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Dept. ID AD 14-026 Page 1 of 2
Meeting Date:7/7/2014
CITY OF HUNTINGTON BEACH
= E R REQUEST FOR. CITY COUNCIL ACTION
MEETING DATE: 7/7/2014
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Fred A. Wilson, City Manager
PREPARED BY: Teri Baker, Assistant to the City Manager
SUBJECT: As recommended by the Intergovernmental Relations Committee (IRC), approve
a City Council position and authorize the Mayor to sign a letter of support for
Assembly Bill 1717 (Peres) which establishes a uniform, statewide collection
mechanism of Utility User Tax (UUT) on prepaid wireless services
Statement of Issue:
Currently, Utility User Tax (UUT) is not collected on prepaid wireless services, yet prepaid wireless
makes up 30% of the market. Assembly Bill 1717 (Peres) would establish a uniform, statewide
collection mechanism of UUT on prepaid wireless services based on the point-of-sale for retail
stores and "known address" for Internet sales.
Financial Impact:
Additional UUT revenue (yet to be determined) to the City from prepaid wireless retail sales.
Recommended Action:
A) Approve a City position of support for Assembly Bill 1717 (Peres) - Utility User Tax (UUT) on
prepaid wireless sales; and,
B) Authorize the Mayor to sign a letter of support for Assembly Bill 1717.
Alternative Action(s):
Do not approve support of AB 1717 and direct staff accordingly.
Analysis:
Prepaid wireless currently makes up 30% of the wireless market, and over 50% of new wireless
sales are prepaid. The trend is likely to increase. Each year, UUT public agencies are losing
existing UUT as a result of more and more wireless customers switching from post-paid service
contracts to lower cost prepaid wireless service.
UUT is usually collected by the service providers from post-paid or contract customers by including
the UUT on the customer's monthly invoice and the tax is allocated based on the customer's billing
address. However, with prepaid wireless, there is no contract and no monthly invoices and the
service is often sold by retailers to the consumer. These customers can use the prepaid service
purchased anywhere; therefore, tax nexus is not determined and the tax goes uncollected. AB1717
protects existing local taxes by solving the collection problem by requiring retailers to collect the
local UUT at the same time that it collects the sales tax on its other retail products based on the
point-of-sale (whether from the store or over the Internet). Under AB1717, the local tax would be
remitted at the same time that the retailer remits its sales taxes to the State Board of Equalization.
HB -5 1- Item 5. - 1
Dept. ID AD 14-026 Page 2 of 2
Meeting Date:7/7/2014
The Intergovernmental Relation's Committee voted 2 (Carchio and Sullivan) — 1 (Harper) to
recommend support of AB 1717.
Environmental Status:
N/A
Strategic Plan Goal:
Improve long-term financial sustainability
Attachment(s):
1. Assembly Bill 1717 — Prepaid Wireless UUT
2. MuniServices Government Services request for support of AB1717
Item 5. - 2 HB -52-
AMENDED IN ASSEMBLY MAY 28, 2014
AMENDED IN ASSEMBLY APRIL 2, 2014
CALIFORNIA LEGISLATURE-2013-14 REGULAR SESSION
ASSEMBLY BILL No. 1717
Introduced by Assembly Member Perea
February 13, 2014
An act to amend Sections 224.4 and 431 of, and to add Section 319
to, the Public Utilities Code, and to amend Sections 41020 and 41030
of, to add Part 21 (commencing with Section 42001) and Part 21.1
(commencing with Section 42100) of Division 2 to, and to add and
repeal Section 41033 of the Revenue and Taxation Code, relating to
telecommunications, and declaring the urgency thereof, to take effect
immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 1717, as amended, Perea. Telecommunications: prepaid mobile
telephony services: state surcharge and fees: local charges collection.
(1) The existing Emergency Telephone Users SurchargeAct generally
imposes a surcharge on amounts paid by every person in the state for
intrastate telephone service to provide revenues sufficient to fund"911"
emergency telephone system costs. Amounts are determined armually
by the Office of Emergency Services, and upon collection are paid to
the State Board of Equalization on a monthly basis by the telephone
service supplier and are deposited into the State Treasury to the credit
of the State Emergency Telephone Number Account in the General
Fund, to be expended for limited purposes, including to pay the
Department of General Services for its costs in administration of the
"911" emergency telephone number system.
97
11B -53- Item 5. - 3
AB 1717 —2—
Under existing law, the Public Utilities Commission has regulatory
authority over public utilities, including telephone corporations, and is
authorized to fix just and reasonable rates and charges for services
provided by those public utilities. Existing law establishes the Public
Utilities Commission Utilities Reimbursement Account and authorizes
the commission to annually determine a fee to be paid by every public
utility providing service directly to customers or subscribers and subject
to the jurisdiction of the conunission, except for a railroad corporation.
The commission is required to establish the fee, with the approval of
the Department of Finance, to produce a total amount equal to that
amount established in the authorized commission budget for the same
year,and an appropriate reserve to regulate public utilities,less specified
sources of funding. Existing law establishes the state's
telecommunications universal service programs and authorizes the
commission to impose charges for the purpose of funding those
programs. Pursuant to this authority,the commission has established 6
end-user surcharges to fund 6 universal service programs.
This bill would enact the Prepaid Mobile Telephony Service Surcharge
Collection Act. The bill would establish a prepaid MTS surcharge, as
defined, based upon a percentage of the sales price of each retail
transaction that occurs in this state for prepaid mobile telephony
services, as defined. The prepaid MTS surcharge would include the
emergency telephone users surcharge, as defined,and PUC surcharges,
as defined. The bill would require a seller, as defined, to collect the
prepaid MTS surcharge, as provided, from a prepaid consumer, as
defined, and remit the amounts collected to the State Board of
Equalization pursuant to the Fee Collection Procedures Law. The bill
would require the board, after deducting its administrative expenses,
to deposit the amounts collected for the emergency telephone users
surcharge into the Prepaid MTS 911 Account and to deposit the amounts
collected for PUC surcharges into the Prepaid MTS PUC Account in
the Prepaid Mobile Telephony Services Surcharge Fund,which the bill
would establish in the State Treasury. The bill would require the
commission to annually compute for prepaid mobile telephony services
the commission's reimbursement fee and 6 universal service program
surcharges, to post notice of those fees and surcharges on its Internet
Web site, and to notify the State Board of Equalization and the Office
of Emergency Services of the amounts and the computation method
used to determine the amounts, which would be adjusted, as specified,
and together would be the PUC surcharges.
97
Item 5. - 4 H B -54-
—3— AB 1717
The bill would require that beginning with the calendar year
beginning January 1, 2016, and ending with an unspecified calendar
year, not less than S9,900,000 be paid to the Prepaid MTS 911 Account
for each calendar year,for prepaid mobile telephony services and that
any deficiency in payment to the Prepaid_MTS 911 Account, below this
amount, resulting from retail transactions by sellers during each
calendar year would be the responsibility of prepaid MTS providers.
The bill would require the commission, 30 days prior to adopting any
adjustment to a reimbursement fee or universal service surcharge on
both postpaid and prepaid intrastate service to prepare a prescribed
resolution or other public document proposing the fee or surcharge
adjustment and explaining the calculation of the new fee or surcharge,
as specified, and would require the commission to make it available to
the public and on the commission's Internet Web site.
The Moore Universal Telephone Service Act establishes the Universal
Lifeline Telephone Service program in order to provide low-income
households with access to affordable basic residential telephone service.
Existing decisions of the commission exempt lifeline services from the
commission's reimbursement fee and the 6 end-user surcharges that
fund the state's 6 universal service programs.
This bill would exempt the purchase in a retail transaction in this state
of prepaid mobile telephony services, either alone or in combination
with mobile data or other services, by a consumer from the prepaid
NITS surcharge and specified local charges if certain conditions are
met, including that the prepaid consumer is certified as eligible for the
state lifeline program or federal lifeline program.
The bill would require the Office of Emergency Services to annually
compute, as specified, the intrastate portion of the 911 surcharge to be
collected on prepaid mobile telephony services, to post notice of those
charges, and to notify the State Board of Equalization of the amount,
which would be the emergency telephone users surcharge. The bill
would require the Office of Emergency Services to prepare a prescribed
summary of the calculation of the proposed 911 surcharge and make
the summary available to the public and on its Internet Web site, as
specified. Local charges would be computed pursuant to the Local
Prepaid Mobile Telephony Seiwices Collection Act, discussed below.
Existing law defines mobile telephony services for purposes of the
Public Utilities Code.
97
HB -J5- Item 5. - 5
AB 1717 —4—
This bill would revise that definition and incorporate that definition
for purposes of the Prepaid Mobile Telephony Service Surcharge
Collection Act.
(2) Existing law generally provides that the legislative body of any
charter city may make and enforce all ordinances and regulations with
respect to municipal affairs. as provided, including, but not limited to,
a utility user tax in that municipality. Existing law generally provides
that the legislative body of a city may levy any tax that may be levied
by a charter city. Existing law further provides that the board of
supervisors of any county may levy a utility user tax on the consumption
of, among other things, telephone service, in the unincorporated area
of the county.
This bill would, on and after January 1, 2016, suspend the authority
of a city, county, or city and county, including any charter city, county,
or city and county, to impose a utility user tax on the consumption of
prepaid communications service at the rate specified in an ordinance
adopted pursuant to existing law. and would instead require the utility
user tax rate to be applied during that period under any ordinance to be
at specified tiered rates,to be collected and administered as prescribed
in the Prepaid Mobile Telephony Services Surcharge Collection Act.
In addition, the bill would, on or after January 1, 2016. suspend the
authority of a city, county, or city and county, including any charter
city, county, or city and county, to impose a charge, that applies to
prepaid mobile telephony service,on access to communication services
or access to local "911" emergency telephone systems. in the city,
county, or city and county at the rate as specified in an ordinance
adopted pursuant to existing law, and would instead require the charge
rate to be applied during that period tinder any ordinance to be at
specified rates, to be collected and administered as prescribed in the
Prepaid Mobile Telephony Services Surcharge Collection Act.This bill
would specify that a change in a utility user tax rate or access charge
rate resulting from either the rate limitations or the end of the suspension
period is not subject to voter approval under either statute or Article
XIII C of the California Constitution.This bill would require these local
charges imposed by a city, county,or a city and county be administered
and collected by the State Board of Equalization,deposited in the Local
Charges for Prepaid Mobile Telephony Services Fund, which this bill
would create, and transmitted to the city, county, or a city and county,
as provided.
97
Item 5. - 6 1 fB -56-
-5— AB 1717
This bill would allow a consumer to rebut the presumed location of
a retail transaction for purposes of the collection of the local charges
by filing a claim and declaration under penalty of perjury.
By expanding the crime of perjury, this bill would impose a
state-mandated local program.
(3) The Fee Collection Procedures Law makes a violation of any
provision of the law, or of certain requirements imposed by the board
pursuant to the law, a crime.
By expanding the application of the Fee Collection Procedures Law,
the violation of which is a crime,this bill would impose a state-mandated
local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the state.
Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act
for a specified reason.
