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HomeMy WebLinkAboutNS-2860 - Modernizing the Telecommunications Utility Users Tax and Reducing the Utility Users Tax Rate for Telecommunications, Electricity, Gas and Water from 6% to 5 and a Half%ORDINANCE NO. NS -2860 AN ORDINANCE OF THE PEOPLE OF SANTA ANA MODERNIZING THE TELECOMMUNICATIONS UTILITY USERS TAX AND REDUCING THE UTILITY USERS TAX RATE FOR TELECOMMUNICATIONS, ELECTRICITY, GAS AND WATER FROM 6% TO 51/2 % THE PEOPLE OF THE CITY OF SANTA ANA DO ORDAIN AS FOLLOWS: SECTION 1: Section 35 -151 of the Santa Ana Municipal Code is hereby amended such that it reads as follows: Sec. 35 -151. Short title. This article shall be known as the "Utility Users Tax Ordinance of the City of Santa Ana." The word "ordinance ", "code" or "article" as used in this article shall mean the "Utility Users Tax Ordinance" unless otherwise so indicated. SECTION 2: Section 35 -152 of the Santa Ana Municipal Code is hereby amended such that it reads as follows: Sec. 35 -152. Purpose. This article is required for the purpose of fixing the rate of taxation for the utility users' tax, and for the purpose of providing a tax levy for the usual and current expenses of the City of Santa Ana. SECTION 3: Section 35 -153 of the Santa Ana Municipal Code is hereby amended such that it reads as follows: Sec. 35 -153. Definitions. The following words and phrases whenever used in this article shall be construed as defined in this section, unless otherwise indicated. (a) "Ancillary telecommunication services" means services that are associated with or incidental to the provision, use or enjoyment of telecommunications services, including but not limited to the following services: Ordinance No. NS -2860 Page 1 of 13 (1) "Conference bridging service" means an ancillary service that links two (2) or more participants of an audio or video conference call and may include the provision of a telephone number. Conference bridging service does not include the telecommunications services used to reach the conference bridge. (2) "Detailed telecommunications billing service" means an ancillary service of separately stating information pertaining to individual calls on a customer's billing statement. (3) "Directory assistance" means an ancillary service of providing telephone number information, and /or address information. (4) "Vertical service" means an ancillary service that is offered in connection with one or more telecommunications services, which offers advanced calling features that allow customers to identify callers and to manage multiple calls and call connections, including conference bridging services. (5) "Voice mail service" means an ancillary service that enables the customer to store, send or receive recorded messages. Voice mail service does not include any vertical services that the customer may be required to have in order to utilize the voice mail service. (b) "Billing address" shall mean the mailing address of the service user where the service supplier submits invoices or bills for payment by the customer. (c) "City" shall mean the City of Santa Ana. (d) "Day" shall mean a calendar day. (e) "Gas" shall mean natural or manufactured gas or any alternate hydrocarbon fuel that may be substituted therefore. (f) "Mobile telecommunications service" shall mean commercial mobile radio service, as defined in Section 20.3 of Title 47 of the Code of Federal Regulations and as set forth in the Mobile Telecommunications Sourcing Act (4 U.S.C. Section 124) and the regulations thereunder. (g) "Month" shall mean a calendar month. (h) "Non- utility service supplier" means: (1) a service supplier, other than a supplier of electric distribution services to all or a significant portion of the city, which generates electricity for sale to others, and shall include but is not limited to any publicly -owned electric utility, investor -owned utility, cogenerator, distributed Ordinance No. NS -2860 Page 2 of 13 generation provider, exempt wholesale generator (15 U.S.C. Section 79z -5a), municipal utility district, federal power marketing agency, electric rural cooperative, or other supplier or seller of electricity; (2) an electric service provider (ESP), electricity broker, marketer, aggregator, pool operator, or other electricity supplier other than a provider of electric distribution services to all or a significant portion of the city, which sells or supplies electricity or supplemental services to electricity users within the city; and (3) a gas service supplier, aggregator, marketer or broker, other than a supplier of gas distribution services to all or a significant portion of the city, which sells or supplies gas or supplemental services to gas users within the city. (i) "Paging : service" means a "telecommunications service" that provides' transmission of coded radio signals for the purpose of activating specific pagers; such