ORDINANCE NO. 444U
AN ORDINANCE OF THE CITY OF RANCHO PALOS VERDES AMENDING CHAPTER 3.30 OF THE RANCHO PALOS VERDES MUNICIPAL CODE RELATING TO THE APPLICATION OF THE TELEPHONE USER TAX AND DECLARING THE URGENCY THEREOF.
WHEREAS, the City of Rancho Palos Verdes has lawfully imposed a utility user tax on telephone communication services since 1993; and
WHEREAS, for ease of administration and the convenience of the telephone communication service providers, the Rancho Palos Verdes Municipal Code defines “telephone communications services” by referring to federal excise tax law administered by the Internal Revenue Service and has for many years administered its tax on telephone communication services consistent with the application of the Federal Excise Tax; and
WHEREAS, administration and application of the Federal Excise Tax has been and continues to be the purview of the Internal Revenue Service; and
WHEREAS, until May 25, 2006, the Internal Revenue Service had administered and applied the Federal Excise Tax in a manner consistent with both Revenue Ruling 79-404 and the manner in which the City intended to administer and apply its tax on telephone communication services, including applying the Federal Excise Tax to long-distance charges which varied in amount with either distance or elapsed transmission time of the involved communication; and
WHEREAS, on May 25, 2006, the Internal Revenue Service issued Notice 2006-50 which announced that after July 31, 2006, the Internal Revenue Service would no longer apply the Federal Excise Tax to long-distance charges and bundled long-distance unless the charges vary in amount with both distance and elapsed transmission time; and
WHEREAS, it has always been and continues to be the City’s intent that its tax on telephone communication services be applied to: (1) long-distance charges which vary in amount either by elapsed transmission time or with distance, or both, and (2) to bundled long-distance and local charges provided under a single plan that does not separately state the charges for local telephone services; and
WHEREAS, the interpretation of the Federal Excise Tax embodied in IRS Notice 2006-50 is inconsistent with both the original legislative intent of the City’s telephone user tax and the manner in which the City has historically imposed its telephone user tax; and
WHEREAS, the City Council wishes to continue to impose the utility user tax on telephone communication services in a manner that is consistent with how it has been historically imposed; and
WHEREAS, the ordinance merely clarifies and restates the type of telephone service that is subject to the tax without reference to the Federal Excise Tax and does not increase the tax or change or expand the type of telephone services that are subject to the tax; and
WHEREAS, Rancho Palos Verdes Municipal Code Section 3.30.130 H expressly requires application of the utility user tax to bundled charges, and that provision is not changed by this ordinance; and
WHEREAS, this ordinance is presented as an urgency ordinance because the above-referenced facts increase the possibility of a sudden and unplanned reduction of the tax on telephone communication services and is, therefore, necessary for preserving the public peace, health or safety;
NOW, THEREFORE THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES DOES HEREBY ORDAIN AS FOLLOWS:
Section 1. Title 2 of the Rancho Palos Verdes Municipal Code is hereby amended by amending Section 3.30.020(I) of Chapter 3.30 to read as follows:
“I. ‘Telephone communication services’ means any local or long-distance telephone service for which there is a charge, regardless of the means or technology used to provide such service, and shall include any telephonic type –and quality of communication for the purpose of transmitting messages or information [including but not limited to voice, both analog and digital, including the use of the Internet Protocol (“IP”) or other similar means for digitization or packetization of telephonic quality communications for transmission via digital networks, in part or in whole; telegraph; teletypewriter; data; facsimile; video; or text] by electronic, radio or similar means through “interconnected service” with the “public switched network” [as these terms are commonly used in the Federal Communications Act and the regulations of the Federal Communications Commission], whether such transmission occurs by wire, cable, cable modem or digital subscriber line (“DSL”), internet, fiber-optic, light wave, laser, microwave, radio wave [including but not limited to mobile telecommunications service, cellular service, commercial mobile service and commercial radio service, personal communications service (“PCS”), specialized mobile radio (“SMR”) and other similar services, regardless of radio spectrum used], switching facilities, satellite or any other similar facilities, and irrespective of whether charges for such service are based on time, distance, or any other basis. ‘Telephone communications services’ shall not include “private mobile radio service” (as defined in Part 20.3 of Title 47 of the Code of Federal Regulations) or “private mobile service” (as defined in 47 U.S.C.A. Section 332(d)(3)) and any other service that is not interconnected to the public switched network.”
