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League of Women Voters of California Education Fund
Telephone Utility User Tax Modernization
City of Oakland
Majority Approval Required
Pass: 44694 / 79.59% Yes votes ...... 11460 / 20.41% No votes
Index of all Measures
|Results as of Jun 19 1:06pm, 100.0% of Precincts Reporting (258/258)|
|Information shown below: Summary | Fiscal Impact | Impartial Analysis | Arguments | Full Text|
Without raising current tax rates, shall Oakland's existing telephone utility user tax be modernized so that tax payers are treated equally regardless of technology used?
Approval of the measure will not change the existing 7.5% tax rate applied to telephone communication charges. The measure clarifies the types of telephone communication services, and the transmission methods used to deliver them, that are subject to the tax. These services include, but are not limited to, voice, telegraph, teletypewriter, data, facsimile, video and text. However, telephone charges for internet access and downloadable digital content such as ring tones and games are not subject to the tax.
s/COURTNEY A. RUBY, CPA
Oakland's UUT was enacted in 1968 to apply to telephone communications. The UUT used the definitions of telephone communications in the 1965 Federal Excise Tax. Oakland relied upon the Internal Revenue Service (IRS) interpretation of the Federal Excise Tax for guidance on the scope and application of the UUT. The definitions and terminology have not been changed since the UUT was enacted. Consistent with the IRS' 1979 ruling, Oakland's UUT and Federal Excise Tax have been assessed for telephone charges that are based on time and distance, as well as cellular phones and rate plans that are based only on time or bundled plans, which combine billing for various types of services.
After revolutionary changes in telephone communication technology and customer billing methods that have occurred since the 1960's, the IRS has faced challenges to its collection of the Federal Excise Tax for wireless communications services that are billed based on time only or "bundled" billing plans. On May 25, 2006, the IRS reversed its long standing interpretation and ruled that the Federal Excise Tax would no longer apply to wireless communications that are billed based on time only or to "bundled" billing plans.
The 2006 IRS ruling does not preclude collection of local taxes like Oakland's telephone UUT. However, a number of federal and state court actions have challenged local collection of telephone UUTs. In December 2007, the City Council adopted an administrative amendment to Chapter 4.28 of the Oakland Municipal Code to clarify that the City was not changing its application of the telephone UUT in response to the IRS' new interpretation of the Federal Excise Tax in 2006 and that Oakland would continue to apply its telephone UUT to telephone communications services.
As discussed above, approval of this measure will not change the tax rate that is currently enforced. Voter approval of the proposed measure will avoid potential court rulings that could preclude the City from continuing to collect the telephone UUT. The proposed measure uses modern terminology to include communications through new technologies and remain current in spite of evolving communications technology. It treats users communications services in a uniform and equitable manner, regardless of the means of transmission or technology used. The telephone UUT does not apply to charges for internet access or digital downloads, such as books, ringtones, games and similar products.
Approval of this measure requires a vote by the majority of the electorate.
|Arguments For Measure J|
Without raising the tax rate, Measure J will modernize and continue the 40-year-old Oakland Telephone Utility Users Tax so taxpayers are treated the same regardless of the technology used. The Telephone Utility Users Tax funds vital municipal services, such as police, fire, public works, parks and libraries.
The current Telephone Utility Users Tax was enacted in 1968 in a different technological and legal environment. To keep pace with communications advances and comply with changes to the Federal law, the City must modernize and ratify the existing Telephone Utility Users Tax today. The State requires voter approval of changes to any tax ordinance. Consequently, we seek voter approval of Measure J to continue and bring up to date the Oakland Telephone Utility Users Tax.
Measure J is not a new tax, and the rate will not increase. Measure J simply updates and continues the existing Telephone Utility Users Tax. It will help keep our city budget balanced and protect every neighborhood from major cutbacks in vital public services, such as police, infrastructure, maintenance, youth programs, fire, paramedic and library services.