transmissions may include messages and /or sounds. (j) "Person" shall mean, without limitation, any natural individual, firm, trust, common law trust, estate, partnership of any kind, association, syndicate, club, joint stock company, joint venture, limited liability company, corporation (including foreign, domestic, and non - profit), joint power agency, municipal district or municipal corporation (other than the city), cooperative, receiver, trustee, guardian, or other representative appointed by order of any court. (k) "Place of primary use" means the street address representative of where the customer's use of the telecommunications service primarily occurs, which must be the residential street address or the primary business street address of the customer. (1) "Post -paid telecommunication service" means the telecommunication service obtained by making a payment on a communication -by- communication basis either through the use of a credit card or payment mechanism such as a bank card, travel card, credit card, or debit card, or by charge made to a service, number which is not associated with the origination or termination of the telecommunication service. (m) "Prepaid telecommunication service" (including prepaid mobile telecommunication service) shall mean the right to access telecommunication services, which must be paid for in advance and which enables the origination of communications using an access number or authorization code, whether manually or electronically dialed. (n) "Private telecommunication service" means a telecommunication service that entitles the customer to exclusive or priority use of a communications channel Ordinance No. NS -2860 Page 3 of 13 or group of channels between or among termination points, regardless of the manner in which such channel or channels are connected, and includes switching capacity, extension lines, stations, and any other associated services that are provided in connection with the use of such channel or channels. A communications channel is a physical or virtual path of communications over which signals are transmitted between or among Customer channel termination points (i. e., the location where the customer either inputs or receives the communications). (o) "Service address" means the residential street address or the business street address of the service user. For a telecommunication service user, "service address" means either: (1) The location of the service user's telecommunication equipment from which the telecommunication originates or terminates, regardless of where the telecommunication is billed or paid; or, (2) If the location in subsection (1) of this definition is unknown (e.g., mobile telecommunications service or VolP service), the service address means the location of the service user's place of primary use. (3) For prepaid telecommunication service, "service address" means the point of sale of the services where the point of sale is within the city, or if unknown, the known address of the service user (e.g., billing address or location associated with the service number), which locations shall be presumed to be the place of primary use. (p) "Service supplier" shall mean any entity or person, including the city that provides, sells, or resells a utility service to a user of such service within the city. (q) "Service user" shall mean a person required to pay a tax imposed under the provisions of this article. (r) "State" shall mean the State of California. (s) "Streamlined Sales and Use Tax Agreement" means the multi -state agreement commonly known and referred to as the Streamlined Sales and Use Tax Agreement, as it is amended from time to time. (t) "Tax administrator" shall mean the Finance Director, or his or her designee. (u) "Telecommunications service" means the transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals to a point, or between or among points, whatever the technology used. The term "telecommunications services" includes such transmission, conveyance, or Ordinance No. NS -2860 Page 4 of 13 routing in which computer processing applications are used to act on the form, code or protocol of the content for purposes of transmission, conveyance or routing without regard to whether such services are referred to as voice over internet protocol (VoIP) services or are classified by the Federal Communications Commission as enhanced or value added, and includes video and /or data services that are functionally integrated with "telecommunication services." "Telecommunications services" include, but are not limited to the following services, regardless of the manner or basis on which such services are calculated or billed: ancillary telecommunication services; intrastate, interstate, and international telecommunication services; mobile telecommunications service; prepaid telecommunication service; post- paid telecommunication service; private telecommunication