CC Resolution No. 09-130 UUT Measure amendmentRESOLUTION N0.09-130
A RESOLUTION OF THE CUPERTINO CITY COUNCIL AMENDING THE BALLOT
MEASURE TITLE, DESCRIPTION, AND ORDINANCE TO BE SUBMITTED TO A
VOTE OF THE PEOPLE REGARDING THE TELEPHONE USERS TAX
(TITLE 3 OF THE CUPERTINO MUNICIPAL CODE)
WHEREAS, on July 21, 2009, the Cupertino City Council unanimously adopted Resolution No.
09-120 which added a ballot measure to the November 3, 2009 general municipal election; and
WHEREAS, the City Council wishes to amend the ballot measure title, description, and
ordinance wording to be submitted to the voters.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Cupertino
as follows:
The ballot measure title and description shall be printed in substantially the
following form:
"Cupertino Vital Services Utility Users Tax Upd;~te Measure.
Without increasing the tax rate, shall an ordinancE; be adopted to
update Cupertino's existing telephone utility user; tax, to fund YES
general city services, including neighborhood police patrols, library
services, city streets, parks and open spaces, senior programs, and
school crossing guards, while maintaining senior citizens' tax
exemptions, retaining local control of revenues, requiring annual NO
audits and public expenditure reviews, by amending language for
consistency with current practice?"
2. The text of the ordinance is attached hereto as Exhibit A, and incorporated herein
by this reference.
PASSED AND ADOPTED at a regular meeting of the City Council of the City of
Cupertino this 4~' day of August 2009, by the following vote:
Vote
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
Council Members
Mahoney, Wang, Sa~idoval, Santoro, Wong
None
None
None
~ .._.
City Clerk
APPROVED:
i
~~
yor, City of Cupertino
EXHIBIT A
ORDINANCE NO.
AN ORDINANCE OF THE CITY OF CUPERTINO ADDING CHAPTER
3.35 TO THE CUPERTINO MUNICIPAL CODE WITH RESPECT TO A
TELECOMMUNICA'CION USERS' TAX
WHEREAS, since 1990 the residents of Cupertino have paid a Utility User Tax (UUT) on
telecommunications services. Like many other California cities, Cupertino uses this funding to
provide essential public services; and, without thi<.; revenue, the City would be forced to cut
funding that supports:
• Neighborhood police patrols
• Library services
• School crossing guards
• City streets
• Open space and parks improvement pr~~jects; and
WHEREAS, communication advances over the past two decades mean that the City must update
its UUT law to match today's technology, including definitions for new communications
technologies; and
WHEREAS, the changes are technical and do not change the rate, or exemptions, and most
residents will see no difference; and,
WHEREAS, the measure would clarify what can and cannot be taxed, close unintended
loopholes, and continue the exemption for seniors; and
WHEREAS, the existing, outdated UUT language is updated to be consistent with current
practice; and,
WHEREAS, the measure will safeguard local revenues already being received for local needs,
and this money cannot be taken away by the State; and,
WHEREAS, many residents live in Cupertino be~;ause it offers a higher level of service,
programs and quality of life than neighboring cities; and,
WHEREAS, the UUT is an important revenue source and preserving that revenue will ensure
that the City can maintain the high quality of public safety, support the community's excellent
schools, maintain parks and open space, and provide the senior programs that residents expect
and deserve.
NOW, THEREFORE, the People of the City of Cupertino do ordain as follows:
SECTION 1: Title 3 of the Cupertino Municipal Code is hereby amended by adding a
new Chapter 3.35, which shall read as follows:
CHAPTER 3.35
TELECOMMUNICA7~ION USERS' TAX
3.35.010 Short Title.
3.35.020 Adoption.
3.35.030 Definitions.
3.35.040 Constitutional, Statutory, and Other Exern t~ ions.
3.35.050 Telecommunication Users' Tax.
3.35.060 Bundling Taxable Items with Non-taxable Items
3.35.070 Substantial Nexus /Minimum Contacts.
3.35.080 Duty to collect -Procedures.
3.35.090 Collection Penalties -Service Suppliers.
3.35.100 Actions to Collect.
3.35.110 Deficiency Determination and Assessment -Tax Application Errors.
3.35.120 Administrative Remedy -Non-Paving Service Users.
3.35.130 Additional Powers and Duties of the Ta~c Administrator.
3.35.140 Records.
3.35.150 Refunds.
3.35.160 Appeals.
3.35.170 No In~unction/Writ of Mandate.
3.35.180 Notice of Changes to Ordinance.
3.35.190 Effect of State and Federal Reference/Authorization.
3.35.200 Independent Audit of Tax Collection, Exemption, Remittance, and Expenditure.
3.35.210 Interaction with Prior Tax.
3.35.220 Remedies Cumulative
3.35.230 Duration.
3.35.010 Short Title.
This Chapter shall be known as the "Telecommunication Users' Tax Ordinance" of the City.