Section 2. Title 2 of the Rancho Palos Verdes Municipal Code is hereby amended by amending Section 3.30.040 of Chapter 3.30 to read as follows:
“Section 3.30.040 Telephone user tax.
A. There is imposed a tax upon the amounts paid for intrastate, interstate, including the District of Columbia, or international telephone communication services, including cellular telephone services and other telephone services that gain access to the public switched network by means of various technologies, by every person using such services in the city. The tax imposed by this section shall be at the rate of three percent of the charges made for such services and shall be paid by the person paying for such telephone services. Said tax shall apply to all such charges billed to a telephone account having a situs in the city, irrespective of whether a particular telephone service originates or terminates within the city. The situs shall be the service address, if known, otherwise the situs shall be the billing address.
B. Notwithstanding the provisions of subsection A of this section, the tax imposed under this section shall not be imposed upon any person for using the following intrastate, interstate, or international telephone communications services :
(1) Service paid for by inserting coins in coin-operated telephones available with respect to local telephone service, or with respect to toll telephone service, except that where such coin-operated telephone service is furnished for a guaranteed amount, the amounts paid under such guarantee plus any fixed monthly or other periodic charge shall be subject to the tax.
(2) Except with respect to local telephone service, services used in the collection of news for the public press, or a news ticker service furnishing a general news service similar to that of the public press, or radio broadcasting, or in the dissemination of news through the public press, or a news ticker service furnishing a general news service similar to that of the public press, or by means of radio broadcasting, if the charge for such service is billed in writing to such person.
(3) Services furnished to an international organization, or to the American National Red Cross.
(4) Any toll telephone service which originates within a combat zone and is from a member of the Armed Forces of the United States performing service in such combat zone; provided a certificate, setting forth such facts as the Secretary may by regulations prescribe, is furnished to the person receiving such payment.
(5) Any toll telephone service which entitles the subscriber, upon payment of a periodic charge (determined as a flat amount or upon the basis of total elapsed transmission time), to the privilege of an unlimited number of telephonic communications to or from all or a substantial portion of the persons having telephone or radio telephone stations in a specified area which is outside the local telephone system area in which the station provided with this service is located, that is for use by a common carrier, telephone or telegraph company, or radio broadcasting station or network in the conduct of its business as such.
(6) The installation of any instrument, wire, pole, switchboard, apparatus, or equipment as is properly attributable to such installation.
(7) Amounts paid by a nonprofit hospital for services furnished to such organization.
(8) Services or facilities furnished to the government of any State, or any political subdivision thereof, or the District of Columbia.
(9) Services or facilities paid for by a nonprofit educational organization and furnished to such organization. For purposes of this subsection, the term NONPROFIT EDUCATIONAL ORGANIZATION means an educational organization described in Section 1 70(b)(1 )(A)(ii) of the Internal Revenue Code which is exempt from income tax under Section 501(a) of the same code. The term also includes a school operated as an activity of an organization described in Section 501 (c)(3) of the Internal Revenue Code which is exempt from income tax under Section 501(a) of the same code, if such school normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on.”