service; paging service; 800 service (or any other toll -free numbers designated by the Federal Communications Commission); 900 service (or any other similar numbers designated by the Federal Communications Commission for services whereby subscribers who call in to pre- recorded or live service). The term "telecommunication services" shall include, but is not limited to, charges for: connection, reconnection, termination, movement, or change of telecommunication services; late payment fees; detailed billing; central office and custom calling features (including but not limited to call waiting, call forwarding, caller identification and three -way calling); voice mail and other messaging services; directory assistance; access and line charges; universal service charges; regulatory or administrative fees, charges or surcharges, including charges or surcharges for programs imposed by state or federal law (whether such charges or surcharges are imposed on the service supplier or the customer); local number portability charges; and text and instant messaging. "Telecommunication services" shall not include digital downloads that are not "ancillary telecommunication services," such as music, ringtones, games, and similar digital products. (v) "VoIP (Voice Over Internet Protocol)" means the digital process of making and receiving real -time voice transmissions over any Internet Protocol network. (w) "800 Service" means a "telecommunications service" that allows a caller to dial a toll -free number without incurring a charge for the call. The service is typically marketed under the name "800," "855," "866," "877," and "888" toll - free calling, and any subsequent numbers designated by the Federal Communications Commission. (x) "900 Service" means an inbound toll "telecommunications service" purchased by a subscriber that allows the subscriber's customers to call in to the subscriber's prerecorded announcement or live service. "900 service" does not include the charge for: collection services provided by the seller of the "telecommunications services" to the subscriber, or service or product sold by the subscriber to the subscriber's customer. The service is typically marketed Ordinance No. NS -2860 Page 5 of 13 under the name "900" service, and any subsequent numbers designated by the Federal Communications Commission. SECTION 4: Section 35 -155 of the Santa Ana Municipal Code is hereby amended such that it reads as follows: Sec. 35 -155. Telecommunication Users' Tax. (a) There is hereby imposed a tax upon every person in the city using telecommunication services. The tax imposed by this Section shall be at the rate of five and one half percent (5.5 %) of the charges made for such services and shall be collected from the service user by the telecommunication services supplier or its billing agent. There is a rebuttable presumption that telecommunication services, which are billed to a billing or service address in the city, are used, in whole or in part, within the city's boundaries, and such services are subject to taxation under this Section. There is also a rebuttable presumption that prepaid telecommunication services sold within the city are used, in whole or in part, within the city and are therefore subject to taxation under this Section. If the billing address of the service user is different from the service address, the service address of the service user shall be used for purposes of imposing the tax, As used in this Section, the term "charges" shall include the value of any other services, credits, property of every kind or nature, or other consideration provided by the service user in exchange for the telecommunication services. (b) "Mobile telecommunications service" shall be sourced in accordance with the sourcing rules set forth in the Mobile Telecommunications Sourcing Act (4 U.S.C. Section 124). The tax administrator may issue and disseminate to telecommunication service suppliers, which are subject to the tax collection requirements of this article, sourcing rules for the taxation of other telecommunication services, including but not limited to post -paid telecommunication services, prepaid telecommunication services, VoIP, and private communication services, provided that such rules are based upon custom and common practice that further administrative efficiency and minimize multi jurisdictional taxation (e.g., Streamlined Sales and Use Tax Agreement). (c) The tax administrator may issue and disseminate to telecommunication service suppliers, which are subject to the tax collection requirements of this article, an administrative ruling identifying those telecommunication services, or charges therefore, that are subject to or not subject to the tax of subsection (a) above. (d) To prevent actual multi jurisdictional taxation of telecommunication services subject to tax under this Section, any service user, upon proof to the tax administrator