3.35.020 Adoption.
This Chapter is adopted pursuant to the powers of the City of Cupertino as authorized by
California Government Code Section 37100.5.
3.35.030 Definitions.
The following words and phrases whenever used in this chapter shall be construed as defined in
this Section.
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:
(1) "Conference bridging service" means an ancillary service that links two 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 Cupertino.
D. "City Manager" shall mean the City Manager or his or her designee.
E. "Telecommunication Services" means "telecommunication services" and "ancillary
telecommunication services."
F. "Mobile Telecommunications Service" has the same meaning and usage 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. "Paging Service" means a "telecommunications service" that provides transmission of
coded radio signals for the purpose of activating s~~ecific pagers; such transmissions may include
messages and/or sounds.
I. "Person" shall mean, without limitation, any n;~tural 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), municipal
district or municipal corporation (other than the City) cooperative, receiver, trustee, guardian, or
other representative appointed by order of any court.
J. "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.
K. "Post paid telecommunication service" means the telecommunication service obtained by
making a payment on acommunication-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 Dissociated with the origination or termination
of the telecommunication service.
L. "Prepaid telecommunication service" means the right to access telecommunication services,
which must be paid for in advance and which enat~les the origination of communications using
an access number or authorization code, whether manually or electronically dialed, and that is
sold in predetermined units or dollars of which the; number declines with use in a known amount.
M. "Private telecommunication service" means a telecommunication service that entitles the
customer to exclusive or priority use of a communications channel or group of channels between
or among termination points, regardless of the ma~lner in which such channel or channels are
connected, and includes switching capacity, exten~~ion lines, stations, and any other associated
services that are provided in connection with the u.se of such channel or channels. A
communications channel is a physical or virtual pith 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 communicat:ions).
N. "Service Address" means either:
(1) The location of the service user's telecommunication equipment from which the
communication originates or terminates, regardless of where the communication is billed or paid;
or,
(2) If the location in subsection (1) of this definition is unknown (e.g., mobile
telecommunications service or VoIP service), the .service address means the location of the
service user's place of primary use.
(3) For prepaid telecommunication servicf;, "service address" means the location
associated with the service number.
O. "Service Supplier" shall mean any entity or pe-rson, including the City, that provides
communication service to a user of such service within the City.
P. "Service User" shall mean a person required to pay a tax imposed under the provisions of this
Chapter.
Q. "State" shall mean the State of California.
R. "Streamlined Sales and Use Tax Agreement" shall mean the multistate agreement
commonly known and referred to as the Streamlined Sales and Use Tax Agreement as it is
amended from time to time.
S. "Tax Administrator" means the City Treasurer of the City or his or her designee.
T. "Telecommunications services" 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 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 th:~t 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; mobile telecommunications service; prepaid
telecommunication service; post-paid telecommunication service; paging service; 800 service (or
any other toll-free numbers designated by the Federal Communications Commission); and 900
service (or any other similar numbers designated ley the Federal Communications Commission
for services whereby subscribers who call in to pr~~-recorded or live service).
U. "VoIP (Voice Over Internet Protocol)" means the digital process of making and receiving
real-time voice transmissions over any Internet Protocol network.
V. "800 Service" means a "telecommunications :service" that allows a caller to dial atoll-free
number without incurring a charge for the call. Th.e service is typically marketed under the name
"800", "855", "866", "877", and "888" toll-free c~~lling, and includes any subsequent numbers
designated by the Federal Communications Commission for such services.
W. "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
under the name "900" service, and includes any s~zbsequent numbers designated by the Federal
Communications Commission.
3.35.040 Constitutional, statutory, and other ea:emptions.
A. Nothing in this Chapter shall be construed as imposing a tax upon any person or service
when the imposition of such tax upon such persor.~ or service would be in violation of a federal or
state statute, the Constitution of the United States or the Constitution of the State. Residential
service users of sixty-five years or older shall be exempt from tax payments under this Chapter.
B. Any service user who is exempt from the tax imposed by this Chapter pursuant to
subsection A. of this Section shall file an application with the Tax Administrator for an
exemption; provided, however, this requirement shall not apply to a service user that is a state or
federal agency or subdivision with a commonly recognized name for such service. Said
application shall be made upon a form approved by the Tax Administrator and shall state those
facts, declared under penalty of perjury, which qu~~lify the applicant for an exemption, and shall
include the names of all utility service suppliers serving that service user. If deemed exempt by
the Tax Administrator, such service user shall give; the Tax Administrator timely written notice
of any change in utility service suppliers so that the Tax Administrator can properly notify the
new utility service supplier of the service user's tax exempt status. A service user who fails to
comply with this Section shall not be entitled to a refund of utility users' taxes collected and
remitted to the Tax Administrator from such servi~~e user as a result of such noncompliance.
