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Business Taxes Law Guide – Revision 2019
 

Local Prepaid Mobile Telephony Services Collection Act



Local Prepaid Mobile Telephony Services Collection Act


42100. Title; Legislative findings and declarations. (a) This part shall be known and may be cited as the Local Prepaid Mobile Telephony Services Collection Act.

(b) The Legislature finds and declares all of the following:

(1) Maintaining effective and efficient communications services, 911 emergency systems, communications-related public policy programs to promote universal service, and various local programs across the state benefit all persons with access to the telecommunications system.

(2) Providers of end-use communications services, including providers of mobile voice telecommunications services, which the Federal Communications Commission terms mobile telephony service, are required to collect and remit utility users taxes and local 911 or access charges (local charges) imposed by over 150 cities and counties in California on end-users of such mobile telephony services, as required by existing state or local law.

(3) Local charges on telecommunication services represent an important source of tax revenue for many cities and counties and are used to pay for such essential governmental services as public safety, streets, parks, libraries, senior centers, and many more.

(4) Prepaid mobile telephony services are an important and growing segment of the communications industry. Prepaid mobile telephony services, unlike postpaid mobile telephony services, are frequently sold by a third-party seller that is not the provider of mobile telephony services, and collecting local charges from prepaid consumers of mobile telephony services at the time of the retail transaction is necessary and the most efficient and competitively neutral means for the collection of those local charges.

(5) The collection of prepaid mobile telephony services by third-party sellers and the remittance of those local charges to the board involves administrative costs and responsibilities that are unique to prepaid mobile telephony services, and therefore justify unique reimbursement and tax rate simplification measures, which are fair and reasonable.

(c) It is a matter of statewide concern that the local charges for local prepaid mobile telephony services be collected in a uniform manner in order for the collection to be fair and uniform on a statewide basis.

(d) It is the intention of the Legislature that this part shall preempt the provisions pertaining to the tax or charge rate, base, and method of collection contained in all local ordinances, rules, or regulations concerning the imposition of a local charge upon the consumption of prepaid mobile telephony services to the extent those provisions are inconsistent with the provisions of this part and Part 21 (commencing with Section 42001). It is not the intent of the Legislature to otherwise preempt, limit, or affect the general authority of local jurisdictions to impose a utility user tax, local 911 charge, or any other local charges.

History.—Added by Stats. 2014, Ch. 885 (AB 1717), in effect September 30, 2014.


42101. Definitions. For purposes of this part, all of the following definitions shall apply:

(a) "Local charge" means the utility user taxes as described in Section 42102, and charges for access to communication services or to local "911" emergency telephone systems, as described in Section 42102.5.

(b) "Ordinance" refers to an ordinance of a local jurisdiction or local agency imposing a local charge, including any local enactment relating to the filing of a refund or a claim arising under the ordinance.

(c) "Board," "direct seller," "local agency," "local jurisdiction," "mobile telephony service," "person," "prepaid consumer," "prepaid mobile telephony service," "prepaid MTS provider," "prepaid MTS surcharge" and "seller" have the same meaning as those terms are defined in Section 42004 of the Prepaid Mobile Telephony Services Surcharge Collection Act (Part 21 (commencing with Section 42001)).

History.—Added by Stats. 2014, Ch. 885 (AB 1717), in effect September 30, 2014.


42101.5. Collection of local charge by a seller; Local agency shall enter into a contract with the board; Notification by local agency of increase, reduction, or elimination of local charge; Election by prepaid MTS provider to remit local charge to local taxing jurisdiction. (a) On and after January 1, 2016, a local charge imposed by a local agency on prepaid mobile telephony services shall be collected from the prepaid consumer by a seller at the same time and in the same manner as the prepaid MTS surcharge is collected under Part 21 (commencing with Section 42001) if, on or before September 1, 2015, the local agency shall enter into a contract with the board for the board to perform the functions set forth in Section 42103. In the contract, the local agency shall: (1) certify to the board that its ordinance applies its local charge to prepaid mobile telephony services and that the local agency agrees to indemnify, and hold and save harmless, the board, its officers, agents, and employees for any and all liability for damages that may result from collection pursuant to the contract; and, (2) certify to the board the amount of the local 911 charge, as set out in Section 42102.5, or the applicable tiered rate for a utility user tax, as set out in Section 42102.

(b) In the event that a local agency adopts a new local charge that is imposed on prepaid mobile telephony services after September 1, 2015, the local agency shall enter into a contract with the board to perform the functions set forth in Section 42103, on or before December 1, with collection of the local charge to commence April 1 of the next calendar year. In the contract, the local agency shall certify to the board: (1) that its ordinance applies its local charge to prepaid mobile telephony services and that the local agency agrees to indemnify, and hold and save harmless, the board, its officers, agents, and employees for any and all liability for damages that may result from collection pursuant to the contract; and, (2) the amount of the local 911 charge, as set out in Section 42102.5, or the applicable tiered rate for a utility user tax, as set out in Section 42102.