that the service user has previously paid the same tax in Ordinance No. NS -2860 Page 6 of 13 another state or city on such telecommunication services, shall be allowed a credit against the tax imposed to the extent of the amount of such tax legally imposed in such other state or city; provided, however, the amount of credit shall not exceed the tax owed to the city under this Section. (e) The tax on telecommunication services imposed by this Section shall be collected from the service user by the service supplier. The amount of tax collected in one month shall be remitted to the tax administrator, and must be received by the tax administrator on or before the twentieth (20th) day of the following month. SECTION 5: Section 35 -155.1 of the Santa Ana Municipal Code is hereby added such that it reads as follows: Sec. 35- 155.1. Bundling Taxable Items. If any nontaxable charges are combined with and not separately stated from taxable service charges on the customer bill or invoice of a service supplier, the combined charge is subject to tax unless the service supplier identifies, by reasonable and verifiable standards, the portions of the combined charge that are nontaxable and taxable through the service supplier's books and records kept in the regular course of business, and in accordance with generally accepted accounting principles, and not created and maintained for tax purposes. If the service supplier offers a combination of taxable and non - taxable services, and the charges are separately stated, then for taxation purposes, the values assigned the taxable and non - taxable services shall be based on its books and records kept in the regular course of business and in accordance with generally accepted accounting principles, and not created and maintained for tax purposes. The service supplier has the burden of proving the proper valuation and apportionment of taxable and non- taxable charges. SECTION 6: Section 35 -155.2 of the Santa Ana Municipal Code is hereby added such that it reads as follows: Sec. 35- 155.2. Substantial Nexus /Minimum Contact. For purposes of imposing a tax or establishing a duty to collect and remit a tax under this article, "substantial nexus" and "minimum contacts" shall be construed broadly in favor of the imposition, collection and /or remittance of the utility users' tax to the fullest extent permitted by State and Federal law, and as it may change from time to time by judicial interpretation or by statutory enactment. Any telecommunication service (including VoIP) used by a person with a service address in the city, which service is capable of terminating a call to another person on the general telephone network, shall be subject to a rebuttable presumption that "substantial nexus /minimum contacts" exists for purposes of imposing a tax, or establishing a duty to collect and remit a tax, under this article. A service supplier Ordinance No. NS -2860 Page 7 of 13 shall be deemed to have sufficient activity in the city for tax collection and remittance purposes if its activities include, but are not limited to, any of the following: maintains or has within the city, directly or through an agent, affiliate, or subsidiary, a place of business of any nature; solicits business in the city by employees, independent contractors, resellers, agents or other representatives; solicits business in the city on a continuous, regular, seasonal or systematic basis by means of advertising that is broadcast or relayed from a transmitter with the city or distributed from a location with the city; or advertises in newspapers or other periodicals printed and published within the city or through materials distributed in the city by means other than the United States mail; or if there are activities performed in the city on behalf of the service supplier that are significantly associated with the service supplier's ability to establish and maintain a market in the city for the provision of utility services that are subject to a tax under this article (e.g., an affiliated person engaging in activities in the city that inure to the benefit of the service supplier in its development or maintenance of a market for its services in the city). SECTION 7: Section 35 -156.1 of the Santa Ana Municipal Code is hereby added such that it reads as follows: Sec. 35- 156.1. Reduction in Rate. The Electricity Users Tax imposed under section 35 -156 shall be reduced from six (6) percent to five and one half (5'/2) percent. SECTION 8: Section 35 -157.1 of the Santa Ana Municipal Code is hereby added such that it reads as follows: Sec. 35- 157.1. Reduction in Rate. The Gas User Tax imposed under section 35 -157 shall be reduced from six (6) percent to five and one half (5'/z) percent. SECTION 9: Section 35 -159.1 of the Santa Ana Municipal Code is hereby added such that it reads as follows: Sec. 35- 159.1. Reduction in Rate. The Water User Tax imposed