or before the due date, the tax administrator shall attach
a penalty for such delinquencies or deficiencies at the rate of fifteen percent (15%) of
the total tax that is delinquent or deficient in the remittance, and shall pay interest at
the rate of one and one-half percent (1.5%) per month, or any fraction thereof, on the
amount of the tax, exclusive of penalties, from the date on which the remittance first
became delinquent, until paid.
C. The tax administrator shall have the power to impose additional penalties upon
persons required to collect and remit taxes pursuant to the provisions of this chapter
for fraud or gross negligence in reporting or remitting at the rate of fifteen percent
(15%) of the amount of the tax collected and/or required to be remitted, or as
recomputed by the tax administrator.
D. For collection purposes only, every penalty imposed and such interest that is accrued
under the provisions of this chapter shall become a part of the tax herein required to
be paid.
E. Notwithstanding the foregoing, the tax administrator may, in his or her discretion,
modify the due dates of this chapter to be consistent with any uniform standards or
procedures that are mutually agreed upon by other public agencies imposing a utility
users' tax, or otherwise legally established, to create a central payment location or
mechanism.
3.30.150 -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 user. Any person owing money to the city under the provisions of this chapter
shall be liable to an action brought in the name of the city for the recovery of such amount,
including penalties and interest as provided for in this chapter, along with any collection
costs incurred by the city as a result of the person's noncompliance with this chapter,
1727464v3 2-30
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 tax
obligation under 11 U.S.C. § 507(a)(8)(C). Service suppliers who seek to collect charges
for service in bankruptcy proceedings shall also include in any such claim the amount of
taxes due the city for those services, unless the tax administrator determines that such
duty is in conflict with any federal or state law, rule, or regulation or that such action would
be administratively impractical.
3.30.160 -Deficiency determination and assessment-Tax application errors.
A. The tax administrator shall make a deficiency determination if he or she determines
that any person required to pay or collect taxes pursuant to the provisions of this
chapter has failed to pay, collect, and/or remit the proper amount of tax by improperly
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 if, in the
opinion of the tax administrator, the cost of collection or enforcement likely outweighs
the tax benefit.
B. The tax administrator shall mail a notice of such deficiency determination to the person
required to pay or remit the tax, which notice shall refer briefly to the amount of the
taxes owed, plus interest at the rate of one and one-half percent (1.5%) per month, or
any fraction thereof, 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 may request in writing to the tax administrator for a
hearing on the matter.
C. If the person fails to request a hearing within the prescribed time period, the amount
of the deficiency determination shall become a final assessment, and shall
immediately be due and owing to the city. If the person requests a hearing, the tax
administrator shall cause the matter to be set for hearing, which shall be scheduled
within thirty (30) calendar days after receipt of the written request for hearing. Notice
of the time and place of the hearing shall be mailed by the tax administrator to such
person at least ten (10) calendar days prior to the hearing, and, if the tax administrator
desires said person to produce specific 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 from time to time for the purpose of
allowing the presentation of additional evidence. Within a reasonable time following
the conclusion of the hearing, the tax administrator shall issue a final assessment (or
non-assessment), thereafter, by confirming, modifying or rejecting the original
deficiency determination, and shall mail a copy of such final assessment to person
owing the tax. The decision of the tax administrator may be appealed pursuant to
Section 3.30.210 of this chapter. Filing an application with the tax administrator and
appeal to the city council, or the city council's designee, pursuant to Section 3.30.210
of this chapter is a prerequisite to a suit thereon.
1727464v3 2-31
E. Payment of the final assessment shall become 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 fifteen percent (15%)
on the total amount of the assessment, along with interest at the rate of one and one-
half percent (1.5%) 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 chapter 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.
3.30.170 -Administrative remedy-Non-paying service users.
A Whenever the tax administrator determines that a service user has deliberately
withheld the amount of the tax owed by the service user 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 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 of taxes owed under
the provisions of this chapter. Nothing herein shall require that the tax administrator
institute proceedings under this section if, in the opinion of the tax administrator, the
cost of collection or enforcement likely outweighs the tax benefit.
B. The tax administrator shall notify the non-paying service user that the tax administrator
has assumed the responsibility to collect the taxes due for the stated periods and
demand payment of such taxes, including penalties and interest. The notice shall be
served on the service user by personal delivery or by deposit of the notice in the United
States mail, postage prepaid, addressed to the service user at the address to which
billing was made by the person required to collect the tax; or, should the service user
have a change of address, to his or her last known address.
C. If the service user fails to remit the tax to the tax administrator within fifteen (15)
calendar days from the date of receipt of notice from the tax administrator, the service
user shall pay in addition to the tax owed, a delinquency penalty in the sum of twenty-
five percent (25%) of the total tax that is owed, but not less than five dollars ($5.00).
3.30.180 -Additional powers and duties of the tax administrator.
A The tax administrator shall have the power and duty, and is hereby directed, to enforce
each and all of the provisions of this chapter.
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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 imposed. The
administrative ruling shall not impose a new tax, revise an existing tax methodology
as stated in this chapter, or increase an existing tax, except as allowed by California
Government Code Section 53750(h)(2). A copy of such administrative rules and
regulations shall be on file in the tax administrator's office. To the extent that the tax
administrator determines 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 exercise of the tax administrator's discretion to
settle 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 utility
users' tax in full as a result of promulgating administrative rulings or entering into
agreements.
C. Upon a proper showing of good cause, the tax administrator may make administrative
agreements, with appropriate conditions, to vary from the strict requirements of this
chapter and thereby: (1) conform to the billing procedures of a particular service
supplier so long as said agreements result in the collection of the tax in conformance
with the general purpose and scope of this chapter; or, (2) to avoid a hardship where
the administrative costs of collection and remittance greatly outweigh the tax benefit.
A copy of each such agreement shall be on file in the tax administrator's office, and
are voidable by the tax administrator or the city at any time.
D. The tax administrator may conduct an audit, to ensure proper compliance with the
requirements of this chapter, 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 three (3) years next preceding the date
of receipt of the written notice by said person from the tax administrator. Upon
completion of the audit, the tax administrator may make a deficiency determination
pursuant to Section 3.30.160 of this chapter for all taxes (and applicable penalties and
interest) owed and not paid, as evidenced by information provided by such person to
the tax administrator. If said person is unable or unwilling to provide sufficient records
to enable the tax administrator to verify compliance with this chapter, the tax
administrator is authorized to make a reasonable estimate of the deficiency. Said
reasonable estimate shall be entitled to a rebuttable presumption of correctness.
E. Upon receipt of a written request of a taxpayer, and for good cause, the tax
administrator may extend the time for filing any statement required pursuant to this
chapter for a period of not to exceed forty-five (45) calendar days, provided that the
time for filing the required statement has not already passed when the request is
received.
1727464v3 2-33
F. The tax administrator shall determine the eligibility of any person who asserts a right
to exemption from, or a refund of, the tax imposed by this chapter.
G. Notwithstanding any provision in this chapter to the contrary, the tax administrator may
waive any penalty or interest imposed upon a person required to collect and/or remit
for failure to collect the tax imposed by this 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, or whether the person offers to voluntarily
disclose its tax liability. The tax administrator may also participate with other utility
users' tax public agencies in conducting coordinated compliance reviews with the goal
of achieving administrative efficiency and uniform tax application determinations,
where possible. To encourage voluntary 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 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 may take into consideration the uniqueness of the
product or service, industry practice or other precedence, and whether the disclosure
was voluntarily made by the service provider or its agent.
3.30.190 -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 keep and preserve, for a period of at least three (3) years,
all records as may be necessary to determine the amount of such tax as he/she may
have been liable for the collection of and remittance to the tax administrator, which
records the tax administrator shall have the right to inspect at a reasonable time.
B. The city may issue an administrative subpoena to compel a person to deliver, to the
tax administrator, copies of all records deemed necessary by the tax administrator to
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 course of business. As an alternative to delivering
the subpoenaed records to the tax administrator on or before the due date provided
in the administrative subpoena, such person may provide access to such records
outside the city on or before the due date, provided that such person shall reimburse
the city for all reasonable travel expenses incurred by the city to inspect those records,
including travel, lodging, meals, and other similar expenses, but excluding the normal
salary or hourly wages of those persons designated by the city to conduct the
inspection.
C. The tax administrator is authorized to execute a non-disclosure agreement approved
by the city attorney to protect the confidentiality of customer information pursuant to
California Revenue and Tax Code Sections 7284.6 and 7284.7. The tax administrator
may request from a person providing transportation or distribution services of gas or
1727464v3 2-34
electricity to service users within the city, a list of the names, billing and service
addresses, quantities of gas or electricity delivered, and other pertinent information,
of its transportation customers within the city pursuant to Section 6354(e) of the
California Public Utilities Code.
D. If a service supplier uses a billing agent or billing aggregator to bill, collect, and/or
remit the tax, the service supplier shall: 1) 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,
2) 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 chapter unreasonably denies the
tax administrator access to such records, or fails to produce the information requested
in an administrative subpoena within the time specified, then the tax administrator may
impose a penalty of Five Hundred Dollars ($500.00) on such person for each day
following: 1) the initial date that the person refuses to provide such access; or, 2) the
due date for production of records as set forth in the administrative subpoena. This
penalty shall be in addition to any other penalty imposed under this chapter.
3.30.200 -Refunds.
Whenever the amount of any tax has been overpaid or paid more than once or has been
erroneously or illegally collected or received by the tax administrator under this chapter
from a person or service supplier, it may be refunded as provided in this section as
follows:
A. Written Claim for Refund. The tax administrator may refund any tax that has been
overpaid or paid more than once or has been erroneously or illegally collected or
received by the tax administrator under this chapter from a person or service 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. To the extent
allowed by law, nothing herein shall permit the filing of a claim on behalf of a class or
group of taxpayers unless each member of the class has submitted a written claim
under penalty of perjury as provided by this section.
B. Compliance with Claims Act. The filing of a written claim pursuant to Government
Code Section 935 is a prerequisite to any suit thereon. Any action brought against the
city pursuant to this chapter shall be subject to the provisions of Government Code
Sections 945.6 and 946. The tax administrator, or the city council where the claim is
in excess of Five Thousand Dollars ($5,000.00), shall act upon the refund claim within
the time period set forth in Government Code Section 912.4. If the tax
1727464v3 2-35
administrator/city council fails or refuses to act on a refund claim within the time
prescribed by Government Section 912.4, the claim shall be deemed to have been
rejected by the city council on the last day of the period within which the city council
was required to act upon the claim as provided in Government Code Section 912.4.
The tax administrator shall give notice of the action in a form, which substantially
complies with that set forth in Government Code Section 913.
C. Refunds to Service Suppliers. Notwithstanding the notice provisions of subsection (A)
of this section, the tax administrator may, at his or her discretion, give written
permission to a service supplier, who has collected and remitted any amount of tax in
excess of the amount of tax imposed by this chapter, to claim credit for such
overpayment against the amount of tax which is due the city upon a subsequent
monthly return(s) to the tax administrator, provided that: 1) such credit is claimed in a
return dated no later than one year from the date of overpayment or erroneous
collection of said tax; 2) the tax administrator is satisfied that the underlying basis and
amount of such credit has been reasonably established; and, 3) in the case of an
overpayment by a service user to the service supplier that has been remitted to the
city, the tax administrator has received proof, to his or her satisfaction, that the
overpayment has been refunded by the service supplier to the service user in an
amount equal to the requested credit.
3.30.210 -Appeals.
A. The provisions of this section apply to any decision (other than a decision relating to
a refund pursuant to Section 3.30.200 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 Section 3.30.200
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
Cal. Gov. Code, § 935(b).) To the extent allowed by law, nothing herein shall permit
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 Section 3.30.200 of this chapter), deficiency determination, assessment,
or administrative ruling of the tax administrator; he or she may appeal to the city
council, by filing a notice of appeal with the city clerk within fourteen (14) calendar
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 the city council, no more than thirty
(30) calendar days from the receipt of the appeal. The City Council may designate an
independent hearing officer to hear the appeal. The appellant shall be served with
notice of the time and place of the hearing, as well as any relevant materials, at least
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
1727464v3 2-36
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 city
council (or the hearing officer designated by the city council) shall issue a written
notice and order upholding, modifying or reversing the determination from which the
appeal is taken. The notice shall be given within fourteen (14) calendar days after the
conclusion of the hearing and shall state the reasons for the decision. The notice shall
specify that the decision is final and that any petition for judicial review shall be filed
within ninety (90) calendar days from the date of the decision in accordance with Code
of Civil Procedure Section 1094.6.
E. All notices under this section may be sent by regular mail, postage prepaid, and shall
be deemed received on the third calendar day following the date of mailing, as
established by a proof of mailing.
3.30.220 -No injunction-Writ of mandate.
No injunction or writ of mandate or other legal or equitable process shall issue in any suit,
action, or proceeding in any court against this city or against any officer of the city to
prevent or enjoin the collection under this chapter of any tax or any amount of tax required
to be collected and/or remitted.
3.30.230 -Notice of changes to chapter.
The tax administrator shall follow the notice requirements of California Public Utilities
Code Section 799 regarding any changes to this chapter.
3.30.240 -Effect of state and federal reference/authorization.
A. 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 thereto by a State or Federal
agency or court of law with the duty to interpret such 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 all or a part of a utility service, or charge therefor, from taxation). Only to the
extent 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.
B. 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
1727464v3 2-37
changes, and the tax shall be imposed and collected to the full extent of the
authorization up to the full amount of the tax imposed under this chapter.
3.30.250 -No increase in tax percentage or change in methodology without voter
approval-Amendment or repeal.
This chapter may be repealed or amended by the city council without a vote of the People.
However, as required by Chapter XlllC of the California Constitution, voter approval is
required for any amendment provision that would increase the rate of any tax levied
pursuant to the ordinance codified in this chapter or extend the tax to a service that is not
included in the ordinance codified in this chapter. The People of the City of Rancho Palos
Verdes affirm that the following actions shall not constitute an increase of the rate of a
tax:
A. The restoration of the rate of the tax to a rate that is no higher than that set by the
ordinance codified in this chapter, if the city council previously acted to reduce the rate
of the tax;
B. An action that interprets or clarifies the methodology of the tax, or any definition
applicable to the tax, so long as such interpretation or clarification (even if contrary to
some prior interpretation or clarification) is not inconsistent with the language of this
Ordinance;
C. The establishment a class of persons 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
D. The collection of the tax imposed by the ordinance codified in this chapter, even if the
city had, for some period of time, failed to collect the tax.
3.30.260 -Independent audit of tax collection, exemption, remittance and
expenditure.
The city shall annually 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 applicable municipal law. The annual verification shall be
performed by a qualified independent third party and the review shall employ 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.
3.30.270 -Remedies cumulative.
All remedies and penalties prescribed by this chapter or which are available under any
other provision of law or equity, including but not limited to the California False Claims
Act (Cal. Gov. Code, § 12650 et seq.) and the California Unfair Practices Act (Cal. Bus.
and Prof. Code,§ 17070 et seq.), are cumulative. The use of one or more remedies by
1727464v3 2-38
the city shall not bar the use of any other remedy for the purpose of enforcing the
provisions of this chapter.
3.30.280 -Validity of prior ordinance.
In the event that a final court order should determine that the election enacting this chapter
(as amended herein) is invalid for whatever reason, or that any tax imposed under this
chapter (as amended herein) is invalid in whole or in part, then the taxes imposed under
this chapter, as it existed prior to its amendment as provided herein, 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) for which the tax imposed by this
chapter is not valid. However, in the event of an invalidation, any tax (other than a tax
that is ordered refunded by the court or is otherwise refunded by the city) paid by a person
with respect to a service and calculated pursuant to this chapter (as amended herein)
shall be deemed to satisfy the tax imposed under chapter, as it existed prior to its
amendment as provided herein, on that service, so long as the tax is paid with respect to
a service provided no later than six (6) months subsequent to the date on which the final
court order is published.
3.30.290 -Legislative review.
Beginning in 1998, and every year thereafter, the city manager shall submit for
consideration by the city council, in connection with the preparation of the city's annual
budget for the following fiscal year, an analysis of the revenues derived from the taxes
imposed by in this chapter. Based on the needs of the city, the city council shall determine
whether any modification to the rate of the tax is necessary or if the tax imposed by this
chapter is unnecessary. However, in no event shall the rate of the tax exceed two and
three quarter percent (2.75%) without a prior vote of the people in favor of such increase.
The review required by this section shall be completed by the city council prior to the
adoption at each year's annual budget, which shall occur by June 30th. If the city council
fails to conduct the periodic review of the tax as required by this section, the city shall not
cause the tax to be collected until the review has been conducted by the city council.
3.30.300-Violations-Misdemeanor.
Any person who violates any of the foregoing provisions of this Chapter is guilty of a
misdemeanor and shall be punished therefor in conformance with Section 1.08.01 O of
this Code.
1727464v3
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EXHIBIT A
"Chapter 3.30 -UTILITY USER TAX
Sections:
* Prior ordinanGe history: OrdinaAces 204 ane 225 .
3.30.01 O~ Short title.
3.30.020 -Purpose.
3.30.030 -Definitions.
3.30.030 ~xemptions.
3.30.040 Telephone user tax . Constitutional. statutorv and other exemptions.
3.30.050 -Telecommunications user tax.
3.30.060 -Electricity user tax.
3.30.090 3.30.070 -Cogenerated electricity user tax.
3.30 .070 3.30.080 -Gas user tax.
3.30.080 Water user tax.
3.30.090 Purpe &&.-Collection of tax from service users receiving direct purchase
of gas or electricity.
3.30.100 Duty to collect ane remit.-Water user tax.
3.30.110 -Bundling taxable items with nontaxable items.
3.30.120 -Substantial nexus-Minimum contacts.
3.30.130 -Duty to collect-Procedures.
3.30.110 Interest ane3.30. 140 -Collection penalties-Service suppliers.
3.30 .1203.30.150 -Actions to collect.
3.30 .160 -Deficiency determination and assessment-Tax application errors.
3.30.170 -Administrative remedy-Non-paying service users.
3.30 .1 30 3.30.180 -Additional powers and duties of the__tax administrator.
3.30.140 3.30.190 -Records.
3.30 .1503.30.200 -Refunds.
3.30 .160 Appeal.3.30.210 -Appeals.
3.30.220 -No injunction-Writ of mandate.
3.30.230 -Notice of changes to chapter.
3 .30 .240 -Effect of state and federal reference/authorization.
3.30.250 -No increase in tax percentage or change in methodology without voter
aporoval-Amendment or repeal.
3 .30.260 -Independent audit of tax collection . exemption. remittance and
expenditure.
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3.30.270 -Remedies cumulative.
3.30.280 -Validity of prior ordinance.
3.30.290 -Legislative review.
3 .30 .170 3.30.300-Violations -=Misdemea no r ...
3.30.180 Effecti,.·e date.
3.30.190 Legislative review.
3.30.010,,; Short title.
The ordinance codified in this chapter shall be known as the "utility user tax ordinance."
"Uti lity User Tax Ordinance of the City of Ran cho Palos Verdes."
(Ord. 292 § 1 (part), 1993)
3.30.020 -Purpose.
The taxes imposed by th is chapter are established solely to raise revenue for the
general governmental purposes of the city. The revenues generated thereby shall be
deposited in the general fund of the city and may be expended for any proper municipal
purpose at the discretion of the city council.
3.30.020 ;.Definitions.
The following words and phrases, whenever used in this chapte r~ shall be construed as
defined in this section, except where the context clearly requires otherwise -;-~
A. "Ancillary telecommunication services" means services that are associated with or
incidental to the provis ion . use or enjoyment of telecommunications services
including . but not limited to . the following services :
1. "Conference brid g in g service" means an ancilla ry service that links two (2) or
more participants of an audio or video conference call and may include the
provision of a telephone number. Conference bridging service does not include
the telecommunications services used to reach the conference bridge .
2 . "Detailed telecommunicat ions billing service " means an ancillary serv ice of
separate ly stating information pertaining to i ndividual calls on a customer's billing
statement.
3 . "Directorv assistance" means an ancillarv service of providing telephone number
information. and/or address information .
4 . "Vertical service " means an anci llary serv ice that is offered in connection with
one or more telecommun ications services . which offers advanced calling features
that allow customers to ide ntify callers and to manage multiple calls and call
connections . inc luding conference bridging services .
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5. "Voice mail service " means an ancillarv service that enables the customer to
store . send or receive recorded messages . Voice mail service does not include
any vertical services that the customer may be required to have in order to utilize
the voice mail service
B. "Billing address" means the mailing address of the service user where the service
suppl ier submits invoices or bills for payment by the customer.
C . ~:city~: means the Gity~ of Rancho Palos Verdes.
D. ~:cogeneration . electrical energy~: means the use for the generation of electricity of
exhaust steam, waste steam, heat, or resultant energy from an industrial,
commercial or manufacturing plant or process, or the use of exhaust steam, waste
steam, or heat from a thermal power plant for an industrial, commercial, or
manufacturing plant or process.
E. ~:Gas ~: means natural or manufactured gas or any alternate gaseous alternative
hydrocarbon fuel which may be substituted therefor.
F. "Month" means a calendar month.
G . "Person " means all domestic and foreign co rpo rations , fiR"A&;
assoc iations , syndicates , joint stock companies , partneFSh ips of every kind , joint
ventures , clubs , Massachusetts business or common la•N trusts , societies and
individuals . For the purposes of this chapter, "person" shall not Include any public entity
which purchases and uses utilft.y-sefvices in the performance of governmental funct ions .
H. "Mobile telecommunications service " means commercial mobile radio service , as
defined in Section 20 .3 of Title 4 7 of the Code of Federal Regulations and as set
forth in the Mobile Te lecommunications Sourcing Act (4 U.S .C. § 124) and the
regulations there under.
I. "Month " means a calendar month.
J . "Non-utility service supplier" means :
1. A service supplier, other than a supplier of electric distribution services to all or a
significant portion of the citv. which generates electricity for sale to others. and
shall include but is not limited to an y publicly-owned ele ct ric utility , investor-
owned utility. cogenerator . distributed generation provider, exempt wholesale
generator. municipal utility district. federal power marketing agency. e lectric rural
coope rative . or other supplier or seller of electricity :
2. An electric service provider (ESP), electricity broker. marketer. aqgreqator
(including a community choice aggregator). pool operator. or other electricity
supplier other than a supplier of electric distribution services to all or a significant
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portion of the city. which sells or supplies electricity or supplemental services to
electricity users within the city: or
3. A gas service supplier. aggregator. marketer or broker. other than a supplier of
gas distribution services to all or a significant portion of the city . which sells or
supplies gas or supplemental services to gas users within the city.
K. "Paging service " means a telecommunications service that provides transmission of
coded radio signals for the puroose of activating specific pagers: such transmissions
may inc l ude messages and/or sounds .
L. "Person " means . 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 d istrict or municipal corooration (other than the
city) cooperative. receiver. trustee. guardian . or other representative appointed by
order of any court .
M. "Place of primarv use " means the street address representative of where the
customer's use of the telecommunications service primarily occurs . which must be
the residential street address or the primary business street address of the
customer .
N . "Post-paid telecommunication service" means the telecommunications service
obtained by making a payment on a communication-by-communication basis either
through the use of a credit card or payment mechanism such as a bank card, travel
card. credit card . or debit card . or by charge made to a service number which is not
associated with the origination or termination of the telecommunications service.
0 . "Prepaid telecommunication service" (including, but not limited to, prepaid mobile
telecommunication service) means the right to access telecommunications services.
wh ich must be paid for in advance and which enables the origination of
commun ications using an access number or authorization code. whether manually
or electronically dialed.
P. "Private telecommunication service " means a telecommunications service that
entitles the customer to exclusive or priority use of a communications channel or
group of channels between 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 communications channel is
a physical or virtual path of communications over which signals are transmitted
between or among customer channel termination points (i. e .. the location where the
customer either inputs or receives the communications).
Q . "Service address" means the residential street address or the business street
address of the service user. For a telecommunications service user. "service
address" means either:
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1. The location of the service user's te lecommunications equipment from which the
telecommunication originates or terminates . rega rdless of where the
telecommunications is billed or paid: or.
2. If the location in subsection (0)(1) of this section is unknown (e.g .. mobile
telecommunications service or VoIP service). the service address means the
location of the service user's place of primarv use.
3 . For prepaid telecommunication service. "service address" mea ns the point of
sale of the services where the point of sale is within the city. or if unknown. the
known address of the service user (e.g .. billing address or location associated
with the service number). which locations shall be presumed to be the place of
primary use.
R. !!Sefvice supplier" means "Serv ice supplier" means any entity or person. includ ing the
city. which provides or sells utility service to a user of such service within the city.
The term shall include any person required to collect. or se lf-collect under Section
3.30.090 hereof. and remit a tax as imposed by this chapter, including its billing
agent in the case of electric or gas suppliers .
S. !!~Service use r!!: means a person required to pay a tax imposed under the provisions
of this chapter.
T. ''Tax administrator" means tho director of finance of the city or other
f)eFSGA desi@nated by the city manager to admin ister the previsions of t his chaptefo.
U. "Telephone commun ication services" means any local or km§-distance
telepf1GAe-seAAGe--far-which there is a charge , regard less of the means or techno lo§Y
used to provide such service , and sf:lall include any telephonic type and quality of
commun icat ion for the purpose of transmitting messages or information (includ ing , but
~ted to , vo ice , both aRalog and digital , including the use of the Internet Protocol
("IP ''} or other similar means for digitization o r packetization of te lephonic qua lity
communications for transmission via digital networks, in part or in 'Nho le ; telegraph ;
teletypewriter; data ; f.acs im ila ; video ; or t8*t} by e lectronic, rad io or simi lar means
through "interconnected service" v1ith the ''public s'l.'itched netv.•ork" (as these terms are
common ly used in the Federal Communications Act and the regulations-ef
V. "State" means the State of California.
W. "Tax administrator" means the director of finance of the city or other person
designated by the city manager to adm inister the provisions of this chapter.
X. "Telecommunications service" means the transmission. conveyance . or routing of
voice. data. audio. video. or any other information or signals to a point. or between
or among points. whatever the technolog y used. and includes broadband service
(e .g .. digital subscriber line (OSU, fiber optic, coaxial cable, and wireless broadband.
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including Wi-Fi. WiMAX . and Wireless MESH) to the extent Federal and/or State law
permits taxation of such broadband services . now or in the future . The term
"telecommunications services" includes such 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 such services are referred to as voice over internet protocol
(VoIP) services or are class ified by the Federal Communications Commissiont,
v.ihether such transmission occurs by wire , cable, cable modem or digital subscriber line
("DSL"), internet, fiber optic , light wavei-taser, micro 1.~Ja1.1 e, radio wave (including , but not
~imlted to , mobile te lecommunications service , cellular serv ice , commercial mobile serviGe
and cammercial radio service , persona l communications service ("PCS "), specialized mobile
radio ("SMR") and other similar services , regardless of radio spectrum used), switching
faci lities , satellite or any other sim ilar faciliti es , aAd irrespective of 1t1hether charges foF-&l:IGR
service are based on time , distance , or any other basis . "Te lephone communicat ions
seFVices" shall not include "p ~ivate mobile radio service" (as defined in Part 20.3 of Title-4+
of the Code of Federal Regu lations ) or "private mobile service " (as defined in 47 U .S.C .A .
SeGtlan 332(El}f3-~er ser:vice that is not interconnected to the publis--switGheG
network.
Y. "Telephone corporation ," "electrical corporation ," "gas corporation" and
~ater coFpoFation " shall have the same meanings as defined in Sections 234 , 21 ~2
and 241 , respectively , of the California Public Utilities Code or any successor statute .
(Ord. 444U § 1, 2006; Ord. 443 § 1, 2006; Ord. 4G3 § 4, 2004; Ord. 292 § 1 (part),
4-993}
3.30.030 Exemptions . as enhanced or value added, and includes video and/or data
services that are functionally integrated wit h telecommunications services.
''Telecommunications services" include. but are not limited to . the following services.
regard less of the manner or basis on which such services are calculated or billed:
ancillarv telecommunication services : intrastate, interstate, and international
telecommunication services: mobile telecommunications service: prepaid
telecommunication service: post-paid telecommunication service: private
telecommunication service: paging service: 800 service (or any other toll -free numbers
designated by the Federal Communications Commission); 900 service (or any other
similar numbers designated by the Federal Communications Commission for services
whereby subscribers who call in to pre-recorded or live service).
Z . "VoIP (Voice Over Internet Protocol)" means the digital process of making and
receiving real-time voice transmissions over any Internet Protocol network .
AA. "800 service" means a telecommunications service that allows a caller to dial a
toll-free number without incurring a charae for the call. The service is typically
marketed under the name "800," "855." "866," "877," and "888" toll-free calling...__aru;t
any subsequent numbers designated by the Federal Communications Commission.
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BB. "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 for : collection services provided by the seller of the telecommunications
services to the subscriber. or serv ice or product sold by the subscriber to the
subscriber's customer. The service is typically marketed under the name "900"
service. and any subsequent numbers designated by the Federal Communications
Commission.
3.30.040 -Constitutional. statutorv and other exemptions.
A. A--Nothing in this chapter shall be construed as imposing a tax upon any person
when the imposition of such tax upon that person would be in violation of the
Constitution of the United States or the Constitution of the State of California, or any
federal or California statute.
B. ~The city council may, by resolution, establish one or more classes of persons or
one or more classes of utility services otherwise subject to payment of the tax
imposed by this chapter and to provide that such classes of persons shall be
exempt, in whole or in part from the payment of the tax imposed by this chapter.
C. G:-Charges made for energy used in the propulsion of a low emission motor vehicle,
as defined in the Vehicle Code of the State of California, shall be exempt, provided
that the owner of such vehicle installs and maintains a separate metering system for
the energy provided to the vehicle.
D. ~Notwithstanding the foregoing, the exemptions provided by subsections !Bl and
!Cl of this section shall not be applicable unless and until applied for by the service
user and granted in accordance with the provisions of subsections !El and !Fl of this
section.
E. €-,-Any service user who becomes eligible for an exemption from the taxes imposed
by this chapter because of the provisions of subsections !Bl and !Cl of this section,
may file an application with the tax administrator for an exemption. Such application
shall be made upon forms supplied by the tax administrator and shall recite facts
under penalty of perjury which qualify the applicant for an exemption. The tax
administrator shall review all such applications and shall certify as exempt those
applicants determined to qualify therefor and shall notify all service suppliers 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 service user from its 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 chapter from such exempt service user until further notice is given by the tax
administrator. The service supplier shall eliminate such exempt service user from its
tax billing procedure not later than sixty (60) calendar days after receipt of such
notice from the tax administrator.
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F. ~All exemptions certified by the tax administrator shall be effective for a period of
two~ years and may thereafter be renewed by the tax administrator upon
application to the tax administrator showing that the prerequisite facts supporting the
initial qualification for exemption still continue; provided, however, that the exemption
shall automatically terminate with any change in the service address or residence of
the exempt individual. If the new address or residence is still within the city, such
individual may apply for a new exemption with each change of address or residence.
Any individual exempt from the tax shall notify the tax administrator within ten ilQl
days of any change in fact or circumstance which might disqualify said individual
from receiving such 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 such exemption either does not exist or ceases to exist.
G. G:---Every service supplier is authorized to bill the tax imposed by this chapter to any
new service user or to any account on which the service use r~:s name has been
changed (excluding changes attributable to spelling errors or other clerical errors)
until such time as the service supplier receives notification from the tax administrator
that an exemption has been granted pursuant to this section.
H. Fh---Notwithstanding any of the provisions of this section, any service supplier who
determines by any means that a new or nonexempt service user is receiving service
through a meter or connection exempt by virtue of an exemption issued to a
previous user or exempt user of the same meter or connection shall immediately
notify the tax administrator of such fact and the tax administrator shall conduct an
investigation to ascertain 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.
L I. Corporations defined under Section 3.30.020(J) shall be exempt from this
ta*.-
(Ord. 292 § 1 (part), 1993)
3.30.040 Telephone user tax.
l1
)lh There is imposed a tax upon the amounts paid for intrastate, interstate , inclutfi.Ag
the district of Columbia , o r international telephone communication serviee&;
including cellular telephone services and other telephone services that gain
access to the public switched network by means of 1Jarious technologies, by
ei.•ery person using sl::lch services in the city. T he tax imposed by this section
shall be at the rate of three percent of the charges made for such services and
shall be paid by the person paying for such telephone services. Such tax shall
appJ~f9es-bllled to a telephone account having a situs in the city,
irrespective of \\'hether a particular telephone service originates or termffiates
within the city . The situs shall be the service address , if known , otheiv.'ise the
situs shall be the billing address.
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B. Now1ith~andlng the provisions of subsection A of this section , the tax imposed
under this section shall not be imposed upon any person f-Or using tho follow~
intrastate , interstate , or international telephone communications services :
1. Service pa id for by inserting coins in coin operated telephones a1.,cailable
with respect to local telephone service, or with respect to tell telephone
service , except that where such coin operated telephone service is
furnished for a guaranteed amount, the amounts paid under such
g.uarantee pltls any fixed monthly or other periodic charge shall be subject
to the tax;
2 . Except with respect to loaai telephone service , services used in the
~ection of.-ftews for the public press , or a ne'NS ticker serv ice furnish ing
a general ne·Ns service sim ilar to that of the public press. or raciio
broadcasting , or in the dissemination of news through the public press , or
a news ticker service furn ishing a general ne 'NS service s imilar to that of
tAe PJ:Jblic press , or by means of rad io broadcasting , if the charge for such
service is billed in 1.vriting to such person;
3 . Services furnished to an International organization , or to the American
National Red Cross;
4. Any toll telephooe-.servlce which originates with in a combat zone and is
from a member of the Armed Forces of the United States perform ing
~ch combat zone ; provided a certificate , sett ing forth such
facts as the secretary may by regulations prescr ibe , is furnished to the
person receiving such payment;
5 . Any toll telephone service which entitles the subscriber, upon payment of
a periodic charge (determ ined as a flat amount or upon the basis of total
elapsed transm iss ion time), to the privilege of an unlim ited n1:Jmber of
telephonic commun ications to or from all or a substantial portion of the
peraons hav ing telephone OF radio te lephone stations in a specified area
which is outsiEle the local telephone system area in which the station
f) · !seated , that is for use by a common carrie r,
telephone or telegraph company , OF radio broadcasting station or net¥.10Fk
in the conduct of its business as such;
6 . The instaUatien of any instrument , w ire, pele , switchboard , apparatus , or
equipment as is properly attributable to such installation ;
7. Amounts paid by a nonprofit hosp ital for serv ices f1:Jrnished to such
organization;
8. Services or facilities furnished to the government of any state, or any
po litical subdivis ion thereof, or the district of Columb ia;
9. SeF¥ices or facilities . paid for by a nonprofit educational organization and
furn ished to such organization . For p1:1rposes of this subsestion , the term
"Nonprofit Educational Organization" means an educational organization
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described in Section 170(b)(1)(A)(ii) ofU:ie Internal Revenue Code wA+GA
is exempt from income tax under Section 501 (a) of the same code . The
term also includes a school operated as an activity of an organization
described in Section 501 (c)(3) of the Interna l Revenl,je Code which is
exempt from income tax unser Sestiafl--W1 (a) of the same code , if such
~I normally maintains a regular faculty and curriculum and normally
has a regu larly enrolled body of pblpils or students in attendance at the
place where its educational activities are regularly carried on .
fGrd . 444U § 2, 2006: Ord. 44J § 2, 2006: Ord. 292 § 1 (µart), 1993)
J . "Telephone corporations ," "electrical corporations." "gas corooratjons " and "water
coroorations ." as defined in Sections 234 . 218, 222 and 241. respectively . of the
California Public Utilities Code . or any successor statute . shall be exempt from this
tax.
3.30.050 -Telecommunications user tax.