(4) This bill would declare that it is to take effect immediately as an
urgency statute.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
The people of the State of California do enact as follows:
1 SECTION 1. Section 224.4 of the Public Utilities Code is
2 amended to read:
3 224.4. (a) "Mobile data service" means the delivery of
4 nonvoice information over a radio band licensed by the Federal
5 Communications Commission, to a mobile device and includes
6 nonvoice information communicated to a mobile telephony services
7 handset,nonvoice information communicated to handheld personal
8 digital assistant(PDA) devices and laptop computers, and mobile
9 paging service carriers offering services on pagers and two-way
10 messaging devices. "Mobile data service" includes mobile
11 broadband service offering connectivity over a radio band licensed
12 by the Federal Communications Commission. Unless specified to
13 the contrary. "mobile data service" does not include nonvoice
14 information communicated through a wireless local area network
15 operating in the unlicensed radio bands, commonly known as a
16 "Wi-Fi" network.
97
HB -57- Item 5. - 7
AB 1717 —6—
1 (b) "Mobile paging service" means the transmission of coded
2 radio signals over a radio band licensed by the Federal
3 Communications Commission, for the purpose of activating
4 specific small radio receivers designed to be carried by a person
5 and to give an aural, visual" or tactile indication when activated.
6 (c) "Mobile satellite telephone service" means voice
7 communication to end users over a mobile satellite service
8 involving the provision of commercial mobile radio service,
9 pursuant to Parts 20 and 25 of Title 47 of the Code of Federal
10 Regulations.
11 (d) "Mobile telephony service" means commercially available
12 interconnected mobile phone services that provide voice
13 communication access to the public switched telephone network
14 (PSTN),or a successor network,by way of mobile communication
15 devices employing radiowave technology to transmit calls,
16 including cellular radiotelephone, broadband Personal
17 Coimntim cations Services(PCS),digital Specialized Mobile Radio
18 (SMR), or another radio band licensed by the Federal
19 Communications Commission. "Mobile telephony services" does
20 not include mobile satellite telephone services or mobile data
21 services used exclusively for the delivery of nonvoice information
22 to a mobile device.
23 SEC. 2. Section 319 is added to the Public Utilities Code, to
24 read:
25 319. (a) The commission shall annually,on or before October
26 1 of each year, commencing October 1, 2015, compute a
27 reimbursement fee as a percentage of the sales price for prepaid
28 mobile telephony services, to be effective on January 1 of the
29 following year and to be collected and remitted pursuant to the
30 Prepaid Mobile Telephony Services Surcharge Collection Act(Part
31 21 (commencing with Section 42001)of Division 2 of the Revenue
32 and Taxation Code). On or before October 8 of each year,
33 commencing October 8, 2015, the commission shall post notice
34 of the reimbursement fee on its Internet Web site and notify both
35 the Office of Emergency Services and the State Board of
36 Equalization of this information as well as the computation method
37 used to determine the reimbursement fee.
38 (b) The commission shall annually, on or before October 1 of
39 each year, commencing October 1, 2015, compute the cumulative
40 amount of the telecommunications universal service surcharges
97
Item 5. - 8 HB -58-
—7— AB 1717
1 as a percentage of the sales price for prepaid mobile telephony
2 services, to be effective on January 1 of the following year and to
3 be collected and remitted pursuant to the Prepaid Mobile Telephony
4 Services Surcharge Collection Act (Part 21 (commencing with
5 Section 42001) of Division 2 of the Revenue and Taxation Code).
6 On or before October 8 of each year,commencing October 8,2015,
7 the commission shall post notice of the cumulative surcharge on
8 its Internet Web site and notify both the Office of Emergency
9 Services and the State Board of Equalization of this inforniation
10 as well as the computation method used to deterinine the
11 cumulative surcharge.
12 (c) (1) Except for the fees and surcharges computed pursuant
1.3 to subdivisions (a) and (b), this section neither restricts the
14 commission's authority to adjust reimbursement fees or universal
15 service surcharges nor requires that they only be adjusted once
16 annually.
17 (2) In annually computing reimbursement fees and universal
18 service surcharges to be collected and remitted to the commission
19 pursuant to this section, the commission shall adjust the fees and
20 surcharges to account for any past overcollection of fees or
21 surcharges from prepaid mobile telephony service customers
22 resulting from a reduction in fees or surcharges made subsequent
23 to December 31 of the previous year.
24 (3) In annually computing reimbursement fees and universal
25 service surcharges to be collected and remitted to the commission
26 pursuant to this section. the commission may adjust the fees and
27 surcharges to account for any past undercollection of fees or
28 surcharges from prepaid mobile telephony service customers
29 resulting from an increase in fees or surcharges made subsequent
30 to December 31 of the previous year.
31 (4) If both upward and downward adjustments are made to
32 reimbursement fees and universal service surcharges subsequent
33 to December 31, the commission may adjust how collections are
34 deposited into the reimbursement and universal service accounts
35 so that overcollections or undercollections are minimized.
36 (5) It is the intent of the Legislature that reimbursement fees
37 and universal service surcharges be applied, as much as possible,
38 in a competitively neutral manner that does not favor either prepaid
39 or postpaid payment for mobile telephony services, and that, over
40 time,collections of state charges from prepaid and postpaid mobile
97
I-IB -59- Item 5. - 9
AB 1717 —8—
1 telephony service customers balance out so that neither pay a
2 disproportionate amount.
3 (6) At least 30 days prior to adopting any adjustment to a
4 reimbursement fee or universal service surcharge to be collected
5 and remitted to the commission on both postpaid and prepaid
6 intrastate service, the commission shall prepare a resolution or
7 other public document proposing the fee or surcharge adjustment
8 and explaining the calculation of the fee or surcharge. The
9 commission shall make the resolution or other public document
10 available to the public and on the commission's Internet Web site
11 and it shall include all of the following:
12 (A) The prior year revenues from the fee or surcharge,including,
13 but not limited to, revenues from prepaid service.
14 (B) Projected expenses and revenues from all sources,including,
15 but not limited to, prepaid service, for the purposes of the fee or
16 surcharge.
17 (C) The rationale for adjustment to the reimbursement fee or
18 universal service surcharge, including, but not limited to, all
19 impacts from prepaid service surcharge collection.
20 (d) The commission shall have enforcement authority to ensure
21 the proper remittances over retail transactions, pursuant to the
22 Prepaid Mobile Telephony Services Surcharge Collection Act(Part
23 21 (commencing with Section 42001)of Division 2 of the Revenue
24 and Taxation Code),where the prepaid mobile telephony services
25 (prepaid NITS) provider is also the seller. The commission shall
26 collaborate with the State Board of Equalization in exercising its
27 enforcement authority pursuant to this subdivision.
28 (e) (1) Carriers providing prepaid mobile telephony service
29 shall remit to the commission the fee established for telephone
30 corporations pursuant to subdivision (a) of Section 431 on the
31 intrastate portion of the revenues received for prepaid mobile
32 telephony service through December 31, 2015.
33 (2) Carriers providing prepaid mobile telephony service shall
34 remit to the commission the telecommunications universal service
35 surcharges established for telephone corporations on the intrastate
36 portion of the revenues received for prepaid mobile telephony
37 service through December 31, 2015.
38 (f) (1) This section does not relieve carriers providing prepaid
39 mobile telephony service of their continuing obligation to report
97
Item 5. - 10 HB -60-
—9— AB 1717
1 prepaid mobile telephony service revenues to the commission in
2 a manner prescribed by the commission.
3 (2) When reporting prepaid mobile telephony service revenues
4 to the commission, carriers providing prepaid mobile telephony
5 service shall report the intrastate revenue portion subject to the
6 reimbursement fee and the telecommunications universal service
7 surcharges, as well as total state wireless revenue.
8 (3) Reports made pursuant to this subdivision are subject to
9 Section 583 and any related orders of the commission.
10 SEC. 3. Section 431 of the Public Utilities Code is amended
11 to read:
12 431. (a) The commission shall annually determine a fee to be
13 paid by every electrical, gas, telephone, telegraph, water, sewer
14 system, and heat corporation and every other public utility
15 providing service directly to customers or subscribers and subject
16 to the jurisdiction of the commission other than a railroad, except
17 as otherwise provided in Article 2(commencing with Section 421),
18 for common carriers and related businesses, and as otherwise
19 provided in Section 319, for prepaid mobile telephony service
20 providers.
21 (b) The annual fee shall be established to produce atotal amount
22 equal to that amount established in the authorized commission
23 budget for the same year, including adjustments for increases in
24 employee compensation, other increases appropriated by the
25 Legislature, and an appropriate reserve to regulate public utilities
26 less the amount to be paid from special accounts or funds pursuant
27 to Section 402, reimbursements, federal fiinds, and any other
28 revenues, and the amount of unencumbered funds from the
29 preceding year.
30 (c) This article shall not apply to any electrical cooperative as
31 defined in Chapter 5 (commencing with Section 2776) of Part 2.
32 SEC. 4. Section 41020 of the Revenue and Taxation Code is
33 amended to read:
34 41020. (a) A surcharge is hereby imposed on amounts paid
35 by every person in the state for both of the following:
36 (1) (A) Intrastate telephone communication service in this state.
37 (B) Notwithstanding subparagraph(A),on and after January 1,
38 2016, in lieu of the surcharge imposed under subparagraph(A), a
39 surcharge shall be imposed on amounts paid for prepaid mobile
40 telephony services pursuant to the Prepaid Mobile Telephony
97
1413 -61- Item 5. - 11
AB 1717 —10—
1 Services Surcharge Collection Act (Part 21 (commencing with
2 Section 42001)).
3 (2) V61P service that provides access to the "911" emergency
4 system by utilizing the digits 9-1-1 by any service user in this state
5 commencing on January 1, 2009. The surcharge shall not apply to
6 charges for V61P service where any point of origin or destination
7 is outside of this state.
8 (b) (1) Notwithstanding Section 41025, charges not subject to
9 the surcharge may be calculated by a service supplier based upon
10 books and records kept in the regular course of business, and, for
11 purposes of calculating the interstate revenue portion not subject
12 to the surcharge, a service supplier may also choose a reasonable
13 and verifiable method from the following:
1.4 (A) Books and records kept in the regular course of business.
15 (B) Traffic or call pattern studies representative of the service
16 supplier's business within California.
17 (C) For VoIP service only, the V61P safe harbor factor
18 established by the FCC to be used to calculate the service supplier's
19 contribution to the federal Universal Service Fund. The FCC safe
20 harbor factor in effect for V61P service on September 1 of each
21 year shall apply for the period of January 1 to December 31,
22 inclusive,of the next succeeding calendar year for purposes of this
23 method. At the time the FCC establishes a safe harbor factor for
24 the federal Universal Service Fund for V61P service that is greater
25 than 75 percent for interstate revenue or abolishes the safe harbor
26 factor applicable to V61P service, this method shall become void
27 and of no effect, in which case a V61P service supplier may use
28 an alternative method approved in advance by the board, which
29 shall be available to all V61P service suppliers. The FCC safe
30 harbor factor applicable to VoIP service, as described in this
31 subparagraph, is used solely as a mechanism to calculate the
32 charges not subject to the surcharge for VoIP service and is not
33 necessarily reflective of the intrastate portion of V61P service.The
34 use of the FCC safe harbor factor authorized by this subdivision
35 shall not be interpreted to permit application of any intrastate
36 requirement, other than the surcharge imposed under this part,
37 upon V61P service suppliers.
38 (2) Any method chosen by a service supplier shall remain in
39 effect for at least one calendar year.
97
Item 5. - 12 HB -62-
-11 — AB 1717
1 (3) If a service supplier reasonably relies upon books and
2 records kept in the regular course of business or any documentation
3 that satisfies the reasonable and verifiable method.then the service
4 supplier's determination of the portion of the billed amount
5 attributable to services not subject to the surcharge shall be
6 rebuttably presumed to be correct. The service supplier's choice
7 of books and records or other method and surcharge billing practice
8 shall also be rebuttably presumed to be fair and legal business
9 practices.