under section 35 -159 shall be reduced from six (6) percent to five and one half (5'/2) percent. SECTION 10: Section 35 -172 of the Santa Ana Municipal Code is hereby amended such that it reads as follows: Sec. 35 -172. RESERVED Ordinance No. NS -2860 Page 8 of 13 SECTION 11: Section 35 -178 of the Santa Ana Municipal Code is hereby added such that it reads as follows: Sec. 35 -178. Effect of State and Federal Reference /Authorization. Unless specifically provided otherwise, any reference to a State or Federal statute in this article shall mean such statute as it may be amended from time to time, provided that such reference to a statute herein shall not include any subsequent amendment thereto, or to any subsequent change of interpretation thereto by a State or Federal agency or court of law with the duty to interpret such law, to the extent that such amendment or change of interpretation would require voter approval under California law, or to the extent that such change would result in a tax decrease (as a result of excluding all or a part of a utility service, or charge therefor, from taxation). Only to the extent voter approval would otherwise be required or a tax decrease would result, the prior version of the statute (or interpretation) shall remain applicable; for any application or situation that would not require voter approval or result in a decrease of a tax, provisions of the amended statute (or new interpretation) shall be applicable to the maximum possible extent. To the extent that the city's authorization to collect or impose any tax imposed under this article is expanded or limited as a result of changes in State or Federal law, no amendment or modification of this article shall be required to conform the tax to those changes, and the tax shall be imposed and collected to the full extent of the authorization up to the full amount of the tax imposed under this article. SECTION 12: Section 35 -179 of the Santa Ana Municipal Code is hereby added such that it reads as follows: Sec. 35 -179. No Increase in Tax Percentage or Change in Methodology Without Voter Approval; Amendment or Repeal. This article of the Santa Ana Municipal Code may be repealed or amended by the city council without a vote of the People. However, as required by Chapter XIIIC of the California Constitution, voter approval is required for any amendment provision that would increase the rate of any tax levied pursuant to this article. The People of the City of Santa Ana affirm that the following actions shall not constitute an increase of the rate of a tax: (1) The restoration of the rate of the tax to a rate that is no higher than that set by this article, if the city council has acted to reduce the rate of the tax; (2) An administrative or legislative action that interprets or clarifies the methodology of the tax, or any definition applicable to the tax, so long as such interpretation or clarification (even if contrary to some prior interpretation or clarification) is not inconsistent with the language of this article; Ordinance No. NS -2860 Page 9 of 13 (3) The establishment a class of persons or class of service that is exempt or excepted from the tax or the discontinuation of any such exemption or exception (other than the discontinuation of an exemption or exception specifically set forth in this article); or (4) The collection of the tax imposed by this article, even if the city had, for some period of time, failed to collect the tax. SECTION 13: Section 35 -180 of the Santa Ana Municipal Code is hereby added such that it reads as follows: Sec. 35 -180. Remedies Cumulative. All remedies and penalties prescribed by this article or which are available under any other provision of law or equity, including but not limited to the California False Claims Act (Government Code Section 12650 et seq.) and the California Unfair Practices Act (Business and Professions Code Section 17070 et seq.), are cumulative. The use of one or more remedies by the city shall not bar the use of any other remedy for the purpose of enforcing the provisions of this article. SECTION 14: Section 35 -181 of the Santa Ana Municipal Code is hereby added such that it reads as follows: Sec. 35 -181. Interaction with Prior Tax. (a) Collection of Tax by Service Providers. Service providers shall begin to collect the tax imposed by this amended article as soon as feasible after the effective date of this article, but in no event later than permitted by Section 799 of the California Public Utilities Code. (b) Satisfaction of Tax Obligation by Service Users. Prior to April 1, 2015, any person who pays the tax levied pursuant to this article, as it existed prior to its amendment as provided herein, with respect to any charge for a service shall be deemed to have satisfied his or her obligation to pay the tax levied pursuant to this article as amended herein, with respect to that charge. The intent