A. There is hereby imposed a tax upon everv oerson in the city using
telecommunications services. The tax imposed by this section shall be at the rate of
two and three quarter percent (2 .75%) of the charges made for such services and
shall be collected from the service user by the telecommunications services supplier
or its billing agent. or as otherwise provided by law . There is a rebuttable
presumption that telecommunications services . which are billed to a billing or service
address in the city . are used . in whole or in part with in the city 's boundaries. and
such services are subject to taxation un der this section. There is also a rebuttable
presumption that prepaid telecommunications services sold within the city are used,
in whole or in part. within the city and are therefore sub ject to taxation under this
section . If the billing address of the service user is different from the serv ice address,
the service address of the service user shall be used for pumoses 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 prov ided by
the service user in exchange for the telecommunications services.
B. Mobile telecommunications service shall be sourced in accordance with the sourcing
rules set forth in the Mobile Telecomm unications Sourcing Act (4 U.S .C. § 116 et
seq.). The tax adm inistrator may issue and disseminate to telecommunications
service suppliers . which are subject to the tax collection requirements of this
chapter. sourcing rules for the taxation of other telecommunications services .
including but not limited to post-paid telecommunications services . prepaid
telecommunications services . Vo IP , and private communicat ion services . provided
that such rules are based upon custom and common practice that further
administrative efficiency and minimize multi -ju risdictional taxation .
C. The tax administrator mav issue and disseminate to telecommunications service
suppliers, which are subject to the tax co ll ection requirements of this chapter. an
administrative rul ing identifying those telecommun ications services . or charges
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therefor. that are subject to the tax of paragraph A above . This administrative rul i ng
shall not impose a new tax. revise an existing tax methodology as stated in th is
Section . or increase an existing tax.
D . As used in this section. the term "telecommunications services " shall include . but is
not limited to. charaes for : connection . reconnection . termination. movement. o r
change of telecommunications services : late payment fees : detailed billing : central
office and custom calling features (including but not limited to call waiting . call
forwarding . caller identification and three-way calling): voice ma il and other
messaging serv ices : directory assistance : access and line charaes: universal service
charges : regulatory or administrative fees . charaes or surcharges. including charges
or surcharges for programs imposed by state or federal law (whether such c harges
or surcharges are imposed on the service suppl ier or the customer): local number
portability charaes : and text and instant messaging. "Telecommunications services"
shall not include digital downloads that are not ancillary telecommunication services .
such as music . ringtones. games . and similar digital products.
E. To prevent actual multi jurisdictional taxation of telecommunications services subject
to tax under this section. any service user. upon proof to the tax administrator that
the service user has previo u sly paid the same tax in another state or city on such
telecommunications services . shal l be allowed a credit against the tax imposed to
the extent of the amount of such tax lega ll y imposed in such other state or city :
provided . however. the amount of credit shall not exceed the tax owed to the city
under this section.
F. The tax on telecommunications services imposed by this section shal l be collected
from the service user by the service supplier. The amount of tax collected in one
month shall be remitted to the tax adm inistrator. and must be received by the tax
administrator on or before the twentieth (20th) day of the following month.
~3 .30.060 -Electricity user tax.
A. A-The re is hereby imposed a tax upon every person using electrical energy electricity
in the city. The tax imposed by this section shall be at the rate of two and three
quarter percent (2.75%) of the charges made for such energy and shall be paid by the
person paying for such ener~he tax appl icable to electrical energy provided by a
nonuti lity suppl ier shall be determined by applying the tax rate to the eqtlivalent charges the
service user would have incurred if the energy used triad been provided by an electrical
corporation franchised by the city . Nonutility suppliers shall install and maintain an
· · · · m 'Nhich will enable compliance w+th this sectiGFr:-
electrjcity . and for any supplemental services or other associated activities directly
related to and/or necessary for the provision of electricity to the service user. which
are provided by a service supplier or non-utility service supplier to a service user.
The tax shall be collected from the serv ice user by the service supplier or non-utility
service supplier. or its billing agent.
B. As used in this section . the term "charges" shall apply to a ll services . components
and items that are : i) necessarv for or common t o the receipt. use or enjoyment of
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electric service: or . ii) currently are or historically have been included in a single or
bundled rate for electric service by a local distribution company to a class of retail
customers . The term "charges" shall include . but is not limited to. the following
charges:
1. Energy charges:
2 . Distribution or transmission charaes :
3. Metering charges:
4 . Standby. reserves. firming . ramping . voltage support . regulation. emergency. or
other similar charges for supplemental services to self-generation service users :
5. Customer charaes . late charges . service establishment or reestablishment
charges . demand charges . fuel or other cost adjustments. power exchange
charges. independent system operator (ISO) charges. stranded investment or
compet itive transition charges (CTC). public purpose program charges. nuclear
decommissioning charges. trust transfer amounts (bond financing charges).
franchise fees. franchise surcharges. annual and monthly charges . and other
charges. fees or surcharges which are necessarv for or common to the receipt.
use or enjoyment of electric service: an d
6. B. "Charges ," as used in this section, shall include charges made for (1) metered
eAergy ; and (2) minimum charges for sef\•ice , including customer charges , serviee
charges , standby charges , charges for temporary &ePJices , demand charges and annual
and monthly charges and any other charges , f.ees and surcharges that are necessary to
e~the receipt , use or enjoyment of electric service ; which are authorized
9fCharges. fees. or surcharges for electricity services or programs which are
mandated by the California Public Utilities Commission or the Federal Energy
Regulatory Commission . or by any state or federal law , whether or not such
charges, fees % or surcharges appear on a bundled or line item basis on the
customer billing . or whether they are imposed on the service provider or the
customer.
C. As used in this section. the term "charges " shall include the value of any other
services, credits, property of everv kind or nature. or other consideration provided by
the service user in exchange for the electricity or services related to the provision of
such electricity.
0 . T he tax administrator. from time to time . may survey the electric service suppliers to
identify the various unbundled billing components of electric retail service that they
commonly provide to residential and commercial/industrial customers in the city. and
the charges therefor. including those items that are mandated by state or federal
regulatory agencies as a condition of providing such electr ic service. The tax
administrator. thereafter, may issue and disseminate to such electric service
suppliers an administrative ruling identifying those components and items which are:
i) necessarv for or common to the receipt, use or enjoyment of electric service: or, ii)
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currently are or histor ically have been included in a single or bundled rate for electric
service by a local distr ibution company to a class of retail customers . Charges for
such components and items shall be subject to the tax of subsection (A) of this
section.
E. C. As used in #Hs-section, the term "using electrical energy" is not intended to , and does
not, mean : (1) the storage of such energy by a person in a battery owned or possesse~
him for use in an automobile or other machinery or device apart from the premises upon
wh-isl=r-the energy was received , provided, however, that the term sha ll include the receiv ing
of such energy for the purpose of us i ng it in the charging of batteries; (2) the mere receivffig
of such energy by an electrical public utility or governmental agency at a peffit-within the city
for resa le; or (3) the use of such energy in tAe-production or d istrit>ution of water by a public
~ or a governmental agency . As used in this section . the term "using electricity"
shall not include the mere receiving of such electricity by an electrical corooration or
governmenta l agency at a point within the city for resale .
(Orel. 403 § 5, 2004; Ord. 292 § 1 (part), 1993)
F. The tax on electricity provided by self-production or by a non-utility service supplier
not under the jurisdiction of this chapter shall be collected and remitted in the
manner set forth in Section 3.30.090 of this chapter. All other taxes on charges for
electricity imposed by this section shall be co llected from the service user by the
electric service supplier or its billing agent. The amount of tax collected in one (1)
month shall be remitted to the tax ad ministrator. and must be rece ived by the tax
administrator on or before the twentieth (20th) day of the following month: or . at the
opt ion of the person required to collect and/or remit the tax . such person shall remit
an estimated amount of tax measured by the tax b ill ed in the previous month or
upon the payment pattern of the service user. which must be received by the tax
administrator on or before the twentieth (201h) day of the following month. provided
that such person shal l submit an adjusted payment or request for credit. as
appropriate . within sixty (60) calendar days following each calendar quarter. The
credit. if approved by the tax administrator . may be appl ied against any subsequent
remittance that becomes due.
3 .30.060 3.30.070 -Cogenerated electricity user tax.
A. A-There is imposed a tax upon every person using cogenerated electrical energy in
the city at the rate specified in Section 3.30.050 . Section 3.30 .060. The tax applicable
to cogenerated electrical energy used on site shall be determined by applying the
tax rate to the equivalent charges the cogenerator would have incurred if the energy
used had been provided to the service user by an electrical corporation franchised
by the city.
B. fh-The cogenerator shall install and maintain an appropriate metering system
wf»GA t hat will enable compliance with this section.
C. G,-lf the cogenerator sells the energy for consumption in the city, the tax will be
imposed by applying the tax rate to the equivalent charges for such service the
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service user would have incurred if the energy used had been provided by the
electrical corporation franchised by the city and shall be collected from the service
user by the service supplier.
(Ord. 292 § 1 (part), 1993)
3.30.070 3.30.080 -Gas user tax.
A. A:-There is herebv imposed a tax .upon every person using gas energy in the city,
which is transported and delivered through ma ins or pipes a pipeline or by mobile
transport. The tax imposed by this section shall be at the rate of two and three
quarter percent (2.75%) of the charges made for such gas and shall be paid by the
person pay ing for ~h gas . . including all services related to the storage .
transportation and deliverv of such gas . The tax shall be collected from the service
user by the service supplier or non-utility service supplier . or its billing agent. and
shall apply to all uses of gas. including but not limited to. heating . electricity
generation by a non-public util ity. and the use of gas as a component of a
manufactured product.
B. As used in this section . the term "charges " sha ll apply to all services. components
and items for gas service that are : il necessarv for or common to the receipt. use or
enjoyment of gas service : or. ii) currently are or historically have been included in a
single or bundled rate for gas service by a local d istribution company to a class of
retail customers . The term "charaes " shall include. but is not limited to . th e fo llowing
charges:
1. The commodi ty charges for purchased gas . or the cost of gas owned by the
service user (including the actual costs att ributed to drilling . product ion . lifting.
st orage. ga t hering . trunkline. p ipel ine . and other operating costs associated with
the production and deliverv of such gas). which is delivered through a gas
pipeline distribution system:
2 . Gas transportat ion charaes (including interstate charaes to the extent not
included in commodity charges):
3. Storage charges : provided . however . that the service supplier shall not be
required to apply the tax to any charges for gas storage services when the
service supplier cannot. as a pract ical matter. determine the jurisdiction where
such stored gas is ultimately used : but it shall be the obligat ion of the service
user to self-collect the amount of tax not applied to any charge for gas stora ge by
the service supplier and to remit the tax to the appropriate jurisdiction:
4 . Capacity or demand charges . late charges . service establishment or
reestablishment charges . transition charges . customer charges . minimum
charges . annual and monthly charges . and any other charges which are
necessarv for or common to the receipt. use or enjoyment of gas service : and .
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5. B . "Charges," as used in this-section , shall include charges made for: (1) metered
gas or mobile traF1sport : (2) gas transpoFtation charges ; and (3) charges for service,
including oustGmer cha rges , service charges, FAinimum charges,--QemaRd charges, and
annual and m~G-aAy other charge authorized or Charges. fees, or
surcharaes for gas services or programs which are mandated by the California
Public Utilities Commission or the Federal Energy Regulatory Commission,
whether or not such charges, fees "' or surcharges appear on a bundled or line
item basis on the customer billing . or whether they are imposed on the service
provider or the customer .
6. r.-C.--
C. As used in this section, the term !!using gas energy!!-+5--flet-iAteAded to , and does not,
mean : ( 1) charges made for gas which is to be reso ld and \Vhich is del ive red through a gas
f}ipeline distribution system or mobile transport ; (2) charges made for gas used by a
<*)§eAerator or as the primary fuel in a fuel cell to generate electricity ; or (3) the use of gas
energy in the production or distribut ion of water by a public utility or governmental agenc~
(Ord. 403 § 9, 2004; Ot=d. 292 § 1 (paFI), 1993) "charaes " shall include the value of
any other services. credits . property of everv kind or nature, or other
consideration provided by the service user in exchange for the gas or services
related to the delivery of such gas.
D. The tax administrator. from time to time, may survey the gas service suppliers to
identify the various unbundled billing components of gas retail service that they
commonly provide to residential and commercial/industrial customers in the city, and
the charges therefor, including those items that are mandated by state or federal
regulatory agencies as a condition of providing such gas service. The tax
administrator, thereafter. may issue and disseminate to such gas service suppliers
an administrat ive ruling identifying those components and items which are: i)
necessarv for or common to the receipt use or enjoyment of gas service : or. ii)
currently are or histor ically have been included in a single or bund led rate for gas
service by a local distribution company to a class of retail customers. Charges for
such components and items shall be subject to the tax of subsection (A) of this
section .
E. There shall be excluded from the cal culation of the tax imposed in this section ,
charges made for gas that is to be resold and delivered through a pipeline
distribution system ..
F. The tax on gas provided by self-production or by a non-utility service supplier not
under the jurisdiction of this chapter sha ll be collected and remitted in the manner
set forth in Section 3.30.090. All othe r taxes on charges for gas imposed by this
section shall be collected from the se rvice user by the gas service supplier or its
bill ing agent. The amount of tax collected in one (1) month shall be remitted to the
tax administrator. and must be received by the tax administrator, on or before the
twentieth (2Qth) day of the following month: or, at the option of the person required to
collect and/or remit the tax, such person shall remit an estimated amount of tax
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measured by the tax billed in the previous month or upon the payment pattern of the
service user. which must be received by the tax administrator on or before the
twentieth (2Qth ) day of the following month. provided that such person shall submit
an adjusted payment or request for credit. as appropriate . within sixty (60) calendar
days following each calendar quarter. The credit. if approved by the tax
adm inistrator. may be appl ied against any subsequent remittance that becomes due.
3.30 .090 -Collection of tax from service users receiving direct purchase of gas or
electricity.
A. Any service user subject to the tax imposed by Section 3.30 .060 or by Section
3 .30.080 of this chapter . which produces gas or electric ity for self-use: which
receives gas or electricity. includ ing any related su pplemental services . directly from
a non-utility service supplier not under the jurisdiction of this chapter : or which . for
any other reason . is not having the full tax collected and rem itted by its service
supplier . a non-utility service supplier. or its billing agent on the use of gas or
electricity in the ci ty. including any related supplemental services. shall report said
fact to the tax administrator and sh all remit the tax due directly to the tax
administrator within thirty (30) calendar days of such use . based on the charges for.
or value of. such gas or electricity . or supplemental services . as provided i n
subsection (8) of th is section . In lieu of paying said actual tax. the service user may .
at its option . remit to the tax administrator within thirtv (30) calendar days of such
use an estimated amount of tax measured by the tax billed in the previous month. or
upon the payment pattern of similar customers of the service supplier using similar
amounts of gas or electr icity. provided that the service user shall submit an adjusted
payment or request for credit. as appropriate. within sixty (60) calenda r days
following each ca lendar quarter. The credit. if approved by the tax administrator in
writing . may be app lied against any subsequent tax bill that becomes due.
B. The tax administrator may require said service user to identify its non-utility service
supplier. and otherwise provide . subject to audit: invoices : books of account: or
other satisfactorv evidence documenting the quantity of gas or electricity used.
including any re lated supplemental services. and the cost or pr ice thereof. If the
service user is unable to provide such satisfactory evidence . or if the administrative
cost of calculating the tax in the opinion of the tax administrator is excessive . the tax
administrator may determ ine the tax by applying the tax rate to the equivalent
charges the service user would have incurred if the gas or electricity used . including
any related supplemental serv ices. had been provided by the service supplier that is
the primary supp lier of gas or electric ity within the city . Rate schedules for this
puroose shall be available from the city .
3.30.080 3.30.100 -Wate r user tax.
A. A-There is imposed a tax upon every person using water in the city which is
delivered through mains or pipes. The tax imposed by this section shall be at the
rate of two and three quarter percent (2.75%) of the charges made for such water
and shall be paid by the person paying for such water.
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8. g,.___!!:charges,~: as used in this section, shall include charges made for (1) metered
water; and (2) minimum charges for service, including customer charges, ready to
serve charges, standby charges and annual and monthly charges and any other
charges, fees and surcharges that are necessary to or common for the receipt, use
or enjoyment of water service, whether or not such charges, fees or surcharges
appeal on a bundled or line item basis on the customer billing.
C. G.,-There shall be excluded from the bases on which the tax imposed by this section
is compu ted charges for water ~that is to be resold and ~that is del ive red
through mains or pipes.
(Ord. 403 § 7, 2004; Ord. 292 § 1 (part), 1993)
3.30.090 Purpose.
The taxes impose€! by this chapter are established so lely to raise re»1enue f.or the
general governmental purposes of the city. +he revenues generated thereby shall be
deposited in the genera l fund of the city an€1 may be expen€1e€1 f.or any proper municipal
purpose at the discretion of the city council.
(Ord. 292 § 1 (part), 1993)
3.30.11 O -Bundlina taxable items with nontaxable items.
If any nontaxable cha rges are combined with and not separately stated from taxable
service charges on the customer bill or invoice of a service supplier. the combined
charae is subject to tax unless the service supplier identifies. by reasonable and
verifiable standards. the portions of the combined charae that are nontaxable and
taxable through the service supplier's books and records kept in the regular course of
business. and in accordance with generally accepted accounting principles. and not
created and maintained for tax purooses . If the service supplier offers a combination of
taxable and non -taxable services. and the charaes are separately stated. then for
taxation purposes. the values assigned the taxable and non-taxable services shall be
based on its books and records kept in the regular course of business and in
accordance with generally accepted accounting principles . and not created and
mainta ined for tax purposes . The service supplier has the burden of proving the proper
valuation and apportionment of taxable and non -taxable charges .
3.30.120 -Substantial nexus-Minimum contacts.
For purposes of imposing a tax or establishing a duty to collect and remit a tax under
this chapter. "substantial nexus." "substantial economic presence" and "minimum
contacts" sha ll be construed broadly in favor of the imposition. collection and/or
remittance of the utility use rs' tax to the fullest extent permitted by State and Federal
law, and as it may change from time to time by judicial interoretation or by statutory
enactment. Any telecommunications service (including VoIP) used by a person with a
service address in the city . which service is capable of terminating a call to another
person on the general telephone network, shall be subject to a rebuttable presumption
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that "substantial nexus/minimum contacts " exists for purooses of imposing a tax . or
establ ish i ng a duty to collect and remit a tax. under this chapter . A service supplier shall
be deemed to have sufficient activity in the c ity for tax collection and remittance
purooses if its activities include . but are not limited to . any of the following : mai ntains or
has within the city . directly or through an agent. affiliate or subsid iarv . a place of
business of any nature : solicits business in the city by employees. independent
contractors. resellers. agents . affi liates 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 distr ibuted from a location with
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 beha lf of the service
supplier that are significantly associated with the service supplier's ability to establish
and maintain a market in the city for the provision of utility services that are subject to a
tax under this chapter <e .g .. an affiliated person engaging in activities in the city that
inure to the benefit of the service supplier in its development or maintenance of a
market for its services in the city).
3.30.100 3.30.130 -Duty to collect and rem it Procedures.
A. Collection by Service Suppliers . T he duty of service suppliers to collect and remit
the taxes imposed by the provisions of this chapter shall be performed as follows:
A. The tax impssed by this chapter shall be colleGte€1 from the service 1:1ser
ey the serv ice suppliers. The amount collected in one month shall be
remitted to the city and shall be d1:1e on or before the twentieth day of the
following month . If remitted by mail , such remittance shall be postmarked
on or before the twentieth day of the following month ; previG~
that if the twentieth day falls on a ·.veekend or legal holiday , and t he
remittance is made by mail , the remittance shall be postmarked as of the
first business day following such weekend or legal holiday .
1. B,--The tax shall be collected by service suppliers insofar as practicable at the
same time as, and along with, the collection of the charges made in accordance
with the service supplier's regular billing practice.,.-# of the service supplier. Where
the amount paid by a service user to a service supplier is less than the full
amount of the charge and tax which Ra&was accrued for the billing period, a
proportionate share of both the charge and the tax shall be deemed to have been
paid. In those cases where a service user has notified the service supplier of
refusal to pay the tax imposed on said charaes , Section 3 .30 .170 shall apply.
2. G,-T he 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 tAat
person which starts on or after the operative date of this chapter . The operat ive date of
this chapter-&Rall be December 20 , 1 QQ3 . VVhere a person 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 more than one billing, one or more
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·.
being for different periods than another, the duty to collect shall commence arise
separately for each billing ,. period.
~~jest-to the tax Imposed by Section 3.30 .050 or
Section 3.30 .070 of th is chapter wl:lo rece ives gas or electricity , including
any related supplemental services , directly from a nol'H:ltHfty serv ice
&UWl·ier not under tl:le jur isdiction of this chapter or who , for any other
reason , is not ha¥ing the full tax collected and remitted by its seFVise
s-uwJ1er , a non utility-seAJice supp lier or its bill ing age nt on the use of
elect ric ity or gas in the city shall report said fact to the tax administrator
and shall remit the tax due directly to the tax administrator within thirty
days of such use.
(Ord. 403 § 8, 2004; Ord. 292 § 1 (part), 1993)
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 a pproved by the tax administrator. on
or before the due date . The full amount of t he tax collected shall be included with t he
return and filed with the tax administrator. The tax administrator is authorized to
require such additional information as he or she deems necessarv to determine if the
tax is being levied . collected. and remitted in accordance with this chapter. Returns
are due immediately upon cessation of business for any reason . Pursuant to
Revenue and Taxation Code Section 7284.6 . the tax administrator. and its agents.
shall maint a in such fili ng returns as confidential information that is exempt from the
disclosure p rovisions of the Public Records Act.
3.30.110 Interest and 3.3 0.140 -Co llect ion penalties-Service suppliers.
A A. Taxes coll ected from a serv ice user by the service suppl ier wh ich are not remitted to the
~dm i nistrator on or before the due dates prov ided in this chapter are delinquent and are
subje ct to penalt ies and interest. Taxes collected from a service user. or owed by a
service user subject to Section 3.30 .090 hereof. are delinquent if not received by the
tax administrator on or before the du e date. Should the due da te occur on a
weekend or legal holiday. the return must be received by the tax administrator on the
first regu lar working day follow ing the weekend or legal holiday. A direct deposit.
including elect ronic fund transfers and othe r similar methods of electronically
exchanging monies between financial account s. made by a service supplie r in
satisfaction of its obligations under this chapter shall be considered timely 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 . B. Pena lties for delinquency in rem ittance of any tax collected or any deficiency
determination , shall attach and be paid by the persons required to colle ct and remit lf the
person required to collect and/or remit the utility users' tax fa il s to collect t he tax (by
failing to properly assess the t ax on one or more services or charges on the
customer's billing) or fails to remi t the tax collected on or before the due date, or. in
the case of a service user that fails to properly self-collect and remit the tax under
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.,
Section 3 .30 .090 hereof on or before the due date. the tax adm inistrator shall attach
a pena lty for such de linquencies or deficiencies at the rate of fifteen percent (15%)
of t he t ot al tax that is del in quen t tax collected or imposed herei n. v..~henever fraud or
~-ess----ne~gence in repOFt iA§----aA d rem itting tax collections is discoi.·ered , the tax
administrator shall ha 1Je the pewer to impose additional penalti es-ef-t1.\'0nty percent of taxes
awed upon persons required to collect and remit taxes under the provisions of this section .
C . C. Every penalty imposed under the provis ions of this section shall become
a part of the tax owed and required to be remitted . D. ,A,ny person required
tEl remit to the tm< administrator delinquent taxes as required in this section ,Q[
deficient in the remittance. and shall pay interest at the rate of one and
one-half percent (1.5%) per month = or portion any fraction thereof= on the
amount of the tax-ewea'1: exclus ive of pena lties= from t he da te on wh ich t he
~remittance first became delinquent= until paid.
E. Notwithstanding the provisions of this section , no penalty or interest shall
be applied if delinquencies are the result of natural disasters or other phenomena
beyond the oontFol of the persoR charged with collecting and remitting tho tax ,
provided tho person required to remit the tax notifies the tax administrator as
soon as normal communications permit.
(Ord. 292 § 1 (part), 1993)
E. The tax administrator shall have the power to impose additi onal penalties upon
persons required to collect and remit taxes purs uant to the provisions of this chapter
for fraud or gross negligence in reporting or remitting at the rate of fifteen percent
(15%) of the amount of the tax co ll ected and/or required to be remitted . or as
recomputed by the tax adm i nistrator.
F. For collection purooses only . everv penalty imposed and such interest that is
accrued under t he provisions of this chapter shall become a part of the tax herein
required to be paid=
G. Notwithstanding the foregoing. the tax admin istrator may, in his or her discretion,
mod ify the due dates of th is chapter to be consistent with any uniform standards or
procedures that are mutually agreed upon by other pub lic agencies impos ing a utility
users' tax , or otherw ise legally established . to create a central payment location or
mechanism .
3.30 .120 3.30.150 -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 -sewioe supplie ro erson required to co llect and remit and shall
no longer be a debt of the service user. Any person owing money to the city under the
provisions of this chapter shall be liable -i-A1Q an action brought by the city attorney in the
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name of the city for the recovery of such amount --. including penalties and interest as
provided for in this chapter. along with any collection costs incurred by the city as a
result of the person's noncompliance with this chapter, including . but not limited to.
reasonable attorneys ' fees. Any tax required to be collected by a service supplier or
owed by a service user is an unsecured priority excise tax obligation under 11 U .S.C . §
507(a}(8}(Cl. Service suppliers who seek to collect charges for service in bankruptcy
proceedings shall also include in any such claim the amount of taxes due the city for
those services. unless the tax administrator determines that such duty is in conflict with
any federal or state law. rule. or regulation or that such action would be administratively
impractical.
(Ord. 292 § 1 (part), 1993)
3.30.130 Additional poweFs and duties of tax administrator.
A. The tax administrator shall have the power and duty , and is diree-ted , to enforce
each and all of the provisions of this chapter.
B.
3.30.160 -Deficiency determination and assessment-Tax application errors.
A. The tax administrator shall ~o\\~r to adopt rules and regula1ions not inconsistent
with the prov isions of this chapter for the purpose of carrying out and enforcing the payment ,
oollection , and remittance of the taxes i~ed herein . A. copy of suc~es and regulations
shall be maintained on file in the office of the tax administrator.
B. C. The tax administrator may enter into administrative agreements to vary
the strict requirements of this chapter so that collection of any tax billing imposed
hereby may be made in conformance with the billing procedures of a particular
service supplier , so long as sa id agreements resu lt in collection of the taxes
imposed herein in conformance v.iith the general purpose and scope of this
chapter . A copy of each s1:1ch agreement shall be maintained on file in the office
of the tax administrator. make a deficiency determination if he or she
determines that any person required to pay or collect taxes pursuant to the
provisions of this chapter has failed to pay, collect. and/or remit the proper
amount of tax by improperly 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 if. in the opinion of
the tax administrator. the cost of collection or enforcement likely outweighs
the tax benefit.
C . The tax administrator shall mail a notice of such deficiency determination to the
person required to pay or remit the tax, which notice shal l refer briefly to the amount
of the taxes owed . plus interest at the rate of one and one-half percent (1.5%) per
month . or any fraction thereof. 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 may request in writing to the tax
administrator for a hearing on the matter.
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D. D. The tax administratoF-Rlay make a special assessment for taxes net--F>aid or rem itted by
a persoR required to pay or remit. ,A, notice of the assessment sl=lall include the amount of
the taxes owned , penalties imposed and the time and place when sucR an assessment sl=lall
be l=leard by the city counci l for confirmation or modificat ion . The tax administrator sl=lall mai l
a-copy of such notice to the service supplier and to the service user at least ten days prior to
the date of the h~ost such notice for at least five days continuously prior to
the date of the heari"Rg at those places in tho city normally designated for the PG~
not ices . Any interested party having any object ions may appear and be heard at the
hearing , provided the objection is filed in writing with the tax adm inistrator prior to the time
set for t h e-Reafin~he-t i me fixed for consider ing said assessment , the city counc il shall
hear the same together 'Nith any oejeetion timely filed and thereupon may confirm or modify
said assessment by resolution . If the person fails to request a hearing within the
prescribed time period. the amount of the deficiency determination shall become a
final assessment. and shal l immediately be due and owing to the city. If the person
requests a hearing, the tax administrator shall cause the matter to be set for hearing.
which shall be scheduled with in thirty (30) calendar days after receipt of the written
request for hearing. Notice of the time and place of the hearing shall be mailed by
the tax administrator to such person at least ten (10) calendar days prior to the
hearing. and. if the tax administrator desires said person to produce specific records
at such hearing. such notice may designate the records requested to be produced.
E. 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 from time to time
for the purnose of allowing the presentation of additional evidence. Within a
reasonable time following the conclusion of the hearing. the tax administrator shall
issue a final assessment (or non-assessment). thereafter. by confirming, modifying
or rejecting the original deficiency determination . and shall mail a copy of such final
assessment to person owing the tax. The decision of the tax administrator may be
appealed pursuant to Section 3.30.210 of this chapter. Filing an application with the
tax administrator and appeal to the city council. or the city council's designee.
pursuant to Section 3 .30.210 of this chapter is a prerequisite to a suit thereon .
F. Payment of the final assessment shall become delinquent if not received by the tax
administrator on or before the thirtieth (30th) day fol lowing the date of receipt of the
notice of final assessment. The penalty for delinquency shall be fifteen percent
C15%l on the total amount of the assessment. along with interest at the rate of one
and one-half percent (1.5%) per month, or any fraction thereof. on the amount of the
tax. exclusive of penalties, from the date of delinquency. until paid . The app licable
statute of limitations regarding a c laim by the city seeking payment of a tax assessed
under this chapter shall commence from the date of delinquency as provided in this
subsection CE).
G. All notices under this chapter 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.
3.30.170 -Administrative remedy-Non -paving service users.
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A. Whenever the tax administrator determines that a service user has deliberately
withheld the amount of the tax owed by the service user from the amounts remitted
to a person reauired to collect the tax. o r whenever the tax adm inistrator deems it in
the best interest of the city. he or she may relieve such person of the obligation to
collect the taxes due under this chapter from certain named service users for
specific billing periods. To the extent the service user has 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
citv with the names and addresses of such service users and the amounts of taxes
owed under the provisions of this chapter. Nothing herei n shall require that the tax
administrator institute proceedings under this section if. in the opinion of the tax
administrator. the cost of collection or enforcement like ly outweighs the tax benefit.
B. ~e-tax administrator determines that a service user has deliberately withheld
tl:le amet1nt of the tax owed by the service user 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 a
service supp lier for a period of two or more billing per iods , or 'A'henever the tax administrator
deems it in the best interest of the city , the tax adm inistrate · · ·
of the obligation to collect taxes due under this chapter from certain named service users for
specified billing perioo&:-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 sAaU-demand payment of such taxes . including penalties and
interest. The notice shall be served on the service user by handing it to him or her
personally personal delivery o r by dep osi t of t he not ice in the United Stat es MaH 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 a change of add ress , to his or her la st known add ress .-1-f-.a--seFViG
user fails to remit the tax to the tax administrator within fifteen days from the date of the
service of the ne>tice upon him or her , •.uhich shall be the date of mai ling if service is not
accompl ished in person , a pena lty of P.venty five percent of the amount of the tax set forth in
the notice shall be imposed , but not-le& · -l-become part of
the tax owed.
C. If the service user fails to remit the ta x to the tax administrator within fifteen (15)
calendar days from the date of receipt of notice from the tax administrator, the
service user shall pay in addition to the tax owed . a delinquency penalty in the sum
of twenty-five percent (25%} of the total tax that is owed . but not less than five
dollars ($5 .00l.
3.30. 180 -Additional cowers and duties of the tax administrator.
A. The tax administrator shall have the power and duty. and is hereby directed. to
enforce each and all of the provisions of this chapter.
B. ~ enalties and interest established by th is
chapter '.vhen the tax administrator determines that such a waiver is appropriate and in
accordance with the intent of this char:iter . The tax administrator may adopt
administrative rules and regulations consistent with provisions of this chapter for the
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puroose of interoreting. clarifying. carrying out and enforcing the payment. collect ion
and remittance of the taxes herein imposed . The administrative ruling shall not
impose a new tax. revise an existing tax methodology as stated in this chapter. or
increase an ex isting tax . except as allowed by California Government Code Section
53750(b)(2). A copy of such administrative rules and regulations shall be on file in
the tax administrator's office. To the exten t that the tax administrator determines 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 exercise of the tax administrator's discretion to settle 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 purooses of Government Code Section 53750 . and the
city does not waive or abrogate its ability to impose the utility users' tax in full as a
result of promulgating administrative rulings or entering into agreements .
G. The tax administrator, from time to time , may...stlfVey the providers of the
various utility services , which are subject to the provisions of this chapter , to
ideAtify the various unbundled billing components of such service that they
commonly provide to residentia l and commercia l custamers in the city , and the
charges therefor , including those items that are mandated by state or federal
regulatory agencies as a condition of providing such serv ice . Thereafter, the tax
administrator may issue and dlssemiAato to such service providers an
administrative ruling identifying those components and items that are : (1)
Aecessary for or common to the receipt , use or enjoyment of such service or (2)
currently , or historically have been , included in a single or bundled rate for such
service by a provider to a class of retai l customers . Charges for such
components and ite111s shall be StJbjeot to the tax that is imposed by this chapter.
D. H. If one or more non taxable items are bundled or billed together with one
or more taxab le items under a single charge on a customer's bill , the entire single
charge shall be deemed taxable by the tax administrator unless . upon the writte~
request of the-Gt1stomer , the service supplier can reasonably identify the non
taxable component of the sing le charge based upon one or more of the following
methodologies , as se lected by tho tax administrator: (1) tho average industry
charges for the inewidual non taxable items inc luded in the entire single charge ;
(2) the amount of the entire single charge less the average indtl-Stry charges-fGF
the individual taxable items included in the entire single charge , or (J) the service
supplier's beaks and records that are kept in the regular sourse of business ,
which must be cansistent with generally accepted accounting principles-.
(Ord. 403 § 9, 2004; Of4.492-§ 1 (part), 1993)
E. Upon a proper showing of good cause, the tax administrator may make
administrative agreements. with appropriate conditions. to varv from the strict
req uirements of th is chapter and thereby : (1) conform to the billing procedures of a
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particular service supplier so long as said agreements result in the collection of the
tax in conformance with the general puroose and scope of this chapter : or. (2) to
avoid a hardship where the administrative costs of collection and remittance greatly
outweigh the tax benefit. A copy of each such agreement shall be on file in the tax
administrator's office . and are voidable by the tax administrator or the city at any
time.
F. The tax administrator may conduct an audit. to ensure proper compliance with the
requirements of this chapter. 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 three (3) years
next preceding the date of receipt of the written notice by said person from the tax
administrator. Upon completion of the audit. the tax administrator may make a
deficiency determination pursuant to Section 3.30 .160 of this chapter for all taxes
(and applicable penalties and interest) owed and not paid. as evidenced by
information provided by such person to the tax administrator. If said person is unable
or unwi l ling 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 rebuttable presumption of correctness.
G . Upon receipt of a written request of a taxpayer. and for good cause. the tax
administrator may extend the time for filing any statement required pursuant to this
chapter for a period of not to exceed forty-five (45) calendar days. provided that the
time for filing the required statement has not already passed when the reauest is
received.
H. The tax administrator shall determine the elig ibility of any person who asserts a right
to exemption from . or a refund of. the tax imposed by this chapter .
I. Notwithstanding any provision in this chapter to the contrary. the tax administrator
may waive any penalty or interest imposed upon a person required to collect and/or
remit for failure to collect the tax imposed by this chapter if the non-collection
occurred in good faith . In determin ing 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. or whether the person offers to
voluntarily disclose its tax liability. The tax administrator may also participate with
other utility users ' tax public agencies in conducting coordinated compliance reviews
with the goal of achieving administrative efficiency and uniform tax application
determinations . where possible . To encourage voluntary 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 services or
charges that were previously deemed by the service provider. in good faith and
without g ross ne g li gence . to be non -taxa ble . In determinin g whether the non-
collection was in good faith and without gross negligence, the tax administrator may
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take into consideration the uniqueness of the product or service . industry practice or
other precedence . and whether the disc losure was voluntarily made by the service
provider or its agent.
