Attached is some language we intend to include in our proposed revisions to the UUT ordinance to try and inoculate against a possible repeal of the Federal Excise Tax and, by extension, the ability to assess UUT on telephone communication services. Crystal C. Alexander, CCMT Deputy City Treasurer [EMAIL PROTECTED] -----Original Message----- From: Brian Moura [mailto:[EMAIL PROTECTED]] Sent: Wednesday, February 09, 2000 2:38 PM To: 'Alexander, Crystal' Subject: RE: [CSMFO Members] Governors: Slash those telecom taxes & fees ! Good thought. I'm hoping other cities with UUTs look at this and add similar language. -----Original Message----- From: Alexander, Crystal [mailto:[EMAIL PROTECTED]] Sent: Wednesday, February 09, 2000 2:37 PM To: 'Brian Moura' Subject: RE: [CSMFO Members] Governors: Slash those telecom taxes & fees ! This is definitely a concern for cities with significant UUT revenues and ours is one. We are on the cusp of going to our City Council with revisions to our UUT ordinance. In order to try and inoculate ourselves from a repeal of the FET, our proposed ordinance carries the following language with respect to telephone communication services: "In the event that a federal excise tax on "communication services" as provided in Sections 4251, 4252 and 4253 of the Internal Revenue Code is subsequently repealed, any reference in this section to such law, including any related federal regulations, private letter rulings, case law and other opinions interpreting these sections, shall refer to that body of law that existed immediately prior to the date of repeal." Crystal C. Alexander, CCMT Deputy City Treasurer [EMAIL PROTECTED] -----Original Message----- From: Brian Moura [mailto:[EMAIL PROTECTED]] Sent: Wednesday, February 09, 2000 2:22 PM To: Brian Moura Subject: [CSMFO Members] Governors: Slash those telecom taxes & fees ! In all of the talk surrounding the Internet Tax Act, most of the discussion surrounds the Sales and Use Tax (SUT). But the issue of telecom taxes (i.e. Franchise Fees, UUT) is also in play and it is almost as large a revenue to cities (22% to average California City with Franchise Fees and UUT) as is the Sales and Use Tax (30% to average California City). The problem with eliminating the 3% Federal Excise Tax on telecom (as proposed by the NGA) is that it is part of the definition of what is (and is not) telephone service for purposes of levying City Utility User Taxes (UUT) in California. So, elimination of the 3% tax will invalidate the telephone portion of many City UUT ordinances in California ! The 3% Federal Excise Tax on telecom is also a trigger contained in the California Internet Tax Act (aka AB 1614, 1998). When Internet Access charges are deemed to be subject to the Federal 3% tax, they can be taxed in California as part of the telephone UUT rates. Again, eliminating the 3% tax nukes a key part of our compromise on the California Internet Tax Act. In the area of telecom taxes, I think the NGA folks have been hanging out with the telecom lobbyists too much. In California, telephone and several other forms of telecom service (fiber, satellite, etc.) have been able to obtain a "certificate of convenience" from the State PUC under PUC Code Section 7901. This gives them a "state franchise" which means they pay ZERO franchise fees and compensation to the cities whose lines they run through. So we have a built-in, State-mandated unequal playing field problem vis-a-vis other franchised utilities and players (such as Cable, Electric, etc). Suggesting that paying ZERO is "too high" of a telecom tax seems inaccurate at best. One wishes that the NGA had run their draft study and policy paper by some of the affected cities before issuing today's press release and quotes. This one is a major problem for us. -- Brian Moura Governors: Slash those telecom taxes! States and localities must radically simplify telecommunications taxes -- or risk strangling the digital economy, the nation's governors warn. By Reuters February 8, 2000 4:46 PM PT http://www.zdnet.com/zdnn/stories/news/0,4586,2435091,00.html?chkpt=zdnn0209 00 <http://www.zdnet.com/zdnn/stories/news/0,4586,2435091,00.html?chkpt=zdnn020 900> WASHINGTON -- States and localities must radically simplify the high taxes they charge telecommunications firms or risk derailing the digital economy, the nation's governors warned on Tuesday. In the first of a set of reports to members on how to survive an economy driven by e-commerce, the National Governors' Association (NGA) urged governors to cut high taxes that it said are suffocating providers of traditional and cell phone services, Internet access, pagers, and other digital-age technology. Thousands of states, cities, counties and parishes also should prune the thicket of taxes that telecom firms' accountants must negotiate, the NGA said, as well as rewrite tax policies that favor one technology over another and pay attention to the infrastructure needed by e-firms. "It's very clear to me that the telecommunications industry is overtaxed," NGA Chairman Michael Leavitt, Utah's governor, said in a news briefing accompanying the release of the 26-page report. "It is time for states to thoroughly review their telecommunications tax policies." Back in the Ma Bell days ------------------------ Before the 1984 breakup of the old Ma Bell system and the lightening growth of technology in the late 1990s, consumers typically had only one telecommunications provider to choose from in their region. Now, however, households pick among a bounty of firms for access to the Internet and for telephones, cell phones, pagers and other devices and technologies. But while private industry has exploded with innovation, many states and localities still greet the e-millennium with prehistoric tax laws that discourage progress, Leavitt said. Not only are tax rates too high, he said, but they are "stacked" on top of each other -- federal on top of state on top of local. Excise tax for the ax? ---------------------- He signaled that a 19-member panel appointed last year to study the future of e-taxes might call for a repeal of the century-old 3 percent excise tax on telecommunications services. States and localities should follow suit by cutting and paring back their own decades-old telecommunications taxes, he said. It would have to be done carefully, Leavitt warned. For instance, tax reform bills must be chiseled so as not to push e-commerce development in savvy suburbs at the expense of rural areas, he said. And lawmakers must deal with growing conflict between state regulators and local governments clamoring to raise revenue via new taxes, franchises and rights of way, he said. How to tax 'bundled' services ----------------------------- Leavitt said one issue facing states is how to tax telecommunications services that are often "bundled" together into one bill going to customers. "In our state, we have an arrangement with AT&T Corp. where they offer packaged services -- cable TV, telephone and Internet use -- all in the same bill," Leavitt said. "The question is what portion of that should be taxed -- since telephone service would be taxed, cable might be handled a different way and Internet would not be taxed" under current rules, he said. Utah is working with a vendor to do a "best estimate" of a customer's taxes, rather than having to do a separate, time-consuming "breakout" of each service, he said.