The decision of the Tax Administrator may be appealed pursuant to Section 3.35.160 of this
Chapter. Filing an application with the Tax Administrator and appeal to the City Manager
pursuant to Section 3.35.160 of this Chapter is a prerequisite to a suit thereon.
C. The City Council may, by resolution, establish one or more classes of persons or one or
more classes of utility service otherwise subject to payment of a tax imposed by this chapter and
provide that such classes of persons or service shall be exempt, in whole or in part from such tax
for a specified period of time.
D. The Tax Administrator shall prepare a list of the persons exempt from the provisions of this
Chapter by virtue of this Section and furnish a copy thereof to each service supplier.
3.35.050 Telecommunication Users' Tax.
A. There is hereby imposed a tax upon every per;~on in the City using telecommunication
services. The maximum tax imposed by this Section shall be at the rate of two and forty
hundredths percent (2.40%) of the charges made fir 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 C;ity's boundaries, and such services are subject
to taxation under this Chapter. 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 1^~e 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 Chapter, sourcing rules for the taxation of other
telecommunication services, including but not limited to post-paid communication services and
prepaid 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 Chapter, an administrative ruling
identifying those telecommunication services, or c:harges therefore, that are subject to or not
subject to the tax of subsection A. above.
D. As used in this Section, the term "telecommwlication services" shall include, but are 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, administrative and other cost recovery charges;
local number portability charges; and text and insl:ant messaging. "Telecommunication services"
shall not include: i) digital downloads that are not "ancillary telecommunication services" such
as books, music, ringtones, games, and similar digital products; and ii) private
telecommunication service.
E. 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 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.
F. 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 (1) month shall be
remitted to the Tax Administrator on or before the last day of the following month or, at the
option of the service supplier, an estimated amount of tax collected, measured by the tax bill in
the previous month, shall be remitted to the Tax .Administrator on or before the last day of each
month.
3.35.060 Bundling Taxable Items with Non-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 reaso~iable 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. The service supplier has
the burden of proving the proper apportionment o f taxable and non-taxable charges. If the
service supplier offers a combination of taxable acid 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 k~:pt 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 f~roving the proper valuation of the taxable and
non-taxable services.
3.35.070 Substantial Nexus /Minimum Contacts.
For purposes of imposing a tax or establishing a duty to collect and remit a tax under this
Chapter, "substantial nexus" and "minimum convicts" shall be construed broadly in favor of the
imposition, collection and/or remittance of the telecommunications 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 Chaptc;r. A service supplier shall be deemed to have
sufficient activity in the City for tax collection anti remittance purposes if its activities include,
but are not limited to, any of the following: mainl:ains or has within the City, directly or through
an agent 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 communication services that are subject to the tax under this Chapter.
3.35.080 Duty to Collect -Procedures.
A. Collection by Service Suppliers. The duty of :service suppliers to collect and remit the taxes
imposed by the provisions of this Chapter shall be performed as follows:
(1) The tax shall be collected by service si.~ppliers insofar as practicable at the same time
as, and along with, the collection of the ch,~rges made in accordance with the regular
billing practice of the service supplier. Where the amount paid by a service user to a
service supplier is less than the full amount of the charge and tax which was accrued for
the billing period, a proportionate share of both the charge and the tax shall be deemed to
have been paid. In those cases where a serrice user has notified the service supplier of
refusal to pay the tax imposed on said charges, Section 3.35.120 shall apply.
(2) The duty of a service supplier to collect the tax from a service user shall commence
with the beginning of the first regular billing period applicable to the service user where
all charges normally included in such regular billing are subject to the provisions of this
Chapter. Where a service user receives more than one billing, one or more being for
different periods than another, the duty to collect shall arise separately for each billing
period.
B. Filing Return and Payment. Each person required by this Chapter to remit a tax shall
file a return to the Tax Administrator, on forms approved by the Tax Administrator, on or
before the due date. The full amount of the tax collected shall be included with the return
and filed with the Tax Administrator. The 'Tax Administrator is authorized to require such
additional information as he or she deems ~lecessary to determine if the tax is being
levied, collected, and remitted in accordan~:e with this Chapter. Returns are due
immediately upon cessation of business for any reason. Pursuant to Revenue and Tax
Code Section 7284.6, the Tax Administrator, and its agents, shall maintain such filing
returns as confidential information that is exempt from the disclosure provisions of the
Public Records Act.
3.35.090 Collection Penalties -Service Suppliers.
A. Taxes collected from a service user are delinquent if not received by the Tax Administrator
on or before the due date. Should the due date occur on a weekend or legal holiday, the return
must be postmarked on the first regular working day following the weekend or legal holiday. A
direct deposit, including electronic fund transfers rind other similar methods of electronically
exchanging monies between financial accounts, made by a service supplier in satisfaction of its
obligations under this subsection shall be considered timely if the transfer is initiated on or
before the due date, and the transfer settles into thy: City's account on the following business day.
