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e CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
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From: JAMES F. PENMAN
City Attorney
Subject: AN ORDINANCE OF THE CITY OF
SAN BERNARDINO AMENDING SECTIONS
3.44.010 AND 3.44.030 OF THE SAN
BERNARDINO MUNICIPAL CODE
CHAPTER 3.44, TELEPHONE USER'S TAX
TO CLARIFY ORIGINAL INTENT AND
REMOVE OBSOLETE REFERENCES
Dept: CITY ATTORNEY
Date: July 31, 2007
MCC: August 6, 2007
Synopsis of Previous Council Action;
Recommended for Approval at the Legislative Review Committee Mtg on July 17, 2007.
Recommended motion:
That said ordinance be laid over for final adoption.
Contact person; James F. Penman
Phone;
5255
Supporting data attached: Staff Reoort
Ward:
FUNDING REQUIREMENTS: Amount:
Source:
Finance:
Council Notes:
Agenda Item No. ~ (p
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STAFF REPORT
Council Meeting Date: AUl!Ust 6. 2007
TO:
FROM:
DATE:
AGENDA ITEM:
Mayor and Common Council
James F. Penman, City Attorney
August 6, 2007
AN ORDINANCE OF THE CITY OF SAN BERNARDINO
AMENDING SECTIONS 3.44.010 AND 3.44.030 OF THE SAN
BERNARDINO MUNICIPAL CODE CHAPTER 3.44, TELEPHONE
USER'S TAX TO CLARIFY ORIGINAL INTENT AND REMOVE
OBSOLETE REFERENCES
For many years the City has imposed a Service User's Tax ("SUT") on a variety of public
utilities, including long distance telephone service. Recent rulings by the Internal Revenue Service
("IRS") and court decisions have made the telephone provision of the City's SUT inconsistent with
the manner in which the tax is in fact collected.
Since 1979, the IRS has imposed the federal excise tax on long distance service if the charges
for the service were based on either time or distance. The existing SUT ordinance defines the type
of telephone service that pays the tax by making reference to sections of the Internal Revenue Code.
The City has relied on the IRS's interpretation of the federal excise tax for its definition of
long distance service since 1984 and has been billing based on this interpretation. On May 25, 2006,
the IRS announced that it will only impose the federal excise tax on long distance service if the
charges for the services are based on time and distance. Action must be taken to delete the obsolete
reference to the Internal Revenue Code which is no longer interpreted consistently with the City's
SUT.
Under the proposed amendment, the City would continue to collect the SUT in the same
manner as it has done for many years. This action will not in anyway increase the amount of the tax.
The ordinance would simply re-state the type of telephone service subject to the SUT without the
references to the Internal Revenue Code. In addition, the definition of telephone communication
services has been modernized to make the definitions consistent with past practice.
In sum, it is important to reiterate that the City will be collecting the same tax, at the same
rate and in the same manner as it has in the past, and currently does.
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1 ORDINANCE NO.
2 AN ORDINANCE OF THE CITY OF SAN BERNARDINO AMENDING
SECTIONS 3.44.010 AND 3.44.030 OF THE SAN BERNARDINO MUNICIPAL CODE
3 CHAPTER 3.44, TELEPHONE USER'S TAX TO CLARIFY ORIGINAL INTENT AND
REMOVE OBSOLETE REFERENCES
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5
THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO
DO ORDAIN AS FOLLOWS:
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A.
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10 B.
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12 C.
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e 14 D.
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SECTION 1. The Mayor and Common Council finds and declares:
Chapter 3.44 of the San Bernardino Municipal Code defines "telecommunications
services" by refening to definitions in the federal excise tax law administered by the
Internal Revenue Service. The common understanding of those definitions was set forth
in Revenue Ruling 79-404.
On May 25, 2006, the Internal Revenue Service (IRS) announced that it had changed its
interpretation of the definitions in the federal excise tax (F.E.T.) and specifically revoked
Notices adopted in 2005 which had reaffirmed Revenue Ruling 79-404.
The Mayor and Common Council does not wish to adopt the IRS' new understanding of
the definitions of the F.E.T. but rather wishes to continue to impose the telephone users
tax as it has been historically imposed.
The amendments are not intended to make any change in the way in which the tax is
calculated, imposed or administered. Therefore the changes made by this ordinance to the
definition of "telecommunications services" do not constitute a change in the methodology
of calculating the tax.