10 (4) It is the intent of the Legislature that the provisions of
11 subparagraph(C) shall not be considered to be a precedent for the
12 application of the surcharge or any other tax or fee where a person
13 is required to collect a tax or fee imposed upon another.
14 (c) The surcharge imposed shall be at the rate of one-half of 1
15 percent of the charges made for the services to and including
16 November 1, 1982,and thereafter at a rate fixed pursuant to Article
17 2 (commencing with Section 41030).
18 (d) The surcharge shall be paid by the service user as hereinafter
19 provided.
20 (e) The surcharge imposed shall not apply to either of the
21 following:
22 (1) In accordance with the Mobile Telecommunications Sourcing
23 Act (Public Law 106-252), which is incorporated herein by
24 reference,to any charges for mobile telecommunications services
25 billed to a customer where those services are provided,or deemed
26 provided,to a customer whose place of primary use is outside this
27 state. Mobile telecommunications services shall be deemed
28 provided by a customer's home service provider to the customer
29 if those services are provided in a taxing jurisdiction to the
30 customer, and the charges for those services are billed by or for
31 the customer's home service provider.
32 (2) To any charges for V61P service billed to a customer where
33 those services are provided to a customer whose place of primary
34 use of VoIP service is outside this state.
35 (f) For purposes of this section:
36 (1) "Charges for mobile telecommunications services" means
37 any charge for, or associated with, the provision of commercial
38 mobile radio service, as defined in Section 20.3 of Title 47 of the
39 Code of Federal Regulations, as in effect on June 1, 1999, or any
40 charge for, or associated with, a service provided as an adjunct to
97
HB -63- Item 5. - 13
AB 1717 —12—
1 a commercial mobile radio service, that is billed to the customer
2 by or for the customer's home service provider, regardless of
3 whether individual transmissions originate or terminate within the
4 licensed service area of the home service provider.
5 (2) "Customer" means (A) the person or entity that contracts
6 with the home service provider for mobile telecommunications
7 services, or with a V61P service provider for V61P service, or (B)
8 if the end user of mobile telecommunications services or V61P
9 service is not the contracting party, the end user of the mobile
10 telecommunications service or V6lP service.This paragraph applies
11 only for the purpose of deterinining the place of primary use. The
12 term "customer" does not include (A) a reseller of mobile
13 telecommunications service or V61P communication service, or
14 (B) a serving carrier under an arrangement to serve the mobile
15 customer outside the home service provider's licensed service
16 area.
17 (3) "Home service provider" means the facilities-based carrier
18 or reseller with which the customer contracts for the provision of
19 mobile telecommunications services.
20 (4) "Licensed service area"means the geographic area in which
21 the home service provider is authorized by law or contract to
22 provide commercial mobile radio service to the customer.
23 (5) "Mobile telecommunications service" means commercial
24 mobile radio service, as defined in Section 20.3 of Title 47 of the
25 Code of Federal Regulations, as in effect on June 1, 1999.
26 (6) "Place of primary use" means the street address
27 representative of where the customer's use of the mobile
28 telecommunications service or V61P service primarily occurs,that
29 must be:
30 (A) The residential street address or the primary business street
31 address of the customer.
32 (B) With respect to mobile telecommunications service,within
33 the licensed service area of the home service provider.
34 (7) (A) "Reseller" means a provider who purchases
35 telecommunications services or V61P service from another
36 telecommunications service provider or V61P service and then
37 resells the services, or uses the services as a component part of,
38 or integrates the purchased services into, a mobile
39 telecommunications service or Vol service.
97
Item 5. - 14 HB -64-
-13— AB 1717
1 (B) "Reseller" does not include a serving carrier with which a
2 home service provider arranges for the services to its customers
3 outside the home service provider's licensed service area.
4 (8) "Serving carrier"means a facilities-based carrier providing
5 mobile telecommunications service to a customer outside a home
6 service provider's or reseller's licensed area.
7 (9) "Taxing jurisdiction" means any of the several states, the
8 District of Columbia, or any territory or possession of the United
9 States, any municipality, city, county, township, parish,
10 transportation district, or assessment jurisdiction, or any other
11 political subdivision within the territorial limits of the United States
12 with the authority to impose a tax, charge, or fee.
13 (10) "VoIP service provider" means that provider of V61P
14 service with whom the end user customer contracts for the
15 provision of VoIP services for the customer's own use and not for
16 resale.
17 (11) "Prepaid mobile telephony services"has the same meaning
18 as in subdivision (j) of Section 42004.
19 SEC. 5. Section 41030 of the Revenue and Taxation Code is
20 amended to read:
21 41.030. (a) The Office of Emergency Services shall determine
22 annually, on or before October 1, to be effective on January 1 of
23 the following year, a surcharge pursuant to subdivision (b) that it
24 estimates will produce sufficient revenue to fund the current fiscal
25 year's 911 costs.
26 (b) (1) Commencing with the calculation made on October 1,
27 2014,the surcharge rate shall be detenluned by dividing the costs
28 (including incremental costs) the Office of Emergency Services
29 estimates for the current fiscal year of 911 plans approved pursuant
30 to Section 53115 of the GOvernment Code, less the available
31 balance in the State Emergency Telephone Number Account in
32 the General Fund, by its estimate of the charges for intrastate
33 telephone communications services and VoIP service to which the
34 surcharge will apply for the period of January 1,2015,to December
35 31. 2015, inclusive, but in no event shall the surcharge rate in any
36 year be greater than three-quarters of 1 percent or less than one-half
37 of 1 percent.
38 (2) Commencing with the calculation made October 1, 2015,
39 to be effective January 1, 2016,the surcharge shall be detennined
40 by dividing the costs (including incremental costs) the Office of
97
1113 -65- Item 5. - 15
AB 1717 —14—
1 Emergency Services estimates for the current fiscal year of 911
2 plans approved pursuant to Section 53115 of the Government
3 Code,less the available balance in the State Emergency Telephone
4 Number Account in the General Fund,by its estimate of the charges
5 for intrastate telephone communications services, the intrastate
6 portion of prepaid mobile telephony services, and VoIP service to
7 which the surcharge will apply for the period of January 1 to
8 December 31, inclusive. of the next succeeding calendar year,but
9 in no event shall the surcharge rate in any year be greater than
10 three-quarters of 1 percent or less than one-half of 1 percent. In
11 making its computation of the charges that are applicable to the
12 intrastate portion of prepaid mobile telephony services,the Office
13 of Emergency Services shall use the computation method
1.4 developed by the Public Utilities Commission and reported to the
15 Office of Emergency Services pursuant to subdivisions(a)and(b)
16 of Section 319 of the Public Utilities Code.
17 (c) The Office of Emergency Services shall notify the board of
18 the surcharge amount collected pursuant to this part and the
19 surcharge amount applicable to prepaid mobile telephony services
20 by October 15 of each year.
21 (d) At least 30 days prior to determining the surcharge pursuant
22 to subdivision(a),the Office of Emergency Services shall prepare
23 a summary of the calculation of the proposed surcharge and make
24 it available to the public and on its Internet Web site.The summary
25 shall contain all of the following:
26 (1) The prior year revenues to fund 911 costs, including, but
27 not limited to, revenues from prepaid service.
28 (2) Projected expenses and revenues from all sources,including,
29 but not limited to, prepaid service to fund 911 costs.
30 (3) The rationale for adjustment to the surcharge determined
31 pursuant to subdivision (b), including, but not limited to, all
32 impacts from the surcharge collected pursuant to Part 21
33 (commencing with Section 42001).
34 SEC. 6. Section 41033 is added to the Revenue and Taxation
35 C'ode, to read:
36 41033. (a) For pu77?oses of this section, the following terms
37 have the following meanings:
38 (1) "Prepaid mobile telephony services-has the same meaning
39 as defined in Section 42004.
97
Item 5. - 16 HB -66-
-15— AB 1717
1 (2) "Prepaid TITS provider" has the same meaning as defined
2 in Section 42004.
3 (3) "Prepaid MTS 911 Account" means the Prepaid MTS 911
4 Account created in the Prepaid Mobile Telephony Services
5 Surcharge Fund pursuant to Section 42023.
6 (4) "Retail transaction" has the same meaning as defined in
7 Section 42004.
8 (5) "Seller"has the same meaning as defined in Section 42004.
9 (b) Beginning with the calendar year beginning January 1,
10 2016, and ending with the calendar year ending December
11 31, , not less than nine million nine-hundred thousand dollars
12 (S9,900,000) shall be paid to the Prepaid MTS 911 Account for
13 each calendar year for prepaid mobile telephony services. Any
14 deficiency in payment to the Prepaid MTS911 Account, below this
15 amount, resulting from retail transactions by sellers during each
16 calendaryear; shall be the responsibility ofprepciidMTSproviders.
17 (c•) On November 15, 2017, and by November 15 of each year
18 thereafter, the board shall determine whether nine million
19 nine-hundred thousand dollars (S9,900,000) was paid to the
20 Prepaid MTS 911 Account pursuant to Section 42023,for retail
21 transactions occurring during the previous calendar year If in
22 any calendar year Less than nine million nine-hundred thousand
23 dollars (59,900,000) was paid to the Prepaid MTS 911 Account,
24 the board shall calculate the deficiency and bill each prepaid MTS
25 provider its pro rata share of that deficiency. A prepaid MTS
26 provider's pro rata share shall be calculated based upon each
27 provider's percentage share of total California intrastate prepaid
28 mobile telephony services revenue.
29 (d) A prepaid MTS provider shall remit the amount billed to it
30 pursuant to subdivision (c)to the board and the board shall deposit
31 all amounts remitted to the Prepaid MTS 911 Account.
32 (e) This section shall remain in effect only until January 1.
33 and as of that date is repealed, unless a later enacted statute, that
34 is enacted before January 1, , deletes or extends that date.
35
36 SEC'. 7. Part 21 (commencing with Section 42001) is added to
37 Division 2 of the Revenue and Taxation Code, to read:
97
HB -67- Item 5. - 17
AB 1717 —16—
1 PART 21. PREPAID MOBILE TELEPHONY SERVICES
2 SURCHARGE COLLECTION ACT
4 CHAPTER 1. GENERAL PROVISIONS AND DEFINITIONS
5
6 42001. This part shall be known, and may be cited, as the
7 Prepaid Mobile Telephony Services Surcharge Collection Act.
8 42002. The Legislature finds and declares all of the following:
9 (a) Maintaining effective and efficient communications services,
10 911 emergency systems, communications-related public policy
11 programs to promote universal service,and various local programs
12 across the state benefits all persons with access to the
13 telecommunications system.
1.4 (b) Providers of end-use communications services, including
15 providers of mobile voice telecommunications services,which the
16 Federal Communications Commission terms mobile telephony
17 service, are required to collect and remit communications taxes,
18 fees, and surcharges on various types of communication service
19 revenues, as provided by existing state or local law.
20 (c) Consumers purchase prepaid mobile telephony services at
21 a wide variety of retail locations and other distribution channels,
22 as well as through service providers.
23 (d) Prepaid mobile telephony services are an important and
24 growing segment of the communications industry. Prepaid mobile
25 telephony services are often the only means by which persons with
26 low incomes can obtain limited access to the telecommunications
27 system.