B. If the person required to collect and/or remit t11e telecommunication users' tax fails to collect
the tax (by failing to properly assess the tax on onc; or more services or charges on the customer's
billing) or fails to remit the tax collected on or before the due date, the Tax Administrator shall
attach a penalty for such delinquencies or deficiencies at the rate of fifteen (15%) percent of the
total tax that is delinquent or deficient in the remittance, and shall pay interest at the rate of one
(1%) percent per month, or any fraction thereof, o;n the amount of the tax, exclusive of penalties,
from the date on which the remittance first becamE: delinquent, until paid.
C. The Tax Administrator shall have the power to impose additional penalties upon persons
required to collect and remit taxes pursuant to the provisions of this Chapter for fraud or gross
negligence in reporting or remitting at the rate of fifteen (15%) percent of the amount of the tax
collected and/or required to be remitted, or as recomputed by the Tax Administrator.
D. For collection purposes only, every penalty imposed and such interest that is accrued under
the provisions of this Section shall become a part of the tax herein required to be paid.
3.35.100 Actions to Collect.
Any tax required to be paid by a service user under the provisions of this Chapter shall be
deemed a debt owed by the service user to the Cite. Any such tax collected from a service user
which has not been remitted to the Tax Administr~itor shall be deemed a debt owed to the City by
the person required to collect and remit and shall r-o longer be a debt of the service user. Any
person owing money to the City under the provisions of this Chapter shall be liable to an action
brought in the name of the City for the recovery o:F such amount, including penalties and interest
as provided for in this Chapter, along with any collection costs incurred by the City as a result of
the person's noncompliance with this Chapter, including, but not limited to, reasonable attorneys
fees. Any tax required to be collected by a service supplier or owed by a service user is an
unsecured priority excise tax obligation under 11 U. S.C.A. Section 507(a)(8)(C).
3.35.110 Deficiency Determination and Assessment -Tax Application Errors.
A. The Tax Administrator shall make a deficiency determination if he or she determines that
any person required to pay or collect taxes pursua~~t to the provisions of this Chapter has failed to
pay, collect, and/or remit the proper amount of tai: by improperly or failing to apply the tax to
one or more taxable services or charges. Nothing ]ierein shall require that the Tax Administrator
institute proceedings under this Section 3.35.110 if, in the opinion of the Tax Administrator, the
cost of collection or enforcement likely outweigh, the tax benefit.
B. The Tax Administrator shall mail a notice of ~;uch deficiency determination to the person
required to pay or remit the tax, which notice shall refer briefly to the amount of the taxes owed,
plus interest at the rate of one (1 %) percent per month, or any fraction thereof, on the amount of
the tax from the date on which the tax should havf; been received by the City. Within fourteen
(14) calendar days after the date of service of such notice, the person may request in writing to
the Tax Administrator for a hearing on the matter.
C. If the person fails to request a hearing within ~:he prescribed time period; the amount of the
deficiency determination shall become a final assessment, and shall immediately be due and
owing to the City. If the person requests a hearing, the Tax Administrator shall cause the matter
to be set for hearing, which shall be scheduled within thirty (30) days after receipt of the written
request for hearing. Notice of the time and place ~~f the hearing shall be mailed by the Tax
Administrator to such person at least ten (10) calendar days prior to the hearing, and, if the Tax
Administrator desires said person to produce specific records at such hearing, such notice may
designate the records requested to be produced.
D. At the time fixed for the hearing, the Tax Administrator shall hear all relevant testimony and
evidence, including that of any other interested parties. At the discretion of the Tax
Administrator, the hearing may be continued fron ~ time to time for the purpose of allowing the
presentation of additional evidence. Within a rea~~onable time following the conclusion of the
hearing, the Tax Administrator shall issue a final ~issessment (or non-assessment), thereafter, by
confirming, modifying or rejecting the original deficiency determination, and shall mail a copy
of such final assessment to person owing the tax. The decision of the Tax Administrator may be
appealed pursuant to Section 3.35.160 of this Chapter. Filing an application with the Tax
Administrator and appeal to the City Manager pursuant to Section 3.35.160 of this Chapter are
prerequisites to a suit thereon.
E. Payment of the final assessment shall become delinquent if not received by the Tax
Administrator on or before the thirtieth (30th) day following the date of receipt of the notice of
final assessment. The penalty for delinquency shill be fifteen percent (15%) on the total amount
of the assessment, along with interest at the rate o:f one (1 %) percent per month, or any fraction
thereof, on the amount of the tax, exclusive of penalties, from the date of delinquency, until paid.