3.30 .1403.30.190 ~ 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 keep and preserve, for a period of at least three Qi
years, all records as may be necessary to determine the amount of such tax as he-eF
£she may have been liable for the collection of and remittance to the tax
administrator, which records the tax administrator or his.lher designee shall have the
right to inspect at aUg reasonable t:imestime .
(Ord. 292 § 1 (part), 1993)
B. The city may issue an administrative subpoena to compe l a person to deliver, to the
tax adm inistrator, copies of all records deemed necessary by the tax administrator to
estab lish compliance with this chapter, including the deliverv of records in a common
electronic format on readi ly availab le media if such records are kept electronically by
the person in the usual and ordinary course of business . As an alternative to
delivering the subpoenaed records to the tax administrator on or before the due date
provided in the administrative subpoena . such person may provide access to such
records outside the city on or before the due date. provided that such person shall
reimburse the city for all reasonab le travel expenses incurred by the city to inspect
those records . including travel. lodging , meals, and other similar expenses. but
excluding the normal sa lary or hourly wages of those persons designated by the city
to conduct the inspection .
C. The tax administrator is authorized to ex ecute a non-disclosure agreement approved
by the city attorney to protect the confidentiality of customer information pursuant to
California Revenue and Tax Code Sections 7284 .6 and 7284 .7. The tax
administrator may request from a person providing transportation or distribution
services of gas or electricity to service users within the city . a list of the names .
billing and service addresses . quantities of gas or electricity delivered . and other
pertinent information. of its transportation customers within the city pursuant to
Section 6354(e) of the California Public Utilities Code.
D. If a service supplier uses a billing agent or bill i ng aggregator to bill. collect, and/or
remit the tax . the service supplier shall : 1) provide to the tax administrator the name .
address and telephone number of each billing agent and bill i ng agg regator currently
authorized by the service supplier to bill. collect. and/or remit the tax to the city : and,
2) upon request of the tax administrator. deliver, or effect the delivery of. any
information or records in the possession of such billing agent or b illing aggreqator
that, in the opinion of the tax administrator. is necessary to veritv the proper
applicati on. calculation . collect ion and/or remittance of such tax to the city.
E. If any person subject to record -keeping under this chapter unreasonably denies the
tax administrator access to such rec ords. or fails to produce the information
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reauested in an administrative subpoena within the time specified , then the tax
adm inistrator may impose a penalty of F ive Hundred Dollars ($500.0Q) on such
person for each day following : 1) the initial date that the p erson refuses to provide
such access: or. 2) the due date fo r p roduction of records as set forth in the
administrative subpoena , This pena lty shall be in addition to any other penalty
imposed under this chapter,
~3.30.200 -Refunds.
A. Whenever the amount of any tax, interest or penalty has been overpaid, or paid
more than once, or has been erroneously or illegally collected or received by the sltytax
administrator under this chapter from a person or service supplier, it may be refunded
as provided in subsection B of this section proviaed a claim in writing therefor, stating under
penalty of perjury--tAe-specific grounds upoA 1Nhich the claim is founded, is filed 1Nith the tax
administrator 11+1ithin one--yeaF-t>f the date of payment Any action brought against the city
pursuant to this section shall b~~e provisions of Govemment Code sections 945.6
and Q46 . Compliance with this section shall be a prerequisite to a suit thereon . The claim shall
be on forms furnished by the tax administrator, shall be presented in accordance \Vith the
requirements of Section 3.24 .030 and shall c learly establish the claimant 's right to the r~
~Nritten records demonstrating entiUement thereto . It is the intent of the c ity that the one year
clairn requirement of th is subsection be given retroactive effect ; provided, however, that any
claims that arose prior to the enactment date of the one year c laims period set forth in tho
S\Jbsect ion , whicn are not other-wise barred-by the then applicable statute of limitations or claim
procedure , must be filed with the tax ad.miRistratGf.-as provided in this title within ninety da;cs
fol!Gwing the effective date of this subsection . th is section as follows:
B. A person required to collect and rem it taxes imposed under th is chapter may
claim a refund or take a credit against taxes collected and not yet rem itted in the
amount overpaid,
A. Written Claim for Refund, The tax adm inistrator may refund any tax that has been
overpaid or paid more than once, o r has been erroneously or illegally collected or
received,when it is establisAea-in a manner prescribed by the tax administrator that the
service user from 'NAeffl the tax has been collected did not owe the tax; provided , however,
that neither a refund nor a credit shalt-Se-a-IJ.ell'.ied unless the amount of the tax so collectett
has either been refunded to the service user or credited to charges sub~ently payable by
the service user to the person required to collect and remit.
C. No by the tax administrator under this chapter from a person or service
supplier, provided that no refund shall be paid under the provisions of this
section unless the claimant establishes his right thereto by ·.witten records . Q[
his or her guardian . conservator, executor. or administrator has submitted
a written claim to the tax admi nistrator within one year of the overpayment
or erroneous or illegal collection of sa id tax. Such claim must clearly
establish claimant's right to the refund by written records showing
entitlement thereto, To the e xtent allowed by law, nothing herein shall
permit the filing of a cla im on behalf of a class or group of taxpayers
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unless each member of the class has submitted a written claim under
penalty of perjury as provided by this section .
B. Compliance with Claims Act. The filing of a written claim pursuant to Government
Code Section 935 is a prerequisite to any suit thereon . Any act ion brought against
the city pursuant to this chapter shall be subject to the provisions of Government
Code Sections 945 .6 and 946 . The tax administrator . or the city council where the
claim is in excess of Five Thousand Dollars ($5.000 .0Q). shall act upon the refund
claim within the time period set forth in Government Code Section 912.4. If the tax
administrator/city council fails or refuse s to act on a refund claim within the time
prescribed by Government Section 912.4 . the claim shall be deemed to have been
rejected by the city council on the last day of the period within which the city council
was required to act upon the claim as pro vided in Government Code Section 912.4.
The tax administrator shall give notice of the action in a form. which substantially
complies with that set forth in Governmen t Code Section 913 .
C. Refunds to Service Suppliers . Notwithstanding the notice provisions of subsection
(A) of this section. the tax administrator may. at his or her discretion . give written
permission to a service supplier. who has collected and remitted any amount of tax
in excess of the amount of tax imposed by this chapter. to claim credit for such
overpayment against the amount of tax which is due the city upon a subsequent
monthly return(s) to the tax administrator . provided that: 1) such credit is claimed in
a return dated no later than one year from the date of overpayment or erroneous
collection of said tax : 2) the tax administrator is satisfied that the underlying basis
and amount of such credit has been reasonably established : and . 3) in the case of
an overpayment by a service user to the service supplier that has been remitted to
the city . the tax administrator has received proof. to his or her satisfaction. that the
overoayment has been refunded by the service supplier to the service user in an
amount equal to the requested credit.
3.30.210 -Appeals.
A. The provisions of this section apply ,to any decision (other than a decision relating to
a refund pursuant to Section 3.30.200 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 Section
3.30 .200 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 . Comp liance with this sect ion shall be a prerequisite to a
su it thereon. (See Cal. Gov . Code , § 935(b).) To the extent allowed by law. nothing
herein shall permit 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 Section 3.30 .200 of this chapter). deficiency determination. assessment.
or administrative ruling of the tax administrator : he or she may appeal to the city
council. by filing a notice of appeal with the city clerk within fourteen (14) calendar
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days of the date of the decision . deficiency determination . assessment. or
administrative rul ing of the tax administrator which aggrieved the service user or
service supplier.
C. The matter shall be scheduled for hearing before the city council. no more than thirty
(30) calendar days from the receipt of the appeal. The Citv Council may designate
an independent hearing officer to hear the appeal. The appellant shall be served
with notice of the time and place of the hea ring. 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 .
P. Based upon the submission of such ev idence and the review of the city 's files . the
citv counci l (or the hearing officer designated by the c ity council) shall issue a written
notice and order up holding. modlfving or reversing the det ermination from which the
appeal is taken . The notice shall be given within fourteen (14) calendar days after
the conclusion of the hearing and shall state the reasons for the decision. The notice
shall specify that the decision is final and that any petition for judicia l review shall be
filed within ninety (90) calendar days fro m the date of the decision in accordance
with Code of Civi l Procedure Section 1094.6.
E. All notices under this section may be sent by regular mail. postage prepaid. and
shall be deemed received on the third calendar day following the date of mailing. as
established by a proof of mailing .
3.30.220 -No injunction-Writ of mandate.
No injunction or writ of mandate or othe r legal or equitable process shall issue in any
suit, action. or proceeding in any court against th is city or against any officer of the citi
to prevent or en join the co l lection under this chapter of any tax or any amount of tax
required to be collected and/or remitted .
3.30.230 -Notice of changes to chapter.
D . Notwithstanding other provisions of this section , 'Nhene ... er a service supplier, pursuant
to an order of the Galif-Ornia Public Utilities GommiS6ion or a court of competent jurisdict ion ,
makes-aAy-Fefund to service users of charges for past utility services , the taxes paid pursuant to
tfli& oode on the amount of such refunded charges shall also be refunded to service users , and
the service supplier shall be entitled to claim a credit for such refunded taxes against-tRe
amount of tax .... •hich is due upon the next month ly retl::lfn,s. In the event this chapter is repea led ,
the amount of any refundable taxes will be borne by the city.-. The tax administrator shall
follow the notice requirements of Cal iforn ia Publ ic Utilities Code Section 799 regarding
any changes to this chapter.
(Ord. 403 § 10, 2004; Ord. 292 § 1 (part), 1993)
3.30.160 Appeal.
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~erson who is aggrieved by any decision of the tax administrator with
respect to the amount of such tax , interest and penalties , if any , or any other
determination of the tax administFator made pursuant ta Section 3.30 .130 may appeal to
the city council by filing a notice of appeal with the city clerk within fifteen days of the
serving or mail ing of the tax administrator's determination . The city c lerk shall fix a time
and date for hearing sucl::l appeal and shall give notice in writing to the appellant in the
mannei: prescribed in Section 3 .30.130(0) for seNice of notice of hearing . The findings
of the city council shall be final and concl usive and shall be seNed upon the appellant in
the manne r prescribed in Section 3.30 .130(0). Any amount found to be due shall be
immediately due and payable upon the service of the notice .
(Ord. 403 § 11 (part), 2004)
3.30.170 Violations Misdemeanor.
Any person whe--violates any of the foregoing provisions of this chapter is guilty
of a misdemeanor and shall be punished therefor in conformance-with Section 1 .08 .010
of this Code.
(Ord. 292 § 1 (part), 1993)
3.30.180 Effesth.·e date.
3.30.240 -Effect of state and federa l reference/a uthorization.
A. 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 interoretation thereto by a
State or Federal agency or court of law with the duty to interpret such 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 all or a part of a utility service, or charge therefor. from
taxation). Only to the extent voter approval would otherwise be required or a tax
decrease would result. the prior vers ion 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 max imum possible extent.
B. To the extent that the citv's authorization to collect or impose any tax imposed under
th is chapte r is expanded or limited as a result of changes in State or Federal law. no
amendment or modification of th is 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 of the tax imposed under this chapter.
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3.30.250 -No increase in tax percentage or chanae in methodology without voter
approval-Amendment or repeal.
This chapter , inasmuch as it provides for a tax levy for the usual and current m<penses of the
sf.t.y , shall take effect immediately upon passage , except that the tax i mpo~
eerome operative and be imposed at the beginn ing of the first regular bill ing perios on or after
tf::le effective sate , as provided in Sect ion 3.30 .100 , and sha ll not apply pr ior to said date.
(Ord. 292 § 1 (pa,:tJ , 1mf-may be repealed or amended by the city council
without a vote of the People. However. as required by Chapter XlllC of the
California Constitution . voter approval is required for any amendment provision
that would increase the rate of any tax levied pursuant to the ordinance codified
in this chapter or extend the tax to a service that is not included in the ordinance
codified in this chapter. The People of the City of Rancho Palos Verdes affi rm
that the following actions shall not co nstitute an increase of the rate of a tax:
A. The restoration of the rate of the tax to a rate that is no higher than that set by the
ordinance codified in this chapter. if the city council previously acted to reduce the
rate of the tax:
B. An action that interorets or clarifies the methodology of the tax. or any definition
applicable to the tax . so long as such interoretation or clarification (even if contrary
to some prior interpretation or clarificat ion) is not inconsistent with the language of
this Ordinance:
C. The establishment a class of persons that is exempt or excepted from the tax or the
discontinuation of any such exemption or exception (other tha n the discontinuation
of an exemption or exception specifically set forth in this Ordinance): and
D. The collection of the tax imposed by the ordinance codified in this chapter, even if
the citv had, for some period of time, faile d to collect the tax.
3.30.260 -Independent audit of tax collection . exemption. remittance and
expenditure.
The city shall annually 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 applicable municipal law . The annual verification shall be
performed by a qualified independent third party and the review shall employ
reasonable. cost-effect ive 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 .
3.30.270 -Remedies cumulative.
All remed ies and pena lties prescribed by this chapter or which are ava ilable under any
other provis ion of law or equity. including b ut not limited to the California False Claims
Act (Cal. Gov. Code .§ 12650 et seq.) and t he California Unfair Practices Act (Cal. Bus.
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and Prof . Code. § 17070 et seq.). are cumu lative. The use of one or more remedies by
the city shall not bar the use of any other remedy for the puroose of enforcing the
provisions of this chapter.
3.30.280 -Validity of prior ordinance.
In the event that a final court order should determine that the election enacting this
chapter (as amended herein) is invalid for whatever reason . or that any tax imposed
under this chapter (as amended herein) is invalid in whole or in part. then the taxes
imposed under this chapter. as it existed prior to its amendment as provided herein.
shall automatically continue to apply with respect to any service for which the tax levied
pursuant to this chapter has been dete rmined to be invalid. Such automatic
continuation shall be effective beginning as of the first date of service (or billing date) for
whi.ch 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 (as amended herein) shal l be deemed to satisfv the
tax imposed under chapter . as it existed prior to its amendment as provided herein. on
that service . so long as the tax is paid with respect to a service provided no later than
six (6) months subsequent to the date on which the final court order is published .
3.30.190 3.30.290 -Legislative review.
Beginning in 1998, and every year thereafter, the city manager shall submit for
consideration by the city council, in connection with the preparation of the city~:s annual
budget for the following fiscal year, an analysis of the revenues derived from the taxes
imposed by in this chapter. Based on the needs of the city, the city council shall
determine whether any modification to the rate of the tax is necessary or if the tax
imposed by this chapter is unnecessary. However, in no event shall the rate of the tax
exceed two and three quarter percent (2.75%) without a pri or vote of the people in favor
of such increase. The review required by this section shall be completed by the city
council prior to the adoption at each year~:s annual budget, which shall occur by June
3Qth. If the city council fails to conduct the periodic review of the tax as required by this
section, the city shall not cause the tax to be collected until the review has been
conducted by the city council.
(Proposition CC passed by voters on •6•1mr.ember 5, 1996: Ord. 292 § 1 (part), 1993)
3.30.300-Violations-Misdemeanor.
Any person who violates any of the foregoing provisions of this Chapter is guilty of a
misdemeanor and shall be punished therefo r in conformance with Section 1.08 .010 of
this Code.
old: RPV Municipal Code Section 3.30 (from website), new: 1727464v3
2-71
CITY OF RANCHO PALOS VERDES
MEMORANDUM
TO:
FROM:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
CAROL W. LYNCH, CITY ATTORNEY
DATE: JULY 15, 2014
SUBJECT: ORDINANCE REDUCING THE UTILITY USER TAX RATE FROM
3% TO 2.75% AND MODERNIZING THE CITY'S UTILITY USER
TAX AND EMERGENCY RESOLUTION AUTHORIZING THE
CITY COUNCIL TO CALL AN ELECTION ON NOVEMBER 4,
2014 TO REQUEST THE VOTERS TO APPROVE THE
ORDINANCE
REVIEWED BY: CAROLYNN PETRU, ACTING CITY MANAGER~
RECOMMENDATIONS
1. ADOPT RESOLUTION NO. 2014-_; A RESOLUTION OF THE CITY
COUNCIL OF THE CITY OF RANCHO PALOS VERDES,
UNANIMOUSLY DECLARING AN EMERGENCY IN CONNECTION
WITH THE PLACEMENT OF A MEASURE THAT MODERNIZES THE
CITY'S UTILITY USER TAX AND DECREASES THE RATE OF THE
TAX ON THE BALLOT FOR A SPECIAL MUNICIPAL ELECTION TO BE
CONSOLIDATED WITH THE NOVEMBER 4, 2014 ELECTION
2. INTRODUCE ORDINANCE NO. ; AN ORDINANCE OF THE PEOPLE
OF THE CITY OF RANCHO PALOS VERDES, REDUCING THE RATE
OF THE CITY'S UTILITY USER TAX FROM 3% TO 2.75% AND
MODERNIZING THE CITY'S UTILITY USER TAX
BACKGROUND
In 1993, the City Council adopted the City's Utility Users Tax ("Tax" or "UUT").
The amount of the Tax is 3%. It is imposed on City residents who use telephone
service, electricity, co-generated electricity, natural gas, and water.
Subsequently, the voters of the State of California adopted Proposition 218.
Even though the City's Tax had been in effect prior to the adoption of Proposition
218, in order for the City to continue to collect the Tax legally, voter approval was
2-72
required. Accordingly, in 2004, the City Council placed the Tax on the ballot, and
the voters ratified the existing Tax at the same 3% rate that had beerr adopted by
the City Council.
Like many utility users taxes, the telephone portion of the City's Tax originally
was imposed upon telephone service that was subject to the Federal Excise Tax
("FET"), because, at that time, it was believed that the FET could be imposed
upon the broadest categories of telephone services. The FET was used routinely
by municipalities as the basis for imposing a utility user tax, so those local taxes
also would be imposed on the broadest range of telephone services.
However, a decision by a federal court invalidated a portion of the methodology
that was used in the FET. Subsequently, in 2006, the Internal Revenue Service
issued a ruling stating that the FET does not apply to most common telephone
billing plans, such as one-rate plans that charge a flat rate for all calls. (The
California Municipal Law Handbook Section 5.50.) Thus, like most utility users
taxes in the state, the basis of the imposition of the City's Tax, as applied to
telephone service, was no longer valid.
In response to these events, some cities put their utility taxes on the ballot for
voter approval of new definitions of telephone services upon which to impose the
utility users tax; others did not amend their ordinances, which still contain the
reference to the FET; and others, like Rancho Palos Verdes, amended their
ordinances without voter approval to delete the reference to the FET and added
a different definition of the telephone services upon which the UUT would be
imposed.
In taking this latter approach in 2006, the City Council made findings that the
intent of the changes to the Tax was not to expand the Tax to any new
categories ·of telephone service that had not been taxed previously, so that voter
approval should not be required. The City Council took this action, rather than
placing the Tax on the ballot again, because the City's voters had ratified the
City's Tax fairly recently, and it was unclear whether changing the definition of
the telephone service upon which the Tax could be imposed would require voter
approval. Subsequent cases have addressed that issue and have clarified that
the option that clearly is legally defensible is to place any definition changes and
updates to the UUT on the ballot for approval.
Since 2006, many changes have occurred with respect to telephone services that
have caused the definitions in the UUT to become somewhat outdated.
Accordingly, some types of telephone services currently are not subject to the
tax, while others are. This is not completely fair to City residents who use
telephone services and currently are subject to the City's UUT. Accordingly,
Staff proposes placing an ordinance on an upcoming ballot that will modernize
the UUT. In addition, at the June 17, 2014 City Council meeting, Council
Member Campbell suggested that the City Council should consider reducing the
R6876.0001/l 720561 v2 2
2-73
rate of the City's UUT. The ordinance that modernizes the UUT also could
reduce the rate of the City's UUT below the current rate of 3%. The Ordinance
that is attached to this staff report proposes a reduction of the current tax rate of
3% to 2.75%. Of course, another tax rate also could be selected by the City
Council and presented to the voters.
History of UUT
Approximately $2.6 million of UUT is deposited into the City's General Fund
annually. About $0.7 million of this amount is based upon telecommunications
services (telephone land line, long distance, and cellular service), and the
remainder is based upon electricity, gas and water service. A five-year history of
UUTfollows:
Utility Users' Tax
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
FY09-10 FYl0-11 FYll-12 FY12-13 FY13-14
li!ll Electricity, Gas & Water m Telecommunications
Loss of UUT -Budget Impact
The FY14-15 General Fund revenue budget is $26.5 million. A net expenditure
of about $19.2 million represents the City's operating budget; and $7.3 million will
be transferred to the Capital Improvement Projects (CIP) Fund for infrastructure
repair, replacement and improvement. Based upon the operating and capital
needs of the City, the City Council has determined that the UUT rate of 3%
continues to be a necessary General Fund revenue source.
The FY14-15 General Fund budget is balanced by a thin margin. If the General
Fund were to lose a revenue source such as UUT, the impact to the current level
of service would be significant. Even if there is no loss of UUT, Staff expects that
the General Fund budget will become more difficult to balance in future years.
• As reported with the 2014 Five-Year Financial Model, Staff expects that
the accumulated Street Maintenance Fund balance will be depleted, and
R6876.0001/1720561 v2 3
2-74
the General Fund will be required to resume large subsidies for right-of-
way maintenance beginning in FY15-16.
• The Los Angeles County Sheriff's Department has notified the City to
expect additional increases to the required liability trust fund contribution
in FY15-16.
• Staff expects that expenditures will increase over the next couple of years
to keep pace with the latest storm water quality mandates from the state
and federal governments.
Due to conservative budget management, the City's General Fund does have a
history of favorable expenditure variances, which have averaged about $1.0
million annual over the last 10 years. However, due to the increased need to
improve the City's aged infrastructure and the limited availability of restricted
revenue dedicated to infrastructure, the City Council recently modified its Policy
No. 41 -Reserve Policies to transfer favorable General Fund expenditure
variances to the CIP Fund for additional infrastructure funding. There are
currently 3 components of infrastructure subsidies from the General Fund:
1. Annual transfer for the residential street rehabilitation program (FY14-15
budget of $3 million);
2. Annual transfer equivalent to the City's transient occupancy tax revenue
(FY14-15 budget of $4 million; and
3. Annual transfer of the prior year expenditure variance (most recent was
$1.7 million FY12-13 variance transferred in FY13-14).
Over 10 years through FY14-15, General Fund transfers total more than $16.7
million for street improvements and $18.4 million for storm drain improvements.
However, even with the large General Fund subsidies for infrastructure, projects
with estimated costs totaling at least $28 million have been identified in the 2014
Five-Year Capital Improvement Plan that remain unfunded over the next five
years.
Fiscal Impact of Rate Reduction
As part of a potential UUT modernization ballot measure, the City Council may
consider a proposed reduction to the UUT rate, as suggested by Councilmember
Campbell. The annual fiscal impact of the proposed quarter-percent reduction
(from 3% to 2.75%) is a revenue decrease of about $221,675.
!''""'"'~' -.,._.,.-,.,~··-••H"H<"'••·-·--••"'•-"'''"'"'"'''''• ••-•""""'"'"' '" '••'''"' """••••• "'
i FY14-15 Budgeted UUT 3% $2,660,100
~Reduction (from 3% to 2.85%) $ __ l~~Ll?OS
j0.25% Reduction (from 3% to 2.75%) $ 221,675
l.9:.?.~ ... ~.~9.~~!i_().':1 .. 1f~()-~.~-~.tg_?'. .. ?~J ................. $ ...... 'Y.±~1.~?Q_
The fiscal impact of the City Council's alternatives are as follows:
R6876.0001/1720561 v2 4
2-75
1. If the City Council takes no action to propose a UUT modernization ballot
measure, the City could lose up to $0.7 million of annual UUT based upon
telecommunications service, until a measure is brought before the voters
for approval.
2. If the City Council proposes a UUT modernization ballot measure, the
following outcomes are possible:
a. The ballot measure fails, and the City loses about $0.7 million of
annual UUT revenue;
b. A ballot measure with no proposed rate reduction prevails, and the
City's UUT revenue remains intact; or
c. A ballot measure prevails wtth a proposed rate reduction of a
quarter-percent, and the City loses an estimated $221,675 of
annual UUT.
Staff recommends that the City Council include a reduction of the rate of the UUT
from 3% to 2.75% in the ordinance that is presented to the voters because that
reduction will benefit the residents while still providing the majority of the current
revenue stream from the UUT to the City to fund City services.
DISCUSSION
The benefit to the City's residents of placing the City's UUT on the upcoming
November ballot is obvious. If the voters were to approve an ordinance that
modernizes the City's UUT at a reduced rate, such as 2.75%, the residents will
receive the benefit of the reduction of the rate of the UUT. In addition, by
modernizing the UUT, newer telephone-related services will be treated the same,
so that telephone users in the City are treated alike. In addition, by placing the
measure on the ballot at the earliest possible election date, which is November
2014, any dispute about the UUT on telephone services will be resolved a year
earlier than if the City waits to place such a measure on the ballot in November
2015, when the next regular City Municipal election will occur.
If the City Council wishes to place the UUT on the November 2014 ballot, the
City Council must adopt a resolution setting forth an emergency that justifies the
election being held prior to an election date that is different from the date of the
City's regular municipal elections in November of odd numbered years.
Staff believes that there are facts upon which the City Council may rely in
declaring an emergency and calling the election in November 2014, instead of
waiting until November 2015. Those facts are set forth in the attached resolution
and are reiterated here: ·
1. Continuous State takeaways over the last few years, including the state's
recent elimination of redevelopment agencies, have resulted in significant
R6876.0001/1720561 v2 5
2-76
reductions in revenues that the City intended would be used to repay the
City for loans made previously to the Rancho Palos Verdes
Redevelopment Agency for expenditures to address landslide damage
and increase land stability within former Redevelopment Project Area No.
1.
2. The Portuguese Bend Landslide is a large active landslide that continues
to move and adversely affects public infrastructure, including Palos
Verdes Drive South, a major arterial street in the City. The constant
damage caused by the landslide requires constant and increased City
expenditures to maintain PVDS as a viable arterial street.
3. During the recession, the State took money monies that previously were
allocated to cities to reduce the State's budget deficit, and it is expected
that similar actions will occur again in the future in response to downturns
in the economy.
4. ·The cost to the City of complying with state and federal clean water rules
continues to increase each year.
5. The City has many unfunded important infrastructure projects, which are
discussed above, totaling more than $28 million, including unfunded
projects to improve City streets ($4.7 million), and storm drains ($9.4
million).
6. The City of Rancho Palos Verdes seeks to maintain current levels of
public safety and police services within the City, even though the cost of
such services continues to increase, including the City's contribution to the
County liability trust fund for law enforcement services, which the City has
been notified will increase again in fiscal year 15-16.
7. The cost saving measures the City has employed in recent years to
maintain a balanced City budget will not be sufficient to avoid future cuts
to services provided by the City to the community, which would have a
negative impact upon public safety and the character of the community in
Rancho Palos Verdes.
If the City Council concurs with the above findings and that the ordinance
reducing the rate of the UUT and modernizing its provisions should be placed on
the ballot for the upcoming election in November 2014, instead of having to wait
until the next regular City election in November 2015, then the City Council
should adopt the attached resolution; the adoption of the resolution requires a
unanimous vote.
CONCLUSION
In addition to adopting the attached resolution, the City Council should review the
attached ordinance and determine if the City Council agrees with Staff's
recommendation that the current rate of the UUT should be reduced from 3% to
2.75% or if another rate should be chosen instead.
Attachments: Draft Resolution
Draft Ordinance
Public Correspondence
R6876.000111720561 v2 6
2-77
CrTYOF RANCHO PALOS VERDES
MEMORANDUM
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: CAROL W. LYNCH, CITY ATTORNEY
DATE: JULY 29, 2014
SUBJECT: ORDINANCE REDUCING THE UTILITY USER TAX RATE FROM
3% TO 2.75% AND MODERNIZING THE CITY'S UTILITY USER
TAX AND EMERGENCY RESOLUTION AUTHORIZING THE
CITY COUNCIL TO CALL AN ELECTION ON NOVEMBER 4,
2014 TO REQUEST THE VOTERS TO APPROVE THE
ORDINANCE
REVIEWED: CAROLYNN PETRU, ACTING CITY MANAGE~
RECOMMENDATIONS:
1) ADOPT THE ATTACHED RESOLUTION: A RESOLUTION OF THE
CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES
UNANIMOUSLY DECLARING AN EMERGENCY IN CONNECTION
WITH THE PLACEMENT OF A MEASURE THAT DECREASES
THE RATE OF THE CITY'S UTILITY USER TAX FROM 3% TO
2.75% AND MODERNIZES THE TAX ON THE BALLOT FOR A
SPECIAL MUNICIPAL ELECTION TO BE CONSOLIDATED WITH
THE NOVEMBER 4, 2014 ELECTION, AND
2) INTRODUCE THE ATTACHED ORDINANCE: AN ORDINANCE OF
THE PEOPLE OF THE CITY OF RANCHO PALOS VERDES
REDUCING THE RATE OF THE CITY'S UTILITY USER TAX FROM
3% TO 2.75% AND MODERNIZING THE CITY'S UTILITY USER
TAX.
2-78
INTRODUCTION:
The purpose of this report is to augment the report that was provided to the City
Council on July 151h, based on the discussion that occurred at that meeting. A
copy of that report is attached to this report for ease of reference.
BACKGROUND:
~ In 1993, the City Council adopted the City's Utility Users Tax ("Tax" or
"UUT"). The amount of the Tax is 3%. It is imposed on City residents who
use telephone service, electricity, co-generated electricity, natural gas,
and water.
~ Subsequently, the voters of the State of California adopted Proposition
218.
~ To comply with Proposition 218, in 2004, the City Council placed the Tax
on the ballot, and the voters ratified the existing Tax at the same 3% rate.
~ The City's Tax originally was imposed upon all telephone services that
were subject to the Federal Excise Tax ("FET"). In response to litigation,
in 2006, the Internal Revenue Service issued a ruling stating that the FET
does not apply to most common telephone billing plans. This invalidated
the basis for the City's Tax as applied to telephone service.
~ In response to these events, some cities, including Rancho Palos Verdes,
amended their ordinances without voter approval to delete the reference
to the FET and replaced it with other terms to cover telephone services
that had been subject to the FET.
~ Since 2006, many changes have occurred with respect to telephone
services that have caused the definitions in the UUT to become outdated.
Some types of telephone services currently are not subject to the tax,
while others are. This inequity cannot be corrected without placing
revisions to the Tax on the ballot for approval by the voters.
~ Recently, new legal challenges and claims have been filed against other
cities that did not place their amended utility user taxes on the ballot.
Attorneys in those cases have claimed damages and substantial
attorney's fees. (We understand that Chula Vista paid $2 million in
attorneys' fees to the attorneys who filed a lawsuit challenging that city's
utility user tax.)
~ Staff proposes placing an ordinance on the November 2014 ballot, to
protect future UUT revenues from legal challenge and to modernize the
UUT so that it will apply to new and formerly undefined types of telephone
services, such as prepaid mobile telephones.
R6876.000111732852v2 2
2-79
~ The proposed ordinance does not increase the UUT or expand the Tax to
other types of utilities, and does not afford the City Council ability to do so
in the future. Thus, video, cable and trash services, for example, still
would not be subject to the City's UUT.
~ Staff recommends that the City Council include a reduction of the rate of
the UUT from 3% to 2.75% in the ordinance that is presented to the voters
because that reduction will benefit the residents while still preserving the
majority of the current revenue stream from the UUT to the City to fund
City services.
~ If the Ordinance is approved by the City Council and the City's voters,
pursuant to the State Constitution, the Tax cannot be increased, and the
. utilities and services that are subject to the Tax cannot be expanded
without voter approval of those changes.
DISCUSSION:
By placing the measure on the ballot at the earliest possible election date, which
is November 2014, any dispute about the City's ability to collect the UUT on
telephone services will be resolved a year earlier than if the City waits to place
such a measure on the ballot in November 2015, when the next regular City
Municipal election will occur. In other words, if approved by the City Council and
the voters, the ordinance will protect future UUT revenues from a successful
legal challenge.
In addition, if the voters were to approve an ordinance that modernizes the City's
UUT at the reduced rate of 2.75%, the residents will receive the monetary benefit
of the reduction of the rate of the UUT. In addition, by modernizing the UUT,
newer types of telephone-related services will be treated the same, so that
telephone users in the City are treated alike.
If the City Council wishes to place the UUT on the November 2014 ballot, the
City Council must unanimously adopt a resolution setting forth an emergency that
justifies the election being held prior to an election date that is different from the
date of the City's regular municipal elections in November of odd numbered
years.
Staff believes that there are facts upon which the City Council may rely in
declaring an emergency and calling the election in November 2014, instead of
waiting until November 2015. Those facts are set forth in the attached resolution
and are reiterated here:
1. Litigation and claims have been filed against other cities that have not
placed their UUT ordinances on the ballot for voter approval, specifically
R6876.000 l/1732852v2 3
2-80
addressing the elimination of the Federal Excise Tax on telephone
services, causing the loss of that important revenue stream and the
payment of a significant amount of attorney's fees. The City of Rancho
Palos Verdes seeks to protect future revenues from its UUT from such
claims and lawsuits and avoid unnecessary legal expenses and exposure.
2. Continuous State takeaways over the last few years, including the state's
recent elimination of redevelopment agencies, have resulted in significant
reductions in revenues that the City intended to be used to repay the City
for loans made previously to the Rancho Palos Verdes Redevelopment
Agency for expenditures to address landslide damage and increase land
stability within former Redevelopment Project Area No. 1.
3. The Portuguese Bend Landslide is a large active landslide that continues
·to move and adversely affects public infrastructure, including Palos
Verdes Drive South, a major arterial street in the City. The constant
damage caused by the landslide requires constant and increased City
expenditures to more than $500,000 annually to maintain PVDS as a
viable arterial street.
4. During the recession, the State took monies that previously were allocated
to cities to reduce the State's budget deficit. It is expected that similar
actions will likely occur again in the future in response to downturns in the
economy.
5. The cost to the City of complying with state and federal clean water rules
continues to increase significantly each year.
6. The City has many unfunded important infrastructure projects, which are
discussed above, totaling more than $28 million, including unfunded
projects to improve City streets ($4.7 million), and storm drains ($9.4
million).
7. The City of Rancho Palos Verdes seeks to maintain current levels of
public safety and police services within the City, even though the cost of
such services continues to increase, including the City's contribution to the
County liability trust fund for law enforcement services, which the City has
been notified will increase again in fiscal year 15-16.
8. The City has made cost reductions to the City's Capital Improvement
(infrastructure) Program in recent years in order to maintain a balanced
budget. However, similar cost reductions alone will not be sufficient to
avoid future cuts to services if future revenue from the UUT is lost due to
legal challenges. Therefore, the loss of significant future revenue from
R6876.0001/1732852v2 4
2-81
UUT would have a negative impact upon public safety and the character
of the community in Rancho Palos Verdes.
CONCLUSION:
If the City Council concurs with the above findings and that the ordinance
reducing the rate of the UUT from 3% to 2.75% and modernizing its provisions
should be placed on the ballot for the upcoming election in November 2014, then
the City Council should adopt the attached resolution and vote to approve the
ordinance. The adoption of the resolution requires a unanimous vote by the
Members of the City Council, and the proposed ordinance requires an affirmative
vote by four Members of the City Council.
Attachments: Draft Resolution
Draft Ordinance
July 15, 2014 Staff report
Public Correspondence
R6876.0001 /1732852v2 5
2-82
Carolynn Petru
From:
Sent:
Long, Thomas D. <tlong@nossaman.com>
Wednesday, July 09, 2014 12:54 PM
To: cc
Subject: Repeal of Utility User Tax?