28 (e) To ensure equitable contributions from end-use consumers
29 of postpaid and prepaid mobile telephony services in this state,
30 there should be standardization with respect to the method used
31 to collect communications taxes,fees.and surcharges from end-use
32 consumers of prepaid mobile telephony services.
33 (f) Prepaid mobile telephony services are frequently sold by a
34 third-party retailer that is not the provider of mobile telephony
35 services, and collecting taxes, fees, and surcharges from prepaid
36 consumers of mobile telephony services at the time of the retail
37 transaction is necessary and the most efficient and competitively
38 neutral means of collection.
39 (g) An equitable distribution mechanism is necessary to ensure
40 that utility user taxes and other telecommunication charges are
97
Item 5. - 18 IIB -68-
-17— AB 1717
1 collected on behalf of cities and counties and are properly
2 distributed to those jurisdictions.
3 42004. For purposes of this part, the following terms have the
4 following meanings:
5 (a) "Board" means the State Board of Equalization.
6 (b) "Emergency telephone users surcharge" means surcharges
7 authorized pursuant to the Emergency Telephone Users Surcharge
8 Act (Part 20 (commencing with Section 41001)) to be collected
9 from prepaid consumers of mobile telephony services.
10 (c) "In this state" means within the exterior limits of the State
11 of California and includes all territory within those limits owned
12 by or ceded to the United States of America.
13 (d) "Local charges" means those charges described in
14 subdivision (a) of Section 42101.
15 (e) "Local jurisdiction" or"local agency'means a city,county,
16 or city and county, which includes a charter city, county, or city
17 and county.
18 (f) .'Mobile data service" has the same meaning as defined in
19 Section 224.4 of the Public Utilities Code.
20 (g) "Mobile telephony service"or"NITS"has the same meaning
21 as defined in Section 224.4 of the Public Utilities Code.
22 (h) "Person' includes any individual, firm, partnership, joint
23 venture,limited liability company,association,social club,fraternal
24 organization, corporation, estate, trust, business trust, receiver,
25 assignee for the benefit of creditors,trustee,trustee in bankruptcy,
26 syndicate, the United States, this state. any city, county, city and
27 county, municipality, district, or other political subdivision of the
28 state, or any other group or combination acting as a unit.
29 (i) "Prepaid consumer" or "consumer'" means a person who
30 purchases prepaid mobile telephony services in a retail transaction.
31 (j) "Prepaid mobile telephony services"means the right to utilize
32 a mobile device authorized by the Federal Communications
33 Commission for mobile telecommunications services or
34 information services. including the download of digital products
35 delivered electronically, content. and ancillary services, or both
36 telecommunications services and information services, that must
37 be purchased in advance of usage in predetennined units or dollars.
38 For these purposes."telecommunications service"and"information
39 service"have the same meanings as defined in Section 153 of Title
40 47 of the United States Code.
97
HB -69- Item 5. - 19
AB 1.717 —18—
1 (k) `Prepaid MTS provider" means a person that provides
2 prepaid mobile telephony services pursuant to a license issued by
3 the Federal Communications Commission.
4 (1) "Prepaid NITS surcharge"means the surcharge that consists
5 of the emergency telephone users surcharge and the Public Utilities
6 Commission surcharges, as calculated pursuant to subdivision(b)
7 of Section 42010, that is required to be collected by a seller from
8 a prepaid consumer.
9 (in) "Public Utilities Commission surcharges"means surcharges
10 authorized by the Public Utilities Commission to be billed and
ll collected from end-use consumers of wireless communications
12 services, and of which the connmission provides the board with
13 notice pursuant to Section 319 of the Public Utilities Code,
14 including:
15 (1) The California High-Cost Fund-AAdmiinistrative Conninittee
16 Fund program surcharge (Section 275.6 of the Public Utilities
17 Code).
18 (2) The California High-Cost Fund-B Administrative Committee
19 Fund program surcharge (Section 739.3 of the Public Utilities
20 Code).
21 (3) The Deaf and Disabled. Telecommunications Program
22 Administrative Committee Fund surcharge (Section 2881 of the
23 Public Utilities Code).
24 (4) The California Teleconnect Fund Administrative Committee
25 Fund program surcharge(Section 280 of the Public Utilities Code).
26 (5) The California Advanced Services Fund program surcharge
27 (Section 281 of the Public Utilities Code).
28 (6) The Moore Universal Telephone Service Act (Article 8
29 (commencing with Section 871)of Chapter 4 of Part 1 of Division
30 1 of the Public Utilities
Code)-1 (7) Public Utilities Commission reimbursement fees imposed
32 pursuant to Chapter 2.5 (commencing with Section 401) of Part 1
33 of Division 1 of the Public Utilities Code.
34 (n) "Retail transaction" means the purchase of prepaid mobile
35 telephony services, either alone or in combination with mobile
36 data or other services, from a seller for any purpose other than
37 resale in the regular course of business. For these purposes, a
38 "purchase"means any transfer of title or possession, exchange,or
39 barter, conditional or otherwise.
97
Item 5. - 20 HB -70-
-19— AB 1717
1 (o) "Seller"means a person that sells prepaid mobile telephony
2 service to a person in a retail transaction.
4 CHAPTER 2. THE PREPAID MOBILE TELEPHONY SERVICES
5 SURCHARGE
6
7 42010. (a) (1) On and after January 1, 2016, a prepaid MTS
8 surcharge shall be imposed on each prepaid consumer and shall
9 be collected by a seller from each prepaid consumer at the time of
10 each retail transaction in this state. The prepaid MTS surcharge
11 shall be imposed as a percentage of the sales price of each retail
12 transaction that occurs in this state.
13 (2) The prepaid MTS surcharge shall be in lieu of any charges
14 imposed pursuant to the Emergency Telephone Users Surcharge
15 Act (Part 20 (commencing with Section 41001)) and the Public
16 Utilities Commission surcharges for prepaid mobile telephony
17 services.
18 (b) The prepaid MTS surcharge shall be annually calculated by
19 the board by no later than November 1 of each year commencing
20 November 1, 2015, by adding the following:
21 (1) The surcharge rate reported pursuant to subdivision (c) of
22 Section 41030.
23 (2) The Public Utilities Commission's reimbursement fee and
24 telecommunications universal service surcharges, established by
25 the Public Utilities Commission pursuant to subdivisions (a) and
26 (b) of Section 319 of the Public Utilities Code.
27 (c) (1) The board shall post, for each local jurisdiction, the
28 combined total of the rates of prepaid MTS surcharge and the rate
29 or rates of local charges, as calculated pursuant to Sections 42102
30 and 42102.5,that each local jurisdiction has adopted,not later than
31 December 1 of each year, on its Internet Web site. The posted
32 combined rate shall be the rate that applies to all retail transactions
33 during the calendar year beginning April 1 following the posting.
34 (2) Notwithstanding paragraph (1), if a local agency notifies
35 the board pursuant to subdivision (d) of Section 42101.5 that the
36 posted rate is inaccurate or it no longer imposes a local charge or
37 local charges or that the rate of its local charge or local charges
38 has decreased, the board shall promptly post a recalculated rate
39 that is applicable to the jurisdiction of that local agency. The
40 change shall become operative on the first day of the calendar
97
I4B -71- Item 5. - 21
AB 1717 —20—
1 quarter commencing more than 60 days from the date the local
2 agency notifies the board of the inaccuracy or that it no longer
3 imposes a local charge or that the rate of its local charge has
4 decreased.Nothing in this section modifies the notice obligations
5 of Section 799 of the Public Utilities Code. However, beginning
6 January 1,2016,the notification and implementation requirements
7 of paragraphs(5) and (6) of subdivision (a) of Section 799 of the
8 Public Utilities Code shall not apply to prepaid mobile telephony
9 services.
10 (3) A seller collecting the prepaid MTS surcharge and local
11 charges pursuant to this part and Part 21.1 (commencing with
12 Section 42100) may rely upon the accuracy of the information
13 posted on the board's Internet Web site in collecting the state
14 surcharge and local charges.
15 (d) (1) Except for amounts retained pursuant to subdivision(e),
16 all amounts of the prepaid MTS surcharge and local charges
17 collected by sellers shall be remitted to the board pursuant to
18 Chapter 3 (commencing with Section 42020).
19 (2) A seller that is authorized to provide lifeline service under
20 the state lifeline program or federal lifeline program, that sells
21 prepaid mobile telephony services directly to the prepaid customer,
22 shall remit the prepaid MTS surcharge to the board, less any
23 applicable exemption from the surcharge that is applicable to the
24 retail transaction pursuant to Section 42012.
25 (e) A seller shall be permitted to deduct and retain an amount
26 equal to 2 percent of the amounts that are collected by the seller
27 from prepaid consumers for the prepaid MTS surcharge and local
28 charges, except in a retail transaction that involves both of the
29 following:
30 (1) The seller is the provider of prepaid mobile telephony
31 services pursuant to Section 224.4 of the Public Utilities Code, or
32 a telephone corporation pursuant to Section 234 of the Public
33 Utilities Code.
34 (2) The seller sells the prepaid mobile telephony services directly
35 to the prepaid consumer.
36 (f) The amount of the combined prepaid MTS surcharge and
37 local charges shall be separately stated on an invoice, receipt, or
38 other similar document that is provided to the prepaid consumer
39 of mobile telephony services by the seller, or otherwise disclosed
97
Item 5. - 22 HB -72-
—21— AB 1717
1 electronically to the prepaid consumer, at the time of the retail
2 transaction.
3 (g) The prepaid MTS surcharge is required to be collected by
4 a seller and any amount unreturned to the prepaid consumer of
5 mobile telephony services that is not owed as part of the surcharge,
6 but was collected from the prepaid consumer under the
7 representation by the seller that it was owed as part of the
8 surcharge, constitute debts owed by the seller to this state. The
9 local charge shall be collected by a seller, and any amount
10 unreturned to the prepaid consumer of mobile telephony services
11 that is not owed as part of the local charge but that was collected
12 from the prepaid consumer under the representation by the seller
13 that it was owed as part of the local charge constitutes a debt owed
14 by the seller jointly to the state,for purposes of collection on behalf
15 of, and payment to, the local jurisdiction and to the local
16 jurisdiction imposing that local charge.
17 (h) A seller that has collected any amount of prepaid MTS
18 surcharge and local charges in excess of the amount of the
19 surcharge imposed by this part and actually due from a prepaid
20 consumer may refund that amount to the prepaid consumer, even
21 though the surcharge amount has already been paid over to the
22 board and no corresponding credit or refund has yet been secured.
23 Any seller making a refund of any charge to a prepaid consumer
24 may repay therewith the amount of the surcharge paid.
25 (i) (1) Every prepaid consumer of mobile telephony services
26 in this state is liable for the prepaid MTS surcharge and any local
27 charges until they have been paid to this state, except that payment
28 to a seller registered under this part relieves the prepaid consumer
29 from further liability for the surcharge and local charges. Any
30 surcharge collected from a prepaid consumer that has not been
31 remitted to the board shall be a debt owed to the state by the person
32 required to collect and remit the surcharge. Any local charge
33 collected from a prepaid consumer that has not been remitted to
34 the board shall be a debt owed jointly to the state, for purposes of
35 collection on behalf of, and payment to, the local jurisdiction and
36 to the local jurisdiction imposing the local charge by the person
37 required to collect and remit the local charge.Nothing in this part
38 shall impose any obligation upon a seller to take any legal action
39 to enforce the collection of the surcharge or local charge imposed
40 by this section.