The applicable statute of limitations regarding a claim by the City seeking payment of a tax
assessed under this Chapter shall commence from the date of delinquency as provided in this
subsection E.
F. All notices under this Section may be sent by :regular mail, postage prepaid, and shall be
deemed received on the third calendar day following the date of mailing, as established by a
proof of mailing.
3.35.120 Administrative Remedy -Non-Paying Service Users.
A. Whenever the Tax Administrator determines :hat a service user has deliberately withheld the
amount of the tax owed by the service user from tl~e amounts remitted to a person required to
collect the tax, or whenever the Tax Administrato~° deems it in the best interest of the City, he or
she may relieve such person of the obligation to c~~llect the taxes due under this Chapter from
certain named service users for specific billing periods. To the extent the service user has failed
to pay the amount of tax owed for a period of two (2) or more billing periods, the service
supplier shall be relieved of the obligation to collect taxes due. The service supplier shall provide
the City with the names and addresses of such service users and the amounts of taxes owed under
the provisions of this Chapter. Nothing herein shall require that the Tax Administrator institute
proceedings under this Section 3.35.120 if, in the ~~pinion of the Tax Administrator, the cost of
collection or enforcement likely outweighs the tax. benefit.
B. In addition to the tax owed, the service user shall pay a delinquency penalty at the rate of
fifteen percent (15%) of the total tax that is owed, and shall pay interest at the rate of one (1%)
percent per month, or any fraction thereof, on the amount of the tax, exclusive of penalties, from
the due date, until paid.
C. The Tax Administrator shall notify the non-paying service user that the Tax Administrator
has assumed the responsibility to collect the taxes due for the stated periods and demand
payment of such taxes, including penalties and interest. The notice shall be served on the service
user by personal delivery or by deposit of the noti~:e in the United States mail, postage prepaid,
addressed to the service user at the address to whip;h billing was made by the person required to
collect the tax; or, should the service user have a change of address, to his or her last known
address.
D. If the service user fails to remit the tax to the "tax Administrator within thirty (30) days from
the date of the service of the notice upon him or h~:r, the Tax Administrator may impose an
additional penalty of fifteen percent (15%) of the ~imount of the total tax that is owed.
3.35.130 Additional Powers and Duties of the Tax Administrator.
A. The Tax Administrator shall have the power and duty, and is hereby directed, to enforce
each and all of the provisions of this Chapter.
B. The Tax Administrator may adopt administrative rules and regulations consistent with
provisions of this Chapter for the purpose of interpreting, clarifying, carrying out and enforcing
the payment, collection and remittance of the taxers herein imposed. The administrative ruling
shall not impose a new tax, revise an existing tax Tnethodology as stated in this Section, or
increase an existing tax, except as allowed by California Government Code Section 53750(h) or
other applicable law. A copy of such administrative rules and regulations shall be on file in the
Tax Administrator's office. To the extent that the "['ax Administrator determines that the tax
imposed under this Chapter shall not be collected :in full for any period of time from any
particular service supplier or service user, that determination shall be considered an exercise of
the Tax Administrator's discretion to settle disputes and shall not constitute a change in taxing
methodology for purposes of Government Code Section 53750(h) or otherwise. The Tax
Administrator is not authorized to amend the City's methodology for purposes of Government
Code Section 53750(h) and the City does not waive or abrogate its ability to impose the
telecommunications users' tax in full as a result o:F promulgating administrative rulings or
entering into agreements.
C. Upon a proper showing of good cause, the Tax Administrator may make administrative
agreements, with appropriate conditions, to vary from the strict requirements of this Chapter and
thereby: (1) conform to the billing procedures of ~- particular service supplier so long as said
agreements result in the collection of the tax in conformance with the general purpose and scope
of this Chapter; or, (2) to avoid a hardship where 1:he administrative costs of collection and
remittance greatly outweigh the tax benefit. A copy of each such agreement shall be on file in
the Tax Administrator's office, and are voidable by the Tax Administrator or the City at any
time.
D. The Tax Administrator may conduct an audit, to ensure proper compliance with the
requirements of this Chapter, of any person required to collect and/or remit a tax pursuant to this
Chapter. The Tax Administrator shall notify said person of the initiation of an audit in writing.
In the absence of fraud or other intentional misconduct, the audit period of review shall not
exceed a period of three (3) years preceding the d~ite of receipt of the written notice by said
person from the Tax Administrator. Upon completion of the audit, the Tax Administrator may
make a deficiency determination pursuant to Section 3.35.110 of this Chapter for all taxes (and
applicable penalties and interest) owed and not paid, as evidenced by information provided by
such person to the Tax Administrator. If said per~;on is unable or unwilling to provide sufficient
records to enable the Tax Administrator to verify ~~ompliance with this Chapter, the Tax
Administrator is authorized to make a reasonable estimate of the deficiency. Said reasonable
estimate shall be presumed correct unless and until rebutted by competent evidence.
