HomeMy WebLinkAboutImpartial Analysis of Measure D-12 by City Attorney - signedAN IMPARTIAL ANALYSIS OF MEASURE D-12
BY THE SAN LUIS OBISPO CITY ATTORNEY
Since 1972, the City of San Luis Obispo has imposed a 5% Utility Users Tax (UUT) on
telephone, electricity, gas, water, and cable users within the City. The tax has been charged
regularly by service providers and remitted to the City as provided by Municipal Code, Chapter
3.16. This City Council proposed Measure D-12 would replace the City's current UUT
ordinance with a revised ordinance that: 1) reduces the City's current tax rate for
telecommunications and cable/video users from 5% to 4.8%; 2) maintains the City's current tax
rate of 5% for electricity, gas, and water users; 3) modernizes the language of the ordinance for
clarity; 4) updates and expands definitions to address dramatic changes in telecommunications
and video services technologies that have emerged since the current ordinance was adopted; 5)
ensures uniform application of the video and telecommunications tax, regardless of the means of
transmission or technology used; and 6) ensures the Telecommunications User's Tax is in
compliance with current federal laws to avoid potential litigation.
The most significant changes proposed measure D-12 are to the telecommunications and video
users tax provisions. Like most older UUT ordinances in California, the City's telephone UUT
provisions defined the scope of the tax on telephone users partially by reference to the Federal
Excise Tax (FET) (26 USC §4251). An IRS ruling in 2006 stated that the FET does not apply to
most common billing plans currently in use, such as "one -rate" plans (which provide a mix of
local and long-distance calling for a flat rate or fixed fee for unlimited dialing). The ruling did
not prohibit cities from continuing to impose telecommunication taxes more broadly than the
Federal government's interpretation of the FET. However, the ruling did create uncertainty
regarding the continuation of longstanding tax practices and expanded application to new
technologies of taxes, like the City's, which include an FET reference. One result of the
ambiguity created has been significant litigation challenging the application of UUT ordinances
with language similar to the City's ordinance. Many cities have sought voter approval of revised
ordinances, like Measure D-12, to avoid potential lawsuits that could limit the continued
collection of telecommunications UUT revenues.
The City's 1972 ordinance was written before new telecommunication technologies, like "smart"
phones or Voice over Internet Protocol (VoIP), and new video technologies, like internet
protocol TV and Video, became available. The proposed measure would encompasses current
technologies and allow the City's ordinance to remain current with evolving communications
and video technologies. The tax would apply uniformly to all users of video and communications
services, regardless of the means of transmission or technology used. The telecommunications
UUT would not apply to charges for internet access or digital downloads, such as books,
ringtones, games and similar products.
Measure D-12 requires approval of a majority of voters. A "yes" vote is a vote to adopt the
revised UUT Ordinance. A "no" vote is a vote to reject the proposed UUT Ordinance, and
continue the UUT in its current form.
The above statement is an impartial analysis of Measure D-12. If you desire a copy of the
measure, please call the City Clerk's office at 781-7000 and a copy will be mailed at no cost
to you.
Chu•istine Dietrick
City Attorney
City of San Luis Obispo