47
HB -73- Item 5. - 23
AB 1717 —22—
1 (2) A credit shall be allowed against, but shall not exceed, the
2 prepaid NITS surcharge and local charges imposed on any prepaid
3 consumer of mobile telephony services by this part to the extent
4 that the prepaid consumer has paid emergency telephone users
5 charges, state utility regulatory commission fees, state universal
6 service charges,or local charges on the purchase to any other state,
7 political subdivision thereof,.,or the District of Columbia.The credit
8 shall be apportioned to the charges against which it is allowed in
9 proportion to the amounts of those charges.
10 0) (1) A seller is relieved from liability to collect the prepaid
11 NITS surcharge imposed by this part that became due and payable,
12 insofar as the base upon which the surcharge is imposed is
13 represented by accounts that have been found to be worthless and
14 charged off for income tax purposes by the seller or, if the seller
15 is not required to file income tax returns,charged off in accordance
16 with generally accepted accounting principles. A seller that has
17 previously paid the surcharge may, under rules and regulations
18 prescribed by the board, take as a deduction on its return the
19 amount found worthless and charged off by the seller. If any such
20 accounts are thereafter in whole or in part collected by the seller.
21 the amount so collected shall be included in the first return filed
22 after such collection and the surcharge shall be paid with the return.
23 (2) The board may by regulation promulgate such other rules
24 with respect to uncollected or worthless accounts as it shall deem
25 necessary to the fair and efficient administration of this part.
26 42012. (a) For purposes of this section,"state lifeline program"
27 means the program furnishing lifeline voice communication service
28 pursuant to the Moore Universal Telephone Service Act (Article
29 8 (commencing with Section 871) of Chapter 4 of Part 1 of
30 Division 1 of the Public Utilities Code).
31 (b) The purchase in a retail transaction in this state of prepaid
32 mobile telephony services, either alone or in combination with
33 mobile data or other services, by a consumer is exempt from the
34 prepaid NITS surcharge if all of the following apply:
35 (1) The prepaid consumer is certified as eligible for the state
36 lifeline program or federal lifeline program.
37 (2) The seller is authorized to provide lifeline service under the
38 state lifeline program or federal lifeline program.
39 (3) The exemption is applied only to the amount paid for the
40 portion of the prepaid mobile telephony service that the lifeline
47
Item 5. - 24 1113 -74-
—23— AB 1717
1 program specifies is exempt from the surcharges and fees that
2 comprise the prepaid NITS surcharge.
3 42014. (a) For purposes of this part,a retail transaction occurs
4 in the state under any of the following circumstances:
5 (1) The prepaid consumer makes the retail transaction in person
6 at a business location in the state (point-of-sale transaction).
7 (2) If paragraph (1) is not applicable, the prepaid consumer's
8 address is in the state (known address transaction). A
9 known-address transaction occurs in the state under any of the
10 following circumstances:
11 (A) The retail sale involves shipping of an item to be delivered
12 to,or picked up by,the prepaid consumer at a location in the state.
13 (B) If the prepaid consumer's address is known by the seller to
14 be in the state, including if the seller's records maintained in the
15 ordinary course of business indicate that the prepaid consumer's
16 address is in the state and the records are not made or kept in bad
17 faith.
18 (C) The prepaid consumer provides an address during
19 consunnnation of the retail transaction that is in the state,including
20 an address provided with respect to the payment instrument if no
21 other address is available and the address is not given in bad faith.
22 (D) The mobile telephone number is associated with a location
23 in this state.
24 (b) (1) A retail transaction shall occur at only one location for
25 purposes of determining local charges. If the retail transaction is
26 a point-of-sale transaction, the consumption of, use of, or access
27 to, the prepaid mobile telephony service shall be presumed to be
28 at that location.
29 (2) If the retail transaction is a known-address transaction, the
30 location shall be as determined in descending order begiluling with
31 subparagraph (A) of paragraph (2) of subdivision (a); if
32 subparagraph (A) of that paragraph is inapplicable,then pursuant
33 to subparagraph (B) of that paragraph; if both subparagraphs (A)
34 and (B)of that paragraph are inapplicable,then subparagraph(C)
35 of that paragraph; and if subparagraphs (A), (B), and (C) of that
36 paragraph are inapplicable, then subparagraph (D) of that
37 paragraph. In a known address transaction, the consumption of,
38 use of; or access to, the prepaid mobile telephony service shall be
39 presumed to be at the known address.
97
xB -75- Item 5. - 25
AB 1717 —24—
1 (c) (1) A seller that relies in good faith on information provided
2 by the board to match the location of a point-of-sale transaction
3 to the applicable prepaid NITS surcharge amount and local charges,
4 that collects that amount from the prepaid consumer, and that
5 remits the amount to the board in compliance with this part, shall
6 not be liable for any additional NITS surcharge or local charges
7 and shall not be required to refund any amounts collected and paid
8 to the board to the prepaid consumer.
9 (2) For a known-address transaction,the seller may collect the
10 prepaid NITS surcharge and local charges that correspond to the
11 five-digit postal ZIP Code of the prepaid consumer's address. A
12 seller that,with due diligence and in good faith, relies on credible
13 information to match the five-digit postal ZIP Code of the prepaid
14 consumer's address to the applicable prepaid NITS surcharge and
15 local charges amount, that collects that amount from the prepaid
16 consumer, and that remits the amount to the board in compliance
17 with this part,shall not be liable for any additional NITS surcharge
18 or local charges and shall not be required to refund any amounts
19 collected and paid to the board to the prepaid consumer, even if
20 the five-digit postal ZIP Code of the prepaid consumer's address
21 that the seller uses corresponds to more than one local charge.
22 42018. (a) Except as provided in subdivisions (b) and (c), if
23 prepaid mobile telephony services are sold in combination with
24 mobile data services or any other services or products for a single
25 price, then the prepaid NITS surcharge and local charges shall
26 apply to the entire price.
27 (b) If prepaid mobile telephone services are sold with a mobile
28 telephone service communication device, commonly termed a
29 cellular telephone,for a single,nonitemized price,then the prepaid
30 NITS surcharge and local charges shall apply to the entire
31 nonitemized price, except if the purchase price for the cellular
32 phone component of the bundled charge is disclosed to the prepaid
33 consumer on a receipt, invoice, or other written or electronic
34 documentation provided to the prepaid consumer,the prepaid NITS
35 surcharge and local charges may be calculated excluding the
36 separately stated price of the cellular telephone.
37 (c) If a minimal amount of prepaid mobile telephony service is
38 sold for a single,nonitemized price with a mobile telephony service
39 communications device,the seller shall not apply the prepaid NITS
40 surcharge or local charges to the transaction. For these purposes,
97
Item 5. - 26 HB -76-
-25— AB 1717
1 a service allotment denominated as 10 minutes or less, or five
2 dollars ($5) or less, is a minimal amount.
4 CHAPTER 3. ADMINISTRATION
5
6 42020. (a) (1) The board shall administer and collect the
7 prepaid MTS surcharge imposed by this part pursuant to the Fee
8 Collection Procedures Law (Part 30 (commencing with Section
9 55001)). For purposes of this part, the references in the Fee
10 Collection Procedures Law to"fee"shall include the prepaid MTS
11 surcharge imposed by this part, and references to"feepayee'shall
12 include a person required to pay the surcharge imposed by this
13 part, which includes the seller, who shall be required to register
1.4 with the board.
15 (2) Notwithstanding Article 1.1 (commencing with Section
16 5 505 0)of Chapter 3 of Part 30, any person required,or that elects,
17 to remit amounts due under Part 1 (commencing with Section
18 6001) by electronic funds transfer pursuant to Article 1.2
19 (commencing with Section 6479.3) of Chapter 5 of Part 1 shall
20 remit prepaid MTS surcharge amounts due under this section by
21 electronic funds transfer.
22 (b) (1) The board may prescribe,adopt,and enforce regulations
23 relating to the administration and enforcement of this part,
24 including, but not limited to, collections, reporting, refunds, and
25 appeals.
26 (2) The board may prescribe,adopt,and enforce any emergency
27 regulations as necessary to implement this part. Any emergency
28 regulation prescribed,adopted,or enforced pursuant to this section
29 shall be adopted in accordance with Chapter 3.5 (commencing
30 with Section 11340) of Part 1 of Division 3 of Title 2 of the
31 Government Code, and, for purposes of that chapter, including
32 Section 11349.E of the Government Code, the adoption of the
33 regulation is an emergency and shall be considered by the Office
34 of Administrative Law as necessary for the immediate preservation
35 of the public peace, health and safety, and general welfare.
36 (c) The board shall establish procedures to be utilized by a seller
37 to document that a sale is not a retail transaction.
38 (d) The board shall establish procedures for sharing of
39 information,other than information protected under Section 19542,
40 related to the collection of the prepaid MTS surcharge upon the
97
Hg -77- Item
AB 1717 —26—
1 request of the Public Utilities Commission or the Office of
2 Emergency Services.
3 (e) The total combined annual expenses incurred for
4 administration and collection by the board pursuant to this part
5 and Part 21.1 (commencing with Section 42100)shall be allocated
6 by the board on a pro rota basis according to revenues collected
7 by the board for: (1) that portion of the prepaid MTS surcharge
8 that is for the emergency telephone users surcharge, (2) that
9 portion q f the prepaid MTS surcharge that is for the Public Utilities
10 Commission surcharges, and(3) local charges.
11 42021. The board shall establish remittance schedules and
12 methods for payment of the prepaid MTS surcharge that utilize
13 existing methods established under the Sales and Use Tax Law
14 (Part 1 (commencing with Section 6001)), including all of the
15 following:
16 (a) The prepaid NITS surcharge, minus the amount retained by
17 the seller pursuant to subdivision(e) of Section 42010, is due and
18 payable to the board quarterly on or before the last day of the
19 month following each calendar quarter.
20 (b) On or before the last day of the month following each
21 calendar quarter. a return for the preceding calendar quarter shall
22 be filed using electronic media with the board.
23 (c) Returns shall be authenticated in a form or pursuant to
24 methods as may be prescribed by the board.
25 42022. Every seller shall register with the board. The board
26 shall establish a method for registration of sellers under this part
27 that utilizes the existing registration process for a seller's permit
28 established pursuant to Section 6066 of the Sales and Use Tax
29 Law(Part 1 (commencing with Section 6001)). Every application
30 for registration shall be made upon a form prescribed by the board
31 and shall set forth the name under which the applicant transacts
32 or intends to transact business, the location of its place or places
33 of business, and such other information as the board may require.
34 An application for registration shall be authenticated in a form or
35 pursuant to methods as may be prescribed by the board.
36 42023. (a) The Prepaid Mobile Telephony Services Surcharge
37 Fund is hereby created in the State Treasury. The Prepaid NITS
38 911 Account and the Prepaid NITS PUC Account are hereby
39 created in the field. The Prepaid Mobile Telephony Services
40 Surcharge Fund shall consist of all surcharges, interest.penalties,
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Item 5. - 28 HB -78-
—27— AB 1717
1 and other amounts collected and paid to the board pursuant to this
2 part, less payments of refunds and reimbursements to the board
3 for expenses incurred in the administration and collection of the
4 prepaid MTS surcharge.