E. Upon receipt of a written request of a taxpayer, and for good cause, the Tax Administrator
may extend the time for filing any statement required pursuant to this Chapter for a period of not
to exceed forty-five (45) days, provided that the time for filing the required statement has not
already passed when the request is received. No I-enalty for delinquent payment shall accrue by
reason of such extension. Interest shall accrue du-°ing said extension at the rate of one (1 %)
percent per month, or any fraction thereof.
F. The Tax Administrator shall determine the eligibility of any person who asserts a right to
exemption from, or a refund of, the tax imposed by this Chapter.
G. Notwithstanding any provision in this Chapter to the contrary, the Tax Administrator may
waive any penalty or interest imposed upon a person required to collect and/or remit for failure
to collect the tax imposed by this Chapter if the non-collection occurred in good faith. In
determining whether the non-collection was in go~~d faith, the Tax Administrator shall take into
consideration industry practice or other precedent;.
3.35.140 Records.
A. It shall be the duty of every person required to collect and/or remit to the City any tax
imposed by this Chapter to keep and preserve, for a period of at least three (3) years, all records
as may be necessary to determine the amount of sL~ch tax as he or she may have been liable for
the collection of and remittance to the Tax Administrator, which records the Tax Administrator
shall have the right to inspect at any reasonable time.
B. The City may issue an administrative subpoena to compel a person to deliver, to the Tax
Administrator, copies of all records deemed neces:;ary by the Tax Administrator to establish
compliance with this Chapter, including the delivery of records in a common electronic format
on readily available media if such records are kept electronically by the person in the usual and
ordinary course of business. As an alternative to delivering the subpoenaed records to the Tax
Administrator on or before the due date provided in the administrative subpoena, such person
may provide access to such records outside the City on or before the due date, provided that such
person shall reimburse the City for all reasonable travel expenses incurred by the City to inspect
those records, including travel, lodging, meals, anti other similar expenses, but excluding the
normal salary or hourly wages of those persons designated by the City to conduct the inspection.
C. The Tax Administrator is authorized to execute anon-disclosure agreement approved by the
City Attorney to protect the confidentiality of cust~~mer information pursuant to California
Revenue and Tax Code Sections 7284.6 and 7284.7.
D. If a service supplier uses a billing agent or billing aggregator to bill, collect, and/or remit the
tax, the service supplier shall: i) provide to the Tai: Administrator the name, address and
telephone number of each billing agent and billing aggregator currently authorized by the service
supplier to bill, collect, and/or remit the tax to the City; and, ii) upon request of the Tax
Administrator, deliver, or effect the delivery of, any information or records in the possession of
such billing agent or billing aggregator that, in the opinion of the Tax Administrator, is or are
necessary to verify the proper application, calculation, collection and/or remittance of such tax to
the City.
E. Any person subject to record-keeping obligati~~ns under this Section unreasonably denies the
Tax Administrator access to such records, or fails to produce the information requested in an
administrative subpoena within the time specified shall be guilty of a violation of this Code
punishable under Section 1.12.010 of this Code or in any other manner permitted by law. Such
penalty shall be in addition to any other penalties provided by this Chapter.
3.35.150 Refunds.
Whenever the amount of any tax has been overpaid or paid more than once or has been
erroneously or illegally collected or received by the Tax Administrator under this Chapter from a
person or service supplier, it may be refunded as provided in this Section as follows:
A. The Tax Administrator may refund any tax th;~t has been overpaid or paid more than once or
has been erroneously or illegally collected or received by the Tax Administrator under this
Chapter from a person or service supplier, provided that no refund shall be paid under the
provisions of this Section unless the claimant or hi.s or her guardian, conservator, executor, or
administrator has submitted a written claim to the Tax Administrator within one year of the
overpayment or erroneous or illegal collection of ;paid tax. Such claim must clearly establish
claimant's right to the refund by written records showing entitlement thereto. Nothing herein
shall permit the filing of a claim on behalf of a class or group of taxpayers unless each member
of the class has submitted a written claim under penalty of perjury as provided by this
subsection. '
B. The filing of a written claim pursuant to Government Code Section 935 is a prerequisite to
any suit thereon. Any action brought against the (~ity pursuant to this Section shall be subject to
the provisions of Government Code Sections 945..5 and 946. The Tax Administrator, or the City
Council where the claim is in excess of five thous;~nd dollars ($5,000), shall act upon the refund
claim within the time period set forth in Government Code Section 912.4. If the Tax
Administrator/City Council fails or refuses to act ~~n a refund claim within the time prescribed by
Government Section 912.4, the claim shall be deemed to have been rejected by the City on the
last day of the period within which the City was resquired to act upon the claim as provided in
Government Code Section 912.4. The Tax Administrator shall give notice of the action in a form
which substantially complies with that set forth in Government Code Section 913.