of this paragraph is to prevent the imposition of multiple taxes upon a single utility charge during the transition period from the prior Utility Users' Tax Code to the amended Utility Users' Tax Ordinance (which transition period ends April 1, 2015) and to permit service providers or other persons with an obligation to remit the tax hereunder, during that transition period, to satisfy their collection obligations by collecting either tax. (c) Satisfaction of Tax Obligation by Service Users Paying the Prior Maximum Utility Users Tax. Prior to July 1, 2015, any person who pays the maximum tax amount payable under the utility users tax pursuant to this article, as it Ordinance No. NS -2860 Page 10 of 13 existed prior to its amendment as provided herein, shall be deemed to have satisfied his or her obligation to pay the tax levied pursuant to this article as amended herein for the period of July 1, 2014 through June 30, 2015. (d) In the event that a final court order should determine that the election enacting this article (as amended herein) is invalid for whatever reason, or that any tax imposed under this article (as amended herein) is invalid in whole or in part, then the taxes imposed under this article, as it existed prior to its amendment as provided herein, shall automatically continue to apply with respect to any service for which the tax levied pursuant to this article has been determined to be invalid. Such automatic continuation shall be effective beginning as of the first date of service (or billing date) for which the tax imposed by this article is not valid. However, in the event of an invalidation, any tax (other than a tax that is ordered refunded by the court or is otherwise refunded by the city) paid by a person with respect to a service and calculated pursuant to this article (as amended herein) shall be deemed to satisfy the tax imposed under this article, as it existed prior to its amendment as provided herein, on that service, so long as the tax is paid with respect to a service provided no later than six months subsequent to the date on which the final court order is published. SECTION 15: Section 35 -182 of the Santa Ana Municipal Code is hereby added such that it reads as follows: Sec. 35 -182. Ratification of Prior Tax. The voters of the City of Santa Ana hereby ratify and approve the past collection of the Utility Users Tax as imposed by Chapter 35, Article VI, of the Santa Ana Municipal Code as it existed prior to the effective date of this Ordinance. SECTION 16: Section 35 -183 to 35 -199 of the Santa Ana Municipal Code is hereby amended such that it reads as follows: Secs. 35- 183 -35 -199. Reserved. SECTION 17: If any section, subsection, sentence, clause, phrase or portion of this ordinance is for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this ordinance. The People of the City of Santa Ana hereby declare that they would have adopted this ordinance and each section, subsection, sentence, clause, phrase or portion thereof irrespective of the fact that any one or more sections, subsections, sentences, clauses, phrases, or portions be declared invalid or unconstitutional. SECTION 18: Neither the adoption of this ordinance nor the repeal hereby of any ordinance shall in any manner affect the prosecution for violation of ordinances, which violations were committed prior to the effective date hereof, nor be construed as Ordinance No. NS -2860 Page 11 of 13 affecting any of the provisions of such ordinance relating to the collection of any tax or penalty or the penal provision applicable to any violation thereof, nor to affect the validity of any bond or cash deposit in lieu thereof, required to be posted, filed or deposited pursuant to any ordinance and all rights and obligations thereunder appertaining shall continue in full force and effect. SECTION 19: Upon the approval by the majority of the voters of the City of Santa Ana at the November 4, 2014 general election, service providers shall begin to collect the tax imposed by this amended article as soon as feasible after the effective date, but in no event later than permitted by Section 799 of the California Public Utilities Code. ADOPTED this 91" day of December, 20, APPROVED AS TO FORM: Sonia R. Carvalho. CitvAttc 0 Sandoval Assistant City Attorney AYES: Councilmembers: Amezcua, Benavides, Martinez, Pulido, Reyna Sarmiento, Tinaiero (7) NOES: Councilmembers: ABSTAIN: Councilmembers: NOT PRESENT: Councilmembers: None (0) Ordinance No. NS -2860 Page 12 of 13 CERTIFICATE OF ATTESTATION AND ORIGINALITY I, MARIA D. HUIZAR, Clerk of the Council, do hereby attest to and certify that the attached Ordinance No. NS -2860 to be the original ordinance adopted by the voters of the City of Santa Ana on November 4, 2014 and certified by the City Council on December 9. 2014. Date: L VVIalk-a- ID Clerk of the Council City of Santa Ana Ordinance No. NS -2860 Page 13 of 13