5 (b) All moneys in the Prepaid Mobile Telephony Services
6 Surcharge Fund attributable to the prepaid MTS surcharge shall
7 be deposited as follows:
8 (1) That portion of the prepaid MTS surcharge that is for the
9 emergency telephone users surcharge shall be deposited into the
10 Prepaid MTS 911 Account.
11 (2) That portion of the prepaid MTS surcharge that is for the
12 Public Utilities Commission surcharges shall be deposited into the
13 Prepaid MTS PUC Account.
14 (c) Moneys in the Prepaid MTS 911 Account and the Prepaid
15 MTS PUC Account may be appropriated by the Legislature only
16 for the purposes for which the moneys were collected.All moneys
17 collected pursuant to this part shall be allocated only to the entities
18 specified in this section and shall not be used for any other purpose,
19 including,but not limited to, loans,transfers,or uses for any other
20 purpose, fund, or account.
21 EC.7.
22 SEC. 8. Part 21.1 (commencing with Section 42100) is added
23 to Division 2 of the Revenue and Taxation Code, to read:
24
25 PART 21.1. LOCAL PREPAID MOBILE TELEPHONY
26 SERVICES COLLECTION ACT
27
28 42100. (a) This part shall be known and may be cited as the
29 Local Prepaid Mobile Telephony Services Collection Act.
30 (b) The Legislature finds and declares all of the following:
31 (1) Maintaining effective and efficient communications services,
32 911 emergency systems, communications-related public policy
33 programs to promote universal service, and various local programs
34 across the state benefit all persons with access to the
35 telecommunications system.
36 (2) Providers of end-use communications services, including
37 providers of mobile voice telecommunications services.which the
38 Federal Communications Commission terms mobile telephony
39 service, are required to collect and remit utility users taxes and
40 local 911 or access charges (local charges) imposed by over 150
97
HB -79- Item 5. - 29
AB 1717 —28—
1 cities and counties in California on end-users of such mobile
2 telephony services, as required by existing state or local law.
3 (3) Local charges on telecommunication services represent an
4 important source of tax revenue for many cities and counties and
5 are used to pay for such essential governmental services as public
6 safety, streets, parks, libraries, senior centers, and many more.
7 (4) Prepaid mobile telephony services are an important and
8 growing segment of the communications industry. Prepaid mobile
9 telephony services,unlike postpaid mobile telephony services,are
10 frequently sold by a third-party seller that is not the provider of
11 mobile telephony services, and collecting local charges from
12 prepaid consumers of mobile telephony services at the time of the
13 retail transaction is necessary and the most efficient and
14 competitively neutral means for the collection of those local.
15 charges.
16 (5) The collection of prepaid mobile telephony services by
17 third-party sellers and the remittance of those local charges to the
18 board involves administrative costs and responsibilities that are
19 unique to prepaid mobile telephony services,and therefore justify
20 unique reimbursement and tax rate simplification measures,which
21 are fair and reasonable.
22 (c) It is a matter of statewide concern that the local charges for
23 local prepaid mobile telephony services be collected in a uniform
24 manner in order for the collection to be fair and uniforni on a
25 statewide basis.
26 (d) It is the intention of the Legislature that this part shall
27 preempt the provisions pertaining to the tax or charge rate, base,
28 and method of collection contained in all local ordinances. rules,
29 or regulations concerning the imposition of a local charge upon
30 the consumption of prepaid mobile telephony services to the extent
31 those provisions are inconsistent with the provisions of this part
32 and Part 21 (commencing with Section 42001). It is not the intent
33 of the Legislature to otherwise preempt,limit,or affect the general
34 authority of local jurisdictions to impose a utility user tax, local
35 911 charge. or any other local charges.
36 42101. For purposes of this part,all of the following definitions
37 shall apply:
38 (a) "Local agency" means a city, county, or city and county,
39 which includes a charter city, county, or city and county.
97
Item 5. - 30 xB -80-
—29— AB 1717
1 (b) "Local charge" means the utility user taxes as described in
2 Section 42102, and charges for access to communication services
3 or to local "911"" emergency telephone systems, as described in
4 Section 42102.5.
5 (c) "Ordinance" refers to an ordinance of a local agency
6 imposing a local charge,including any local enactment relating to
7 the filing of a refund or a claim arising under the ordinance.
8 (d) `Board," "local jurisdiction," "'mobile telephony service,"
9 "person, m""prepaid consuer;""Prepaid mobile telephony service,"
10 "prepaid MTS provider," and "prepaid MTS surcharge" have the
11 same meaning as those terms are defined in the Prepaid Mobile
12 Telephony Services Surcharge Collection Act (Part 21
13 (commencing with Section 42001)).
14 42101.5. (a) On and after January 1, 2016, a local charge
15 imposed by a local agency on prepaid mobile telephony services
16 shall be collected from the prepaid consumer by a seller at the
17 same time and in the same manner as the prepaid MTS surcharge
18 is collected under Part 21 (commencing with Section 42001) if,
19 on or before September 1, 2015, the local agency shall enter into
20 a contract with the board for the board to perform the functions
21 set forth in Section 42103. In the contract, the local agency shall:
22 (1) certify to the board that its ordinance applies its local charge
23 to prepaid mobile telephony services and that the local agency
24 agrees to indemnify, and hold and save harmless, the board. its
25 officers,agents,and employees for any and all liability for damages
26 that may result from collection pursuant to the contract; and, (2)
27 certify to the board the amount of the local 911 charge, as set out
28 in Section 42102.5, or the applicable tiered rate for a utility user
29 tax, as set out in Section 42102.
30 (b) In the event that a local agency adopts a new local charge
31 that is imposed on prepaid mobile telephony services after
32 September 1, 2015, the local agency shall enter into a contract
33 with the board to perform the functions set forth in Section 42103,
34 on or before December 1, with collection of the local charge to
35 commence April 1 of the next calendar year. In the contract, the
36 local agency shall certify to the board: (1)that its ordinance applies
37 its local charge to prepaid mobile telephony services and that the
38 local agency agrees to indemnify, and hold and save harmless,the
39 board, its officers, agents, and employees for any and all liability
40 for damages that may result from collection pursuant to the
97
HB -81- Item 5. - 31
AB 1.717 —30—
1 contract. and, (2) the amount of the local 911 charge, as set out in
2 Section 42102.5, or the applicable tiered rate for a utility user tax,
3 as set out in Section 42102.
4 (c) In the event that a local agency increases its local charge
5 after September 1, 2015,the local agency shall provide the board
6 with written notice of the increased local charge on or before
7 December 1,with collection of the local charge to commence April
8 1 of the next calendar year.
9 (d) In the event that a local agency reduces or eliminates a local
10 charge on prepaid mobile telephony services, the local agency
11 shall provide the board with written notice pursuant to subdivision
12 (c) of Section 42010.
13 (e) Notwithstanding subdivision (a), through and including
14 December 31. 2015, a prepaid MTS provider may elect to remit
15 the local charge to the appropriate local taxing jurisdiction based
16 on the applicable tax rate of Section 42102, Section 42102.5, or
17 both, and those remittances shall be deemed to be in full
18 compliance with the local ordinance imposing a local charge on
19 prepaid mobile telephony service.
20 42102. (a) Notwithstanding any other law,on and after January
21 1, 2016, the authority of a city, county, or city and county, which
22 includes a charter city, county, or city and county, to impose a
23 utility user tax on the consumption of prepaid mobile telephony
24 service in the city,county,or city and county at the rate as specified
25 in an ordinance authorized pursuant to Section 7284.2 or any other
26 law is suspended,and the utility user tax rate to be applied instead
27 during the period under any ordinance as so adopted is the
28 applicable of the following:
29 (1) In the case of a city, county, or city and county that has
30 adopted an ordinance to impose a utility user tax on the
31 consumption of prepaid communication services in the city,county,
32 or city and county at the rate of less than 1.5 percent,the rate shall.
33 be 0 percent.
34 (2) In the case of a city, county, or city and county that has
35 adopted an ordinance to impose a utility user tax on the
36 consumption of prepaid communication services in the city,county,
37 or city and county at the rate of 1.5 percent or more but less than
38 2.5 percent, the rate shall be 1_5 percent.
39 (3) In the case of a city, county, or city and county that has
40 adopted an ordinance to impose a utility user tax on the
97
Item 5. - 32 HB -82-
-31 — AB 1717
1 consumption of prepaid communication services in the city,county,
2 or city and county at the rate of 2.5 percent or more but less than
3 3.5 percent, the rate shall be 2.5 percent.
4 (4) In the case of a city, county, or city and county that has
5 adopted an ordinance to impose a utility user tax on the
6 consumption of prepaid communication services in the city,county,
7 or city and county at the rate of 3.5 percent or more but less than
8 4.5 percent, the rate shall be 3.5 percent.
9 (5) In the case of a city, county, or city and county that has
10 adopted an ordinance to impose a utility user tax on the
11 consuumption of prepaid communication services in the city,county,
12 or city and county at the rate of 4.5 percent or more but less than
13 5.5 percent, the rate shall be 4.5 percent.
14 (6) In the case of a city, county, or city and county that has
15 adopted an ordinance to impose a utility user tax on the
16 consumption of prepaid communication services in the city,county,
17 or city and county at the rate of 5.5 percent or more but less than
18 6.5 percent, the rate shall be 5.5 percent.
19 (7) In the case of a city, county, or city and county that has
20 adopted an ordinance to impose a utility user tax on the
21 consumption of prepaid communication services in the city,county,
22 or city and county at the rate of 6.5 percent or more but less than
23 7.5 percent, the rate shall be 6.5 percent.
24 (8) In the case of a city, county, or city and county that has
25 adopted an ordinance to impose a utility user tax on the
26 consumption of prepaid communication services in the city,county,
27 or city and county at the rate of 7.5 percent or more but less than
28 9 percent, the rate shall be 7.5 percent.
29 (9) In the case of a city, county, or city and county that has
30 adopted an ordinance to impose a utility user tax on the
31 consumption of prepaid communication services in the city,county,
32 or city and county at the rate of 9 percent or more, the rate shall
33 be 9 percent.
34 (b) Subdivision (a) is a self-executing, provision that operates
35 without regard to any decision or act on the part of any city,county,
36 or city and county. A change in a utility user tax rate resulting
37 from either the suspension of,or the termination of the suspension
38 of, a utility user rate adopted by a city, county, or city and county
39 set forth in subdivision (a) is not subject to voter approval under
40 either statute or Article XIII C of the California Constitution.
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HB -83- Item 5. - 33
AB 1717 —32—
1 (c) Notwithstanding subdivision (a), a city, county, or city and
2 county may levy, increase, or extend a utility user tax at any rate
3 on the consumption of communication services,including a utility
4 user tax on the consumption of prepaid mobile telephony service,
5 except that during the period on and after January 1, 2016, any
6 utility user tax rate on prepaid mobile telephony service under any
7 ordinance as so adopted shall be the applicable rate specified in
8 subdivision(a).
9 (d) On and after January 1, 2016, this part shall be all of the
10 following:
11 (1) The exclusive method for both of the following:
12 (A) Collecting the local utility user taxes, local 911 charges,
13 and any other local charges imposed on consumers using prepaid
14 mobile telephony services.
15 (B) Defining the scope of the tax or charge with respect to
16 prepaid mobile telephony services.
17 (2) The complete substitute for the utility user tax rate set out
18 in the local ordinance with the applicable tiered rate as established
19 by the Legislature.
20 (3) This part shall not preempt, limit, or affect the general
21 authority of local jurisdictions to impose a utility user tax, local
22 911 charge, or any other local charges.