C. Notwithstanding the notice provisions of subsection A. of this Section, the Tax Administrator
may, at his or her discretion, give written permission to a service supplier, who has collected and
remitted any amount of tax in excess of the amount of tax imposed by this Chapter, to claim
credit for such overpayment against the amount of'tax which is due the City upon a subsequent
monthly return(s) to the Tax Administrator, provided that: i) such credit is claimed in a return
dated no later than one year from the date of overpayment or erroneous collection of said tax; ii)
the Tax Administrator is satisfied that the underlying basis and amount of such credit has been
reasonably established; and, iii) in the case of an overpayment by a service user to the service
supplier that has been remitted to the City, the Tai: Administrator has received proof, to his or
her satisfaction, that the overpayment has been refunded by the service supplier to the service
user in an amount equal to the requested credit.
D. Notwithstanding subsections A, B, and C above:, a service supplier shall be entitled to take
any overpayment as a credit against an underpayment whenever such overpayment has been
received by the City within the three (3) years preceding a deficiency determination or
assessment by the Tax Administrator in connectio~i with an audit instituted by the Tax
Administrator pursuant to Section 3.35.130 D. A .service supplier shall not be entitled to said
credit unless it first clearly establishes, to the satis faction of the Tax Administrator, the right to
the credit by written records showing entitlement thereto. Under no circumstances shall an
overpayment taken as a credit against an underpayment pursuant to this subsection qualify a
service supplier for a refund to which it would not otherwise be entitled under the one-year
written claim requirement of this Section.
3.35.160 Appeals.
A. The provisions of this Section apply to any decision (other than a decision relating to a
refund pursuant to Section 3.35.150 of this Chapter), deficiency determination, assessment, or
administrative ruling of the Tax Administrator (other than the adoption of rules and regulations
for the implementation of this Chapter to be implemented prospectively). Any person aggrieved
by any such decision may appeal to the City Manager by filing a notice of appeal with the City
Clerk within fourteen (14) days of the date of the decision, deficiency determination, assessment,
or administrative ruling of the Tax Administrator :from which appeal is taken. Compliance with
this Section shall be a prerequisite to a suit thereo~l. Nothing herein shall permit the filing of a
claim or action on behalf of a class or group of ta~:payers.
B. The matter shall be scheduled for hearing before an independent hearing officer selected by
the City Manager no more than thirty (30) days fr~~m the receipt of the appeal. The appellant
shall be served with notice of the time and place of the hearing, as well as any relevant materials,
at least five (5) calendar days prior to the hearing. The hearing may be continued from time to
time upon mutual consent. At the time of the hearing, the appealing party, the Tax
Administrator, and any other interested person may present such relevant evidence as he or she
may have relating to the determination from which the appeal is taken.
C. Based upon the submission of such evidence rind the review of the City's files, the hearing
officer shall issue a written notice and order upholding, modifying or reversing the determination
from which the appeal is taken. The notice shall )•~e given within fourteen (14) days after the
conclusion of the hearing and shall state the reaso~is for the decision. The notice shall specify
that the decision is final and that any petition for judicial review shall be filed in accordance with
Code of Civil Procedure Section 1094.6.
D. All notices under this Section may be sent by U.S. mail, postage prepaid, and shall be
deemed received on the third calendar day following the date of mailing, as established by a
proof of mailing.
3.35.170 No Injunction/Writ of Mandate.
No injunction or writ of mandate or other legal or equitable process shall issue in any suit,
action, or proceeding in any court against this Cit}~ or against any officer of the City to prevent or
enjoin the collection under this Chapter of any tax or any amount of tax required to be collected
and/or remitted.
3.35.180 Notice of Changes to Ordinance.
If a tax under this Chapter is added repealed, increased, reduced, or the tax base is changed, the
Tax Administrator shall follow the notice requirements of California Public Utilities Code
Section 799.
3.35.190 Effect of State and Federal Reference/.Authorization
Unless specifically provided otherwise, any reference to a state or federal statute in this Chapter
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 feder;~l 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 (e.g., as a result of excluding all or a part of a communication service, or charge
therefore, from taxation). Only to the extent voter approval would otherwise be required or a tax
decrease would result, the prior version of the stati.~te (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 Chapter is expanded or limited as a result of changes in state or federal law, no
amendment or modification of this Chapter shall be required to conform the tax to those changes,
and the tax shall be imposed and collected to the fi.tll extent of the authorization up to the full
amount of the tax imposed under this Chapter.