Section 3. The City of Rancho Palos Verdes has lawfully imposed a telephone users’ tax on every person (including businesses) in the City since 1993. The City’s telephone user tax applies to intrastate calls, interstate calls, and international calls, and applies equally to traditional as well as wireless telephone communication services. The projected revenues from the telephone user tax for Fiscal Year 2006-2007 are anticipated to be approximately $690,000 dollars if the telephone users tax continues to be applied in a manner consistent with the original legislative intent and the City’s long-standing practices. For ease of administration and for the convenience of the telephone communication services providers, the City’s ordinance cross-referenced federal statutory definitions from the Federal Excise Tax (FET). In addition, the City historically looked to the federal interpretation of the Federal excise Tax for guidance on the scope and application of the City’s utility users’ tax on telephone communication services. Until recently, the FET and the IRS’ application thereof appeared to be consistent with the City’s legislative intent with respect to the telephone user tax. However, a recent notice from the IRS (Notice 2006-50) interpreting the FET now jeopardizes collection of the City’s telephone user tax. In the event that the City’s telephone users tax were to be applied consistent with Notice 2006-50, it is projected that the total telephone users tax revenues would decrease by $460,000 dollars for Fiscal Year 2006-07. The revenues from the telephone users tax are critical to the public peace, health and safety in that these revenues pay the costs associated with essential services, including public safety. For these reasons, it is necessary for the City to immediately adopt amendments to its utility user tax ordinance with respect to telephone communication services in order to remove all cross-references to the FET and to reaffirm that it will continue its long-standing practice of applying its tax to all telephone communication services irrespective of what technology is utilized to transmit the call and regardless of whether the charges for such telephone services are based on elapsed time, distance, or any other basis. Allowing the IRS Notice to apply to the City’s telephone user tax will risk the public health, safety and welfare of the City’s residents and the general public. It is therefore urgent that the enactment of modifications to the City’s utility user relating to telephone communication services become effective immediately to prevent adverse impacts to the public health, safety and welfare that result from unregulated peddling. Based on the foregoing, the City Council hereby finds that this ordinance is necessary for the immediate preservation of the public health, safety and welfare, hereby declares the facts constituting the urgency, and passes this ordinance by at least a four-fifths vote of the City Council. Accordingly, this measure is adopted immediately upon introduction pursuant to Government Code Section 36934 and shall take effect immediately pursuant to Government Code Section 36937(b).
Section 4. Because the provisions of the Rancho Palos Verdes Municipal Code, as amended by this ordinance, do not alter the amount of the City’s telephone user tax, do not expand the application of the tax, and are substantially the same as the previous provisions of the Code as they read immediately prior to the adoption of this ordinance, the amendments made by this ordinance shall be construed as continuations of the earlier provisions and not as new enactments.
Section 5. The City Council declares that, should any provision, section, paragraph, sentence, or word of this ordinance be rendered or declared invalid by any final action in a court of competent jurisdiction, or by reason of any preemptive legislation, the remaining provisions, sections, paragraphs, sentences and words of this ordinance shall remain in full force and effect.
Section 6. The City Clerk shall cause this Ordinance to be posted in three (3) public places in the City within fifteen (15) days after its passage, in accordance with the provisions of Section 36933 of the Government Code. The City Clerk shall further certify to the adoption and posting of this Ordinance, and shall cause this Ordinance and its certification, together with proof of posting, to be entered in the Book of Ordinances of the Council of this City.
Section 7. This Ordinance shall go into effect and be in full force and effect immediately upon adoption.
PASSED, APPROVED and ADOPTED this 15th day of August 2006.
/s/ Stefan Wolowicz
/s/ Carolynn Petru
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES )ss
CITY OF RANCHO PALOS VERDES )
I, Carolynn Petru, City Clerk of the City of Rancho Palos Verdes, do hereby certify that the whole number of members of the City Council of said City is five; that the foregoing Ordinance No. 444U was duly and regularly adopted by the City Council of said City at a regular meeting thereof held on August 15, 2006, and that the same was passed and adopted by the following roll call vote:
AYES: Clark, Gardiner, Long, Stern, and Mayor Wolowicz