23 42102.5. (a) Notwithstanding any other law, on and after
24 January 1.2016,the authority of a city,county,or city and county,
25 which includes a charter city,county,or city and county,to impose
26 a charge, that applies to prepaid mobile telephony service. for
27 access to communication services or access to local "911"
28 emergency telephone systems in the city,county,or city and county
29 at the rate as specified in an ordinance is suspended, and the rate
30 to be applied instead during that period under any ordinance as so
31 adopted is the applicable of the following:
32 (1) In the case of a city, county, or city and county that has
33 adopted an ordinance to impose a charge that applies to prepaid
34 mobile telephony service for access to communication services or
35 access to local "911" emergency telephone systems in the city,
36 county, or city and county at the rate of less than one dollar($1)
37 per month per access line,including any adjustments for inflation,
38 the rate shall be 0 percent.
39 (2) In the case of a city, county, or city and county that has
40 adopted an ordinance to impose a charge that applies to prepaid
97
Item 5. - 34 FIB -84-
—33— AB 1717
1 mobile telephony service for access to communication services or
2 access to local "911" emergency telephone systems in the city,
3 county, or city and county at a specified percentage or at the rate
4 of one dollar ($1) per month per access line, including any
5 adjustments for inflation, or more, the rate shall be the specified
6 percentage or the rate obtained by dividing the dollar amount by
7 50, rounded to the nearest one-tenth of 1 percent.
8 (b) Subdivision (a) is a self-executing provision that operates
9 without regard to any decision or act on the part of any city,county,
10 or city and county. A change in an access charge rate resulting
1 I from either the suspension of,or the termination of the suspension
12 of, a charge adopted by a city, county, or city and county set forth
1.3 in subdivision (a) is not subject to voter approval under either
14 statute or Article XIII C of the California Constitution.
15 (c) Notwithstanding subdivision (a), a city, county, or city and
16 county may levy, increase, or extend a charge at any rate, that
17 applies to prepaid mobile telephony services, for access to
18 communication services or access to local "911" emergency
19 telephone systems in the city, county, or city and county, except
20 that during the period on and after January 1,2016, any charge on
21 prepaid mobile telephony service under any ordinance as so
22 adopted shall be the applicable rate specified in subdivision (a).
23 42103. (a) The board shall perform all functions incident to
24 the collection of the local charges of a city, county, or a city and
25 county, and shall collect and administer the local charges in the
26 manner prescribed for the collection of the prepaid NITS surcharge
27 in the Prepaid Mobile Telephony Services Surcharge Collection
28 Act (Part 21 (commencing with Section 42001)), subject to the
29 limitations set forth in Section 42105. For purposes of this part,
30 the references in the Fee Collection Procedures Law to"fee"shall
31 include the local charge imposed by this part, and references to
32 "feepayer" shall include a person required to pay the local charge
33 imposed by this part, which includes the seller.
34 (b) All local charges collected by the board shall be deposited
35 in the Local Charges for Prepaid Mobile Telephony Services Fund
36 which is hereby created in the State Treasury, and shall be held in
37 trust for the local taxing jurisdiction, and shall not be used for any
38 other purpose. Local charges shall consist of all taxes, charges,
39 interest, penalties, and other amounts collected and paid to the
40 board, less payments for refunds and reimbursement to the board
97
HB -85- Item 5. - 35
AB 1717 —34—
1 for expenses incurred in the administration and collection of the
2 local charges. The board shall transmit the funds to the local
3 jurisdictions periodically as promptly as feasible.The transmittals
4 required under this section shall be made at least once in each
5 calendar quarter. The board shall furnish a quarterly statement
6 indicating the amounts paid and withheld for expenses gflhe board
7 and subject to subdivision (e) of Section 42020.
8 (c) The board shall prescribe and adopt rules and regulations as
9 may be necessary or desirable for the administration and collection
10 of local charges and the distribution of the local charges collected.
11 (d) The board's audit duties under this part shall be limited to
1.2 verification that the seller complied with this part.
13 (e) The board may contract with a third party for purposes of
14 this part, solely in connection with the following board duties:
15 (1) To allocate and transmit collected local charges in the Local
16 Charges for Prepaid Mobile Telephony Services Fund pursuant to
17 subdivision (b) to the appropriate local jurisdictions.
18 (2) To audit proper collection and remittance of the local charge
19 pursuant to this part.
20 (3) To respond to requests from sellers,consumers,boards,and
21 others regarding issues pertaining to local charges that are within
22 the scope of the board's duties.
23 (f) For purposes of this part, any third-party contract under
24 subdivision(e) shall be subject to the following limitations:
25 (1) Any third party shall, to the same extent as the board, be
26 subject to subdivision (b) of Section 55381, relating to unlawful
27 disclosures.
28 (2) A third-party contract shall not provide, in whole or in part,
29 in any manner a contingent fee arrangement as payment for services
30 rendered. For purposes of this section, "contingent fee" includes,
31 but is not limited to, a fee that is based on a percentage of the tax
32 liability reported on a return, a fee that is based on a percentage
33 of the taxes owed, or a fee that depends on the specific tax result
34 attained.
3 5 42105. (a) The city,county,or city and county that has adopted
36 an ordinance to impose a local charge that applies to prepaid mobile
37 telephony service shall be solely responsible for:
38 (1) Defending any claim regarding the validity of the ordinance
39 in its application to prepaid mobile telephony service.
97
Item 5. - 36 HB -86-
-35— AB 1717
1 (2) Interpreting any provision of the ordinance, except to the
2 extent specifically superseded by this statute.
3 (3) Responding to any claim for refund by a customer arising
4 under subdivision (b), (c), or(d). The claim shall be processed in
5 accordance with the provisions of the local enactment that allows
6 the claim to be filed.
7 (4) Certifying that the city,county,or city and county ordinance
8 applies the local charge to prepaid mobile telephony services and
9 agreeing to indemnify and hold harmless the board, its officers,
10 agents, and employees for any and all liability for damages that
11 may result from collection of the local charge.
12 (5) Reallocation of local charges as a result of correcting errors
13 relating to the location of the point of sale of a seller or the known
14 address of a consumer, for up to two past quarters from the date
15 of knowledge.
16 (b) A consumer may rebut the presumed location of the retail
17 transaction to the city or county clerk of the local jurisdiction, as
18 provided in subdivision(b)of Section 42014,by filing a claim and
19 declaration under penalty of perjury on a form established by the
20 city or county clerk of the local jurisdiction indicating the actual
21 location of the retail sale. The claim shall be processed in
22 accordance with the provisions of the local enactment that allows
23 the claim to be filed.
24 (c) A consumer that is exempt from the local charge under the
25 local enactment may file a claim for a refund from the local
26 jurisdiction in accordance with the refund provisions of the local
27 enactment that allows the claim to be filed.
28 (d) In connection with any actions or claims relating to or arising
29 from the invalidity of a local tax ordinance, in whole or in part,
30 the seller shall not be liable to any consumer as a consequence of
31 collecting the tax. In the event a local jurisdiction is ordered to
32 refund the tax, it shall be the sole responsibility of the local
33 jurisdiction to refund the tax. In any action seeking to enjoin
34 collection of a local charge by a seller, in any action seeking
35 declaratory relief concerning a local charge, in any action seeking
36 a refund of a local charge, or in any action seeking to otherwise
37 invalidate a local charge,the sole necessary party defendant in the
38 action shall be the local jurisdiction on whose behalf the local
39 charge is collected, and the seller collecting the local charge shall
40 not be named as a party in the action. There shall be no recovery
97
HB _87_ Item 5. - 37
AB 1717 —36—
1 from the state for the imposition of any unconstitutional or
2 otherwise invalid local charge that is collected pursuant to this
3 part.
4 42106. (a) For purposes of this section:
5 (1) "Quarterly local charges" means the total amount of local
6 charges transmitted by the board to a city, county, or city and
7 county for a calendar quarter.
8 (2) "Refund" means the amount of local charges deducted by
9 the board from a city's, county's. or city and county's quarterly
10 local charges in order to pay the city's, county's, or city and
11 county's share of a local charge refund due to one taxpayer.
12 (3) "Offset portion" means that portion of the refund which
13 exceeds the greater of fifty thousand dollars($50,000)or 20 percent
14 of the city's,county's,or city and county's quarterly local charges.
15 (b) Except as provided in subdivision (c), if the board has
1.6 deducted a refund from a city's, county's, or city and county's
17 quarterly local charges which includes an offset portion, then the
18 following provisions apply:
19 (1) Within three months after the board has deducted an offset
20 portion,the city,county,or city and county may request the board
21 to transmit the offset portion to the city,county,or city and county.
22 (2) As promptly as feasible after the board receives the city's,
23 county's, or city and county's request, the board shall transmit to
24 the city, county,or city and county the offset portion as part of the
25 board's periodic transmittal of local charges.
26 (3) The board shall thereafter deduct a pro rata share of the
27 offset portion from future transmittals of local charges to the city,
28 county, or city and county over a period to be determined by the
29 board, but not less than two calendar quarters and not more than
30 eight calendar quarters,until the entire amount of the offset portion
31 has been deducted.
32 (c) The board shall not transmit the offset portion of the refund
33 to the city, county, or city and county if that transmittal would
34 reduce or delay either the board's payment of the refund to the
35 taxpayer or the board's periodic transmittals of local charges to
36 other cities, counties, or city and county.
37 42107. The city, county, or city and county shall pay to the
38 board its costs of preparation to administer and collect local
39 charges. The city, county, or city and county shall pay costs
40 monthly as are incurred and billed by the board.The costs include
97
Item 5. - 38 HB -88-
—37— AB 1717
1 all preparatory costs, including costs of developing procedures,
2 programming for data processing, developing and adopting
3 appropriate regulations, designing and printing of forms,
4 developing instructions for the board's staff and for taxpayers,and
5 other necessary preparatory costs which shall include the board's
6 direct and indirect costs as specified by Section 11256 of the
7 Government Code. Any disputes as to the amount of preparatory
8 costs incurred shall be resolved by the Director of Finance, and
9 his or her decision shall be final.
10 42109. The board shall annually prepare a report showing the
11 amount of both reimbursed and unreimbursed costs incurred by it
12 in administering the collection of local charges pursuant to this
13 part.
14 42110. (a) Notwithstanding Section 55381, it is unlawful for
15 any person,other than an officer or employee of a county,city and
16 county, city, or district, who obtains access to information
17 contained in, or derived from, prepaid mobile telephony services
18 surcharge and local charge records of the board pursuant to
19 subdivision (b), to retain that information after that person's
20 contract with the county, city and county. city, or district has
21 expired.
22 (b) (1) When requested by resolution of the legislative body of
23 any county,city and county,city,or district,the board shall permit
24 any duly authorized officer or employee of the county, city and
25 county, city, or district. or other person designated by that
26 resolution,to examine all of the prepaid mobile telephony services
27 surcharge and local charge records of the board pertaining to the
28 ascertainment of those prepaid mobile telephony services surcharge
29 and local charges to be collected for the county, city and county,
30 city, or district by the board pursuant to contract entered into
31 between the board and the county, city and county,city, or district
32 pursuant to this part. Except as otherwise provided in this section,
33 this subdivision does not allow any officer, employee, or other
34 person authorized or designated by a county,city and county,city,
35 or district to examine any sales or transactions and use tax records
36 of any taxpayer. The costs that are incurred by the board in
37 complying with a request made pursuant to this subdivision shall
38 be deducted by the board from those revenues collected by the
39 board on behalf of the county, city and county, city, or district
40 making the request.