Dear Councilmembers:
I noticed this item to be considered by you. I would urge you to tread carefully before advancing this
proposal further. Reducing the city's revenue would seem risky unless you can determine that the
city has surpluses after meeting its obligations.
Specifically, are all of the. city's infrastructure deficits now fully funded?
Is the city revenue per resident now above average compared to California cities such that perhaps
we can consider it has too much money?
Is the city spending more. ori infrastructure maintenance and improvement than its depreciation each
year? Are we $pending eno1,.1gh more to cover the replacement costs of wasting assets instead of just
book value?
What operational and infrastructure projects would you cut back to cover the lost revenue?
Thomas D. Long
Attorney at Law " ·
NOSSAMAN LLP
777 South Figueroa Street, 34th Floor
Los Angeles, CA 90017 " .
tlong@nossaman.com
T.
D
ni NOSSA· MANi 1· susscR1sE To E-ALERrs Jll ! · · UP nossaman.corn .
PLEASE NOTE: The information In this e-mail message ls confidential. It may also be attorney-client privileged and/or
protected from disclosure as attorney work product. If you have received this e-mail message in error or are not the
intended recipient, you may not use, copy, nor disclose to anyone this message or any information contained in it. Please
notify the sender by reply e-mall and delete the message. Thank you.
1
2-83
From:
Sent:
To:
Subject:
Mayor Jerry Duhovic
Ken Delong <ken.delong@verizon.net>
Tuesday, July 15, 2014 1:32 PM
cc
Tonight's Council Agenda Item 6
Council Members: Susan Brooks, Brian Campbell, Jim Knight, Anthony Misetich
Subject; July 15, 2014 RPV Council Agenda Item 6.
June 3rd the RPV Council approved the FY 2014 / 2015 budget which included the Utility Users Tax (UUT) as
recommended by staff for the FY 2014 I 2015 budget period. Now, barely 30 days later, staff has declared that an
emergency situation exists and the Council should take immediate action to have a Special Election this November.
What has occurred ·in the past 30 days or so to create this emergency? How much staff I City Attorney time was used to
create the resolution and supporting documents? When was the Council aware of this project?
Justification: There is NO justification for having a Special Election to amend the Utility Users Tax (UUT).
Staff report page 6-2, last paragraph "Accordingly, some types of telephone services currently are not subject to the tax
(UUT), while others are. This is not completely fair to City residents (our emphasis) who use telephone services and
currently are subject to the City's UUT. Accordingly Staff proposes placing an ordinance on an upcoming ballot that will
modernize the UUT."
There is no other commentary that RPV is violating any California law whatsoever with the current UUT. Staff has not
presented any facts, other than an opinion that the current UUT is unfair, that support staffs belief that this matter is an
"emergency" that requires a Special Election.
Some Facts for Consideration:
My personal Verizon and AT&T services
310 541-8369 -6/25/14 Verizon (local Services) $47.99 -UUT $1.71-2.9%
310 541-8369 -6/20/14 AT&T (Usage Plan) $40.93 -UUT $1.18 -2.9%
310 377-2426 -6/16/14 (Verizon FiOS) $144.73 -UUT $1.26 -$.9%
310 748-2426 -6/23/14 (AT&T Mobile) $45 -UUT $.84-1.9%
My 310 541-8369 is "traditional" telecom services and few should be paying more than I do for "traditional" services. I
do not consider a $2.89 monthly fee to be so outrageous that we need to have a Special Election to supposedly rectify a
few cents.
I have checked with several friends who subscribe to Cox bundled services and their UUT is less than $1.00.
Is it staffs position that it is unfair that I and others pay a UUT of $2.89 for "traditional" services and those with a FiOS
bundled service pay only $1.26 and that RPV must take steps to resolve this unfair situation? RPV has greater
substantive issues that having staff concern itself over $1.26 per month in UUT fees. Or does staff have other motives?
What staff is missing is that Federal law restricts applying any taxes to Internet services and the backbone of FiOS and
similar bundled services (AT&T U-Verse I Cox Cable) is Internet technology and protocols. The portion of "bundled
services" that is used for "traditional services" is taxable with FCC I Calif. PUC approval of taxing formulas.
1
2-84
Section 3.30.020-Definitions begin on page 6-12 and conclude on 6-15. What is the purpose? Are these definitions
designed to merely cloud the situation or does staff perceive a new taxing opportunity? Why else is this listing of terms
included?
Staff proposes a cost reduction of .25% for which the taxpayers will supposedly be appreciative. In view of the Section
3.30.020 Definitions, it does appear that staff likely has other ideas about how UUT taxes might be increased.
Before rushing into the questionable UUT modernization scheme, there should be an overall assessment of RPV taxing
schemes and revenues. As staff reported (Loss of UUT-Budget Impact) page 6-3, General Fund revenues for FY 2014 /
2015 are projected at $26.5 million which allows transfer of $7.3 million to the Capital Improvements Projects (CIP)
fund. Not included is the projected TOT income of over $4 million making a total transfer of over $11 million to the CIP
fund for FY 2014 I 2015. Rather than tinker with the UUT, let's get rid of the unneeded Storm Drain User Fee.
In conclusion, this proposal appears to be a "Trojan Horse" and we remain unaware of the full implications of the
proposed Ordinance modification. Most RPV residents do not want to pay excessive taxes however, until the full
implications of the proposed modifications to the UUT Ordinance are clear, I prefer to continue to pay the supposedly
unfair $1.26 UUT per month while we await clarification of RPV's financial structure.
Ken Delong
2
2-85
Cal iaCityFinanceocom August 2013
Tfu. 6t7vlijCJrnit7v LrJC:tlvl 9CJvernMent Fint7vnc.e A-lMt7vnt7vc.
Utility User Tax Facts
The Utility User Tax (UUT) may be
imposed by a city on the consumption of
utility services, including {but not limited
to) electricity, gas, water, sewer,
telephone (including cell phone and long
distance), sanitation and cable television.1
The rate of the tax and the use of its
revenues are determined by the local
agency. A UUT may be imposed as a
special tax, earmarked for a specific
purpose, or a general tax to be used for a
variety of municipal service needs at the
discretion of the city council. The tax is
levied by the city, collected by the utility
as a part of its regular billing procedure,
and then remitted to the city. Statewide,
Cities and Counties With UUTs
Cities 2 Counties 2
Number with UUT 154 4
~-~~-··~.-~,.,,~-,"'~
Telephone UUTs 146 4
Intrastate 146 4
Interstate 114 4
International 110 4
~-~~--~~--,·~--~""·-~-~~----·----·---
Wireless 126 3
Electricity 153 4
Gas 153 4
-~•-••>"•-•-•n•-•••·-·-•-n--•----,.~•~«-•m-. .-·-•<>-••••-···--.. -·
Cable lV 86 1
Water 83 1
Sewer 13 1 -Garbage 10 0
city and county utility user taxes generate about $2 billion per year.
Voter Approval is Now Required to Levy a New or Increased UUT
Most of the 154 cities and 4 counties 2
with UUTs adopted the taxes by vote of the
city council (or in the case of a county UUT,
the County Board of Supervisors) prior to
1986. Generally, taxes imposed since then
require voter approval. The Constitution
(Article XlllC) requires 2/3 voter approval for
any new or increased special tax. A special tax
is dedicated to a specific purpose. A new or
increased general tax requires majority voter
approval.
180
160
140
120
100
80
60
20
0
State
Po~ulation
Total co\.€red
158 50%
"~'"'~ ..
150 49%
150 49%
118 41%
114 44%
·-~~~~~--~~~-~~~
129 44%
157 49%
157 49%
·-----~·--"--·-·····-···--~-
87 20%
84 21%
14 4%
10 1%
150 157
3
4
5
4
Currently, all UUTs are general taxes
except two. In June 2003, voters in the City of
CATV Telephone
Wireless
Telephone Gas, 8ectric
Landline Water, etc.
1 .Authority: General law cities: Government Code § 37100.5; Calif Constitution Article XI § 5 ("municipal affairs")
2 The City/County of San Francisco is counted here as a county, not a city.
3 No UUT on telecom in Azusa, Buena Park, Pacifica, Scotts Valley.
4 Irvine charges commercial only.
5 Irvine, Alhambra commercial only.
2217 Isle Royale Lane • Davis, CA • 95616-6616 • Tel: 530.758.3952
2-86
t/I
Cl.)
:+:; c:
::I
0
(.) oa
t/I
Cl.)
:+:; u ....
0
'fl:
UUT facts -2-rev August 20 I 3
Desert Hot Springs approved a UUT which dedicates 50% of the proceeds to resolving the
city's bankruptcy related debt.6 In June 2010, voters in the City of Mammoth Lakes approved
the extension of the cities sun-setting UUT but earmarking it for "mobility, recreation, and arts
and culture." Ironically, that city later filed for bankruptcy facing a massive court judgment
from a land use dispute.
The UUT is Vital to Funding Essential Municipal Services
City Utility User Tax rates range from 1% to 11%. The particular utilities to which the tax
is applied varies. In some cities different rates apply to residential versus commercial users.
The most common rate (the mode) is 5%, applied broadly among many types of utilities. The
average rate (mean) is 5.5% with a standard deviation of 2.1%. Because most large cities have
UUTs, half of California residents and a majority of businesses pay a utility user tax.
The UUT is a vital element in the funding of critical city services. On average, the UUT
provides 15% of general purpose (i.e. non-earmarked) revenue in cities that levy it. In some
cities, the UUT provides as much as 1/3 of the general fund (Holtville, Compton, Richmond).
UUT revenues most commonly fund police, fire, parks, library, and long-range land use
planning s_ervices -and related support services (e.g. accounting, payroll, personnel,
information systems, etc.).
Counties Also Levy UUTs
A county may levy a UUT on the consumption of electricity, gas, water, sewer, telephone,
telegraph and cable television services in the unincorporated area.7 Four (4) of the 58
counties levy a UUT (Alameda, Los Angeles, Sacramento, and San Francisco).
California Util User Tax Rates as of s1112013
45 ~---·~--·---·-·-·-___.;;;"---------42 ------·-····--
40
35
30
25
20
15
10
5 2
0
>Oto 1% >1% to >2% to >3% to >4% to >5% to >6% to >7% to >8% to >9% to >10% to
Rate
2% 3% 4% 5% 6% 7% 8% 9% 10% 11%
6 In 2009, those voters increased the tax to 7%.
7 Revenue and Taxation Code Section 7284.2 et seq.
CaliforniaCityFinance.Com
2-87
UUT Facts 3-rev August 2013
Some UUTs Result From State Cuts to City Funds
Many city UUT levies and increases have resulted from cuts to city revenues by the state.
In 1992, facing massive deficits in the state budget, the Legislature and Governor began the
annual transfer of billions of dollars of property tax revenue from cities, counties and special
districts to K-14 schools, allowing the state to reduce its general fund spending on education.
Cities and counties, who depend substantially on sales tax and property tax revenues for
discretionary income, were already experiencing the same recessionary effects as the state.
These property tax shifts, using a mechanism called the "Educational Revenue Augmentation
Fund" (ERAF}, continue today. In FY 2008-09 the annual property tax shift totals $7.5 billion
including over $1.2 billion from cities.8
City property tax revenue, a top source of general purpose revenue for most, was cut
from at least 9% and 24% on average. Cities responded by cutting services, deferring
infrastructure maintenance, relying more heavily on debt financing, paring down reserves,
more aggressively pursuing sales tax generators, and raising taxes and assessments. Within a
few years of the beginning of the ERAF property tax shifts, more than fifty (50+} cities
increased an existing or levied a new UUT.
100%
90%
80%
70%
30%.
20% -
0%
Discretionary Revenues and Spending
Typical Full Service City
Revenues
Parks&Rec
Libr.Y '· < ···. ~~,-~¥','''
Planning
Other
Exenditures
8 For more information on ERAF, see http:/ /WW\v.californiacityfinance.com/#ERAF
CaliforniaCityFinance.Com
2-88
)() 13
UUTs on Telecommunications
The application of utility user taxes to certain telephone services has been a topic of
substantial legal and legislative turmoil due to changes in technology and federal law.
UUTs and the FET
Many Utility User Taxes in California include reference to the Federal Excise Tax
("FET")9 commonly limiting the application of the utility user taxes to charges that are
"subject to" the FET. Telephone calls which are not charged based on both time and
distance -such as those paid by coin in phone booths -are exempt from the FET. By
reference, these types of calls are also exempt from some local UUT ordinances. Many cell
phone bills are based upon a package which provides a mix of local and long-distance
calling for a flat rate.
In 2007, several federal courts and the IRS ruled that telephone service packages
which provide a mix of local and long-distance calling for a flat rate or a fixed fee are based
on neither time nor distance and are therefore not subject to the FET.10 The IRS
subsequently adopted a regulation incorporating these rulings.11 That meant that if a city
wished to continue to impose its UUT on cell phone or other telephone calls which are not
charged on both time and distance, it must amend its ordinance to remove the reference
to this exemption to the FET.
A number of cities have amended their UUT ordinances to clarify that they did not
wish to adopt the IRS' new practice, but rather wished to continue to impose their UUTs as
they had historically been imposed (i.e. on charges based on time or distance). At the time
of this writing, several localities are challenging the right of local taxing authorities to
amend their ordinances without voter approval, or to continue to collect this revenue
without amendment. The lawsuits argue that an amendment to an ordinance to bring it
into conformity with the FET ruling is an "increase" subject to voter approval under
Proposition 218.
UUTs and the MTSA
Prior to the adoption of the Mobile Telecommunications Sourcing Act of 2000
(MTSA)12 by Congress, cellular carriers had argued that the federal Constitution forbade
the application of a utility user tax to telephone calls which neither originated nor
terminated within the taxing agency. The MTSA expanded the permissible nexus for
taxation to all cellular telephone charges for accounts with a primary place of use in the
jurisdiction. However, carriers have argued in the courts that the California State
9 42 U.S.C. §§ 4251 et seq.
10 IRS Notice 2006-50
11 Revenue Bulletin 2007-5 Section 10
12 4 U.S.C. §§ 116 et seq.
2-89
UUT Facts rnv August 2013
Constitution Article XlllC prohibits cities and counties from applying the MTSA nexus rules
without voter approval.13
As a result of these events, doubt has been cast over the application of some
outdated local UUT ordinances to certain types of telephone service. Proposition 218
requires voter approval of any change in the "methodology" by which a tax is
administered if the change increases the amount of the tax paid by the taxpayer.14 Many
agencies that rely on UUTs on telephony have successfully sought voter approval of an
updated ordinance that reflects the realities of the modern telecommunications industry.
Recent Voter Approval Record
From June 2002 through June 2013 there were 173 utility user tax measures placed
before voters by cities and counties. Just three of these were county measures. Proposals for
new or increased UUTs did not fare well: Just 20 of 66 proposals passed.
• Eight of these new/increase proposals were framed as two-thirds vote special taxes
dedicated to police/fire (3) or streets (1); just two passed. Both were in Desert Hot
Springs: June 2003 new 5% rate, May 2009 an increase to 7%.
• Ten attempted an "a/b" advisory vote strategy, proposing a majority-vote general tax
with a second companion "advisory measure" regarding the specific use of the funds.
Five of the ten passed. Of the 19 majority vote UUT general tax increase measures, just
two passed (Rialto in June 2003, Menlo Park in November 2006).
Utility User Tax Measures (increase or expand) June 2002 -June 2013
Cities and counties
Modernize I Reduce
Modernize/SameRate
Ratification (La Habra)
Continuation
Special Tax (2/3)
:3eneral Tax w/ Advisory
General Tax New/Iner.
0% 10% 20% 30% 40% 50% 60%
13 Verizon Wireless v. Los Angeles, No. B 1853 73, AB Cellular IA, LLC dba AT&T Wireless v.
City of Los Angeles, 150 Cal.App.4th 747 (2007)
14 Gov. Code§ 53750(h)
CaliforniaCityFinance.Com
70% 80% 90%
Fail
1
100%
2-90
UUT Facts 6 20!3
But voters were more accepting of UUTs already in place. Among the 21 measures to
continue existing UUTs beyond a sunset date, 18 passed. All 11 measures which asked voters
to ratify existing taxes following the 1991 La Habra decision upholding the validity of
Proposition 62's majority vote requirement on general law cities passed.
Over the last decade, an increasing number of cities with UUTs have gone to their voters
to modernize their ordinances to assure applicability to new technologies (e.g wireless,
internet-based, etc.) and billing methods (e.g. flat rate, etc.). In some cases, the measures
have proposed small reductions in the UUT rate. All but five of the 75 measures passed.
During this period there were also 14 referenda placed on the ballot by citizens
concerning UUTs. All seven measures to repeal a local UUT failed and four out of the five
measures to reduce local UUTs failed. Voters in Greenfield {Monterey County) voted to reduce
their UUT from 6% to 3% in November 2002. A referendum to restrict the use of UUT
revenues to law enforcement services passed in Seaside (Monterey County) in November
2002, but a similar measure failed in Stockton in March 2003.
2-91
Resolution No. 9437
Resolution of the Council of the City of Palo Alto Calling a Special Election for
November 4, 2014 for Submittal to the Qualified Electors of the City a
Measure Related to the Utility Users Tax
RECITALS
A. The City's long term economic health is dependent on a diverse revenue base.
B. Since 1987 the residents of the City of Palo Alto have paid a utility user tax on
telephone communications services.
C. The telecommunications portion of the total UUT revenue is $2.8 million annually
or nearly 2 percent of general fund revenue.
D. Telephone communication advances over the past two decades mean that the City
must update its utility users tax to match today's technology, including definitions for new
telecommunications technologies.
E. Updating the existing outdated utility users tax on telecommunications services
with a modest reduction of the existing rate will ensure that taxpayers are treated the same
regardless of the type of technology used.
F. The telecommunications users tax component of the utility users tax is an
important revenue source and preserving that revenue will ensure that the City can preserve
essential City services including fire protection, rapid emergency response and crime
prevention, library hours and services, maintenance of City parks, playgrounds and athletic
fields and continue to provide the programs that residents expect and deserve.
G. The measure will safeguard local revenues already being received for local needs
and this money cannot be taken away by the State.
H. The UUT discount for large volume commercial users of electricity, gas and water is
contrary to current city goals of energy conservation.
I. A proposed ordinance, attached hereto and incorporated herein by reference as
Attachment "A" (the "Ordinance"), would modernize the telecommunications portion of the
UUT and eliminate the large volume utility tax discount for gas, electric and water.
J. Pursuant to Government Code Section 53724 and Election Code Section 9222, the
City Council desires to submit the Ordinance to the voters of the City at the Election.
The Council of the City of Palo Alto RESOLVES as follows:
1
140617 jb 0131201
2-92
SECTION 1. Findings. The City Council finds and determines that each of the findings
set forth above are true and correct.
SECTION 2. General Tax Proposal. The City Council proposes to impose the general tax
set forth in the Ordinance and to present this proposal to the voters on November 4,
2014. The proposed type of tax, the rate ofthe tax, and the method of tax collection are as set
forth in the Ordinance.
SECTION 3. Special Election. The City Council hereby calls a special municipal election
on Tuesday, November 4, 2014. Pursuant to Elections Code Section 9222, the City Council
hereby submits the Ordinance to the voters at the Election and orders the following question to
be submitted to the voters at the Election:
To ensure continued funding for basic and essential services such YES
as police, fire and street maintenance and repair, shall the City of
Palo Alto maintain the telecommunications portion of the Utility
Users Tax while reducing the rate from 5% to 4.75%; modernize
its provisions to ensure equal treatment of taxpayers regardless NO of telecommunications technology used; and eliminate a
discounted tax rate paid by a small number of commercial large
users of gas, electric and water services?
This question requires the approval of a majority of those casting votes.
SECTION 4. AdoQtion of Measure. The measure to be submitted to the voters is
attached to this Resolution as Attachment A and incorporated herein by this reference.
SECTION 5. Notice of Election. 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 6. Impartial Analysis. Pursuant to California Elections Code Section 9280, the
City Council hereby directs the City Clerk to transmit a copy of the measure to the City
Attorney. The City Attorney shall 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 on or before August 19,
2014.
SECTION 7. Ballot Arguments. Pursuant to Elections Code Section 9286 et. seq., August
12, 2014 at 5:30 p.m. shall be the deadline for submission of arguments in favor of, and
arguments against, any local measures on the ballot. If more than one argument for and/or
against is received, the priorities established by Elections Code Section 9287 shall control.
SECTION 8. Rebuttal Arguments. The provisions of Elections Code Section 9285 shall
control the submission of any rebuttal arguments. The deadline for filing rebuttal arguments
shall be August 19, 2014 at 5:30 p.m.
2
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SECTION 9. Consolidation Request. The Council of the City of Palo Alto requests the
governing body of any other political subdivision, or any officers otherwise authorized by law,
to partially or completely consolidate such elections and the City Council consents to such
consolidation. The Council requests the Board of Supervisors of Santa Clara County to include
on the ballots and sample ballots, all qualified measures submitted by the City Council to be
ratified by the qualified electors of the City of Palo Alto.
SECTION 10. Request for County Services. Pursuant to Section 10002 of the California
Elections Code, the Council of the City of Palo Alto hereby requests the Board of Supervisors of
Santa Clara County to permit the Registrar of Voters to render services to the City of Palo Alto
relating to the conduct of Palo Alto's General Municipal and Special Elections which are called
to be held on Tuesday, November 4, 2014. The services shall be of the type normally performed
by the Registrar of Voters in assisting the clerks of municipalities in the conduct of elections
including, but not limited to, checking registrations, mailing ballots, hiring election officers and
arranging for polling places, receiving absentee voter ballot applications, mailing and receiving
absent voter ballots and opening and counting same, providing and distributing election
supplies, and furnishing voting machines.
SECTION 11. Transmittal of Resolution. The City Clerk is hereby directed to submit
forthwith a certified copy of this resolution to the Santa Clara County Board of Supervisors and
to the Registrar of Voters.
II
II
II
II
II
II
II
II
II
II
II
II
II
3
140617 jb 0131201
2-94
SECTION 12. Exemption from CEQ.A. The City Council finds that this resolution is not a
project under Section 21065 of the California Environmental Quality Act (CEQA).
INTRODUCED AND PASSED: June 23, 2014
AYES: BERMAN, BURT, HOLMAN, KLEIN, KNISS, PRICE, SCHARFF, SCHMID,
SHEPHERD
NOES:
ABSENT:
ABSENTIONS:
b~. ~--'----""'-·
City Clerk 4'
4
140617 jb 0131201
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Attachment A
Ordinance No.
Ordinance of the Council of the City of Palo Alto Amending Chapter 2.35
of Title 2 of the Palo Alto Municipal Code Relating to the Utility Users Tax
The People of the City of Palo Alto do ordain as follows:
SECTION 1. Chapter 2.35 of the Palo Alto Municipal Code is hereby amended by
amending Chapter 2.35 as follows:
2.35.010 Short title.
2.35.020 Tax imposed.
Chapter 2.35
UTILITY USERS TAX
2.35.030 Disposition of tax revenue.
2.35.040 Definitions.
2.35.050 Constitutional exemption.
2.35.060 Electricity users tax.
2.35.070 Gas users tax.
2.35.080 Water users tax.
2.35.090 Tele~ommunications users tax.
2.35.ldO Tax rate for high volume service users.
2.35.110 Council authorization to suspend collection of a portion of tax for limited
periods of time.
2.35.120 Collection of tax.
2.35.130 Reporting and remitting.
2.35.140 Penalty for delinquency.
2.35.150 Records.
2.35.160 Failure to pay tax -Administrative remedy.
2.35.170 Actions to collect.
2.35.180 Administrative rules, regulations and agreements.
2.35.190 Refunds.
2.35.200 Bundling Taxable Items with Nontaxable Items.
2.35.010 Short title.
This chapter shall be known as the "Utility Users Tax."
(Ord. 3781 § 1 (part), 1987)
2.35.020 Tax imposed.
There is established and imposed, commencing on the effective date of the ordinance
codified in this chapter, a utility users tax at the rate set forth in this chapter.
(Ord. 3781 § 1 (part), 1987)
2.35.030 Disposition of tax revenue.
140510 ib 0131177 Rev. May 10, 2014
2-96
The tax imposed by this chapter is for the purpose of raising revenues for the general
govern mental purposes of the city. All of the proceeds from the tax imposed by this chapter
shall be placed in the city's general fund.
(Ord. 3781 § 1 (part), 1987)
2.35.040 Definitions.
(a) Except where context otherwise requires, the definitions given in this section govern the
construction of this chapter:
(1) "City" means the city of Palo Alto.
(2) "Month" means a calendar month.
(3) "Person" means any natural person, firm, association, joint venture, joint stock company,
partnership of any kind, club, Massachusetts business or common law trust or society,
organization, corporation (foreign and domestic), business trust of any kind, or the manager,
lessee, agent, servant, officer or employee of any of them.
(4) "Service supplier" means a person required to collect and remit a tax imposed by this
chapter and includes the city's utilities department with respect to a tax imposed on the use of
gas, electricity and water aAEl a Ry telephoAe cor13or:ati0A with respect to the taM imposes on
the use of telephoRe services.
(5) "Service user" means a person required to pay a tax imposed by this chapter.
(6) "Utility tax year" means the period beginning on the effective date of the ordinance
codified in this chapter and ending June 30, 1988, for the initial utility tax year. Thereafter, the
utility tax year shall be the twelve-month period beginning July 1st and ending June 30th of the
next succeeding calendar year.
_ (7) "TelephoAe cori:wratioR" means the same as elefiAcd in SeGtioR 2:94 of the Public Utilities
Coele of the state.
(Ord. 3781 § 1 (part), 1987)
2.35.050 Constitutional exemption.
Nothing in this chapter shall be construed as imposing a tax upon the city of Palo Alto or any
other person if imposition of such tax upon that person would be in violation of the
Constitution of the United States or that of the state of California or any other statute or
regulation that applies to charter cities. The City may adopt an administrative policy to
implement this provision.
(Ord. 3781 § 1 (part), 1987)
2.35.060 Electricity users tax.
(a) There is imposed a tax upon every person in the city using electricity in the city. The tax
imposed by this section shall be at the rate of five percent of the charges to a service user made
for such electricity by a service supplier, except as provided in Section 2.35.100. Said tax shall
be paid by the person paying for such electricity.
140510 Jb 0131177 Rev. May 10, 2014
2-97
(b) "Charges," as used in this section, shall include charges made for metered energy and
charges for service, including customer charges, service charges, standby charges, charges for
temporary services, demand charges, and annual and monthly charges.
(c) As used in this section, the term "using electricity" shall not be construed to mean the
storage of such electricity 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 electricity
was received; provided, however, that the term shall include the receiving of such electricity for
the purpose of using it in the charging of batteries; nor shall the term include the mere
transmission or receiving of such electricity by a governmental agency at a point within the city
for resale.
(Ord. 3781 § 1 (part), 1987)
2.35.070 Gas users tax.
(a) There is imposed a tax upon every person in the city using gas in the city which is
delivered through mains or pipes. The tax imposed by this section shall be at the rate of five
percent of the charges to a service user made for such gas by a service supplier, except as
provided in Section 2.35.100. Said tax shall be paid by the person paying for such gas.
(b) "Charges," as used in this section, shall include charges made for metered gas and
charges for service, including customer charges, service charges, demand charges, standby
charges, charges for temporary service, and annual and monthly charges.
(c) 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 mains or pipes and
charges made for gas to be used in the generation of electrical energy by a governmental
agency.
(Ord. 3781 § 1 (part), 1987)
2.35.080 Water users tax.
(a) There is imposed a tax upon every person in the city using water which is delivered
through mains or pipes in the city. The tax imposed by this section shall be at the rate of five
percent of the charges to a service user made for such water by a service supplier, except as
provided in Section 2.35.100. Said tax shall be paid by the person paying for such water.
(b) "Charges," as used in this section, shall include charges for metered water and charges
for service, including customer charges, service charges, standby charges, charges for
temporary service, and annual and monthly charges.
(c) There shall be excluded from the base on which the tax imposed in this section is
computed charges made for water which is to be resold and delivered through mains or pipes
and charges made for water used in the generation of electrical energy by a governmental
agency.
(Ord. 3781 § 1 (part), 1987)
140510 Jb 0131177 Rev. May 10, 2014
2-98
2.35.090 TelecommunicationspheAe users tax.
(a) There is imposed a tax upon every person in the city, using intrastate telephone
communication services in the city, other than a telephone corporation. The tax lmpos€d by
this section shall be at the rate of #¥e 4. 75 percent of the charges made to a service user for
such services by a service supplier and shall be paid by the person paying for such services.
(b) As used in this section, the term "charges" shall not include charges for services paid for
by inserting coins in a coin-operated telephone except that where such coin-operated services
are furnished for a guaranteed amount, the amounts paid under such guarantee plus any fixed
monthly or other periodic charge shall be included in the base for computing the amount of tax
due; nor shall the term "telephone comm1:1nications ser¥ices" incluEle Ian a mobile services or
maritime mobile seP1ices as defined in Section 2.1 ofTitle 47 of the GoEle of Federal
Reg1:1lations, or any amendment or replacement thereof.
_kl_ The telephone users tax imposed by this section is intended to, and does, apply to all
charges billed to a telephone account having a situs in the city, irrespective of whether a
particular communication service originates and/or terminates within the city. The situs shall be
the service address, if known; otherwise the billing address.
--1QL. The term "telephone communication services" means refers to tl:lat serviee wl:lich
pra·1ides access to a telephone system and the i:>ri'lilege of telepl:lenic ~1::1alit•1 comR'l1-mication
witl:l s1::1bstantially all persons ha¥ing tele13hone stations wl=!ich are 13art of swcl=l tele13hone
S'(stem. The term "telept:lone coffimunication services" also refers to that service which
pro¥iEies access to a telei:ihone s•;steFA for data anEl/or video to the exteAt permitted la·,· law.
the transmission, conveyance, or routing of voice, data, audio, video, or any other information
or signals to a point, or between or among points, whatever the technology used, including, but
not limited to, traditional telephone service, mobile telecommunications service, and
broadband service (e.g., digital subscriber line (DSL), fiber optic, coaxial cable, and wireless
broadband, including Wi-Fi, WiMAX, and Wireless MESH) to the extent not prohibited by
Federal and/or State law, now or in the future. "Telephone communication 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 such service is referred to as voice over internet protocol
(VoIP) services or is classified by the Federal Communications Commission as enhanced or value
added, and includes video and/or data service that is functionally integrated with "telephone
communication services."
(e) The tax imposed by this section applies to all telephone communication services however
charged or billed, including, but not limited to prepaid services, post-paid services, 800 services
(or any other toll-free numbers), or 900 services.
(f} The tax imposed by this section applies to ancillary telephone communication services,
which are those services that enable or enhance access to telephone communication services.
Ancillary telephone communication services include, but are not limited to, charges for
connection, reconnection, termination, movement, or change of telephone communication
140510 jb 0131177 Rev. May 10, 2014
2-99
services; detailed billing; central office and custom calling features (including but not limited to
call waiting, call forwarding, caller identification and three-wav calling); voice mail and other
messaging services; directory assistance; access and line charges; local number portabilit)l
charges; text and instant messaging; and conference calls.
(g) "Mobile telecommunication service" means commercial mobile radio service, as defined
in Section 20.3 of Title 47 of the Code of Federal Regulations and as set forth in the Mobile
Telecommunications Sourcing Act (4 U.S.C. Section 124) and the regulations thereunder.
(h) "Place of primary use" means the street address representative of where the customer's
use of the telephone communications service primarily occurs, which must be the residential
street address or the primary business street address of the customer.
(I) "Service address" means either (1) the location of the service user's telephone
communication equipment from which the communication originates or terminates, regardless
of where the communication is billed or paid; or (2) if the location of the equipment is unknown
(e.g., mobile telecommunication service or VoIP service), the service address means the
location ofthe service user's place of primary use: or (3) for prepaid telephone communication
service "service address" means the point of sale of the services where the point of sale is
within the city, or If unknown, the known address of the service user (e.g., billing address or
location associated with the service number), which locations shall be presumed to be the place
of primary use.
(j) There is a rebuttable presumption that a telephone communication service, which is billed
to a billing or service address in the city, is used, in whole or in part, within the city's
boundaries, and such service is subject to taxation under this section. There is also a rebuttable
presumption that a prepaid telephone communication service sold within the city is primarily
used, in whole or in part, within the city and is therefore subject to taxation under this section.
If the billing address of the service user is different from the service address, the service
address of the service user shall be used for purposes of imposing the tax. As used in this
section, the term "charges" shall include the value of any other services, credits, property of
every kind or nature, or other consideration provided by the service user in exchange for the
telephone communication service.
(c) Notwithstanding the provisions ef s1:19section (a) ofthis section, tl'le taK imposed l:lAdeF
this sectien shall net 9e h~~poseE:f 1:1pon aA'{ persons foF l:lsing intrastate teler:>hone
cemmunication services to the eKteAt that the amouAts paid f-Or such ser¥ices are eKempt from
or not subject to tAe tax imposed l.mder Division 21 Part 20 of the California ReYenue ans
Ta>!atioA Code, or the taK imposed under Section 4251 of the Internal Revenue Code, any
amenelment or any replacement thereof.
(Ord. 3781 § 1 (part), 1987)
2.:n.100 Tax ratie fer high veh.ime serviGe wsers.
(a) The ta>! rate imposeel on electricity1 gas and water users in Sections 2.~5.0!;0, 2.~S.070
anel 2.35.080 rcspecti .. ·ely shall be three percent on all utiliti; c1=1arges to a service 1:1ser
exceeding the wm1:1lative aAlount of $800,000.00 f-Or water, gas and electricity or any
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coR-lbination thereof d1:1ring any utilit1· tax vear and shall be two percent of tl'le aR-lount ef 1:1tility
chaFges exceeding the c1:1mulati•1e amount ef $2,400,000.00 for water, gas or electricity or anv
comelnatlon thereof d1:1ring any utllitv tax vear,
(b) Commencing on July 1, 1988, and every Jul1· 1st thereafter, the directer of finance shall
annually adjust the three 19ercent and two percent tax rate thresholds specified in s1::11:lsection
(a) of this section 13y the aARual change in the Consumer Price lnele><, All Urban Const:H-l"1ers, for
the San Francisco Oakland San Jose Metropolitan Area pualished ey the B1::1reau of Labor
Statistics or any replacement index published b't' saiEI Bureau {"lnde><"I for the preceding ~·ear as
illustrates bv the following form1::1la;
NT-T ~A) I (8)
~IT -New threshold for the upcoming utility taM year
T -C1:1rrent threshold
A -The lndeM for April preceding the upcoming 1:1tilit·1 tax year
B -The Index for the pre\lious April.
For example, on July 11 1988, the thresholds sl'lall ae adj1::1sted b•t' m1:1ltiJ:Jlying them by the
April, 1988, lnde>< di•1ided by the April, 1987, Index.
(e) Wl=tere anv person can establisl'l to the satisfaction of tl:!e eireetor of finance tl=tat be is a
person responsible for ti-le payment of one or more taxes 1:1nder this chapter, he mav aggregate
d1arges for gas, electricity or water or any combination tl=tereof for 13ur13oses of determining the
ap13lication of tl:le ree1:1ceEI rate p1::1rsuant to tl:iis section. The city manager shall develop ai:ld
p1:1elist'I written reg1:1lations for determining wt.licl:i f)erson(s) is a seP1ice user for tl:ie fiJl:IFfiJOses of
implen:ienting the lower rates autlwrizeel by tl:iis section. Suel:i regulations n:ia'Jf be amenEled
from time to time,
(Ord, 3781 § 1 (13art), 1987)
2.35.110 Council authorization to suspend collection of a portion of tax for limited periods of
time.