SECTION 2. That Section 3.44.0ID of the San Bernardino Municipal Code is hereby
17 amended to read as follows:
18 3.44.010 Definitions.
20
19 The following words and phrases whenever used in this Chapter shall be construed as
defined in this section:
A.
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"Telephone communication services" shall mean any telephonic type and quality of
communication including that which is interconnected to the public switched network,
which allows people to talk to each other without the necessity of conversing in person.
In determining whether a service constitutes a telephone communication service, all
technology used to transmit voice communications from one person to another shall be
included irrespective of whether, for example, such technology utilizes computer
processing applications on the form, code or protocol of the content of the communication
or where the origination and/or termination points of the transmission, conveyance or
routing are not fixed. Such means of transmission shall include, without limitation for the
purpose of transmitting messages or information (including but not limited to voice,
telegraph, teletypewriter, data facsimile, video, or test) by electronic, radio or similar
means whether such transmission occurs by wire, cable, fiber-optic, light wave, laser,
microwave, radio wave [including, but not limited to, cellular service, personal
communications service (PCAS), specialized mobile radio (SMR), and other types of
personal wireless service regardless of radio spectrum used], switching facilities, satellite
or any other similar facilities.
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e 1 B. "Month" means a calendar month.
2 C. "Person" shall include, but is not limited to, any domestic or foreign corporation, firm,
association, syndicate, joint stock company, partnerships of any kind, joint venture, club,
3 Massachusetts business or common law trust, society, and individuals.
4 D. "Service user" means a person required to pay a tax imposed under the provisions of this
Chapter.
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SECTION 3. Section 3.44.030 of the San Bernardino Municipal Code is hereby amended
6 to read as follows:
7 3.44.030 Telephone Users Tax.
8 A. A tax is imposed upon every person in the City using telephone communication services,
including services for intrastate, inter-state, or international calls, and using any
9 teletypewriter exchange services in the City. The tax imposed by this section shall be at
the rate of 7.83 percent (7.83%) of the charges made for such services and shall be paid
10 by the person paying for such services. Interstate calls shall be deemed to include calls
to the District of Colombia.
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B. As used in this Section, "charges" shall include (but are not limited to) monthly service
12 charges for the providing of cellular telephone communication services to a person whose
billing address is in the City. It shall not include charges for services paid for by inserting
13 coins in coin-operated telephones except that where such coin-operated telephone service
is furnished for a guaranteed amount, the amounts paid under such guarantee plus any
e 14 fixed monthly or other periodic charge shall be included in the base for computing the
amount of tax due; nor shall the words "telephone communication services" include
15 maritime mobile services as defined in Section 2.1 of Title 47 of the Code of Federal
Regulations, or as that Section may be amended from time to time.
16
C. The tax imposed in this section shall be collected from the service user by the person
17 providing the telephone communication services or the teletypewriter exchange services.
The amount of tax collected in one month shall be remitted to the Director of Finance on
18 or before the twentieth day of the following month.
19 D. In order to prevent actual multi-state taxation the person paying the tax imposed in this
Section on interstate or international telephone communications services or teletypewriter
20 exchange services,. may receive a credit therefore, upon presentation of proof to the
Director of Finance that the person has paid a tax in another State on the same telephone
21 call or service.
22 III
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24 III
25 III
26 III
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5 _dayof
6 COUNCIL MEMBERS:
7 ESTRADA
8 BAXTER
9 BRINKER
10 DERRY
11 KELLEY
12 JOHNSON
13 MC CAMMACK
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AN ORDINANCE OF THE CITY OF SAN BERNARDINO AMENDING SECTIONS
3.44.010 AND 3.44.030 OF THE SAN BERNARDINO MUNICIPAL CODE CHAPTER 3.41:
TELEPHONE USER'S TAX TO CLARIFY ORIGINAL INTENT AND REMOVJ<-
OBSOLETE REFERENCES
I HEREBY CERTIFY that the foregoing Ordinance was duly adopted by the Mayor and
4 Common Council of the City of San Bernardino at a
meeting thereof, held on the
,2007, by the following vote, to wit:
AYES
NAYS
ABSTAIN ABSENT
Rachel Clark, City Clerk
The foregoing Ordinance is hereby approved this _ day of
,2007.
PATRICK 1. MORRIS, Mayor
City of San Bernardino
Approved as to form:
JAMES F. PENMAN
City Attorney
L 7.~_. ....
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