97
HB -89- Item 5. - 39
AB 1717 —38—
1 (2) The resolution of the legislative body of the county,city and
2 county, city, or district shall certify that any person designated by
3 the resolution, other than an officer or employee, meets all of the
4 following conditions:
5 (A) Has an existing contract with the county, city and county,
6 city,or district to examine those prepaid mobile telephony services
7 surcharge and local charge records.
8 (B) Is required by that contract to disclose information contained
9 in, or derived from, those prepaid mobile telephony services
10 surcharge and local charge records only to an officer or employee
11 of the county, city and county, city, or district who is authorized
12 by the resolution to examine the information.
13 (C) Is prohibited by that contract from performing consulting
14 services for a seller during the term of that contract.
15 (D) Is prohibited by that contract from retaining the information
16 contained in, or derived from, those prepaid mobile telephony
17 services surcharge and local charge records,after that contract has
18 expired.
19 (3) Information obtained by examination of board records
20 pursuant to this subdivision shall be used only for purposes related
21 to the collection of the prepaid mobile telephony services surcharge
22 and local charges by the board pursuant to the contract, or for
23 purposes related to other governmental functions of the county,
24 city and county, city, or district set forth in the resolution.
25 (c) If the board believes that any information obtained pursuant
26 to subdivision(b)has been disclosed to any person not authorized
27 or designated by the resolution of the legislative body of the county,
28 city and county, city, or district, or has been used for purposes not
29 permitted by subdivision(b),the board may impose conditions on
30 access to its local charge records that the board considers
31 reasonable,in order to protect the confidentiality of those records.
32 (d) Predecessors, successors, receivers, trustees, executors,
33 administrators, assignees, and guarantors, if directly interested,
34 may be given information as to the items included in the measure
35 and amounts of any unpaid local charges or amounts of local
36 charges required to be collected, interest, and penalties.
37 S£C-. 8.
38 SEC. 9. No inference shall be drawn from the enactment of
39 this act with respect to any remittance requirements of a prepaid
40 MTS provider pursuant to the law as it existed prior to the
97
Item 5. - 40 HB -90-
—39— AB 1717
1 enactment of this act.Additionally, nothing in this act shall affect
2 any remittance requirements of a prepaid mobile telephony services
3 provider for any service other than prepaid mobile telephony
4 services. Nothing in this act shall affect the federal remittance
5 requirements of a prepaid mobile telephony services provider.
6 S Ft G. 9.
7 SEC. 10. It is the intent of the Legislature that the remittance
8 obligations of a prepaid mobile telephony services provider,
9 relating to emergency telephone users surcharge and any charges
10 imposed by the Public Utilities Commission pursuant to Chapter
11 2.5 (commencing with Section 401) of Part 1 of Division I of the
12 Public Utilities Code or for purposes of the universal services
13 programs, shall remain applicable for each of the following:
1.4 (a) The collection of surcharges,the liability for which accrued
15 prior to January 1, 2016.
16 (b) The making of any refunds and the effecting of any credits
17 for payments made on claims of liability that accrued prior to
18 January 1, 2016.
19 (c) The disposition of money collected on any liability that
20 accrued prior to January 1, 2016.
21 (d) The commencement of any action or proceeding pursuant
22 to the Public Utilities Act(Part 1 (commencing with Section 201)
23 of Division 1 of the Public Utilities Code).
24 S FtC. i 0
2.5 SEC. 11. No reimbursement is required by this act pursuant to
26 Section 6 of Article XIII B of the California Constitution because
27 the only costs that may be incurred by a local agency or school
28 district will be incurred because this act creates a new crime or
29 infraction.eliminates a crime or infraction,or changes the penalty
30 for a crime or infraction, within the meaning of Section 17556 of
31 the Government Code,or changes the definition of a crime within
32 the meaning of Section 6 of Article XIII B of the California
33 Constitution.
34 SL G. ir
35 SEC. 12. This act is an urgency statute necessary for the
36 immediate preservation of the public peace,health,or safety within
37 the meaning of Article IV of the Constitution and shall go into
38 immediate effect. The facts constituting the necessity are:
39 In order to provide a standardized collection mechanism as soon
40 as possible by which state and local charges are collected from
97
xB -91- Item 5. - 41
AB 171.7 —40—
1 end-users of prepaid mobile telephony services,thereby pei-initting
2 needed financial support for programs necessary to serve the public
3 or telecommunications users,it is necessary that this act take effect
4 immediately.
O
97
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AB 1717(PEREA):TELECOMMUNICATIONS:PREPAID MOBILE TELEPHONY SERVICE
[_-�,-o lbi He.arino`'.' TZIes&� v, June 17,, Sena* FPIeroy', LJfilif es and Commani['czions Committee: e,xpeded Wednesda Jul.7e 2fl beawiflo il?
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Purpose of this communication
AB 1717 is important to the approximately 153 cities and 3 counties in California that impose a Utility Users Tax (UUT). AB
1717 protects existing local taxes. The bill would establish a uniform, statewide collection mechanism for prepaid wireless
services based on the point of sale for retail stores and "known address" for internet sales. AB 1717 is similar to AB 300
(Peres) from 2013. Governor Brown indicated in his AB 300 veto message that he encourages the author to partner with the
local governments and State Agencies affected by these revenues to craft a bill with a more cost effective solution.
Keeping the conversation going and suggested action by local governments with o UUT - position letters and tolls to
Senators and representatives
Many cities have already weighed in and sent letters of support to the Legislature (Assembly) for the measure. AB 1717
passed off the Assembly Floor by a 71-2 vote. We are told that Legislators want and need to hear from their cities,especially
those with a UUT. We believe it is important to support AB 1717 during the upcoming Senate hearings (as noted above) and
allow stakeholder conversations to continue and explore cost saving measures to improve the bill, including learning from the
experience of other states who have implemented similar laws. Cities are encouraged to review the bill at www.leginfo.ca.gov
and to send position letters to the Senate Committees that will hear the bill as soon as possible citing specific impact. A draft
sample letter and distribution list is included in this communication. Included below is a list of Senators that serve on the
Committee's that will hear AB 1717 in the immediate future.
Why UUT from prepaid wireless is important to Colifornio cities and counties
In many cities, the UUT is the second highest source of general fund revenue (sales tax is first). Many California cities and
counties impose a local UUT on the "users" of telecommunications services that generates over$650 million a year in vital tax
revenues for these local agenies. Over 85% of these taxes have received voter approval, and over 50% of the $650 million of
telecom UUT comes from wireless services. Currently, prepaid wireless makes up 30%of the wireless market and over 50%of
new wireless sales are prepaid. That trend is likely to increase. Each year, UUT public agencies are losing existing UUT as a
result of more and more wireless customers switching from post-paid "contracts"to lower cost prepaid wireless service
The difference between prepaid and post-paid—the nexus issue
The UUT is usually collected by the service providers from post-paid or contract customers by including the UUT on the
customer monthly invoice and the tax is allocated to the customer's billing address. However with prepaid wireless there is
no contract and no monthly invoices and the service is often sold by retailers to the consumers (e.g., Walmart, Target, etc.),
rather than the service providers. These customers can use the prepaid service purchased anywhere—therefore tax nexus is
not determined and the tax goes uncollected. Since approximately 70% of the prepaid transactions are sold by retailers, the
bypass of our local UUT has become a major problem.
Collecting, remitting,processing the revenues
AB 1717 solves the collection problem by requiring California retailers to collect the local UUT at the same time that it collects
the sales tax on its other retail products, based on the point of sale (whether from a store or over the internet). In some
states that have adopted similar legislation as AB 1717, the amount of state 911 fees on prepaid wireless has more than
doubled.
Achieving administrative ease and efficiency
Under AB 1717,the local tax would be remitted to the BOE at the same time that the retailer remits its sales taxes to the BOE.
The BOE would distribute the revenues to the local agency. For administrative ease, however, the number of different UUT
rates would be reduced to eight tiers,with almost no city losing more than Y2 from its existing rate. AB1717 also addresses a
mechanism for collecting the state 911 and CPUC surcharges.
AB 1717 Letter Distribution:
iacqueline.kinnev@sen.ca.gov(Senate Energy, Utilities and Communications)
colin.grinnell@sen.ca.gov (Senate Governance and Finance)
ionathan@arambel@asm.ca.gov (Assembly Member Perea's office)
fran.mancia@muniservices.com (MuniServices—will distribute to other stakeholders)
Sample Letter for Use-Either or Both Senate Committees
The Honorable Alex Padilla
Chair, Senate Energy, Utilities and Communications Committee
State Capitol, Room 5046 Sacramento, CA 95814
The Honorable Lois Wolk
Chair, Senate Governance and Finance Committee
State Capitol, Room 408 Sacramento, CA 95814
Subject: AB 1717 (Perea)Telecommunications: prepaid mobile telephony services(support)
Dear Senator Padilla/ Dear Senator Wolk:
The City of INSERT is pleased to support of AB 1717 (as introduced) and requests an "AYE" vote when it comes before
your Committee. AB 1717 is critical for protecting our City's existing utility users tax (UUT) on telecommunications by
providing a mechanism for the collection of our voter approved local tax on prepaid wireless services. Our local
ordinance treats prepaid and post-paid wireless in the same manner, however, the task of collecting from prepaid
customers needs a special solution.
Over the last three years or so, our City has been experiencing a drop in our wireless UUT, as more and more wireless
customers convert from post-paid to prepaid service. Now, over 50% of all new wireless services are prepaid and one-
third of all new smartphones are prepaid. Our City cannot afford to lose these vital tax revenues to pay for essential
governmental services. Last year, the Governor vetoed AB 300 because of the high cost of implementation. In response,
our local government representatives have been diligently working with the other stakeholders to significantly reduce
these costs, borrowing on the experience of other states with similar laws.
We hope to soon have specific cost reduction proposals that will benefit all of the stakeholders. Your support of AB
1717 will allow this process to go forward, with important future amendments to reduce implementation costs, and
thereby protect our existing,voter-approved local taxes.
Respectfully,
INSERT
cc: Members, Senate Energy, Utilities and Communications Committee
Jacqueline Kinney, Principal Consultant, Senate Energy, Utilities and Communications Committee
Members, Senate Governance and Finance Committee
Colin Grinnell, Senate Governance and Finance Committee
Assembly Member Perea
Tj-____ G A A
Calls to Senators and Representatives
Cities with a UUT may want to consider making a call to one or more members, especially if your representative sits on one
these committees. (Contact detail is available at www.sen.co.gov)
Senate Energy, Utilities and Communications(phone: 916.651.4107)
Staff Consultant: Jacqueline Kinney
Senator Alex Padilla (Chair)(phone: 916.651.4020)
Senator Jean Fuller(Vice Chair)
Senator Marty Block
Senator Anthony Cannella
Senator Ellen M. Corbett
Senator Kevin de Len
Senator Mark DeSaulnier
Senator Jerry Hill
Senator Steve Knight
Senator Fran Pavley
Senator Lois Wolk
Senate Governance and Finance(phone: 916.651.4119)
Staff Consultant: Colin Grinnell
Senator Lois Wolk(Chair) (phone: 916-651-4003)
Senator Steve Knight(Vice Chair)
Senator Jim Beall
Senator Mark DeSaulnier
Senator Ed Hernandez
Senator Carol Liu
Senator Mimi Walters
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