The city council may from time to time determine to collect less than the five percent tax
imposed by Sections 2.35.060, 2.35.070, 2.35.080 and 2.35.090 from all service users and may
suspend a portion of the maximum rates by passage of an ordinance stating:
(a) The council's intention to suspend collection of a portion of said tax;
(b) The duration of the suspension, which in no event shall exceed one year;
(c) The exact portion of the tax, collection of which is being suspended.
This rate suspension shall apply to all service users across the board and shall be in effect for
one year from the effective date of said ordinance.
(Ord. 3781§1 (part), 1987)
2.35.120 Collection of tax.
(a) Every service supplier shall collect the amount of tax imposed by this chapter from the
service user.
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(b) The tax shall be collected insofar as practicable at the same time as, and along with, the
collection of charges made in accordance with the regular billing practice of the service
supplier. Except in those cases where a service user pays the full amount of said charges but
does not pay any portion of a tax imposed by this chapter, or where a service user has notified
a service supplier that he is refusing to pay a tax imposed by this chapter which said service
supplier is required to collect, if the amount paid by a service user Is less than the full amount
of the charge and tax which has accrued for the billing period, a proportionate share of both
the charge and tax shall be deemed to have been paid.
(c) The duty to collect the tax from a service user shall commence thirty days after the
effective date of the ordinance codified in this chapter. If a person receives more than one
billing, one or more being for a different period than another, the duty to collect shall arise
separately for each billing period.
(Ord. 3781 § 1 (part), 1987)
2.35.130 Reporting and remitting.
Each service supplier, shall, on or before the last day of each month, make a return to the
director of finance, on forms provided by him, stating the amount of taxes billed by the service
supplier during the preceding month. At the time the return is filed, the full amount of the tax
collected shall be remitted to the director of finance. The director of finance may require
further Information in the return. Returns and remittances are due immediately upon cessation
of business for any reason.
(Ord. 3781 § 1 (part), 1987)
2.35.140 Penalty for delinquency.
(a) Taxes collected from a service user which are not remitted to the tax administrator on or
before the due dates provided in this chapter are delinquent.
(b) Penalties for delinquency in remittance of any tax collected or any deficiency in
remittance, shall attach and be paid by the person required to collect and remit at the
rate of ten percent of the total tax collected or imposed herein.
(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 chapter for fraud or
negligence in reporting or remitting at the rate of ten percent of the amount of the tax
collected or as recomputed by the director of finance.
(d) Every penalty imposed under the provisions of this section shall become a part of the tax
required to be remitted.
(Ord. 3781 § 1 (part), 1987)
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2.35.150 Records.
It shall be the duty of every service supplier required to collect and remit to the city any tax
imposed by this chapter to keep and preserve, for a period of three years, all records as may be
necessary to determine the amount of such tax as such service supplier may have been
required to collect and remit to the city, which records the director of finance shall have the
right to inspect at all reasonable times.
(Ord. 3781 § 1 (part), 1987)
2.35.160 Failure to pay tax -Administrative remedy.
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 service supplier, or that a
service user has failed to pay the amount of the tax for a period or four or more billing periods,
or whenever the director of finance deems it in the best interest of the city, he shall relieve the
service supplier ofthe obligation to collect taxes due under this chapter from certain named
service users for specified billing periods. The director 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 service supplier,
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.
(Ord. 3781 § 1 (part), 1987)
2.35.170 Actions to collect.
Any tax required to be paid by a service user under the provisions of this chapter shall be 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 chapter shall be liable to an action brought in the name of the city for the recovery of
such amount including applicable penalties and attorneys' fees.
(Ord. 3781 § 1 (part), 1987)
2.35.180 Administrative rules, regulations and agreements.
The city manager has the authority to adopt rules and regulations not inconsistent with the
provisions of this chapter for the purpose of carrying out and enforcing the payment, collection
and remittance of any tax herein imposed, and the city manager may also make administrative
agreements to vary the strict requirements of this chapter so that the collection of any tax
imposed herein may be made in conformance with the billing procedures of a particular service
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2-103
supplier so long as the overall results of such agreements result in collection of the tax in
conformance with the general purpose and scope of this chapter. A copy of such rules and
regulations and a copy of any such agreement shall be on file and available for public
examination in the office of the city clerk. Failure or refusal to comply with any such rules,
regulations or agreements promulgated under this section shall be deemed a violation of this
chapter.
(Ord. 3781 § 1 (part), 1987)
2.35.190 Refunds.
(a) Claim Required. Prior to seeking judicial relief with respect to a dispute regarding
whether the amount of any tax has been overpaid, paid more than once or erroneously
or illegally collected or received by the city under this chapter, an aggrieved taxpayer, fee
payer, service supplier, service user or any other person must comply with the provisions
of section 2.28.230 of this code.
(b) Service Suppliers. A service supplier may claim a refund or take as credit against taxes
collected and remitted, the amount 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 service supplier.
{Ord. 5078 § 5, 2010: Ord. 3781 § 1 (part), 1987)
2.35.200 Bundling Taxable Items with Nontaxable Items.
If any nontaxable charges are combined with and not separately stated from taxable service
charges on the customer's bill or invoice of a service supplier, the combined charges are subject
to tax unless the service supplier identifies, by reasonable and verifiable standards, the portions
of the combined charges that are nontaxable and taxable through the service supplier's books
and records kept in the regular course of business, and in accordance with generally accepted
accounting principles, and not created and maintained for tax purposes. If the service supplier
offers a combination of taxable and non-taxable services, and the charges are separately stated,
then for taxation purposes, the values assigned the taxable and non-taxable services shall be
based on its books and records kept in the regular course 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 and apportionment of taxable
and non-taxable charges.
SECTION 2. General Tax. Proceeds of the tax imposed by this Ordinance shall be
deposited in the general fund of the City and shall be available for any legal purpose.
SECTION 3. Amendment or Repeal. The City Council may repeal Chapter 2.35 of the
Palo Alto Municipal Code or amend that Chapter without a vote of the people except that any
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amendment to Chapter 2.35 that increases the amount or rate of tax due from any Person
beyond the inflation-adjusted amounts and rates authorized by this Ordinance may not take
effect unless approved by a vote of the people.
SECTION 4. Severabilitv. If any section, subsection, sentence, clause, phrase, or
portion of this Ordinance is for any reason held to be invalid or unenforceable by a court of
competent jurisdiction, the remaining portions of this Ordinance shall nonetheless remain in
full force and effect. The people hereby declare that they would have adopted each section,
subsection, sentence, clause, phrase, or portion of this Ordinance, irrespective of the fact that
any one or more sections, subsections, sentences, clauses, phrases, or portions of this
Ordinance be declared invalid or unenforceable.
SECTION 5. Effective Date. This ordinance shall be effective only if approved by a
majority of the voters and shall go into effect immediately after the vote is declared by the City
Council and the duty of service providers to collect the tax shall commence as provided in
California Public Utilities Code Section 799.
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.
I hereby certify that the foregoing Ordinance was PASSED, APPROVED and ADOPTED by
the People of the City of Palo Alto voting on the 4th day of November, 2014.
ATIEST:
City Clerk
APPROVED AS TO FORM:
Senior Asst. City Attorney
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Mayor
APPROVED
City Manager
Director of Administrative
Services
Rev. May 10, 2014
2-105
PROPOSED ORDINANCE FOR VOTER CONSIDERATION
AT THE NOVEMBER 4, 2014 GENERAL MUNICIPAL ELECTION
ORDINANCE
AN ORDINANCE OF THE PEOPLE OF SANTA ANA
MODERNIZING THE TELECOMMUNICATIONS UTILITY
USERS TAX AND REDUCING THE UTILITY USERS TAX
RATE FOR TELECOMMUNICATIONS, ELECTRICITY, GAS
AND WATER FROM 6% TO 5 ~ %
THE PEOPLE OF THE CITY OF SANTA ANA DO ORDAIN AS FOLLOWS:
SECTION 1: Section 35-151 of the Santa Ana Municipal Code is hereby
amended such that it reads as follows:
Sec. 35-151. Short title.
This article shall be known as the "Utility Users Tax Ordinance of the City of
Santa Ana." The word "ordinance", "code" or "article" as used in this article shall mean
the "Utility Users Tax Ordinance" unless otherwise so indicated.
SECTION 2: Section 35-152 of the Santa Ana Municipal Code is hereby
amended such that it reads as follows:
Sec. 35-152. Purpose.
This article is required for the purpose of fixing the rate of taxation for the utility
users' tax, and for the purpose of providing a tax levy for the usual and current
expenses of the City of Santa Ana.
SECTION 3: Section 35-153 of the Santa Ana Municipal Code is hereby
amended such that it reads as follows:
Sec. 35-153. Definitions.
The following words and phrases whenever used in this article shall be construed
as defined in this section, unless otherwise indicated.
(a) "Ancillary telecommunication services" means services that are associated
with or incidental to the provision, use or enjoyment of telecommunications
services, including but not limited to the following services:
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(1) "Conference bridging service" means an ancillary service that links two
(2) or more participants of an audio or video conference call and may
include the provision of a telephone number. Conference bridging service
does not include the telecommunications services used to reach the
conference bridge.
(2) "Detailed telecommunications billing service" means an ancillary service
of separately stating information pertaining to individual calls on a
customer's billing statement.
(3) "Directory assistance" means an ancillary service of providing telephone
number information, and/or address information.
(4) "Vertical service" means an ancillary service that is offered in connection
with one or more telecommunications services, which offers advanced
calling features that allow customers to identify callers and to manage
multiple calls and call connections, 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 does not
include any vertical services that the customer may be required to have in
order to utilize the voice mail service.
(b) "Billing address" shall mean the mailing address of the service user where
the service supplier submits invoices or bills for payment by the customer.
(c) "City" shall mean the City of Santa Ana.
(d) "Day" shall mean a calendar day.
(e) "Gas" shall mean natural or manufactured gas or any alternate hydrocarbon
fuel that may be substituted therefore.
(f) "Mobile telecommunications service" shall mean commercial mobile radio
service, as defined in Section 20.3 of Title 47 of the Code of Federal
Regulations and as set forth in the Mobile Telecommunications Sourcing Act
(4 U.S.C. Section 124) and the regulations thereunder.
(g) "Month" shall mean a calendar month.
(h) "Non-utility service supplier'' means:
(1) a service supplier, other than a supplier of electric distribution services
to all or a significant portion of the city, which generates electricity for
sale to others, and shall include but is not limited to any publicly-owned
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electric utility, investor-owned utility, cogenerator, distributed
generation provider, exempt wholesale generator (15 U.S.C. Section
79z-5a), municipal utility district, federal power marketing agency,
electric rural cooperative, or other supplier or seller of electricity;
(2) an electric service provider (ESP), electricity broker, marketer,
aggregator, pool operator, or other electricity supplier other than a
provider of electric distribution services to all or a significant portion of
the city, which sells or supplies electricity or supplemental services to
electricity users within the city; and
(3) a gas service supplier, aggregator, marketer or broker, other than a
supplier of gas distribution services to all or a significant portion of the
city, which sells or supplies gas or supplemental services to gas users
within the city.
(i) "Paging service" means a "telecommunications service" that provides
transmission of coded radio signals for the purpose of activating specific
pagers; such transmissions may include messages and/or sounds.
0) "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), joint power agency, municipal
district or municipal corporation (other than the city), cooperative, receiver,
trustee, guardian, or other representative appointed by order of any court.
(k) "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 address 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 communication-by-communication basis
either through the use of a credit card or payment mechanism such as a bank
card, travel card, credit card, or debit card, or by charge made to a service
number which is not associated with the origination or termination of the
telecommunication service.
(m) "Prepaid telecommunication service" (including prepaid mobile
telecommunication service) shall mean the right to access telecommunication
services, which must be paid for in advance and which enables the origination
of communications using an access number or authorization code, whether
manually or electronically dialed.
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(n) "Private telecommunication service" means a telecommunication service that
entitles the customer to exclusive or priority use of a communications channel
or group of channels between 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 communications channel is a physical or virtual path of
communications over which signals are transmitted between or among
customer channel termination points (i. e., the location where the customer
either inputs or receives the communications).
(o) "Service address" means the residential street address or the business street
address of the service user. For a telecommunication service user, "service
address" means either:
(1) The location of the service user's telecommunication equipment from
which the telecommunication originates or terminates, regardless of
where the telecommunication is billed or paid; or,
(2) If the location in subsection (1) of this definition is unknown (e.g., mobile
telecommunications service or VoIP 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
point of sale of the services where the point of sale is within the city, or
if unknown, the known address of the service user (e.g., billing address
or location associated with the service number), which locations shall
be presumed to be the place of primary use.
(p) "Service supplier" shall mean any entity or person, including the city that
provides, sells, or resells a utility service to a user of such service within the
city.
(q) "Service user" shall mean a person required to pay a tax imposed under the
provisions of this article.
(r) "State" shall mean the State of California.
(s) "Streamlined Sales and Use Tax Agreement" means the multi-state
agreement commonly known and referred to as the Streamlined Sales and
Use Tax Agreement, as it is amended from time to time.
(t) "Tax administrator" shall mean the Finance Director, or his or her designee.
(u) "Telecommunications service" means the transmission, conveyance, or
routing of voice, data, audio, video, or any other information or signals to a
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point, or between or among points, whatever the technology used. The term
"telecommunications services" includes such 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 such 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 with
"telecommunication services." "Telecommunications services" include, but
are not limited to the following services, regardless of the manner or basis on
which such services are calculated or billed: ancillary telecommunication
services; intrastate, interstate, and international telecommunication services;
mobile telecommunications service; prepaid telecommunication service; post-
paid telecommunication service; private telecommunication service; paging
service; 800 service (or any other toll-free numbers designated by the Federal
Communications Commission); 900 service (or any other similar numbers
designated by the Federal Communications Commission for services
whereby subscribers who call in to pre-recorded or live service). 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 identification and three-way calling); voice mail and other
messaging services; directory assistance; access and line charges; universal
service charges; regulatory or administrative fees, charges or surcharges,
including charges or surcharges for programs imposed by state or federal law
(whether such charges or surcharges are imposed on the service supplier or
the customer); 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.
(v) "VoIP (Voice Over Internet Protocol)" means the digital process of making
and receiving real-time voice transmissions over any Internet Protocol
network.
(w) "800 Service" means a "telecommunications service" that allows a caller to
dial a toll-free number without incurring a charge for the call. The service is
typically marketed under the name "800," "855," "866," "877," and "888" toll-
free calling, and any subsequent numbers designated by the Federal
Communications Commission.
(x) "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 for: collection services provided by the seller of the
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"telecommunications services" to the subscriber, or service or product sold by
the subscriber to the subscriber's customer. The service is typically marketed
under the name "900" service, and any subsequent numbers designated by
the Federal Communications Commission.
SECTION 4: Section 35-155 of the Santa Ana Municipal Code is hereby
amended such that it reads as follows:
Sec. 35-155. 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 of five and one half percent (5.5%) of the charges made for such services
and shall be collected from the service user by the telecommunication
services 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 taxation under this Section. There is also a rebuttable
presumption that prepaid telecommunication services sold within the city are
used, in whole or in part, within the city and are therefore subject to taxation
under this Section. If the billing address of the service user is different from
the service address, the service address of the service user shall be used for
purposes of imposing the tax. As used in this Section, the term "charges"
shall include the value of any other services, credits, property of 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 Mobile Telecommunications Sourcing Act (4
U.S.C. Section 124). The tax administrator may issue and disseminate to
telecommunication service suppliers, which are subject to the tax collection
requirements of this article, sourcing rules for the taxation of other
telecommunication services, including but not limited to post-paid
telecommunication services, prepaid telecommunication services, VoIP, and
private communication services, provided that such rules are based upon
custom and common practice that further administrative efficiency and
minimize multi jurisdictional taxation (e.g., Streamlined 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
article, an administrative ruling identifying those telecommunication services,
or charges therefore, that are subject to or not subject to the tax of subsection
(a) above.
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(d) To prevent actual multi jurisdictional taxation of telecommunication services
subject to 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 city on such telecommunication services, shall be allowed a
credit against the tax imposed to the extent of the amount of such tax legally
imposed in such other state or city; provided, however, the amount of credit
shall not exceed the tax owed to the city under this Section.
(e) The tax on telecommunication services imposed by this Section shall be
collected from the service user by the service supplier. The amount of tax
collected in one month shall 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.
SECTION 5: Section 35-155.1 of the Santa Ana Municipal Code is hereby added
such that it reads as follows:
Sec. 35-155.1. Bundling Taxable Items.
If any nontaxable charges are combined with and not separately stated from
taxable service charges on the customer bill or invoice of a service supplier, the
combined charge is subject to tax unless the service supplier identifies, by
reasonable and verifiable standards, the portions of the combined charge that are
nontaxable and taxable through the service supplier's books and records kept in the
regular course of business, and in accordance with generally accepted accounting
principles, and not created and maintained for tax purposes. If the service supplier
offers a combination of taxable and non-taxable services, and the charges are
separately stated, then for taxation purposes, the values assigned the taxable and
non-taxable services shall be based on its books and records kept in the regular
course 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 and apportionment of taxable and non-
taxable charges.
SECTION 6: Section 35-155.2 of the Santa Ana Municipal Code is hereby added
such that it reads as follows:
Sec. 35-155.2. Substantial Nexus/Minimum Contact.
For purposes of imposing a tax or establishing a duty to collect and remit a
tax under this article, "substantial nexus" and "minimum contacts" shall be construed
broadly in favor of the imposition, collection and/or remittance of the utility 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
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
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general telephone network, shall be subject to a rebuttable presumption that
"substantial nexus/minimum contacts" exists for purposes of imposing a tax, or
establishing a duty to collect and remit a tax, under this article. 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, affiliate, 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
with 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 are significantly associated with the service supplier's ability to
establish and maintain a market in the city for the provision of utility services that are
subject to a tax under this article (e.g., an affiliated person engaging in activities in
the city that inure to the benefit of the service supplier in its development or
maintenance of a market for its services in the city).
SECTION 7: Section 35-156.1 of the Santa Ana Municipal Code is hereby added
such that it reads as follows:
Sec. 35-156.1. Reduction in Rate.
The Electricity Users Tax imposed under section 35-156 shall be reduced from
six (6) percent to five and one half (5Yi) percent.
SECTION 8: Section 35-157.1 of the Santa Ana Municipal Code is hereby added
such that it reads as follows:
Sec. 35-157.1. Reduction in Rate.
The Gas User Tax imposed under section 35-157 shall be reduced from six (6)
percent to five and one half (5Yi) percent.
SECTION 9: Section 35-159.1 of the Santa Ana Municipal Code is hereby added
such that it reads as follows:
Sec. 35-159.1. Reduction in Rate.
The Water User Tax imposed under section 35-159 shall be reduced from six (6)
percent to five and one half (5Yi) percent.
SECTION 10: Section 35-172 of the Santa Ana Municipal Code is hereby
amended such that it reads as follows:
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Sec. 35-172. RESERVED
SECTION 11: Section 35-178 of the Santa Ana Municipal Code is hereby added
such that it reads as follows:
Sec. 35-178. Effect of State and Federal Reference/Authorization.
Unless specifically provided otherwise, any reference to a State or Federal
statute in this article 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
thereto by a State or Federal agency or court of law with the duty to interpret such
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 all or a part of a utility service', or charge
therefor, from taxation). Only to the extent 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 article is expanded or limited as a result of changes in State or Federal
law, no amendment or modification of this 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
authorization up to the full amount of the tax imposed under this article.
SECTION 12: Section 35-179 of the Santa Ana Municipal Code is hereby added
such that it reads as follows:
Sec. 35-179. No Increase in Tax Percentage or Change in Methodology Without Voter
Approval; Amendment or Repeal.
This article of the Santa Ana Municipal Code may be repealed or amended by
the city council without a vote of the People. However, as required by Chapter XlllC
of the California Constitution, voter approval is required for any amendment
provision that would increase the rate of any tax levied pursuant to this article. The
People of the City of Santa Ana affirm that the following actions shall not constitute
an increase of the rate of a tax:
(1) The restoration of the rate of the tax to a rate that is no higher than that
set by this article, if the city council has acted to reduce the rate of the tax;
(2) An administrative or legislative action that interprets or clarifies the
methodology of the tax, or any definition applicable to the tax, so long as
such interpretation or clarification (even if contrary to some prior
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interpretation or clarification) is not inconsistent with the language of this
article;
(3) The establishment a class of persons or class of service 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 article); or
(4) The collection of the tax imposed by this article, even if the city had, for
some period of time, failed to collect the tax.
SECTION 13: Section 35-180 of the Santa Ana Municipal Code is hereby added
such that it reads as follows:
Sec. 35-180. Remedies Cumulative.
All remedies and penalties prescribed by this article or which are available
under any other provision of law or equity, including but not limited to the California
False Claims Act (Government Code Section 12650 et seq.) and the California
Unfair Practices Act (Business and Professions Code Section 17070 et seq.), are
cumulative. The use of one or more remedies by the city shall not bar the use of any
other remedy for the purpose of enforcing the provisions of this article.
SECTION 14: Section 35-181 of the Santa Ana Municipal Code is hereby added
such that it reads as follows:
Sec. 35-181. Interaction with Prior Tax.
(a) Collection of Tax by Service Providers. Service providers shall begin to
collect the tax imposed by this amended article as soon as feasible after the
effective date of this article, but in no event later than permitted by Section
799 of the California Public Utilities Code.
(b) Satisfaction of Tax Obligation by Service Users. Prior to April 1, 2015, any
person who pays the tax levied pursuant to this article, as it existed prior to its
amendment as provided herein, with respect to any charge for a service shall
be deemed to have satisfied his or her obligation to pay the tax levied
pursuant to this article as amended herein, 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 Utility Users'
Tax Code to the amended Utility Users' Tax Ordinance (which transition
period ends April 1, 2015) and to permit service providers or other persons
with an obligation to remit the tax hereunder, during that transition period, to
satisfy their collection obligations by collecting either tax.
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(c) Satisfaction of Tax Obligation by Service Users Paying the Prior Maximum
Utility Users Tax. Prior to July 1, 2015, any person who pays the maximum
tax amount payable under the utility users tax pursuant to this article, as it
existed prior to its amendment as provided herein, shall be deemed to have
satisfied his or her obligation to pay the tax levied pursuant to this article as
amended herein for the period of July 1, 2014 through June 30, 2015.
(d) In the event that a final court order should determine that the election enacting
this article (as amended herein) is invalid for whatever reason, or that any tax
imposed under this article (as amended herein) is invalid in whole or in part,
then the taxes imposed under this article, as it existed prior to its amendment
as provided herein, shall automatically continue to apply with respect to any
service for which the tax levied pursuant to this article has been determined to
be invalid. Such automatic continuation shall be effective beginning as of the
first date of service (or billing date) for which the tax imposed by this article 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 article (as
amended herein) shall be deemed to satisfy the tax imposed under this article,
as it existed prior to its amendment as provided herein, 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.
SECTION 15: Section 35-182 of the Santa Ana Municipal Code is hereby added
such that it reads as follows:
Sec. 35-182. Ratification of Prior Tax.
The voters of the City of Santa Ana hereby ratify and approve the past
collection of the Utility Users Tax as imposed by Chapter 35, Article VI, of the Santa
Ana Municipal Code as it existed prior to the effective date of this Ordinance.
SECTION 16: Section 35-183 to 35-199 of the Santa Ana Municipal Code is
hereby amended such that it reads as follows:
Secs. 35-183-35-199. Reserved.
SECTION 17: If any section, subsection, sentence, clause, phrase or portion of
this ordinance is for any reason held to be invalid or unconstitutional by the decision of
any court of competent jurisdiction, such decision shall not affect the validity of the
remaining portions of this ordinance. The People of the City of Santa Ana hereby
declare that they would have adopted this ordinance and each section, subsection,
sentence, clause, phrase or portion thereof irrespective of the fact that any one or more
sections, subsections, sentences, clauses, phrases, or portions be declared invalid or
unconstitutional.
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SECTION 18: Neither the adoption of this ordinance nor the repeal hereby of
any ordinance shall in any manner affect the prosecution for violation of ordinances,
which violations were committed prior to the effective date hereof, nor be construed as
affecting any of the provisions of such ordinance relating to the collection of any tax or
penalty or the penal provision applicable to any violation thereof, nor to affect the
validity of any bond or cash deposit in lieu thereof, required to be posted, filed or
deposited pursuant to any ordinance and all rights and obligations thereunder
appertaining shall continue in full force and effect.
SECTION 19: Upon the approval by the majority of the voters of the City of
Santa Ana at the November 4, 2014 general election, service providers shall begin to
collect the tax imposed by this amended article as soon as feasible after the effective
date, but in no event later than permitted by Section 799 of the California Public Utilities
Code.
ADOPTED this ___ day of ______ , 2014.
APPROVED AS TO FORM:
Sonia R. Carvalho, City Attorney
By: -----------Jose Sandoval
Chief Assistant City Attorney
A YES: Councilmembers
NOES: Councilmembers
ABSTAIN: Councilmembers
NOT PRESENT: Councilmembers
Miguel A. Pulido
Mayor
---------------
---------------
---------------
---------------
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RESOLUTION NO. 2014-XXX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SANTA ANA CALLING FOR THE PLACEMENT OF A
GENERAL TAX MEASURE TO BE PLACED ON THE
BALLOT OF THE GENERAL MUNICIPAL ELECTION TO
BE HELD ON TUESDAY, NOVEMBER 4, 2014 FOR
SUBMISSION TO THE VOTERS OF A PROPOSED
ORDINANCE TO UPDATE AND MODERNIZE THE CITY'S
UTILITY USERS TAX AS IT RELATES TO
TELECOMMUNICATIONS AND REDUCING THE TAX AS
IT RELATES TO ALL UTILITY USERS TAX CHARGES;
AND DIRECTING THE CITY ATTORNEY TO DRAFT AN
IMPARTIAL ANALYSIS
WHEREAS, pursuant to Sections 35-155, 35-156, 35-157 and 35-159 of the
Santa Ana Municipal Code, the City currently levies a Utility Users Tax ("UUT") at the
rate of six (6) percent of all charges made for telephone, electricity, gas and water
services; and
WHEREAS, if approved by the voters, the proposed ordinance modernizing and
reducing the UUT across the board to the rate of five and one-half (5 1/2) percent of all
charges made for telecommunication, electricity, gas and water services would be on
par with the State average and will help ensure stability in budget planning and reduce
the risk of legal challenges; and
WHEREAS, the UUT is a general tax which funds the City general fund. The
general fund pays for essential City services such as police protection, fire and
paramedic services, street operations and maintenance, library services, parks and
recreation services and general municipal services to the public; and
WHEREAS, the City of Santa Ana has already taken a variety of measures to
reduce spending, including avoiding filling vacant positions, implementing furlough days
for City employees, closing City facilities on certain days, and reducing services, and
whereas further reductions in spending wiff have real and noticeable impacts on public
safety, the quality of life enjoyed by Santa Ana residents, and Santa Ana's
attractiveness as a place to live, work and do business; and
WHEREAS, the City currently receives approximately $24 million per year in
UUT, approximately $9 million which is generated solely from telephone communication
services, and such revenues are critical to the public welfare and the City's financial
ability to provide essential municipal services; and
SOA-9
Resolution No. 2014-XXX
Page 1 of 5
2-118
WHEREAS, several lawsuits have been filed in other jurisdictions challenging the
application of the UUT to certain telephone/telecommunication services as a result of
outdated ordinance definitions or references to outdated federal laws; and
WHEREAS, the different rulings in these cases has caused some ambiguity in
the City's application of its UUT to telephone and other telecommunications services
which could result in the elimination of 37% or more of the City's UUT revenue,
amounting to over $9 million of loss general fund revenue per year; and
WHEREAS, a number of telephone companies are applying the City's UUT
inconsistently due to outdated definitions and legal uncertainty, exposing the City to
refund claims and legal challenges regarding inconsistent application of the City's
telephone communications tax; and
WHEREAS, without immediate voter approval of the City's telephone
communications UUT, the City will increase its exposure to claims for refunds on the
City telephone communications UUT that could adversely affect its budget; and
WHEREAS, without immediate voter approval of the City's telephone
communications UUT, the City's budget could be vulnerable to serious financial
shortfalls due to adverse court rulings (existing and/or imminent) regarding the City's
telephone communications UUT that cannot be covered by current City reserves or by
readily available alternative revenue sources; and
WHEREAS, such financial shortfalls may force the reduction of essential
municipal services, which will endanger the health, safety and general welfare of the
City and its citizens; and there is a need to amend the UUT in order to maintain funding
for City services at existing levels for the health, safety and general welfare of the
citizens of the City; and
WHEREAS, the City desires reasonable certainty in the collection and receipt of
its UUT and budgetary planning; consistent application of its telephone communications
UUT; and the elimination of current risks associated with its existing telephone
communications UUT: and
WHEREAS, on November 6, 1996, the voters of the State of California approved
Proposition 218 (California Constitution, Article Xl!C), an amendment to the State
Constitution which requires that all general taxes which are imposed, extended or
increased must be approved by a majority vote of the voters; and
WHEREAS, the amendments proposed may be characterized as an imposition
or extension of the UUT under Proposition 218; and
WHEREAS, Proposition 218 permits the City Council to call an election to
impose, increase or extend a general tax; and
Resolution No. 2014-XXX
Page 2 of 5
SOA-10
2-119
II
ii
WHEREAS, as described above, modernization of the telephone
communications UUT will have a positive effect on the health, safety and general
welfare of the citizens of the City by eradicating all ambiguities related to the telephone
communications UUT.
WHEREAS, based on all of the information presented at the April 15, 2014
meeting of the City Council, both written and oral, including the staff reports, minutes,
and other relevant materials, the City Council finds that under CEQA Guidelines
15060(c)(2) and 15378 (b), subdivisions (2) and (4), this tax does not constitute a
project under CEQA and therefore review under CEQA is not required.
NOW, THEREFORE, the City Council of the City of Santa Ana hereby finds,
determines and declares as follows that:
Section 1. The foregoing recitals are true and correct and are hereby
incorporated by reference.
Section 2. Submission of Ordinance. Pursuant to Government Code Section
53724 and any other applicable requirements of laws of the State of California, the City
Council hereby orders the following proposed ordinance to be submitted to the voters of
the City of Santa Ana at the general municipal election to be held on November 4, 2014:
-· -·--
"Shall the ordinance reducing and reforming the utility users YES
tax for telephone, electricity, gas and water services from six
(6) percent to five and one-half (5 1/2) percent be adopted?"
NO
I .
Section 3. Text of Ordinance. The full text of the proposed ordinance to be
submitted to the voters is attached as Exhibit 1 (the "Ordinance") hereto and shall be
made available to the public upon request. If a simple majority of the qualified voters
voting on the Measure vote in favor therefore, the Measure shall be deemed adopted
upon the City Council's declaration of the results of the election and effective 10 days
thereafter.
Section 4. Conduct of Election. The Clerk of the Council is authorized,
instructed and directed to procure and furnish any and all official ballots, printed matter
and all supplies, equipment and paraphernalia that may be necessary in order to
properly and lawfully conduct the election. In all particulars not recited in this
Resolution, the election shall be held and conducted as provided by law for holding
municipal elections.
SOA-11
Resolution No. 2014-XXX
Page 3 of 5
2-120
Section 5. Notice of Election. Notice of time and place of holding the
election is hereby given, and the Clerk of the Council is authorized, instructed and
directed to five further or additional notice of the election, in time, form and manner as
required by law.
Section 6. Impartial Analysis. Pursuant to Elections Code section 9280, the
City Council hereby directs the Clerk of the Council to transmit a copy of the ordinance
to the City Attorney. The City Attorney shall prepare an impartial analysis of the
ordinance, not to exceed 500 words in length, showing the effect of the ordinance on
the existing law and the operation of the ordinance, and transmit such impartial analysis
to the Clerk of the Council within ten (1 O) days following the adoption of this Resolution.
Section 7. Certification. This Resolution shall take effect immediately upon
its adoption by the City Council, and the Clerk of the Council shall attest to and certify
the vote adopting this Resolution.
ADOPTED this __ day of ___ , 2014.
APPROVED AS TO FORM:
Sonia R. Carvalho, City Attorney
By: ___________ ~
Jose Sandoval,
Chief Assistant City Attorney
Miguel A. Pulido
Mayor
AYES: Councilmembers: -----------------
NOES: Councilmembers: -----------------
ABSTAIN: Councilmembers: ----------------~
NOT PRESENT: Councilmembers: ----------------
Resolution No. 2014-XXX
Page 4 of 5
SOA-12
2-121
TEXT OF THE ORDINANCE
ORDINANCE NO. ----
AN ORDINANCE OF THE PEOPLE OF THE CITY OF SEAL BEACH
AMENDING SEAL BEACH MUNICIPAL CODE CHAPTER 4.50 TO
DECREASE AND MODERNIZE THE UTILITY USERS' TAX
WHEREAS, the City Council desires to decrease the City's utility user taxes;
WHEREAS, over the years the State has taken $4,000,000 from the City of Seal
Beach;
WHEREAS, the City of Seal Beach needs a reliable source of locally-controlled
funds to maintain seNices such as fast 9-1-1 emergency response time, by local
firefighters and paramedics, seNing our significant senior population and all Seal Beach
residents;
WHEREAS, the City's existing but outdated utility users tax ordinance must be
updated to ensure all taxpayers are treated equally regardless of the technology used;
WHEREAS, funds from this measure will maintain senior programs, including
transit seNices and also help maintain storm drains and sewers to prevent toxic
pollution from contaminating beaches and coastal waters;
WHEREAS, this measure contains rigorous fiscal oversight and accountability
safeguards such as mandatory annual independent financial audits;
WHEREAS, these requirements ensure that funds are spent efficiently,
effectively, and as promised, cannot be taken by Sacramento; and
WHEREAS, all funds raised by this measure are legally required to be used for
Seal Beach seNices, ensuring local control because none of this money goes to
Sacramento.
1
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NOW, THEREFORE, THE PEOPLE OF THE CITY OF SEAL BEACH DO HEREBY
ORDAIN AS FOLLOWS:
"Section 1. Chapter 4.50 (UTILITY USERS' TAX) of the Seal Beach Municipal
Code is hereby amended in its entirety to read as follows:
Chapter 4.50 Utility Users Tax
The taxes imposed by this chapter previously have been established solely to
raise revenue for the general governmental purposes of the city. The revenues
generated thereby shall be deposited in the general fund of the city and may be
expended for any proper municipal purpose.
§ 4.50.010 Definitions.
For the purposes of this Chapter 4.50, unless otherwise apparent from the
context, certain words and phrases used in this Chapter 4.50 are defined as follows:
a. Ancillary telecommunication setvices shall mean services that are
associated with or incidental to the provision, use or enjoyment of telecommunications
services, including but not limited to the following services:
1. Conference bridging setvice shall mean an ancillary service that
links two (2) or more participants of an audio or video conference call and may include
the provision of a telephone number. Conference bridging service does not include the
telecommunications services used to reach the conference bridge.
2. Detailed telecommunications billing setvice shall mean an ancillary
service of separately stating information pertaining to individual calls on a customer's
billing statement.
3. Directory assistance shall mean an ancillary service of providing
telephone number information, and/or address information.
4. Vertical setvice shall mean 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 setvice shall mean an ancillary service that enables the
customer to store, send or receive recorded messages. Voice mail service does not
include any vertical services that the customer may be required to have in order to
utilize the voice mail service.
b. Billing address shall mean the mailing address of the service user where
the service provider submits invoices or bills for payment by the service users.
c. City shall mean the City of Seal Beach.