3.35.200 Independent Audit of Tax Collection, l~xemption, Remittance, and Expenditure.
The City shall annually verify that the taxes owed under this Chapter have been properly applied,
exempted, collected, and remitted in accordance with this Chapter, and properly expended
according to applicable municipal law. The annual. verification shall be performed by a qualified
independent third party and the review shall employ reasonable, cost-effective steps to assure
compliance, including the use of sampling audits. The verification shall not be required of tax
remitters where the cost of the verification may exceed the tax revenues to be reviewed.
3.35.210 Interaction with Prior Tax.
A. Satisfaction of Tax Obli atg ion by Service Users. Any person who pays the tax levied
pursuant to Section 3.35.050 of this Code with respect to any charge for a telecommunication
service shall be deemed to have satisfied his or her obligation to pay the tax levied pursuant to
Section 3.34.030 of this Code with respect to that ~~harge. Likewise, prior to April 1, 2010, any
person who pays the tax levied pursuant to Section 3.34.030 of this Code with respect to any
charge for a service subject to taxation pursuant to this Chapter shall be deemed to have satisfied
his or her obligation to pay the tax levied pursuant to Section 3.35.050 of this Code 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 fr~~m the prior telephone users' tax to the new
telecommunication users' tax (which transition period ends April 1, 2010) and to permit
telecommunications service providers, during that transition period, to satisfy their collection
obligations by collecting either tax.
B. Collection of Tax by Service Providers. Service providers shall begin to collect the tax
imposed by this Chapter as soon as feasible after tl~e effective date of the Chapter, but in no
event later than permitted by Section 799 of the California Public Utilities Code.
C. Judicial Determinations. In the event that a finial court order should determine that the
election enacting this Chapter 3.35 is invalid for whatever reason, or that any tax imposed under
this Chapter 3.35 is invalid in whole or in part, then the taxes imposed under Section 3.34.030
shall automatically continue to apply with respect to any service for which the tax levied
pursuant to this Chapter has been determined to bey 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 Chapter 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 red-unded by the City) paid by a person with
respect to a service and calculated pursuant to this Chapter shall be deemed to satisfy the tax
imposed under Section 3.34.030 on that service, so long as the tax is paid with respect to a
service provided no later than six months subsequE;nt to the date on which the final court order is
published.
3.35.220 Remedies Cumulative.
All remedies and penalties prescribed by this Chapter or which are available under any other
provision of law or equity, including but not limitc;d 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 Chapter.
3.35.230 Duration.
The tax shall be levied until November 6, 2030 at which time, the tax levied hereinunder, unless
further extended, shall cease.
SECTION 2. Effective Date. This Chapl:er shall become effective if approved by a
majority vote of the electorate voting on the issue, at the General Municipal Election to be held
on November 3, 2009 within the City of Cupertino. If so approved, the City Clerk shall certify to
adoption of this Ordinance, which shall take effect 10 days upon such certification.
SECTION 3. Amendment or Repeal. Chapter 3.35 of the Cupertino Municipal Code
may be repealed or amended by the City Council without a vote of the people. However, as
required by Article XIIIC of the California Consti~:ution, voter approval is required for any
amendment provision that would increase the rate of any tax levied pursuant to this Ordinance.
The People of the City of Cupertino affirm that thc; following actions shall not constitute an
increase of the rate of a tax:
1. The restoration of the rate of the tax to a rats; that is no higher than that set by this
Ordinance, if the City Council has acted to reduce the rate of the tax;
2. An action that interprets or clarifies the methodology of the tax, or any definition
applicable to the tax, so long as interpretation or clarification (even if contrary to some prior
interpretation or clarification) is not inconsistent with the language of this Ordinance.
3. The establishment of a class of person that i;~ 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 irc this Ordinance); and
4. The collection of the tax imposed by this Ordinance, even if the City had, for some period
of time, failed to collect the tax.
SECTION 4. Severability. If any section. subsection, sentence, clause, phrase, or
portion of this Ordinance is for any reason held to be invalid or unenforceable by a court of
competent jurisdiction, the remaining portions of this Ordinance shall nonetheless remain in full
force and effect. The people hereby declares that they would have adopted each section,
subsection, sentence, clause, phrase, or portion of :his Ordinance, irrespective of the fact that any
one or more sections, subsections, sentences, clauses, phrases, or portions of this Ordinance be
declared invalid or unenforceable.
SECTION 5. Ratification of Prior Tax. The voters of the City of Cupertino hereby
ratify and approve the past collection of the Telephone Users Tax under Chapter 3.34 of the
Cupertino Municipal Code as it existed prior to th~~ effective date of this Ordinance.
SECTION 6. Certification. The Mayor i~: hereby authorized to sign where indicated
below to certify to the adoption of this Ordinance.
PASSED, APPROVED and ADOPTED by the People of the City of Cupertino this 3rd
day of November 2009.
Orrin Mahoney
MAYOR
ATTEST:
Kim Smith
CITY CLERK