(No arguments against Measure J were submitted)
|Full Text of Measure J|
|A proposed ordinance amending Chapter 4.28 of the Oakland Municipal Code in order to modernize the provisions of the Telephone Utility Users Tax without increasing the tax rate.
WHEREAS, the City of Oakland has imposed a telephone utility users tax on all persons in the City using telephone communications services since 1968; and
WHEREAS, municipal ordinances similar to Oakland's telephone utility users tax have been the subject of court challenges due to outdated definitions or references to outdated federal laws; and
WHEREAS, the City requires reasonable certainty in the collection and receipt of General Fund taxes and the City Council has determined that the steps it takes now are necessary to eliminate potential legal issues and to ensure continued collection of tax revenue that is essential for the City to continue to provide vital public services; and
WHEREAS, the Council determines that it is in the best interest of the City of Oakland to submit a telephone utility users tax to the voters that will use modern terminology that will remain current regardless of changes in technology; and
WHEREAS, accordingly, the City Council of the City of Oakland desires to amend Section 4.28.030 the Oakland Municipal Code in order to remove outdated language and to modernize the telephone utility users tax without increasing in the current tax rate; and
WHEREAS, the City desires to treat users of communications services in a uniform and equitable manner, regardless of the means of transmission or technology used, so that users of communications services transmitted by traditional technologies bear an equitable tax burden when compared with users of communications services transmitted via newly developed technologies; and
WHEREAS, the proposed definitions are technologyneutral and reflect the modern use of communications so that all telephone communications users will be treated equally; and
WHEREAS, all revenues received from the tax will be deposited in the general fund of the City to be expended for general fund purposes; now, therefore, be it
RESOLVED: That the City Council of the City of Oakland does hereby submit to the voters at the June 3, 2008 special election the text of the proposed ordinance, which shall be as follows:
AN ORDINANCE AMENDING THE OAKLAND MUNICIPAL CODE IN ORDER TO MODERNIZE THE TELEPHONE UTILITY USERS TAX SO THAT ALL TELEPHONE COMMUNICATIONS SERVICE USERS ARE TREATED EQUALLY REGARDLESS OF THE TECHNOLOGY USED AND WITHOUT INCREASING THE TAX RATE.
Be it ordained by the People of the City of Oakland:
Section 1. The Municipal Code is hereby amended to add, delete, or modify sections as set forth below (section numbers and titles are indicated in bold type; additions are indicated by underscoring and deletions are indicated by
Section 2. Code Amendment. Section 4.28.020 of the Oakland Municipal Code is hereby amended to read as follows:
Section 3. Code Amendment. Section 4.28.030 of the Oakland Municipal Code is hereby amended to read as follows:
4.28.030 Telephone users tax imposed.
A. There is imposed a tax upon every person, other than a telephone corporation, using telephone communication services including, but not limited to, cellular telephones and facsimile transmissions, whose place of primary use is within the city of Oakland. The tax imposed by this section shall be at the rate of seven and one-half (7.50) percent of all charges made for such services and shall be paid by the person using such services, and collected by the provider of such services.
Section 4. Severability. Should any provision of this Ordinance, or its application to any person or circumstance, be determined by a court of competent jurisdiction to be unlawful, unenforceable or otherwise void, that determination shall have no effect on any other provision of this Ordinance or the application of this Ordinance to any other person or circumstance and, to that end, the provisions hereof are severable.
Section 5. Majority Approval; Effective Date. This Ordinance shall be effective only if approved by a majority of the voters voting thereon and shall go into effect ten (10) days after the vote is declared by the City Council.
Section 6. Council Amendments. The City Council of the City of Oakland is hereby authorized to amend Sections 4.28.020, 4.28.030 and 4.28.190 of the Oakland Municipal Code as adopted by this Ordinance in any manner that does not increase the rate of the telephone users tax, otherwise constitute a tax increase for which voter approval is required by Article XIII C of the California Constitution or entirely dispense with the requirement for independent audits stated in Section 4.28.190.