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d. City Manager shall mean the City Manager, or his or her authorized
representative.
e. Gas shall mean natural or manufactured gas or any alternative
hydrocarbon fuel, which may be substituted therefore.
f. Mobile telecommunications service shall mean commercial mobile radio
seNice, as defined in Section 20.3 of Title 47 of the Code of Federal Regulations and as
set forth in the Mobile Telecommunications Sourcing Act (4 U.S.C. Section 124) and the
regulations there under.
g. Month shall mean a calendar month.
h. Non-utility service supplier shall mean:
1. A seNice supplier, other than a supplier of electric distribution
seNices to all or a significant portion of the City of Seal Beach, which generates
electricity for the sale to others, and shall include but not be limited to any publicly-
owned electric utility, investor-owned utility, cogenerator, distributed generation
provider, exempt wholesale generator, (15 U.S.C. Section 79z-5a) municipal utility
district, Federal power marketing agency, electric rural cooperative, or other supplier or
seller of electricity;
2. An electric seNice provider (ESP), electricity broker, marketer,
aggregator, pool operator, or other electricity supplier other than a provider of electric
distribution seNices to all or a significant portion of the City of Seal Beach, which sells
or supplies electricity or supplemental seNices to electricity users within the City of Seal
Beach; and
3. A gas seNice supplier, aggregator, marketer or broker, other than a
supplier of gas distribution seNices to all or a significant portion of the City of Seal
Beach, which sells or supplies gas or supplemental services to gas users within the City
of Seal Beach.
i. Paging service means a "telecommunications seNice" that provides
transmission of coded radio signals for the purpose of activating specific pagers; such
transmissions may include messages and/or sounds.
j. Person shall mean, without limitation, any domestic, non-profit or foreign
corporation; firm; association; syndicate; joint stock company; partnership of any kind;
limited liability company; joint venture; club; trust: Massachusetts business or common
law trust; estate; society; cooperative; receiver, trustee, guardian or other representative
appointed by order of any court; any natural individual; joint power agency, municipal
district or municipal corporation, other than the City of Seal Beach.
k. Place of primary use shall mean the street address representative of
where the customer's use of the telecommunications seNice primarily occurs, which
3
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must be the residential street address or the primary business street address of the
customer.
I. Post-paid telecommunication service shall mean the telecommunication
service obtained by making a payment on a communication-by-communication basis
either through the use of a credit card or payment mechanism such as a bank card,
travel card, credit card, or debit card, or by charge made to a service number which is
not associated with the origination or termination of the telecommunication service.
m. Prepaid telecommunication service (including prepaid mobile
telecommunication service) shall mean the right to access telecommunication services,
which must be paid for in advance and which enables the origination of communications
using an access number or authorization code, whether manually or electronically
dialed.
n. Private telecommunication service shall mean a telecommunication
service that entitles the customer to exclusive or priority use of a communications
channel or group of channels between 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 communications channel is a
physical or virtual path of communications over which signals are transmitted between
or among customer channel termination points (i.e., the location where the customer
either inputs or receives the communications)
o. Service address shall mean the residential street address or the business
street address of the service user. For a telecommunications service user, "service
address" means either:
1. The location of the service user's telecommunication equipment
from which the communication originates or terminates, regardless of where the
communication is billed or paid; or,
2. If the location in paragraph a. of this definition is unknown (e.g.,
mobile telecommunications service or VoIP service), the service address shall mean the
location of the service user's place of primary use.
3. For prepaid telecommunication service, "service address" means
the point of sale of the services where the point of sale is within the City, or if unknown,
the known address of the service user (e.g., billing address or location associated with
the service number), which locations shall be presumed to be the place of primary use.
p. Service supplier shall mean any person, including the City, who provides
or sells telecommunication, electric or gas service to a user of such services within the
City. The term shall include any person required to collect, or self-collect under
subsection 4.50.035 hereof, and remit a tax as imposed by this Chapter 4.50, including
its billing agent in the case of electric or gas suppliers.
4
2-125
q. Service user shall mean a person required to pay a tax imposed by this
Chapter 4.50.
r. State shall mean the State of California.
s. Tax Administrator shall mean the Seal Beach Finance Director, or his or
her authorized representative.
t. Telecommunications services shall mean the transmission, conveyance,
or routing of voice, data, audio, video, or any other information or signals to a point, or
between or among points, whatever the technology used, and includes broadband
service (e.g., digital subscriber line (DSL), fiber optic, coaxial cable, and wireless
broadband, including Wi-Fi, WiMAX, and Wireless MESH) to the extent Federal and/or
State law permits taxation of such broadband services, now or in the future. The term
"telecommunications service" includes such 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 such service is referred to as voice over internet protocol (VoIP) services or is
classified by the Federal Communications Commission as enhanced or value added,
and includes video and/or data service that is functionally integrated with
"telecommunication services". Telecommunications services include, but is not limited
to the following services, regardless of the manner or basis on which such services are
calculated or billed: ancillary telecommunication services; intrastate, interstate and
international telecommunication services; all forms of VoIP service; mobile
telecommunications service; prepaid telecommunication service; post-paid
telecommunication service; private telecommunication service; paging service; 800
service (or any other toll-free numbers designated by the Federal Communications
Commission); 900 service (or any other similar numbers designated by the Federal
Communications Commission for services whereby subscribers who call in to
prerecorded or live service).
u. VoIP (Voice Over Internet Protocol) means the digital process of making
and receiving real-time voice transmissions over any Internet Protocol network.
v. 800 Service means a "telecommunications service" that allows a caller to
dial a toll-free number without incurring a charge for the call. The service is typically
marketed under the name "800," "855," "866," "877," and "888" toll-free calling, and any
subsequent numbers designated by the Federal Communications Commission.
v. 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 for: collection services provided by the seller of the "telecommunications
services" to the subscriber, or service or product sold by the subscriber to the
subscriber's customer. The service is typically marketed under the name "900" service,
and any subsequent numbers designated by the Federal Communications Commission.
5
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§ 4.50.015 Constitutional and Statutory Exemptions.
a. The taxes imposed by this Chapter 4.50 shall not apply to:
1. Any person or service if imposition of such tax upon that person or
service would be in violation of a Federal or State statute or the Constitution of the State
of California, or the Constitution of the United States; or
2. The City.
b. Any service user that is exempt from the tax imposed by this Chapter 4.50
pursuant to subsection (a) of this Section shall file an application with the Tax
Administrator for an exemption; provided, however, this requirement shall not apply to a
service user that is a State or Federal agency or subdivision with a commonly
recognized name for such service. Said application shall be made upon a form
approved by the Tax Administrator and shall state those facts, declared under penalty of
perjury, which qualify the applicant for an exemption, and shall include the names of all
service suppliers serving that service user. If deemed exempt by the Tax Administrator,
such service user shall give the Tax Administrator timely written notice of any change in
service suppliers so that the Tax Administrator can properly notify the new service
supplier of the service user's tax exempt status. A service user that fails to comply with
this Section shall not be entitled to a refund of a users' tax collected and remitted to the
Tax Administrator from such service user as a result of such noncompliance.
c. The decision of the Tax Administrator may be appealed pursuant to
Section 4.50.090. Filing an application with the Tax Administrator and appeal to the
City Administrator, or designee, pursuant to Section 4.50.090 is a prerequisite to a suit
thereon.
d. 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.
§ 4.50.016 Low Income Senior Citizen.
a. The tax imposed by this Section shall not apply to:
1. Any individual 65 years of age or older who uses telephone,
electric, or gas services, in or upon any premises occupied by such individual, provided
that the combined adjusted gross income (as such term is used for federal income tax
purposes) of all members of the household in which such individual resides, for the
calendar year prior to the fiscal year (July 1st through June 30th) for which the
exemption provided in this section is applied (as documented by a copy of the current
federal income tax return(s) or California income tax return(s) is below the U.S.
Department of Housing and Urban Development (HUD) Section 8 Income Limit
established for the calendar year ending within the fiscal year for which the exemption is
applied. The income limit set forth in this subsection in the year 2014 is $45,650. If for
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any reason, the HUD Section 8 Income limit is not adjusted in a given year, the income
limit for purposes of the exemption provided in this section shall be established by
reference to an index deemed appropriate for these purposes by the City Council.
2. Any service user exempt from the taxes imposed by this chapter
because of age and household income, may file an application with the Finance Director
for an exemption. Such application shall be made upon forms supplied by the Finance
Director and shall recite facts under oath that qualify the applicant for an exemption.
The Finance Director shall review all such applications and certify as exempt those
applicants determined to qualify therefore and shall notify all service suppliers affected
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
service user from its 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 chapter
from such exempt service user until further notice by the Finance Director is given. The
service supplier shall eliminate such exempt service user from its tax billing procedure
for the 1st regular full billings dated on or after November 1, 1975, upon receipt of such
notice from the Finance Director prior to October 1, 1975, and thereafter, no later than
60 days after receipt of such notice from the Finance Director.
3. All exemptions shall continue and be renewed automatically by the
Finance Director so long as the prerequisite facts supporting the initial qualification for
exemption shall continue; provided, however, that the exemption shall automatically
terminate with any change in the service address or residence of the exempt individual;
further provided, such individual may nevertheless apply for a new exemption with each
change of address or residence. Any individual exempt from the tax shall notify the
Finance Director within 10 days of any change in fact or circumstance that might
disqualify said individual from receiving such 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 such exemption either does not exist or ceases to exist. Any service
supplier who determines by any means that a new or nonexempt service user is
receiving service through a meter or connection exempt by virtue of an exemption
issued to a previous user or exempt user of the same meter or connection shall
immediately notify the Finance Director of such fact. The Finance Director shall conduct
an investigation to ascertain 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.
§ 4.50.020 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 of
10% of the charges made for such services and shall be collected from the service user
by the telecommunication services supplier or its billing agent, or as otherwise provided
by law. 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
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City's boundaries, and such services are subject to taxation under this Section. There is
also a rebuttable presumption that prepaid telecommunication services sold within the
city are primarily used, in whole or in part, within the City and are therefore subject to
taxation under this Section. If the billing address of the service user is different from the
service address, the service address of the service user shall be used for purposes of
imposing the tax. As used in this Section, the term "charges" shall include the value of
any other services, credits, property of 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 Mobile Telecommunications Sourcing Act (4 U.S.C.
Section 124). The Tax Administrator may issue and disseminate to telecommunication
service suppliers, which are subject to the tax collection requirements of this Section,
sourcing rules for the taxation of other telecommunication services, including but not
limited to post-paid telecommunication services, prepaid telecommunication services,
and private telecommunication services, provided that such rules are based upon
custom and common practice that further administrative efficiency and minimize multi-
jurisdictional taxation.
c. The Tax Administrator may issue and disseminate to telecommunication
service suppliers, which are subject to the tax collection requirements of this Section, an
administrative ruling identifying those telecommunication services, or charges therefore,
that is subject to the tax of paragraph a. above. This administrative ruling shall not
impose a new tax, revise an existing tax methodology as stated in this Section, or
increase an existing tax, except as allowed by California Government Code Section
53750(h)(2)(A).
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 identification and three-way calling); voice mail and other messaging
services; directory assistance; access and line charges; universal service charges;
regulatory or administrative fees, charges or surcharges; charges or surcharges for
programs imposed by state or. federal law (whether such charges or surcharges are
imposed on the service supplier or the customer); 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 actual multi-jurisdictional taxation of telecommunication
services subject to 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
city on such telecommunication services, shall be allowed a credit against the tax
imposed to the extent of the amount of such tax legally imposed in such other State or
City; provided, however, the amount of credit shall not exceed the tax owed to the City
under this Section.
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f. The tax on telecommunication services imposed by this Section shall be
collected from the service user by the service supplier. The amount of tax collected in
one month shall be remitted to the Tax Administrator, and must be received by the Tax
Administrator on or before the 20th day of the following month.
§ 4.50.025 Electricity Users Tax.
a. There is hereby imposed a tax upon every person using electricity in the
City. The tax imposed by this subsection shall be at the rate of 10% of the charges
made for such electricity, and for any supplemental services or other associated
activities directly related to and/or necessary for the provision of electricity to the service
user, which are provided by a service supplier or non-utility service supplier to a service
user. The tax shall be collected from the service user by the service supplier or non-
utility service supplier, or its billing agent.
b. As used in this subsection, the term "charges" shall apply to all services,
components and items that are: i) necessary or common to the receipt, use and
enjoyment of electric service; or, ii) currently, or historically have been, included in a
single or bundled rate for electric service by a local distribution company to a class of
retail customers. The term "charges" shall include, but is not limited to, the following
charges:
1. Energy charges;
2. Distribution or transmission charges;
3. Metering charges;
4. Standby, reserves, firming, voltage support, regulation, emergency,
or other similar charges for supplemental services to self-generation service users;
5. Customer charges, late charges, service establishment or
reestablishment charges, demand charges, fuel or other cost adjustments, power
exchange charges, independent system operator (ISO) charges, stranded investment or
competitive transition charges (CTC), public purpose program charges, nuclear
decommissioning charges, trust transfer amounts (bond financing charges), franchise
fees, franchise surcharges, annual and monthly charges, and other charges, fees and
surcharges which are necessary to or common for the receipt, use and enjoyment of
electric service; and
6. Charges, fees, or surcharges for electricity services or programs,
which are mandated by the California Public Utilities Commission or the Federal Energy
Regulatory Commission, or by any state or federal law, whether or not such charges,
fees, or surcharges appear on a bundled or line item basis on the customer billing, or
whether they are imposed on the service provider or the customer.
c. As used in this subsection, the term "charges" shall include the value of
any other services, credits, property of every kind or nature, or other consideration
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provided by the service user in exchange for the electricity or services related to the
provision of such electricity.
d. The Tax Administrator, from time to time, may survey the electric service
suppliers to identify the various unbundled billing components of electric retail service
that they commonly provide to residential and commercial/industrial customers in the
City, and the charges therefor, including those items that are mandated by State or
Federal regulatory agencies as a condition of providing such electric service. The Tax
Administrator, thereafter, may issue and disseminate to such electric service providers
an administrative ruling identifying those components and items which are: (i)
necessary or common to the receipt, use or enjoyment of electric service; or, (ii)
currently, or historically have been, included in a single or bundled rate for electric
service by a local distribution company to a class of retail customers. Unbundled
charges for such components and items shall be subject to the tax of paragraph a.
above.
e. As used in this subsection, the term "using electricity" shall not be
construed to include the mere receiving of such electricity by an electric public utility or
governmental agency at a point within the City for resale, or the use of such energy in
the production or distribution of water by a public utility or a governmental agency.
f. The tax on electricity provided by self-production or by a non-utility service
supplier not under the jurisdiction of this Chapter 4.50 shall be collected and remitted in
the manner set forth in subsection 4.50.35 hereof. All other taxes on charges for
electricity imposed by this subsection shall be collected from the service user by the
electric service supplier or its billing agent. The amount of tax collected in 1 month shall
be remitted to the Tax Administrator, and must be received by the Tax Administrator on
or before 20th day of the following month; or, at the option of the person required to
collect and/or remit the tax, such person shall remit an estimated amount of tax
measured by the tax billed in the previous month or upon the payment pattern of the
se:rvice user, which must be received by the Tax Administrator on or before the 20th day
of following month, provided that the service user shall submit an adjusted payment or
request for credit, as appropriate, within 60 days following each calendar quarter. The
credit, if approved by the Tax Administrator, may be applied against any subsequent tax
bill that becomes due.
§ 4.50.030 Gas Users Tax.
a. There is imposed a tax upon every person using gas in the City of Seal
Beach which is delivered through a pipeline distribution system or by mobile transport.
The tax imposed by this Section shall be at the rate of 10% of the charges made for
such gas, including all services related to the storage, transportation and delivery of
such gas. The tax shall be collected from the service user by the service supplier or
non-utility service supplier, or its billing agent, and shall apply to all uses of gas,
including but not limited to, heating, electric generation by a non-public utility, and the
use of gas as a component of a manufactured product.
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b. As used in this subsection, the term "charges" shall apply to all services,
components and items for gas service that are: i) necessary or common to the receipt,
use and enjoyment of gas service; or, ii) currently, or historically have been, included in
a single or bundled rate for gas service by a local distribution company to a class of
retail customers. The term "charges" shall include, but is not limited to, the following
charges:
1. The commodity charges for purchased gas, or the cost of gas
owned by the service user (including the actual costs attributed to drilling, production,
lifting, storage, gathering, trunkline, pipeline, and other operating costs associated with
the production and delivery of such gas), which is delivered through a gas pipeline
distribution system;
2. Gas transportation charges (including interstate charges to the
extent not included in commodity charges);
3. Storage charges; provided, however, that the service provider shall
not be required to apply the tax to any charges for gas storage services when the
service providers cannot, as a practical matter, determine the jurisdiction where such
stored gas is ultimately used; but it shall be the obligation of the service user to self-
collect the amount of tax not applied to any charge for gas storage by the service
supplier and to remit the tax to the appropriate jurisdiction;
4. Capacity or demand charges, late charges, service establishment
or reestablishment charges, marketing charges, administrative charges, transition
charges, customer charges, minimum charges, annual and monthly charges, and any
other charges which are necessary or common to the receipt, use and enjoyment of gas
service; and,
5. Charges, fees, or surcharges for gas services or programs, which
are mandated by the California Public Utilities Commission or the Federal Energy
Regulatory Commission, whether or not such charges, fees, or surcharges appear on a
bundled or line item basis on the customer billing, or whether they are imposed on the
service provider or the customer.
c. As used in this subsection, 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 gas or services related to the delivery
of such gas.
d. The Tax Administrator, from time to time, may survey the gas service
suppliers to identify the various unbundled billing components of gas retail service that
they commonly provide to residential and commercial/industrial customers in the City,
and the charges therefor, including those items that are mandated by State or Federal
regulatory agencies as a condition of providing such gas service. The Tax
Administrator, thereafter, may issue and disseminate to such gas service suppliers an
administrative ruling identifying those components and items which are: (i) necessary
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or common to the receipt, use or enjoyment of gas service; or, (ii) currently, or
historically have been, included in a single or bundled rate for gas service by a local
distribution company to a class of retail customers. Charges for such components and
items shall be subject to the tax of paragraph a. above.
e. There shall be excluded from the base on which the tax imposed by this
Section is computed charges made for gas sold for use in the generation of electrical
energy or for the production or distribution of water by a public utility or government
agency; and charges made by a gas public utility for gas used and consumed in the
conduct of the business of gas public utilities.
f. The tax on gas provided by self-production or by a non-utility service
supplier not under the jurisdiction of this Chapter 4.50 shall be collected and remitted in
the manner set forth in subsection 4.50.035 hereof. All other taxes on charges for gas
imposed by this subsection shall be collected from the service user by the gas service
supplier or its billing agent. The amount of tax collected in one (1) month shall be
remitted to the Tax Administrator, and must be received by the Tax Administrator on or
before the 20th day of the following month; or, at the option of the person required to
collect and/or remit the tax, such person shall remit an estimated amount of tax
measured by the tax billed in the previous month or upon the payment pattern of the
service user, which must be received by the Tax Administrator on or before the 20th day
of the following month, provided that the service user shall submit an adjusted payment
or request for credit, as appropriate, within 60 days following each calendar quarter.
The credit, if approved by the Tax Administrator, may be applied against any
subsequent tax bill that becomes due.
§ 4.50.035 Collection of Tax From Service Users Receiving Direct Purchase of
Gas or Electricity.
a. Any service user subject to the tax imposed by subsections 4.50.025 or
4.50.030 hereof, which produces gas or electricity for self-use; which receives gas or
electricity, including any related supplemental services, directly from a non-utility service
supplier not under the jurisdiction of this Chapter 4.50; or which, for any other reason, is
not having the full tax collected and remitted by its service supplier, a non-utility service
supplier, or its billing agent on the use of gas or electricity in the City, including any
related supplemental services, shall report said fact to the Tax Administrator and shall
remit the tax due directly to the Tax Administrator within 30 days of such use. In lieu of
paying said actual tax, the service user may, at its option, remit to the Tax Administrator
within 30 days for such use an estimated amount of tax measured by the tax billed in
the previous month, or upon the payment patter of similar customers of the service
supplier using similar amounts of gas or electricity, provided that the service user shall
submit an adjusted payment or request for credit, as appropriate, within 60 days
following each calendar quarter. The credit, if approved by the Tax Administrator, may
be applied against any subsequent tax bill that becomes due.
b. The Tax Administrator may require said service user to identify its
nonutility service supplier and provide, subject to audit, invoices, books of account, or
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other satisfactory evidence documenting the quantity of gas or electricity used, including
any related supplemental services, and the cost or price thereof. If the service user is
unable to provide such satisfactory evidence, or, if the administrative cost of calculating
the tax in the opinion of the Tax Administrator is excessive, the Tax Administrator may
determine the tax by applying the tax rate to the equivalent charges the service user
would have incurred if the gas or electricity used, including any related supplemental
services, had been provided by the service supplier that is the primary supplier of gas or
electricity within the City. Rate schedules for this purpose shall be available from the
City.
§ 4.50.040 Effect of Commingling Taxable Items with Nontaxable Items.
If any nontaxable charges are combined with and not separately stated from
taxable service charges on the customer bill or invoice of a service supplier, the
combined charge is subject to tax unless the service supplier identifies, by reasonable
and verifiable standards, the portions of the combined charge that are nontaxable and
taxable through the service supplier's books and records kept in the regular course of
business, and in accordance with generally accepted accounting principles, and not
created and maintained for tax purposes. If the service supplier offers a combination of
taxable and non-taxable services, and the charges are separately stated, then for
taxation purposes, the values assigned the taxable and non-taxable services shall be
based on its books and records kept in the regular course 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 and apportionment of taxable and non-taxable charges.
§ 4.50.045 Substantial Nexus/Minimum Contacts.
For purposes of imposing a tax or establishing a duty to collect and remit a tax
under this Article, "substantial nexus", "substantial economic presence", and "minimum
contacts" shall be construed broadly in favor of the imposition, collection and/or
remittance of the utility 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 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 telephone network, shall be subject to a rebuttable presumption
that "substantial nexus/minimum contacts" exists for purposes of imposing a tax, or
establishing a duty to collect and remit a tax, under this Article. 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, affiliate or subsidiary, a place of
business of any nature; solicits business in the City by employees, independent
contractors, resellers, agents, affiliates 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 with
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
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States mail; or if there are activities performed in the City on behalf of the service
supplier that are significantly associated with the service supplier's ability to establish
and maintain a market in the City for the provision of utility services that are subject to a
tax under this Article (e.g., an affiliated person engaging in activities in the City that
inure to the benefit of the service supplier in its development or maintenance of a
market for its services in the City).
§ 4.50.050 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 4.50 shall be performed
as follows:
1. The tax shall be collected by service suppliers insofar as
practicable at the same time as, and along with, the collection of the charges made in
accordance with the regular billing practice of the service supplier. Where the amount
paid by a service user to a service supplier is less than the full amount of the charge
and tax which was accrued for the billing period, a proportionate share of both the
charge and the tax shall be deemed to have been paid. In those cases where a service
user has notified the service supplier of refusal to pay the tax imposed on said charges,
subsection 4.50.065 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 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.
b. Filing Return and Payment. Each person required by this Chapter to remit
a tax shall file a return to the Tax Administrator, on forms approved by the Tax
Administrator, on or before the due date. The full amount of the tax collected shall be
included with the return and filed with the Tax Administrator. The Tax Administrator is
authorized to require such additional information as he or she deems necessary to
determine if the tax is being levied, collected, and remitted in accordance with this
Chapter. Returns are due immediately upon cessation of business for any reason.
Pursuant to Revenue and Tax Code Section 7284.6, the Tax Administrator, and its
agents, shall maintain such filing returns as confidential information that is exempt from
the disclosure provisions of the Public Records Act.
§ 4.50.055 Collection Penalties; Service Suppliers or Self-Collectors.
a. Taxes collected from a service user, or owed by a service user subject to
subsection 4.50.035 hereof, are delinquent if not received by the Tax Administrator on
or before the due date. Should the due date occur on a weekend or legal holiday, 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
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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 timely 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 utility 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, or,
in the case of a service user that fails to properly self-collect and remit the tax under
subsection 4.50.035 hereof on or before the due date, the Tax Administrator shall attach
a penalty for such delinquencies or deficiencies at the rate of 15% of the total tax that is
delinquent or deficient in the remittance, and shall pay interest at the rate of and 0.75%
per month, or any fraction thereof, on the amount of the tax, exclusive of penalties, from
the date on which the remittance first become 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 4.50 for fraud or gross negligence in reporting or remitting at the rate of 15% of
the amount of the tax collected and/or required to be remitted, or as recomputed by the
Tax Administrator.
d. For collection purposes only, every penalty imposed and such interest that
is accrued under the provisions of this Section shall become a part of the tax herein
required to be paid.
e. Notwithstanding the foregoing, the Tax Administrator may, in his or her
discretion, modify the due dates and/or penalty and interest provisions of this Section to
be consistent with any uniform standards or procedures that are mutually agreed upon
by UUT public agencies, or otherwise legally established, to create a UUT central
payment location or mechanism.
§ 4.50.060 Deficiency Determination and Assessment; Tax Application Errors.
a. The Tax Administrator shall make a deficiency determination if he or she
determines that any person required to pay or collect taxes pursuant to the provisions of
this Chapter 4.50 has failed to pay, collect, and/or remit the proper amount of tax by
improperly 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 if, in the opinion of the Tax Administrator, the cost of collection or enforcement
likely outweighs the tax benefit.
b. The Tax Administrator shall mail a notice of such deficiency determination
to the person required to pay or remit the tax, which notice shall refer briefly to the
amount of the taxes owed, plus interest at the rate of 0.75% per month, or any fraction
thereof, on the amount of the tax from the date on which the tax should have been
received by the City. Within 14 calendar days after the date of service of such notice,
the person may request in writing to the Tax Administrator for a hearing on the matter.
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c. If the person fails to request a hearing within the prescribed time period,
the amount of the deficiency determination shall become a final assessment, and shall
immediately be due and owing to the City. If the person requests a hearing, the Tax
Administrator shall cause the matter to be set for hearing, which shall be scheduled
within 30 days after receipt of the written request for hearing. Notice of the time and
place of the hearing shall be mailed by the Tax Administrator to such person at least 1 O
calendar days prior to the hearing, and, if the Tax Administrator desires said person to
produce specific 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 from time to time for
the purpose of allowing the presentation of additional evidence. Within a reasonable
time following the conclusion of the hearing, the Tax Administrator shall issue a final
assessment (or non-assessment), thereafter, by confirming, modifying or rejecting the
original deficiency determination, and shall mail a copy of such final assessment to
person owing the tax. The decision of the Tax Administrator may be appealed pursuant
to subsection 4.50.090. Filing an application with the Tax Administrator and appeal to
the City Administrator, or designee, pursuant to subsection 4.50.090 is a prerequisite to
a suit thereon.
e. Payment of the final assessment shall become delinquent if not received
by the Tax Administrator on or before the 30th day following the date of receipt of the
notice of final assessment. The penalty for delinquency shall be 15% on the total
amount of the assessment, along with interest at the rate of 0. 75% 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 4.50 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.
§ 4.50.065 Administrative Remedy; Non-paying Service Users.
a. Whenever the Tax Administrator determines that a service user has
deliberately withheld the amount of the tax owed by the service user 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 due under this Section certain named service users for
specific billing periods. Whenever 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 of taxes owed under the
provisions of this Section 4.50.065. Nothing herein shall require that the Tax
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Administrator institute proceedings under this Section 4.50.065 if, in the opinion of the
Tax Administrator, the cost of collection or enforcement likely outweighs the tax benefit.
b. In addition to the tax owed, the service user shall pay a delinquency
penalty at the rate of 15% of the total tax that is owed, and shall pay interest at the rate
of three-quarters of one percent (3/4%) per month, or any fraction thereof, on the
amount of the tax, exclusive of penalties, from the due date, until paid.
c. The Tax Administrator shall notify the nonpaying service user that the Tax
Administrator has assumed the responsibility to collect the taxes due for the stated
periods and demand payment of such taxes, including penalties and interest. The
notice shall be served on the service user by personal delivery or by deposit of the
notice in the United States mail, postage prepaid, addressed to the service user at the
address to which billing was made by the person required to collect the tax; or, should
the service user have a change of address, to his or her last known address.
d. If the service user fails to remit the tax to the Tax Administrator within 30
days from the date of the service of the notice upon him or her, the Tax Administrator
may impose an additional penalty of 15% of the amount of the total tax that is owed.
§ 4.50.070 Actions to Collect.
Any tax required to be paid by a service user under the provisions of this Chapter
4.50 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 user. Any person owing money to the City under the
provisions of this Chapter 4.50 shall be liable to an action brought in the name of the
City for the recovery of such amount, including penalties and interest as provided for in
this Chapter 4.50, along with any collection costs incurred by the City of Seal Beach as
a result of the person's noncompliance with this Chapter 4.50, including, but not limited
to, reasonable attorney's fees. In the event that a service user or service supplier owing
a tax under this Chapter 4.50 files bankruptcy, then such debt to the City shall be
deemed an unsecured priority excise tax obligation under 11 U.S.C.A. Section
507(a)(8)(C). Service suppliers who seek to collect charges for service in bankruptcy
proceedings shall also include in any such claim the amount of taxes due the City for
those services, unless the Tax Administrator determines that such duty is in conflict with
any federal or state law, rule, or regulation or that such action would be administratively
impractical.
§ 4.50.075 Additional Powers and Duties of the Tax Administrator.
a. The Tax Administrator shall have the power and duty, and is hereby
directed, to enforce each and all of the provisions of this Chapter 4.50.
b. The Tax Administrator may adopt administrative rules and regulations
consistent with provisions of this Chapter 4.50 for the purpose of interpreting, clarifying,
carrying out and enforcing the payment, collection and remittance of the taxes herein
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imposed. The administrative ruling shall not impose a new tax, revise an existing tax
methodology as stated in this Chapter 4.50, or increase an existing tax, except as
allowed by California Government Code Section 53750(h)(2). A copy of such
administrative rules and regulations shall be on file in the Tax Administrator's office. To
the extent that the Tax Administrator determines that the tax imposed under this
Chapter 4.50 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 exercise of
the Tax Administrator's discretion to settle 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 utility users' tax in full as a result of promulgating administrative rulings or
entering into agreements.
c. Upon a proper showing of good cause, the Tax Administrator may make
administrative agreements, with appropriate conditions, to vary from the strict
requirements of this Chapter 4.50 and thereby; (1) conform to the billing procedures of a
particular service supplier (or service user subject to subsection 4.50.035 hereof) so
long as said agreements result in the collection of the tax in conformance with the
general purpose and scope of this Chapter 4.50; or, (2) to avoid a hardship where the
administrative costs of collection and remittance greatly outweigh the tax benefit. A
copy of each such agreement shall be on file in the Tax Administrator's office, and are
voidable by the Tax Administrator or the City of Seal Beach at any time.
d. The Tax Administrator may conduct an audit, to ensure proper compliance
with the requirements of this Chapter 4.50, of any person required to collect and/or remit
a tax pursuant to this Chapter 4.50. 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 or review shall not exceed a period of 3 years next
preceding the date of receipt of the written notice by said person from the Tax
Administrator. Upon completion of the audit, the Tax Administrator may make a
deficiency determination pursuant to subsection 4.50.060 for all taxes (and applicable
penalties and interest) owed and not paid, as evidenced by information provided by
such person to the Tax Administrator. If said person is unable or unwilling to provide
sufficient records to enable the Tax Administrator to verify compliance with this Chapter
4.50, the Tax Administrator is authorized to make a reasonable estimate of the
deficiency. Said reasonable estimate shall be entitled to be a rebuttable presumption of
correctness.
e. Upon receipt of a written request of a taxpayer, and for good cause, the
Tax Administrator may extend the time for filing any statement required pursuant to this
Chapter 4.50 for a period of not to exceed 45 days, provided that the time for filing the
required statement has not already passed when the request is received. No penalty
for delinquent payment shall accrue by reason of such extension. Interest shall accrue
during said extension at the rate of 0.75% per month, prorated for any portion thereof.
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f. The Tax Administrator shall determine the eligibility of any person who
asserts a right to exemption from, or a refund of, the tax imposed by this Chapter 4.50.
g. The Tax Administrator, with the written approval of the City Manager, may
compromise a claim pursuant to this Chapter 4.50 where the portion of the claim
proposed to be released is equal to or less than $4,999 dollars; and, with the approval
of the City Council, may compromise such a claim where the portion proposed to be
released is greater than $4,999 dollars.
h. Notwithstanding any provision in this Chapter 4.50 to the contrary, the Tax
Administrator may waive any penalty or interest imposed upon a person required to
collect and/or remit for failure to collect the tax imposed by this Chapter 4.50 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, or whether the person offers to
voluntarily disclose its tax liability. The Tax Administrator may also participate with
other utility users' tax public agencies in conducting coordinated compliance reviews
with the goal of achieving administrative efficiency and uniform tax application
determinations, where possible. 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 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.
§ 4.50.080 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 4.50 to keep and preserve, for a period of at least
3 years, all records as may be necessary to determine the amount of such tax that such
person 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 Tax Administrator may issue an administrative subpoena to compel a
person to deliver, to the Tax Administrator, copies of all records deemed necessary by
the Tax Administrator to establish compliance with this Chapter 4.50, 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 course of
business. As an alternative to delivering the subpoenaed records to the Tax
Administrator on or before the due date provided in the administrative subpoena, such
person may provide access to such records outside the City on or before the due date,
provided that such person shall reimburse the City for all reasonable travel expenses
incurred by the City to inspect those records, including travel, lodging, meals, and other
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similar expenses, but excluding the normal salary or hourly wages of those persons
designated by the City to conduct the inspection.
c. The Tax Administrator is authorized to execute a nondisclosure
agreement approved by the City Attorney to protect the confidentiality of customer
information pursuant to California Revenue and Tax Code Sections 7284.6 and 7284.7.
The Tax Administrator may request from a person providing transportation or
distribution services of gas or electricity to service users within the City, a list of the
names, billing and service addresses, quantities of gas or electricity delivered, and other
pertinent information, of its transportation customers within the City pursuant to Section
6354(e) of the California Public Utilities Code.
d. If a service supplier uses a billing agent or billing aggregator to bill, collect,
and/or remit the tax, the service supplier shall: ( 1) 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, (2) 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 Chapter 4.50
unreasonably denies the Tax Administrator, or the Tax Administrator's designated
representative, access to such records, or fails to produce the information requested in
an administrative subpoena within the time specified, the Tax Administrator may impose
a penalty of $500.00 dollars on such person for each day following: i) the initial date
that the person refuses to provide such access; or, ii) the due date for production of
records as set forth in the administrative subpoena. This penalty shall be in addition to
any other penalty imposed under this Chapter 4.50.
§ 4.50.085 Refunds/Credits.
Whenever the amount of any tax has been overpaid or paid more than once or
has been erroneously or illegally collected or received by the Tax Administrator under
this Chapter 4.50, it may be refunded or credited 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 4.50, 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
1 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 member of the class has submitted a written claim
under penalty of perjury as provided by this Section.
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b. The submission of a written claim, which is acted upon by the City
Council, shall be a prerequisite to a suit thereon. (See California Government Code
Section 935). The Tax Administrator, or the City Council where the claim is in excess of
$4,999 dollars shall act upon the refund claim within the time period set forth in
Government Code Section 912.4. If the City Council fails or refuses to act on a refund
claim within the time prescribed by Government Section 912.4, the claim shall be
deemed to have been rejected by the City Council on the last day of the period within
which the City Council was required to act upon the claim as provided in Government
Code Section 912.4. The Tax Administrator shall give notice of the action in a form
which substantially complies with that set forth in Government Code Section 913.
c. Notwithstanding the notice provisions of subsection (a) of this Section, the
Tax Administrator may, at his or her discretion, give written permission to a service
supplier, who has collected and remitted any amount of tax in excess of the amount of
tax imposed by this Chapter 4.50, 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, prior to taking such credit by the service supplier: 1) such
credit is claimed in a return dated no later than one year from the date of overpayment
or erroneous collection of said tax; 2) the Tax Administrator is satisfied that the
underlying basis and amount of such credit has been reasonably established; and, 3) in
the case of an overpayment by a service user to the service supplier that has been
remitted to the City, the Tax Administrator has received proof, to his or her satisfaction,
that the overpayment has been refunded by the service supplier to the service user in
an amount equal to the requested credit.
§ 4.50.090 Appeals.
a. The provisions of this Section apply to any decision (other than a decision
relating to a refund pursuant to Section 4.50.085), 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 Section 4.50.085
hereof), 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
Government Code Section 935(b).) Nothing herein shall permit 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 subsection 4.50.085 hereof), 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 14 days of the
date of the decision, deficiency determination, assessment, or administrative ruling of
the Tax Administrator which aggrieved the service user or service supplier.
c. The matter shall be scheduled for hearing before an independent hearing
officer selected by the City Manager, or designee, no more than 30 days from the
receipt of the appeal. The appellant shall be served with notice of the time and place of
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the hearing, as well as any relevant materials, at least 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, the City Manager, 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 City Manager shall issue a written notice and order upholding, modifying or
reversing the determination from which the appeal is taken. The notice shall be given
within 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 and that any petition for
judicial review shall be filed within 90 days from the date of the decision in accordance
with Code of Civil Procedure Section 1094.6.
e. All notices under this Section may be sent by regular mail, postage
prepaid, and shall be deemed received on the third calendar day following the date of
mailing, as established by a proof of mailing.
§ 4.50.095 No Injunction/Writ of Mandate.
No injunction or writ of mandate or other legal or equitable process shall issue in
any suit, action, or proceeding in any court against this City or against any officer of the
City to prevent or enjoin the collection under this Chapter 4.50 of any tax or any amount
of tax required to be collected and/or remitted.
§ 4.50.100 Remedies Cumulative.
All remedies and penalties prescribed by this Chapter 4.50 or which are available
under any other provision of law or equity, including but not limited to the California
False Claims Act (Government Code Section 12650 et seq.) and the California Unfair
Practices Act (Business and Professions Code Section 17070 et seq.), are cumulative.
The use of one or more remedies by the City shall not bar the use of any other remedy
for the purpose of enforcing the provisions of this Chapter 4.50.
§ 4.50.105 Notice of Changes to Ordinance.
If a tax under this Chapter 4.50 is added, repealed, increased, reduced, or the
tax base is changed, the Tax Administrator shall follow the notice requirements of Public
Utilities Code Section 799.
§ 4.50.110 Future Amendment to Cited Statute.
Unless specifically provided otherwise, any reference to a State or Federal
statute in this Chapter 4.50 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 thereto by a State or
Federal agency or court of law with the duty to interpret such law, to the extent that such
amendment or change of interpretation would require voter approval under California
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law, or to the extent that such change would result in a tax decrease (as a result of
excluding all or a part of a utility service, or charge therefor, from taxation). Only to the
extent 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 4.50 is expanded or limited as a result of changes in State or
Federal law, no amendment or modification of this Chapter 4.50 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 of the tax imposed under this Chapter
4.50.
§ 4.50.115 Penalties.
Any person violating any of the provisions of this Chapter 4.50 shall be deemed
guilty of a misdemeanor, or an infraction at the discretion of the City.
§ 4.50.120 Annual Rate Review and Independent Audit of Tax Collection,
Exemption, Remittance and Expenditure.
The rates set forth in this chapter shall be reviewed by the City Council on an
annual basis at a regularly scheduled meeting in conjunction with the adoption of the
budget. The City shall annually verify that the taxes owed under this Section have been
properly applied, exempted, collected, and remitted in accordance with this Section, and
properly expended according to applicable municipal law. The annual verification shall
be performed by a qualified independent third party and the review shall employ
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.
§ 4.50.125 No Increase in Tax Percentage or Change in Methodology Without
Voter Approval; Amendment or Repeal.
This Chapter 4.50 may be repealed or amended by the City Council without a
vote of the People. However, as required by Chapter XlllC of the California
Constitution, voter approval is required for any amendment provision that would
increase the rate of any tax levied pursuant to this Ordinance, provided however, the
following actions shall not constitute an increase of the rate of a tax:
a. 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;
b. An action that interprets or clarifies the methodology of the tax, or any
definition applicable to the tax, so long as such interpretation or clarification (even if
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contrary to some prior interpretation or clarification) is not inconsistent with the language
of this Ordinance;
c. The establishment a class of persons 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
d. 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 2. Interaction with Prior Tax.
(a) Collection of Tax by Service Providers. Service providers shall begin to
collect the tax imposed by this amended code as soon as feasible after the effective
date of this code, but in no event later than permitted by Section 799 of the California
Public Utilities Code.
(b) Satisfaction of Tax Obligation by Service Users. Prior to April 1, 2015, any
person who pays the tax levied pursuant to this code, as it existed prior to its
amendment as provided herein, with respect to any charge for a service shall be
deemed to have satisfied his or her obligation to pay the tax levied pursuant to this code
as amended herein, 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 Utility Users Tax code to the amended Utility Users Tax code
(which transition period ends April 1, 2015) and to permit service providers or other
persons with an obligation to remit the tax hereunder, during that transition period, to
satisfy their collection obligations by collecting either tax.
Section 3. If any section, subsection, subdivision, paragraph, sentence, clause or
phrase of this Chapter 4.50 or any part thereof is for any reason held to be invalid,
unlawful or unconstitutional, such decision, and the decision not to enforce such, shall
not affect the validity of the remaining portion of this Chapter 4.50 or any part thereof.
The City Council hereby declares that it would have passed each section, subsection,
subdivision, paragraph, sentence, clause or phrase thereof, irrespective of the fact that
any one or more sections, subsections, subdivisions, paragraphs, sentences, clauses or
phrases be declared invalid, unlawful or unconstitutional.
Section 4. Effective Date. This ordinance shall be deemed adopted upon the date
that the vote is declared by the City Council and shall go into effect 10 days after that
date, as provided in Section 9217 of the California Elections Code.
Section 5. Ratification of Prior Tax. The voters of the City of Seal Beach hereby
ratify and approve the past collection of the Utility Users Tax as imposed by Chapter
4.50 of the Seal Beach Municipal Code as it existed prior to the effective date of this
Ordinance.
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Section 6. The City Clerk shall certify to the passage and adoption of this Ordinance
and shall cause this Ordinance to be published in accordance with the law.
PASSED AND ADOPTED by the voters of the City of Seal Beach at an election held on
November 4, 2014.
Mayor
Attest:
City Clerk
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RESOLUTION NUMBER ---
A RESOLUTION OF THE SEAL BEACH CITY COUNCIL REQUESTING
THAT THE BOARD OF SUPERVISORS OF THE COUNTY OF ORANGE
CONSOLIDATE A GENERAL MUNICIPAL ELECTION TO BE HELD ON
TUESDAY, NOVEMBER 4, 2014 WITH THE STATEWIDE GENERAL
ELECTION TO BE HELD ON THAT DA TE PURSUANT TO §10403 OF
THE ELECTIONS CODE
WHEREAS, a General Municipal Election has been called by Ordinance No. 1641,
adopted on June 23, 2014;
WHEREAS, the City Council also desires to submit to the voters at the election ballot
measures whether to amend the Seal Beach City Charter to make the city clerk an
appointed position and whether to amend the Municipal Code to reduce and modernize
the City's utility user taxes;
WHEREAS, it is desirable that the General Municipal Election be consolidated with the
Statewide General Election to be held on the same date and that within the City
precincts, polling places, and election officers of the two elections be the same, and that
the county election department of the County of Orange canvass the returns of the
General Municipal Election and that the election be held in all respects as if there were
only one election.
NOW, THEREFORE, the Seal Beach City Council does resolve, declare, determine,
and order as follows:
SECTION 1. That pursuant to the requirements of California Elections Code § 10403,
the City hereby requests that the Orange County Board of Supervisors consent and
agree to the consolidation of a General Municipal Election with the Statewide General
Election on Tuesday, November 4, 2014, for the purposes of electing three Members of
the City Council (District 1, District 3, and District 5) for a full four-year term of office and
presenting to the voters the measures identified in Section 2.
SECTION 2. That the following measures are to appear on the ballot as follows:
(Ballot measure designations will be assigned by the County.)
Seal Beach City Charter Amendment. Shall the office of city clerk be YES -appointive?
NO
Seal Beach UUT Modernization/Tax Reduction Measure. Shall the
City of Seal Beach adopt an ordinance reducing the utility users tax YES -rate; modernizing its ordinance to require equal treatment of taxpayers
, regardless of technology, to maintain 9-1-1 response, police officer NO I patrols, firefighter/paramedic staffing, senior/transit programs, -
sewers/storm drains to prevent toxic pollution from contaminating
I
beaches and coastal waters, and other city services; and requiring low-
income senior exemptions, annual audits, local control of funds, and no
rate increase without voter approva_!l__ ___________
2-147
Resolution Number xxxx
SECTION 3. The county election department is authorized to canvass the returns of the
General Municipal Election. The election shall be held in all respects as if there were
only one election, and only one form of ballot shall be used. The election will be held
and conducted in accordance with the provisions of law regulating the statewide
election.
SECTION 4. The Board of Supervisors is requested to issue instructions to the County
election department to take any and all steps necessary for the holding of the
consolidated election.
SECTION 5. The City of Seal Beach recognizes that additional costs will be incurred by
the County by reason of this consolidation and agrees to reimburse the County for
actual costs.
SECTION 6. The Council hereby directs the City Clerk to file a certified copy of this
Resolution with the Board of Supervisors and the county election department of the
County of Orange.
SECTION 7. The City Clerk shall certify to the passage and adoption of this Resolution
and enter it into the book of original resolutions.
PASSED, APPROVED and ADOPTED by the Seal Beach City Council at a regular
meeting held on the 28th day of July, 2014 by the following vote:
AYES: Council Members------------------
NOES: Council Members------------------
ABSENT: Council Members ------------------
ABSTAIN: Council Members-----------------
Mayor
ATTEST:
City Clerk
2-148
Resolution Number 5733
STATE OF CALIFORNIA }
COUNTY OF ORANGE } SS
CITY OF SEAL BEACH }
I, Linda Devine, City Clerk of the City of Seal Beach, do hereby certify that the foregoing
resolution is the original copy of Resolution Number __ on file in the office of the City
Clerk, passed, approved, and adopted by the City Council at a regular meeting held on
the 28th day of July, 2014.
City Clerk
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THOMAS PENFIELD (SB# 62380)
JEREMY ROBINSON (SB# 188325)
CASEY GERRY SCHENK FRANCA VILLA
BLATT·& PENFIELD LLP
11 0 Laurel Street
San Diego, California 92l01
TEL-(619) 238-1811
2011 ,JUN 22 Pi'. 3: 18
'.It.,':.:·.': '. '" . ~ .
:: 1. :· ,.! -. i '· ,-,., ,',
FAX -(619) 544-9232
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JAMES T. CAPRETZ (SB# 44442)
ANTHONY CHU (SB#219023)
CAPRETZ & ASSOCIATES
5000 Birch Street, Suite 2500
Newport Beach, California 92660
TEL -(949)724-3000
FAX -(949)757-2635
Attorneys for Plaintiffs
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF SAN DIEGO, CENTRAL DISTRICT
CARLA VILLA and VANESSA GARZA, on ) CASE N0.:37-2011-00093296·CU·MC-CTL
behalf of themselves and all others similarly
situated,
vs.
Plaintiffs, COMPLAINT FOR DECLARATORY,
INJUNCTIVE, MONETARY AND
OTHER RELIEF
1s CITY OF CHULA VISTA; and DOES 1
through 100, inclusive,
19 JURY TRIAL DEMANDED
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Defendant. ~
-~--~-~
Plaintiffs Carla Villa and Vanessa Garta ("Plaintiffs"), on behalf of themselves and all
others similarly situated residents and taxpayers of the City of Chula Vista, California, seek
injunctive, declaratory, and other equitable relief against the City of Chula Vista ("City" or
"Defendant"), and Does 1through100, inclusive, in connection with its improper collection and
administration of the City of Chula Vista Utility Users Tax ("UUT"). Plaintiffs also seek
recovery on behalf of themselves and all other similarly situated taxpayers of the taxes illegally
collected by Defendant. The grounds upon which such reliefs are sought are as follows:
COMPLAINT -l
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:"
I.
THE PARTIES
1. Plaintiff Carla Villa is a resident of the City of Chula Vista. Plaintiff Villa is
currently a customer of Verizon Wireless and.has paid and continues to pay the Chula Vista City
UUT to this company. Verizon has collected the Chula Vista City UUT as part of its normal
billing practice. Plaintiff Villa was unlawfully required to pay the UUT on her long distance
service, and continues to be improperly subject to the UUT.
2. Plaintiff Vanessa Garza is a resident of the City of Chula Vista. Plaintiff Garza is
currently a customer of AT&T and has paid and continues to pay the Chula Vista City UUT to
this company. AT&T has collected the Chula Vista City UUT as part of its normal billing
practice. Plaintiff Garza was unlawfully required to pay the UUT on her long distance service,
and continues to be improperly subject to the UUT.
3. Defendant The City of Chula Vista is located within the County of San Diego and
has a population of approximately 230,000 residents.
4. The true names or capacities, whether individual, corporate, associate or
otherwise of defendants DOES 1 through 100, inclusive, are unknown to plaintiffs, who
therefore sue said defendants by such fictitious names. Plaintiffs are informed and believe and
therefore allege that each of the defendants designated herein as a DOE is legally responsible in
some manner for the events and happenings herein referred to and caused injuries and damages
legally thereby as hereinafter alleged.
5. Plaintiffs are informed and believe and thereon allege that at all times herein
mentioned, each of the DOE defendants was the agent, servant and employee of the remaining
defendants, and at all times herein mentioned, each was acting within the time, place and scope
of said agency and employment.
Ill//
!Ill!
COMPLAINT -2
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II.
JURISDICTION AND VENUE
6. This Court has jurisdiction over the causes of action asserted herein pursuant to
the California Constitution, Article VI, § 10, because this case is a cause not given by statute to
other trial courts. The amount in controversy exceeds the jurisdictional minimum of this Court.
7. This Court has jurisdiction over Defendant because it is located within San Diego
County, California.
8. Venue is proper in this Court pursuant to California Code of Civil Procedure
Section 395 because the City is located within this Court's jurisdiction and because the conduct
at issue took place and had an effect in this County.
III.
FACTUAL ALLEGATIONS
14 A. The Chula Vista City UUT
15 9. The City imposes a 5% tax "upon every person in the city using intrastate
16 · telephone communication services in the city." Chula Vista Municipal Code ("CVMC") §
17 3.44.030, subd. {A). The "tax imposed in this section shall be collected from the service user by
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the person providing the intrastate telephone communications services" and such tax "shall be
remitted to the city finance officer." CVMC § 3.44.030, subd. (D).
10. The UUT, however, by its own terms, excludes from taxation any charges "for
services paid for by users of mobile telephone and marine telephone services." CVMC §
3.44.030, subd. (B).
11. Yet despite its express prohibition, the UUT is automatically added to the
monthly mobile phone charges of Chula Vista tax-payers and because the UUT is embedded in
billing statements, most tax-payers are unaware of the UUT or the fact that it has been illegally
collected.
12. In addition to the exclusion of mobile phone services, the CVMC also provides
that the UUT "shall not be imposed upon any person for using intrastate telephone
COMPLAINT • 3
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communications services to the extent that the amounts paid for such services are exempt from
or not subject to the tax imposed under section 4251, 4252, and 4253 of Title 26 of the United
States Code ("Federal Excise Tax")." CVMC § 3.44.030, subd. (C). Thus, any services not
taxable under the Federal Excise Tax cannot be lawfully taxed by the City,
13. The Federal Excise Tax is imposed upon, among other services, "toll telephone
service," which is defined, in relevant part, as telephone communications "for which ... there is
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individual communication." I.R.C. §4252(b)(l)(A)(emphasis added.) Telephonic
communications that are billed at rates that do not vary with both distance and transmission time, ·
therefore, fall outside of the Federal Excise Tax, and hence the UUT.
14. On May 25, 2006, the Internal Revenue Service ("I.R.S.") announced in Notice
2006-50 that it would cease collecting the Federal Excise Tax on amounts paid for time only
service and that it would refund taxes improperly collected from February 28, 2003 through July
31, 2006, the date by which service providers were required to cease collecting the tax on non-
taxable service.
15. The services that the I.RS. has acknowledged are non-taxable include bundled
1e service, where local and long distance are not separately billed (including landline and cellular
19 telephone service), and all long distance service. A true_ and correct copy of Notice 2006·50 is
20 attached hereto as Exhibit A.
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16. As noted above, because the City UUT incorporates the standard of the Federal
Excise Tax, any charges for telephone service that are not taxable under the Federal Excise Tax
cannot be taxed by the City. Thus, the position by the I.R.S. that such services are not taxable
under the federal Excise Tax is conclusive as to the applicability of the City UUT here.
17. However, the l.R.S. statement is not necessarily a prerequisite to a finding that the
City UUT is inapplicable to telephone service charged by time only. Under the plain language o
the Federal Excise Tax, charges for telephone services that do not vary by time and distance have
never been taxable. Thus, it is no defense that the UUT only became improperly applied
COMPLAINT - 4
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subsequently to the issuance of I.R.S. Notice 2006-50. In fact, even the I.R.S. has acknowledged
that the Federal Excise Tax was never properly applied to time-only service by granting
taxpayers a refund of all taxes improperly collected since February 2003.
18. Accordingly, the City UUT, by its terms, does not apply to (1) mobile phone
services and (2) services which include long distance telephone service where the charge varies
only by time and charges for "bundled service." Bundled service is that where local and long
distance services are provided under a plan that does not separately state the charge for the
telephone service and can include cellular service, landline service, prepaid telephone card
service, and voice-over internet protocol service. See I.RS. Notice 2006-500.
19. Since there is no question that the City UUT has been improperly applied,
Plaintiffs and all other taxpayers are clearly entitled to a refund of all UUTs improperly collected
for the maximum period pennissible, along with interest.
C. Proposition II-The City's failed attempt to retroactively authorize the UUT
20. Recognizing that the validity of the City's right to expand the City UUT to mobile
16 phone services was in doubt, the City decided to ask voters to update the law governing the City
17 UUT. In November 2010, the City placed on the election ballot the "Telecommunications Users'
1s Tax Amendments," otherwise known as "Proposition H."
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21. According to an analysis by the Chula Vi:-;ta City Attorney's office, Proposition H
purported to establish a "modern definition of telecommunication services subject to the City
UUT and would have applied to all types of telecommunications regardless of the technology
used and regardless of the whether the communication is intrastate, interstate or international."
Recognizing that the City UUT had been improperly levied and collected, according to the Chula
Vista City Attorney's office "Proposition H ensures that the Telecommunications User's Tax is
in compliance with current federal laws and assists to avoid potential litigation."
26
22. But Proposition H was defeated. Of those who voted, 56.3% voted against the
27
passage of Proposition H. Yet despite the conclusive defeat of Proposition H, the City continues
28
to date to levy and collect the City UUT and the taxes continue to flow into the City's coffers.
COMPLAINT - 5
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D.
23.
,.•"·.
Allegations Concerning Plaintiffs' Demand
On April 4, 2010, Plaintiff Villa served a demand on the Mayor, City Council and
Director of Finance/Treasurer of the City, via first class mail, seeking to have returned the
money that had been improperly collected and retained by the City. A true and correct copy of ·
that demand is attached hereto as Exhibit B.
24. Plaintiff Villa's demand letter specified the basis for the claims and requested a
refund and the cessation of the UUT collected on (1) long distance telephone service where the
charge varies only by time, and (2) charges for "bundled service," which are services where local
and long distance services are provided under a plan that does not separately state the charge for
the local telephone service and can include cellular service, landline service, prepaid telephone
car service and voice-over internet protocol service.
25. The City Attorney of Chula Vista responded in letters dated April 22, 2011 and
May 4, 2011 stating, in part, that cla.ss claims are not permitted for refunds of taxes. True and
correct copies of the letters are attached hereto as Exhibits C and D.
26. On May 6, 2011, Plaintiff Villa submitted an amendment to her original clailn to
17 address the purported Cal. Govt. Code deficiencies as identified by the City. A true and correct
18 copy of Plaintiff Villa's amendment is attached hereto as Exhibit E.
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27. By letter of May 26, 2011, the City, in part, rejeeted Plaintiff Villa's claims, and,
in part, attempted to return as late the claims presented by Plaintiff Villa in regards to sums
remitted more than twelve months before the claim was presented. A true and correct copy of the
City's May 26, 2011 letter is attached hereto as Exhibit F.
IV.
CLASS ACTION ALLEGATIONS
28. Plaintiffs bring this action on behalf of themselves and, pursuant to C.C.P. §382,
on behalf of the following class of persons (the "Class"):
All persons, including individuals, non-corporate entities, and corporations,
28 wherever organized and existing, who have paid the Chula Vista Utility Users
Tax imposed by Chula Vista Municipal Code §3.44.030 on mobile phone services
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and who have paid for telephone services which are not taxable under section
4251 of the Internal Revenue Code.
29. This class includes cellular customers, long distance landline customers, and
customers of so-called "bundled" services, and includes those taxpayers with respect to whom
the l.R.S. con9eded were improperly taxed in Notice 2006-50, as to whom there is no question o
liability.
30.
31.
32.
This action is properly maintainable as a class action.
This Class is so numerous that joinder of all members would be impracticable.
Plaintiffs are committed to prosecuting the action and have retained competent
counsel experienced in litigation of this nature. Plaintiffs' claims are typical of the claims of the
other members of the Class and Plaintiffs have the same interests as the other members of the
Class. Plaintiffs are adequate class representatives of the Class.
33. Questions oflaw and fact common to the members of the Class predominate over
any questions affecting any individual member, and a class action is superior to all other
available methods for the fair and efficient adjudication of the controversy.
34. The common questions of law and fact include, but are not limited to:
a.
b.
c.
Whether the UUT has been improperly applied and collected;
Whether the refund procedures provided by the UUT are inadequate;
Whether Plaintiffs and the members of the Class are entitled to declaratory
21 and injunctive relief; and
22 d. Whether Plaintiffs and the members of the Class are entitled to recover
2 3 illegally collected taxes.
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35. The prosecution of separate actions by individual members of the Class would
create the risk of inconsistent or varying adjudications, and would establish incompatible
standards of conduct for the Defendant. The Defendant has acted, or has refused to act, on
grounds generally applicable to the Class, making preliminary and final injunctive relief on
behalf of the Class as a whole, appropriate.
COMPLAINT - 7
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v.
COUNT I
Claim for Declaratory and Injunctive Relief Preventing Further Improper
Collection of the UUT
36. Plaintiffs repeat and re-allege each and every allegation contained above as if
fully set forth herein.
37. The City, and Does 1 through 100, inclusive, have collected and continue to
collect the UUT in clear violation of law. It is unquestionable that the bundled and long distance
telephone services, as described above, have been and continue to be illegally taxed by the City,
and Does 1through100, inclusive.
38. Legal remedies available to Plaintiffs and the Class are inadequate to redress the
illegal collection of the UUT.
39. Because the City, and Does 1through100, inclusive, have continued to collect th
tax despite clear pronouncements by the I.R.S. that bundled and long distance services are not
taxable under the Federal Excise Tax, a refund alone is inadequate relief and would require
taxpayers to file a multiplicity of actions.
40.
41.
Accordingly, Plaintiffs and the Class are entitled to:
a. a declaration that the UUT has been illegally applied and collected; and ·
b. an injunction preventing further collection of the UUT on amounts paid for
telephone service that the I.R.S. has conclusively determined to be not taxable
under the Federal Excise Tax.
COUNT IT
Money Had and Received
Plaintiffs repeat and re-allege each and every allegation contained above as if
fully set forth herein.
COMPLAINT • 8
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42. As set forth above, the City, and Does 1 through 100, inclusive, imposed and
continue to impose the UUT on services to which it does not apply, including mobile phone
service~ and bundled and long distance telephone services.
43. These monies which have been collected belong to Plaintiffs and the members of
the Class, and in fairness, should be returned to Plaintiffs and members of the Class.
44. Plaintiffs, on behalf of themselves and all other similarly situated taxpayers,
demanded the return of these monies, but the City, and Does 1through100, inclusive, have
refused to comply.
45. The City, and Does 1 through 100, inclusive, have no legal or equitable right to
retain these monies.
46. Accordingly, Plaintiffs and members of the Class are entitled to return of all
monies improperly collected under the guise of the UUT, along with statutory interest.
COUNT III
Unjust Enrichment
4 7. Plaintiffs repeat and rewallege each and every allegation contained above as if
fully set forth herein.
48. The City, and Does 1through100, inclusive, have been unjustly enriched by the
illegal exaction of money from Plaintiffs and Class members under the guise of the UUT.
49. Plaintiffs and the Class are entitled to full reimbursement from the City, and Does
1through100, inclusive, in the actual amounts by which the City, and Does 1through100,
inclusive, has been unjustly enriched at the expense of the Plaintiffs and the Class.
VI.
PRAYER FOR RELIEF
A. Certify the Class as a class action pursuant to C.C.P. §382;
B. Issue a declaratory judgment that the City, and Does 1 through 100, inclusive, have
improperly collected the UUT on all phone services to which federal courts and the
l.R.S. have declared the Federal Excise Tax to be inapplicable;
COMPLAINT - 9
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C. Enjoin the City, and Does 1through100, inclusive, from further improper collection
of the UUT;
D. Order the City, and Does I through 100, inclusive, to provide an accounting of the
total amount of the funds illegally collected under the guise of the UUT;
E. Order the prompt return to members of the Class the full amount of the funds in the
possession of the City, and Does 1 through 100, inclusive, that were illegally
collected as alleged UUT, plus interest;
F. Reimburse Plaintiffs and the members of the Class in amounts to be determined at
trial, 6r, where applicable, to the full extent allowed by law;
G. Award pre-judgment interest to Plaintiffs and Class members to the fullest extent
allowed by law;
H. A ~ard Plaintiffs and the members of the Class the costs of bringing this action,
including the payment of reasonable attorneys' fees, a11d administrative and litigation
costs and expenses; and
I. Grant such other relief as the Court deems just and proper.
COMPLAINT -10
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JURY DEMAND
Plaintiffs demand a trial by jury on all issues that may be so tried.
DATED: June 22, 2011 CASEY GERRY SCHENK FRANCA VILLA
BLA TI & PENFIELD LLP
By IA ,,_Or~~~~ ~i--v:~~v;...:_~P":._;_""~~_:..._._~-'----+'
Thomas Penfield
Jeremy Robinson
110 Laurel Street
San Diego, California 92101
T-(619) 238-1811 .
F-(619) 544-9232 ·
CAPRETZ & ASSOCIATES
James T. Capretz
Anthony Chu
5000 Birch Street, Suite 2500
Newport Beach, California 92660
T-(949)724-3000
F-(949)756-2635
COMPLAINT -11
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Exhibit A
2-161
Part Ill -Administrative, Procedural, and Miscellaneous
Communications Excise Tax; Toll Telephone Service
Notice 2006-50
SECTION 1. PURPOSE
(a) In general. As further described In this notice, the Internal Revenue
Service will follow the holdings of Am. Bankers Ins. Group v. United States, 408
F.3d 1328 (11th Cir. 2005) (ABIG); OfficeMax, Jnc. v. United States, 428 F.3d
583 (6th Cir. 2005); Nat'I RR Passenger Corp. v. United States, 431 F.3d 374
(D.C. Cir. 2005) (Amtrak); Fortis v. United States, 2006 U.S. App. LEXIS 10749
(2d Cir. Apr. 27, 2006); and Reese Bros. v. United States, 2006 U.S. App. LEXIS
11468 (3d Cir. May 9, 2006). These cases hold that a telephonic communication
for which there is a toll charge that varies with elapsed transmission time and not
distance (time-only service) is not taxable toll telephone service as defined in
§ 4252(b)(1) of the Internal Revenue Code. As a result, amounts paid for time-
only service are not subject to the tax imposed by§ 4251. Accordingly, the
government will no longer litigate this issue and Notice 2005-79, 2005-46 I.RB.
952, which states otherwise, is revoked.
(b) Credits and refunds. Taxpayers may be entitled to request credit or
refund of the excise taxes paid for the services covered by this notice. This
notice provides guidance regarding these requests. In addition, the
Commissioner will authorize the scheduling of an overassessment under § 6407
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to keep the period of !imitations open for these requests. This overassessment
will apply to all taxpayers and to all taxes paid for the services covered by this
notice beginning with the tax paid on services that were billed to customers after
February 28, 2003.
SECTION 2. BACKGROUND
{a} In generalN~(1) Tax imposed. Section 4251 (a)(1) imposes a tax on
amounts paid for communications services.
(2} Payment of tax. Section 4251 (a)(2) provides that the tax imposed shall
be paid by the person paying for the service (taxpayer). Section 4251(b)(2)
provides that the applicable percentage is 3 percent of amounts paid for
communlcations services.
(3) Collection of tax. Section 4291 provides that the tax is collected by the
person receiving the payment (collector). In most cases, the collector, which is
also responsible for paying over the tax to the government, is the
telecommunications company that provides the communications services to the
taxpayer.
(b) Definitions--(1) Communications services. Section 4251 (b)(1) provides
that the term communications services means (A} local telephone service; (B) toll
telephone service; and (C} teletypewriter exchange service. This notice does not
address teletypewriter exchange service.
(2) Local telephone service. Section 4252(a) provides that local telephone
service means (1) the access to a local telephone system, and the privilege of
telephonic quality communication with substantially all persons having telephone
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or radio telephone stations constituting a part of such local telephone system;
and (2) any facility or service provided in connection with such a service. Local
telephone service does not include any service that is a toll telephone service as
defined in§ 4252(b) or a private communications service as defined in § 4252(d).
This notice does not address private communications service.
(3) Toll telephone service--(i) Time and distance. Section 4252(b)(1) .
provides that toll telephone service includes a telephonic quality communication
for which there is a toll charge that varies in amount with the distance and
elapsed transmission time of each individual communication and for which the
charge is paid within the United States.
(ii} Periodic charge for a specified area. Section 4252(b)(2) provides that
toll telephone service also includes a service which entitles the subscriber, upon
payment of a periodic charge (determined as a flat amount or upon the basis of
total elapsed transmission time), to the privilege of an unlimited number of
telephonic communications to or from all or a substantial portion of the persons
having telephone or radio telephone stations In a specified area which is outside
the local telephone system area in which the station provided with this service is
located.
(c) Rev. Rul. 79-404. Rev. Rul. 79-404, 1979-2 C.B. 382, concludes that a
long distance telephone call for which the charge varies with elapsed
transmission time but not with distance is toll telephone service described in
§ 4252(b)(1).
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(d) Notice of proQosed rulemaklnq. In a notice of proposed rulemaking (68
FR 15690; Aprll 1, 2003), the Service proposed an amendment to the Facilities
and Services Excise Taxes Regulations to provide that toll telephone service
. described in section 4252{b)(1) may include a communication service for which
the charge does not vary with the distance of each individual communication.
(e) Recent litigation. ABIG, OfficeMax, Amtrak, and Reese Bros. hold
time-only service is not toll telephone service as defined in § 4252(b )(1 ). Further,
ABIG, OfficeMax, and Reese Bros. hold that the communications service
provided was not a service described in § 4252(b )(2) because the end result was
not a "periodic charge" based on total elapsed time but rather a monthly bill
based on a summation of toll charges for individual communications. (In Amtrak,
toll telephone service described In§ 4252(b){2) would have been exempt from
tax under the common carrier exception in § 4253(f).) ABIG, QfficeMax, Amtrak,
and Reese Bros. also hold that the communications services provided were not
local service, notwithstanding the access the services provided to the local
telephone system. (Fortis affirms, in a per curiam opinion, a district court
decision reaching the same results.)
(f) Notice 2005-79. Notice 2005-79, 2005-46 l.R.B. 952, states that the
Service will continue to assess and collect the tax imposed by § 4251 on all
taxable communications services, including those similar to the services in ABIG.
SECTION 3. TERMS DEFINED
The following terms are defined solely for purposes of this notice:
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(a) Bundled service. Bundled service is local and long distance service
provided under a plan that does not separately state the charge for the local
telephone service. Bundled service includes, for example, Voice over Internet
Protocol service, prepaid telephone cards, and plans that provide both local and
long distance service for either a flat monthly fee or a charge that varies with the
elapsed transmission time for which the service is used. Telecommunications
companies provide bundled service for both landline and wireless (cellular)
service.
(b) Local-only service. Local-only service is local telephone service, as
defined in § 4252(a), provided under a plan that does not include long distance
telephone service or that separately states the charge for local service on Its bill
to customers. The term also includes services and facilities provided in
connection with service described in the preceding sentence even though these
services and facilities may also be used with long distance service. See, for
example, Rev. Rul. 72-537, 1972-2 C.B. 574 (telephone amplifier); Rev. Rul. 73-
171, 1973-1C.B.445 (automatic call distributing equipment); and Rev. Rul. 73-
269, 1973-1 C.B. 444 (special telephone).
(c) Long distance service. Long distance service is telephonic quality
communication with persons whose telephones are outside the local telephone
system of the caller.
(d) Nontaxable service. Nontaxable service means bundled service and
long distance service.
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SECTION 4. EFFECT OF ABIG, OFFICEMAX, AMTRAK, FORTIS, AND
REESE BROS.
(a) Tax treatment of communications se['!jqe after ABIG. OfficeMax.
Amtrak. Fortis. and Reese Bros. The Service will follow ABIG, OfficeMax,
Amtrak, Fortis, and Reese Bros. Accordingly, taxpayers are no longer required
to pay tax under§ 4251 for nontaxable service. In addition, collectors or
taxpayers may request a refund of tax paid under§ 4251 on nontaxable service
that was billed to the taxpayers during the period after February 28, 2003, and
before August 1, 2006 (the relevant period).
(b) Tax on local-only service. Collectors should continue to collect and
pay over the § 4251 tax on amounts paid for local-only service. As noted in
section 3(b) of this notice, local-only service includes amounts paid for facilities
or services provided in connection with local telephone service. Thus, for
example, tax will continue to be imposed on amounts paid by a taxpayer for
renting an amplifier phone provided in connection with local telephone service
that is subject to tax.
(c) Effect on collectors. Collectors are directed to cease collecting and
paying over tax under§ 4251 on nontaxable service that is billed after July 31,
2006, and are not required to report to the IRS any refusal by their customers to
pay any tax on nontaxable service that is billed after May 25, 2006. Collectors
should not pay over to the IRS any tax on nontaxable service that is billed after
July 31, 2006. The form will require collectors to certify that for the third quarter
of 2006 that the§ 4251 tax reported on the Form 720 does not include any tax on
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nontaxable service that was billed after July 31, 2006. Consequently, the IRS will
deny all taxpayer requests for refund of tax on nontaxable service that was billed
after July 31, 2006. All such requests should be directed to the collector. In
addition, collectors may repay to taxpayers the tax on nontaxable service that
was billed before August 1, 2006, but are not required to repay such tax.
Collectors may also request a refund or make an adjustment to their separate
accounts, as appropriate, subject to the provisions of§ 6415 and section 5(d){4)
of this notice. Collectors must continue to collect and pay over tax under § 4251
on amounts paid for local only service.
SECTION 5. REQUESTS FOR CREDIT OR REFUND
(a) In general-~(1) Request must follow this notice. The Commissioner
agrees to credit or refund the amounts paid for nontaxable service if the taxpayer
requests the credit or refund in the manner prescribed in this Notice.
(2) Form of request. Taxpayers may request a credit or refund of tax on
nontaxable service that was billed after February 28, 2003, and before August 1,
2006, only on their 2006 Federal income tax returns. For this purpose, the 2006
income tax return is the income tax return for calendar year 2006 or for the first
taxable year including December 31, 2006. Forms 1040 (series), 1041, 1065,
1120 (series), and 990wT will include a line for requesting the overpayment
amount. Persons that are not otherwise required to file a federal income tax
return must nevertheless file a return to obtain the credit or refund. Except as
provided in section 5(d)(4) of this notice, a request for this credit or refund on any
other form (such as a Form 720, 843, or 8849) will not be processed by the
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Service. Taxpayers will be permitted to request the safe harbor amount under
paragraph (c} of this section only if they have paid all taxes billed by their service
provider after February 28, 2003, and before August 1, 2006.
{3) Guidance on the form. The instructions to the respective federal
income tax return forms will provide additional guidance. The forms and
instructions will require taxpayers to certify that ( 1) the taxpayer has not received
from the collector a credit or refund of the tax paid on nonti;ixable service billed
during the relevant period and (2) the taxpayer will not ask the collector for a
credit or refund of that tax and has withdrawn any such request that was
previously submitted. The instructions will also require that taxpayers, except for
those individuals using the safe harbor amount, retain records that substantiate
the request. These records should include bills from the collector that show the
amount of tax charged for nontaxable service for each month during the relevant
period and receipts, canceled checks, or other evidence that the amount
requested was actually paid.
(b) Period of request. The Commissioner will authorize the scheduling of
an overassessment under§ 6407 to preserve the period of limitations during
which taxpayers may request refunds of the tax on nontaxable service that was
billed to customers after February 28, 2003, and before August 1, 2006.
Therefore, requests may be made for credits or refunds of tax paid for
nontaxable service billed after February 28, 2003 and before August 1, 2006.
(c) Amount of the request--(1) Requests by individual taxpayers-(i) Safe
harbor amount. Individual taxpayers may request a safe harbor amount. No
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documentation will be required to be submitted or kept to support the safe harbor
request. However, taxpayers will be permitted to request the safe harbor amount
only If they have paid all taxes billed by their service provider after February 28,
2003, and before August 1, 2006; have not received a credit or refund of these
taxes from the service provider, and either have not requested such a credit or
refund from the service provider or have withdrawn any such request. The
amount of this safe harbor is still under consideration and will be announced in
later guidance.
(ii) Actual amount. Taxpayers that do not request the safe harbor amount
may request a credit or refund of the actual amount of tax they paid.
(d) How to file--(1) Requests by individual taxpayers. Individual taxpayers
may request a credit or refund of federal excise taxes paid on nontaxable service
only on their 2006 Form 1040, 1040A, or 1040-EZ, Individual Income Tax Return.
Individuals who are not otherwise required to file a federal income tax return
must nevertheless file Form 1040EZ-T to request the credit or refund. Individual
taxpayers, Including Schedule C filers, may request either the safe harbor
amount or the actual amount of tax paid for nontaxable service.
(2) Requests by taxpayers other than individual taxpayers. Taxpayers
other than individual taxpayers (entities) may request only the actual amount of
tax paid on nontaxable service billed during the relevant period. No safe harbor
amount is allowed for entities.
(3) Requests by entities-~(i) In general. Entities may request a credit or
refund of federal excise taxe~ paid on nontaxable service only on their 2006
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income tax returns. Any part of the credit or refund attributable to tax payments
that were deducted as an ordinary and necessary business expense (Including in
the determination of unrelated business taxable income) must be included in
income for the taxable year in which the refund Is received or accrued to the
extent that the tax payments reduced the amount of federal income tax (or
unrelated business income tax) imposed.
{ii) Partnerships. A partnership, as defined in§ 7701(a)(2), may request a
credit or refund of federal excise taxes paid on nontaxable service only on its
2006 Form 1065, U.S. Return of Partnership Income. Any amount of the credit
or refund included in partnership income and any interest on the credit or refund
must be reported on the partnership's return for the taxable year in which
received or accrued and must be allocated to its partners on the Schedule K~1,
Partner's Share of Income, Credits, Deductions, etc., for that taxable year.
(iii) S Corporations. An S Corporation, as defined in § 1361, may request
a credit or refund of federal excise taxes paid on nontaxable service only on its
2006 Form 11208, U.S. Income Tax Return for an S Corporation. Any amount of
the credit or refund included in S Corporation income and any interest on the
credit or refund must be reported on the S Corporation's return for the taxable
year in which received or accrued and must be allocated to its shareholders on
the Schedule K-1, Shareholder's Share of Income, Credits, Deductions, etc., for
that taxable year.
(iv) Estates and trusts. An estate or a trust, as defined in§ 301.7701~4(a)
of the Procedure and Administration Regulations, may request a credit or refund
2-171
11
of federal excise taxes paid on nontaxable service only on its 2006 Form 1041,
U.S. Income Tax Return for Estates and Trusts. Any amount of the credit or
refund included in the estate's or trust's income and any interest on the credit or
refund must be reported on the estate's or trust's Form 1041, U.S. Income Tax
Return for Estates and Trusts, for the taxable year in which received or accrued.
However, for a trust that Is treated as owned by the granter or other person under
subpart E (§ 671 and following), part I, subchapter J, chapter 1 of the Internal
Revenue Code (grantor trust), the owner of the trust may request a credit or
refund of federal excise taxes treated as paid by the owner for nontaxable
service only on its applicable 2006 federal tax return.
(v) Tax ~xempt organizations. An organization that is described in
§ 501 (a) may request a credit or refund of federal excise taxes paid on
nontaxable service only on its 2006 Form 990-T, Exempt Organization Business
Income Tax Return. Tax exempt organizations that are not otherwise required to
file a federal income tax return must nevertheless file Form 990-T to request the
credit or refund. Any amount of the credit or refund included in the organization's
unrelated business taxable income must be reported on the organization's Form
990~T, Exempt Organization Business Income Tax Return, for the taxable year in
which received or accrued. An organization that is subject to tax on its interest
income must also report any interest on the credit or refund on its Form 990-T,
Exempt Organization Business Income Tax Return, for the taxable year in which
received or accrued.
2-172
12
(vi) Corporations. A corporation, as defined in § 7701 (a)(3), that is not
described in section 5(d)(3)(1ii) of this notice may request a credit or refund of
federal excise taxes paid on nontaxable service on!y on its 2006 Form 1120
(series) income tax return (generally, Form 1120, U.S. Corporation Income Tax
Return). Any amount of the credit or refund included in the corporation's income
and any interest on the credit or refund must be reported on the corporation's
income tax return for the taxable year in which received or accrued.
Corporations that are not otherwise required to file a federal income tax return
must nevertheless file Form 1120 (series) to request the credit or refund
(vii) Other nonfiling entities. Entities that are not otherwise required to file
a federal income tax return must file Form.990-T to request the credit or refund.
(4) Requests and adjustments by collectors-(i) Section 6415 conditions to
allowance. The conditions to allowance described in § 6415 apply to all requests
and adjustments by collectors, as defined by section 2(a)(3) of this notice. Thus,
a request by a collector is allowed only if the person that paid over the tax
establishes that it has repaid the amount of the tax to the person from whom the
tax was collected, or obtains the written consent of such person to the allowance
of the credit or refund.
(ii) Requests for regular method collectors--{A) In general. A person that
collected the tax imposed by§ 4251 on nontaxable service and paid it over to the
government based on amounts actually collected under§ 40.6302(c}-1 (a)(2)(i) of
the Excise Tax Procedural Regulations (regular method collectors) may request
a credit or refund.
2-173
.. . .-: :·.~:·'< =''.·:'; ,, :··:~<:~· :· ::· .1:;! ! ;·:::: :::-•:.-: :. · .... :=:·: :.1-~''' :.'::·_>'.:'··:?··'·.:··:;''.'~'· :•.; ~! ·.:: ;\'.'~:·:.''.::::?: ~ ~::,:'.<;:;~;::• ·';'.l,-."i'· ·:·i~: .':::·~:. :.!; ·. ! ,:·~!;~··:··''·:': ·:,~"'-::::··:··.:·; ·:·:, .... :;-~:::::~:i~(::··:~?;f.'.':;-..;·:.:;l · .. i _:<::·< ·::~::~·:, :-._:~.;~·::.';t:·:·'·:·':''..:":'.'.<.:=::::·~:· ;··.:: . .:~·-::::::'.:~.::~ :.:·:;·.:·,:·.:;:._. :,·: '..;:.::';'·';··.~'':'.·?~·.,;.'.•::.'· ;_-.:.-=:;\:,• :'! ·<'\ '."' ·:;:.:;_-:::~-:·:','·'.:'r"~.: :::;
13
(B) Form of the request. Regular method collectors may use Form 720X,
Amended Quarterly Federal Excise Tax Return, line 1, IRS No. 22, for credit or
refund of amounts collected and repaid to taxpayers.
(iii) Account adjustments for alternative method collectors. A person that
collected the tax Imposed by§ 4251 on nontaxable service and paid it. over to the
government based on amounts considered as collected under
§ 40.6302(c)w1 (a)(2)(ii) {alternative method collectors) may adjust the separate
account for the amount of an overpayment. The required adjustment to the
separate account is described in§ 40.6302(c)-3(b)(2)(ii)(C). The adjustment is
reflected on Form 720, Schedule A, line 2, but may not reduce tax liability on
Form 720 below zero.
(e) Interest on the credit or refund included in income. If a taxpayer
requests a credit or refund of the actual amount of tax paid, interest on the credit
or refund of the tax paid for nontaxable service must be included as income on
the taxpayer's income tax return for the taxable year In which the interest is
received.or accrued. Thus, individuals are generally required to report the
interest on their 2007 Income tax returns.
(f) Estimated tax effects. Although the credit or refund allowed to a
taxpayer under this notice will be requested on the taxpayer's income tax return,
it is not a credit against tax for purposes of§§ 6654 and 6655. Accordingly, the
taxpayer may not take the credit or refund into account in determining the
amount of the required installments of estimated tax for 2006. In determining the
amount of the required installments of estimated tax for 2007, the income
! ;
2-174
4
14
attributable to the credit or refund is taken Into account on the date the income is
paid or credited in the case of a cash method taxpayer and on the date the return
making the request is filed in the case of an accrual method taxpayer.
(g) Requests that dQ not follow the provisions of this notice. Requests that
do not follow the provisions of this notice (whether filed before or after its
publication)--
(1) Will not be processed to the extent they relate to the tax paid on
nontaxable service that was billed after February 28, 2003; and
(2) Will be processed normally to the extent they relate to the tax paid on
nontaxable service that was billed before March 1, 2003.
SECTION 6. EFFECT ON OTHER DOCUMENTS
Notice 2005-79, 2005-46 I.RB. 952, is revoked. Rev. Rul. 79-404, 1979-2
C.B. 382, will be revoked in a later revenue ruling.
SECTION 7. DRAFTING INFORMATION
The principal author of this notice Is Taylor Cortright of the Office of the
Associate Chief Counsel (Passthroughs and Special Industries). For further
information regarding this notice, contact (202) 622-3130 (not a toll-free call).
2-175
Exhibit B
2-176
CaseyGerry
CASEY GERRY SCHENK FRANCAVILLA BLATT & PENFIELD LLP
110 Laurel Street, San Oi11go, CA 92101-1419
·-·--------·-·----------------------·-·-------·-·--Tel (619) ~~-18'.11 Fax (6191544-9232 ------·-·----·-----'---·-------------------------
David S. Casey, Jr.
Frederick Schenk
Robert J. Francavilla
Gayle M. Bh1tt
Thomas 0, Penfield
Thoma$ P. Luneau
Jeremy K Robinson
Wendy M. Behan
Jessica Kfarer Pride
Stephanie S. Baril
ofOaunsal
T. Michael Reed
Scott C. Cummins
Mitchel Olson MD, JD
Richard Westbrook
'111«-1 ea;!
David S. Casey, Sr.
-1S13·~~
Prmdimt,
Califomla Stoto Bar, 11175
Richard F. Gerry
11124-2004'
Pl1IO!dmt.
Auoclotloo olTtlal t.swy,..
of Amerioa, 1682
North County Office
1901 Camino Vida Roble
Suits 121
Carisbad, CA 92008
176Ql7.~~ll!Wl ..
Fax 1760) 794-9982
April 4, 2011
Via First Class Mail
Mayor Cheryl Cox
City of Chula Vista
276 Fourth Avenu.e
Chula Vista, CA 91910
Councihnember Patricia Aguilar
City of Chula Vista
276 Fourth Avenue
Chula Vista, CA 91910
Councilmember Pamela Bensoussan
City of Chula Vista .
276 Fourth Avenue
Chula Vista, C~ 91910
Councilmember Steve Castaneda
City of Chula Vista
276 Fourth Avenue
Chula Vista, CA 91910
Councilmember Rudy Ramirez
· City of Chula Vista
276 Fourth Avenue
Chula Vista, CA 9191 O
Maria Kachadoorian ·
Director of Finance/Treasurer
City of Chula Vista
276 Fourth Avenue ' . . . '
Chula Vista, CA 91910
Re: Chula Vista City Utility Users Tax
To the Honorable Mayor, City Council and Director of Finance of the
City of Chula Vista:
Our client, Carla Canedo Villa, a resident of 964 Wind Cave Place,
Chula Vista, California, 91914-3613, on behalf herself and all similarly
situated taxpayers in the City of Chula Vista ("City"), respectfully
requests the immediate cessation of the collection of the Utility Users
Trial Attorneys Since 1947
www.cglaw.com
2-177
I .
CaseyGerry
April 4, 2011
Page2
·---··~··-,----~-~·-------------···--· .. -~····-··-~-~----·.--.-.---·-·--·------·---...---·-·---··-··-····---.-.......... ~---~-----·--~·-· .... ·-------.·-------.. ---~--------
Tax ("UUT") on certain telephone services, described below, and the
return of all monies to the persons and entities from whom the UUT was
collected on those services.
The CitY UUT imposes a 5% tax on the charges paid for intrastate,
interstate, and international telephone communication services by every
person in the City. Chula Vista Muni. Code § 3.44.030. However, the
UUT expressly excludes from taxation any charges "for services paid for
by users o:fmobile telephone and marine telephone service." Chula Vista
Muni. Code§ 3.44.030, subd. (B). Also excluded from tax:atlon is "any
person for using intrastate telephone communications services to the
·extent that the amounts paid for such services are exempt from or not
subject to the tax imposed under sections 4251, 4252, and 4253 of Title
26 of the United States Code ("federal excise tax")." Chula Vista Muni.
Code§ 3.44.030, subd. (C).
Section 4251 of Title 26 of the United States Code imposes a 3% tax on
amounts paid for local telephone service, toll telephone service, and
teletype exchange service. Toll telephone service is defined in relevant
part as "a telephonic quality communication for which ... there is a toll
charge which varies in amount with the distance and elapsed
transmission time of each individual communication .... " 26 u.s.c. §
4252 (2006). (emphasis added).
The tax iniposed by ·sectio~ 4251 of the Internal :Revenue Code does not
apply to toll telephone service where the charge varies only by time and
not by distance. See I.R.S. Notice 2006-50, 2006 WL 1452787 (May 25,
2006) ("amounts paid for time-only service are not subject to the tax
imposed by§ 4251"). See also, Am. Bankers Ins. Group v. United
States, 408 F.3d 1328 (11th Cir; 2005); OfficeMax, Inc. y, UniteQ.State§,
428 F.3d 583 (6th Cir. 2005).
Accordingly, the City UUT, by its terms, does not apply to mobile phone
services and services which include: (1) long distance telephone service
where the charge varies only by time, and (2) charges for "bundled
2-178
CaseyGerry
April 4, 2011
Page3
----··~---~-.----.,A•·~· ..... -·•--·••-·--•w•-....... _._,, ___ . .,.,,_,, __ , ______ ,_,,_., .. _,.,..,_, .. ,'"'."''•---·-·----·"-''"" .... 'OH•-···· .. -· .. -~··•~··---·-·------.... ---·---.--.. ·-·-"-
service," which are services where local and long distance services are
provided under a plan that does not separately state the charge for the
local telephone service and can include cellular service, landline service,
prepaid telephone card service, and voice-over internet protocol service.
See I.R.S. Notice 2006-50.
Carla Caneda Villa and all other similarly situated taxpayers have paid,
·and continue to pay, the UUT.on telephone services to which the City
UUT does not apply, i.e., wireless phone services provided to residents in
the City. This collection ofUUT taxes is in violation of Article XIIIA, §
3 of the California Constitution and California Government Code§§
53722, et seq.
Thus, the City is in the position of bailee or trustee with respect to these
specific monies and would be unjustly enriched by retaining them. Carla
Caneda Villa, on behalf herself and all similarly situated taxpayers in the
City, hereby respectfully requests the immediate return of these monies.
The City is able to determine the identities of all relevant taxpayers and
the specific monies due to each of them; however, upon information and
belief the total amount exceeds $10,000. Further, upon information and ·
belief this claim, if filed as a civil action, would not be a limited civil
·case as that tenn is defined in California Code of Civil Procedure Section
86.
Accordingly, Carla Caneda Villa, on behalf herself and all similarly
situated taxpayers in the City, further respectfully requests the immediate
cessation of collection of the UUT on these services to which it does not
apply and a return of all monies to the persons and entities from whom
the UUT was collected on those services.
2-179
t, .. -1 • .,;
CaseyGerry
-·---~-·-----
April 4, 2011
Page4
-----~ .. ·•-H•H-·----·--~ .. ·--·--·-------·-·--~ ..... _ .. ,,. ... ________ ... __ ,, __ .. __ ,_~--·--··------~----:--·•-••--•-----·-----·
Notices or correspondence concerning this matter should be sent to:
Thomas Penfield, Esq.
Jeremy Robinson, Esq.
CASEY GERRY SCHENK
FRANCA VILLA BLATT &
PENFIBLDLLP
110 Laurel Street
San Diego, CA 92101
. Anthony Chu, Esq.
CAPRBTZ & ASSOCIATES
5000 Birch St., Suite 2500
Newport Beach, CA 92660
If you do not respond within 45 days, we will assume that you have
denied these requests.
Very truly yours,
THOMAS D. PENFIELD
TDP:sw
2-180
····"j
Exhibit C
2-181
· · · · -···· · · ::: ;· .. -·:.::·,:·: '·-:. ' · ·'. '~'·'.:'.;.-: i r .\~·1.~1::: , .. "! ' · · · i · . .'·· ·-. ." •":·" .::·· :·: .·.~: ":f·;.> ·:-.~.-~ ~:l'·:'i .~·."'"!,'·:' •. •.:;·; .) 'F.t::; ~: •:;~ > ·.;. ~-~ ::::: ~·' ·:, ,. :i, ~-:.\;~::··}.;:::-._: •:·~··'.'i",;:• !:· , "'i" ; :"' :;· -1:;,;.-.'. : '. ·.7 ~·;::...:~'\"''.-'.;·~t-:·;::•.1;\~·:·:;'F ~. ·-:::>~ :· : ! . ;~'.·:·:'.:• ··.; :·-·;·:. , · ::.:. ;"::::: ·.'. '.: i";: '.':"'-i.~~.-c·:··:'~~ =: ;;.;-ri · ··· I · ., · .. '·.-'·;~".·.~::::; ,: ·:;··:>:·=.:::.:• :t..;-:~:;::"'.:: ..
i
CllYOt CHULA VISTA Qffice of the City Attorney
April 22, 2011
VIA CERTIFIED OVERNJQHT DELIVERY
Thomas Penfield, Esq.
Jeremy Robinson, Esq.
Casey Gerry Schenk Francavilla Blatt &
Penfield LLP
110 Laurel Street
San Diego, CA 92101
Anthony Chu, Esq.
Capretz & Associates
5000 Birch St., Suite 2500
Newport Beach, CA 92660
Re: Chula Vista City Utility Users Tax Claim
Dear Nji'. ~enfield:
l am writing you on behalf of the City of Chula Vista (the "City'') regarding your request
that the City stop collection of the Utility Users Tax ("UUT"), and refund unspecified amounts to
Carla Caneda Villa and other unspecified City taxpayers ("Claim"). The original Claim
materials were dated April 4, 2011.
The Claim is insufficient and this letter constitutes notice pursuant to the California
Government Code of such insufficiency, First, class claims are not permitted for refunds of
taxes. Chula Vista Municipal Code Section 3.44.120 provides in pertinent part: "Nothing herein
shall permit the filing of a refund claim on behalf of a class or group of taxpayers." The Claim
for taxpayers beyond the named claimant, Ms.' Villa, is therefore defective under Section
3.44.120.
Second, to the extent that you purport to represent the interests of multiple claimants, the
Claim does not comply with the requirements of the Government Claims Act concerning claims
on behalf of multiple claimants. See Cal. Govt. Code § 910 et seq.; 'Woosley v. State of
California (1992) 3 Cal.4th 758; Neecke v. City of Mill Walley (1995) 39 Cal.App.4th. 946. For
example, you have not provided the City with the names of the individuals seeking refunds, the
addresses of the claimants, the date or dates the payments were made, or the amounts claimed on
their behalf. The absence of such information makes it impossible for the City to investigate and
consider the claim because, contrary to your allegation, the City does not have within its control
www.chulavistaca.gov (619) 691-5037 fax (619) 409·5823
2-182
..
April 22, 2011
Page2
information to identify which individuals may have paid UUT, when they paid it or bow much
they allegedly paid.
Third, the Claim does not provide the City sufficient infonnation to enable it to evaluate
the time period for which you seek a refund of UUT payments allegedly made by Ms. Villa, or
any of the other unidentified claimants whose interests you purport to represent To the extent
Ms. Villa, or any other unidentified claimant, seeks sums remitted more than twelve months
before the Claim was presented, that portion of the Claim is not timely presented within the time .
allowed by law.
Finally, even as to the named claimant, the claim is insufficient. Again, as noted above,
the City does not have control of information providing the identity of individuals who paid
UUT, how much they paid, on what services they may have paid UUT or when any such
payments were made. Thus, the City does not have infonnation sufficient to enable it to evaluate
the merits of Ms. Villa's claim. Moreover, the City's Municipal Code Section 3.44.120 requires
that claims be submitted by claimants under penalty of perjury. The Claim has not been verified
by Ms. Villa, nor has it been verified by the other multiple claimants you purport to represent.
Accordingly, the Claim you presented to the City of Chul8::#:i,~ta is insufficient. Pursuant
to Government Code Section 910.8, no action will be taken on thisr'cfaim by the City for period
of 15 days after the date of this notice. Therefore, if you wish to :file an amended claim
correcting these deficiencies, you should do so within that time period.
Very truly yours,
CITY ATTORNEY
Glen R. Googins
By:
Bart Miesfeld,
Senior Assist t City. ~ttomey
City of Chula Vi5ta
2-183
..
Exhibit D
2-184
''') i
. ~Jf?---._ ¢,.Ji.Jl!JU;
~~~~
CITYOF
CHUIAVISTA Office of the City Attorney
VIA FEDERAL EXPRESS
Tho11rns Penfield, Esq.
. Jeremy Robinson, Esq.
May 4, 201 I
Casey GetTY Schenk Francavilla Blatt & Penfield LLP
I I() Laun::l Street
San Diego, CA 92101
Anthony Chu, Esq .
Capretz & Assoqiates
5000 Birch St., Suite 2500
Newport Beach, CA 92660
RE: NOTICE OF RETURNED CLAIM FOR FAfLURE TO PRESENT WITHIN
REQUIRED TIME PERIOD
De<ir IV! r. Pen Jidd:
This letter·, in aclclition to our earlier letter dated April 22, 20011, is presented on behalf of the
City of Chula Vista (the "City") regarding your request that the. City stop collection of the Utility Users
Tax ("UUT') and refund unspeci fled amounts to Carla Caneda Villa and other unspecified City
Lux.payers ("Claim"). Your original Claim materinls were dated April 4, 201 L
By letter dated April 22, 2011. the City has previously notified you that the original claim was
i11su rlicient pursuant to the requirements of the Califomia Government Code. For the reasons
previously stated, the claim remains insufficient.
Please be further advised that the Claim tiled with the City on April 4, 2001 l, is being returned
Ld jiLHl us laLL'.' in regilrds lo that portion of the Claim which seeks sums remitted more than twelve
111011ths before the claim W<1s presented. Claims of the nature presented by you in your April 4, 2011
materials must be presente.c\ with in one year of the accrual of the cause of action.
By:
276 Fourth Avenue, Chula Vista, CA 91910
Very truly yours,
CITY ATTORNEY
Glen R. Googins
www.chulavistaca.gov (619) 691-5037 fax (619) 409-5823
2-185
'' .. ~j
Exhibit E
2-186
... ;.:; .. :-:.;'-·.:
' '
.• :./··;,',.A ' .' '..
\... " . .. ' .. ~ -
,. ...
CAPl\.;'rz &
ASSOCIATES
I' ,t
....
Lawyers
www. cap re tz. com
tchu@capretz.com
Anthony Chu
VIA FIRST CLASS MAIL
Mayor Cheryl Cox
City Of Chula Vista
276 Fourth Avenue
Chula Vista, CA 91910
Councilmember Patricia Aguilar
City of Chula Vista
276 Fourth Avenue
Chula Vista, CA 91910
Councilmember Pamela Bensoussan
City of Chula Vista
276 Fourth Avenue
Chula Vista, CA 91910
May 6, 2011
Councllmember Steve Castaneda
City of Chula Vista
276 Fourth Avenue
Chula Vista, CA 9191 O
Councilmember Rudy Ramirez
City of Chula Vista
276 Fourth Avenue
Chula Vista, CA 91910
Marla Kachadoorlan
Director of Financefrreasurer
City of Chula Vista
276 Fourth Avenue
Chula Vista, CA 91910
Re: Chula Vista City Utility Users Tax
To the Honorable Mayor, City Council and Director of Finance of the City of
Chula Vista:
Pursuant to Cal. Govt. Code §910.6, this letter shall constitute an
amendment to the Claim dated April 4, 2011 presented by Carla Caneda Villa on
behalf of herself and all others similarly situated to request that the City of Chula
Vista stop collection of the Utility Users Tax ("UUT") and for refund of the
amounts received by the City under the ausplces of the UUT.
While we respectfully disagree wrth the positions taken by the City
regarding the perrnisslbility of class claims for refunds and the length of the
claims perlod stated in the City's letters of April 22, 2011 and May 4, 2011, and
we reserve ou·r right to challenge the City's position on those Issues, this letter
serves to address the points raised by the City regarding the amounts and the
dates of the UUT payments made by Ms. Villa.
·Ms. Villa has maintained an account with Verizon Wireless since 1994.
WhUe Ms. VIiia Is not currently in possession of her account billing statements
dating back to 1994, her available statements for the 12 month period from May
201 O to the present reflect that Ms. Villa has been charged and paid $76.15
5000 lllRCK STREET+ WEST TOWER, SUITE 2500 • NEWPORT BEACH, CA 92$60 • T~(949) 724-3000 + F~{949) 757-2635
2-187
4 ') \,.
Mayor Cheryl Cox
City Council
Director of Finance
City of Chula Vista
May 6, 2011
Page2
,
~-
towards taxes and governmental surcharges categorized on her billing statement
as the "Chula Vista City UUT."
Assuming the City has collected the UUT from the residents of Chula Vista
In connection with wireless phone service since at feast the Inception of Ms.
Villa's Verizon account, the City has improperly collected an estimated amount of
$1,292.55 from Ms. Villa alone.
Accordingly, given that Ms. Villa has presented a claim consistent with the
requirements under Cal. Govt. Code§ 910, please advise within 45 days of the
date of this letter whether the City will accept her claim for refund.
Respectfully submitted,
/~.7 '
i/'1"1 #.~ ?<.----.
Anthony Chu, Esq. ·
CAPRETZ & ASSOCIATES
AC/rd
cc: Thomas Penfield, Esq.
Jeremy Robinson, Esq.
5000 BIRCH STREET. WEST roWER, SUITE 2500. NEWPORT BEACH, CA 92660. T~(9119) 724-3000 • F-(949) 757-2635
2-188
.. ')
Exhibit F
2-189
" ~(~ ::us:;·
~
CITY OF
CHUlAVISTA Office of the City Attorney
VIA FEDERAL EXPRESS
Thomas Penfield, Esq.
Jeremy Robinson, Esq_
May 26, 2011
Casey Gerry Schenk Francavilla Blatt & Penfield LLP
I I 0 Laurel Street
San Diego, CA 92101
RE: Chuhl Vista City Utility Users tax Claim
Dear Mr. Penfield & Mr. Chu:
Anthony Chu, Esq.
Capretz & Associates
5000 Birch St., Suite 2500
N'ewpo1t Beach, CA 92660
l am writing you on behalf of the City of Chula Vista (the "City") regarding your request
that the City stop collection of the Utility Users Tax ("UUT''), and refund i.mspecified amounts to
Carla Caneda Villa and other unspecified City taxpayers ("Claim''). The original Claim
materials were dated April 4, 2011.
By letter dated May 6, 2011, you purported to present "an amendment to the Claim dated
April 4, 2011 ". This Jetter incorporates by reference the City's earlier responses to you dated
April 22, 2011 and May 4, 2011 (and the City hereby reasserts all insufficiency and untimeliness
assertions as if stated herein fully) with the exception that you have now provided the amount of
$76.15 as the amotmt paid by Ms. Villa for the twelve month period from May 2010 to the
present, and such amounts were categorized on her billing statement as the "Chula Vista UUT."
Copies of the City's earlier responses are enclosed for your review.
This Jetter shall first serve to return as late all claims the City has already outlined in our
letters of April 22, 2011 and May 4, 201 l. However, with respect to those claimsi or portions
thereof, which are timely, then, for those claims, or portions thereof, this letter will further serve
to advise that the Claim you .filed on April 4, 2011, with its purported amendment dated May 6,
2011, has been rejected and denied.
WARNING:
Subject to ceitain exceptions, you have only six (6) months from
the date this notice was personally delivered 01· deposited in the
mail to file a cotirt action based upon state law. (See Government
Code Section 945.6.) This notice does not affect or extend any
276 Fourth Avenue, Chula Vista, CA 91910 www.chulavistaca.gov (619) 691-5037 fax (619) 409~5823
2-190
·-:i'.\ ;.:·.1;··:: \ ·.~\\:'-'-'..'-~-'.·-·: . .,. ':i .. ':>:· ~-~'. <':'·'·' ·:-···.·=·~=;::~:.( -:·:.,: , :~·;: '.':~ ::: 'I '·i·:' .'=:.~::·::.,,:-::
r 1 ) ..
SC'M:tcz
Enck)Sute~
Thomas Pe11fleld, Esq.
Anthony Chu, Esq.
Page Two
May26, 2011
other applicable statute of limitations. Depending on the type of
action, a shorter statute oflimitations may apply.
Although you are attorneys, Government Code section 913 also requi.res the City
to advise as follows: "You may seek the advice of an attorney of your choice in
connection with this matter. If you desire to consult with an attorney, you should
do so immediately."
Finally, the City, pllrsuant to sections 128.7 and 1038 of the California Code of
Civil Procedure, will seek to recover all costs of defense in the event this action is
filed in this matter and it is determined that the action was not brought, or
maintained, in good faith and with reasonable cause.
By:
Very truly yours)
CITY ATTORNEY
Glen R. Googins
City of Chula Visln
0
ssistant City Attorney
2-191
( )1 ....
Office of the City Attorney
VIA FEDERAL EXPRESS
Thomas Penfield, Esq.
Jeremy Rofuinson, Esq.
May4, 2011
Casey Ge1w Schenk Francavilla Blatt & Penfield LLP
I l 0 Laure 1 St reel
San Diego, CA 92101
Anthony Chu, Esq.
Capretz & Associates
5000 Birch St., Suite 2500
Newport Beach7 CA 92660
RE: NOTICE OF RETURNED CLAIM FOR FAILURE TO PRESENT WITHIN
REQUIRED TIME P:ERlOD
Dear Mr. Penfield:
This lettei·, in addition to our earlier letter dated April 22, 20011, is presented on behalf of the
City of Chula Vista (the "City") regarding your request that the City stop collection of the Utility Users
Tax ("UUT") and refund unspecified amounts to Carla Caneda Villa and other unspecified City
taxpayers ("Claim"). Your original Claim materials were dated April 4, 2011.
By Jetter dated April 22, 2011, the City has previously notified you that the original claim was
insufticie11l pursuant to the requirements of the California Government Code. For the reasons
previously stated, the claim remains insufficient.
Please be further advised that the Claim filed with the City oo April 41 20011, is being returned
10 yo Lt as late in regards to that portion of the Clain:i. which seeks sums remitted more than twelve
months before the chum was presented. Claims of the nature presented by you in your April 4, 2011
materials must be presented within one year of the accrual of the cause of action.
Brr::
BCM:lu2:·
Very truly yours,
CITY ATTORNEY
Glen R. Googins
276 Fourth Avenue, Chula Vista, CA 91910 www.chulavbta<:a.gov (619) 691-5037 fax (619) 409-5823
2-192
--.·.·.·:,f
~~~ .. ctt6rA~STA Office of the City Attorney
April 22, 2011
VIA CERTlFIED OVERNIGHT DELIVERY
Thomas Penfield, Esq.
Jeremy Robinson, Esq.
Casey Gerry Schenk Francavilla Blatt &
Penfield LLP
110 Laurel Street
San Diego, CA 92101
Anthony Chu, Esq.
Capretz & Associates
5000 Birch St, Suite 2500
Newport Beach, CA 92660
Re: . Chula Vista City Utility Users Tax Claim
Dear .Mr. Penfield:
I am writing you on behalf of the City of Chula Vista (the "City'') regarding your request
that the City sfop collection oft.he Utility Users Tax ("UUT11), and re.fund unspecified amowits to
Carla Caneda Villa and other unspecified City taxpayers ("Claim"). The original Claim
materials were dated April 4, 2011.
The Claim is insufficient and this letter constitutes notice pursuant to the California
Government Code of such insufficiency. First, class claims are not permitted for refunds of
taxes. Chula Vista Municipal Code Section 3.44 .120 provides in pertinent part; "Nothing herein
shall permit the filing of a refund claim on behalf of a class or group of taxpayers." The Claim
for taxpayers beyond the named claimant, Ms: Villa, is therefore defective under Section
3.44.120.
Second, to the extent ~t you purport to represent the interests of multiple claimants, the
Claim does not comply with the requirements of the Goverrummt Claims Act concerning claims
on behalf of multiple claimants. See Cal. Govt. Code § 910 et seq.; Woosley v. State of
California (1992) 3 Cal.4th 758; Neecke v. City of Mill 'falley (1995) 39 Cal.App.41h 946. For
e:xample, you have not provided the City with the :names of the individuals seeking refunds, the
addresses of the claimants, the date or dates the payments were made, or the amounts claimed on
their behalf. The absence of such info:tmation makes it impossible for t.b.Q City to investigate and
consider the claim because, contrary to your allegation, the City does pot have within its control
276 Fourth Avenue, Chula Vista, CA 91910 www.chulavistaca.gov fax (619) 409-5823
2-193
April 22, 2011
Page2
information to identify which individuals may have paid UUT, when they paid it or how much
they allegedly paid.
Third, the Claim does not provide the City sufficient information to enable it to evaluate
the· ti.me period for which you seek a refund of UUT payments allegedly made by Ms. Villa; or
any of the other unidentified claimants whose interests you pmport to represent. To the extent
Ms. Villa, or any other unidentified claimant, seeks sums remitted more than twelve months
before the Claim was presented, that portion of the Claim is not timely presented within the time
~~~~ I
Finally, even as t-0 the named claimant, the claim is insufficient Again, as noted above,
• the City does not have control of information providing the identity of individuals who paid
UUT, how much they paid, on what services they may have paid UUT or when any such
payments were made. Thus, the City does not have information sufficient to enable it to evaluate
the merits of Ms. Villa's claim. Moreover; the City's Municipal Code Section 3.44.120 requires
that claims be submitted by claimants under penalty of perjury. The Claim has not been verified
by Ms. Villa, nor has it been. verified by the other multiple claimants you purport to represent.
Accordingly, the Cla:im:;you presented to the City of Chula Vista is insufficient. Pursuant
to Government Code Sectidfi 910.8, no action will be taken on tbis claim by the City for period
of 15 days after the date of this notice. Therefore, if you \Vish to file an .amended claim
correcting these deficiencies> you should do so within that ti.me period.
Very truly yours,
CITY AITORNEY
Glen R Googins
By:
City of Chula Vista
2-194