(c) In the event that a local agency increases its local charge after September 1, 2015, the local agency shall provide the board with written notice of the increased local charge on or before December 1, with collection of the local charge to commence April 1 of the next calendar year.

(d) In the event that a local agency reduces or eliminates a local charge on prepaid mobile telephony services, the local agency shall provide the board with written notice pursuant to subdivision (c) of Section 42010.

(e) Notwithstanding subdivision (a), through and including December 31, 2015, a prepaid MTS provider may elect to remit the local charge to the appropriate local taxing jurisdiction based on the applicable tax rate of Section 42102, Section 42102.5, or both, and those remittances shall be deemed to be in full compliance with the local ordinance imposing a local charge on prepaid mobile telephony service.

History.—Added by Stats. 2014, Ch. 885 (AB 1717), in effect September 30, 2014.


42101.7. Exemption from collection of surcharge for sellers with de minimis sales. (a) Commencing January 1, 2017, a seller, other than a direct seller, with de minimis sales of prepaid mobile telephony services of less than fifteen thousand dollars ($15,000) during the previous calendar year is not required to collect local charges pursuant to Section 42101.5. The Department of Finance shall annually review and adjust that de minimis sales threshold as necessary to minimize program administration costs and maintain revenues to support program administration, enforcement, and Public Utilities Commission public purpose programs and rulemaking activities. Any adjustment of the de minimis sales threshold shall become operative on January 1 of the following calendar year. Nothing in this section prevents a seller from collecting and remitting the surcharge on a voluntary basis even if the seller meets the de minimis sales threshold.

(b) For purposes of this section, the de minimis sales threshold shall be based on the aggregate of all sales of prepaid mobile telephone services subject to the local charges at all retail locations operated by the seller and not the individual sales at each retail location operated by the seller.

History.—Added by Stats. 2015, Ch. 25 (SB 84), in effect June 24, 2015.


42102. Suspension of authority to impose utility user tax on prepaid mobile telephony service at rate specified in ordinance; Applicable utility user tax rates. (a) Notwithstanding any other law, on and after January 1, 2016, the authority of a city, county, or city and county, which includes a charter city, county, or city and county, to impose a utility user tax on the consumption of prepaid mobile telephony service in the city, county, or city and county at the rate as specified in an ordinance authorized pursuant to Section 7284.2 or any other law is suspended, and the utility user tax rate to be applied instead during the period under any ordinance as so adopted is the applicable of the following:

(1) In the case of a city, county, or city and county that has adopted an ordinance to impose a utility user tax on the consumption of prepaid communication services in the city, county, or city and county at the rate of less than 1.5 percent, the rate shall be 0 percent.

(2) In the case of a city, county, or city and county that has adopted an ordinance to impose a utility user tax on the consumption of prepaid communication services in the city, county, or city and county at the rate of 1.5 percent or more but less than 2.5 percent, the rate shall be 1.5 percent.

(3) In the case of a city, county, or city and county that has adopted an ordinance to impose a utility user tax on the consumption of prepaid communication services in the city, county, or city and county at the rate of 2.5 percent or more but less than 3.5 percent, the rate shall be 2.5 percent.

(4) In the case of a city, county, or city and county that has adopted an ordinance to impose a utility user tax on the consumption of prepaid communication services in the city, county, or city and county at the rate of 3.5 percent or more but less than 4.5 percent, the rate shall be 3.5 percent.

(5) In the case of a city, county, or city and county that has adopted an ordinance to impose a utility user tax on the consumption of prepaid communication services in the city, county, or city and county at the rate of 4.5 percent or more but less than 5.5 percent, the rate shall be 4.5 percent.

(6) In the case of a city, county, or city and county that has adopted an ordinance to impose a utility user tax on the consumption of prepaid communication services in the city, county, or city and county at the rate of 5.5 percent or more but less than 6.5 percent, the rate shall be 5.5 percent.

(7) In the case of a city, county, or city and county that has adopted an ordinance to impose a utility user tax on the consumption of prepaid communication services in the city, county, or city and county at the rate of 6.5 percent or more but less than 7.5 percent, the rate shall be 6.5 percent.

(8) In the case of a city, county, or city and county that has adopted an ordinance to impose a utility user tax on the consumption of prepaid communication services in the city, county, or city and county at the rate of 7.5 percent or more but less than 9 percent, the rate shall be 7.5 percent.

(9) In the case of a city, county, or city and county that has adopted an ordinance to impose a utility user tax on the consumption of prepaid communication services in the city, county, or city and county at the rate of 9 percent or more, the rate shall be 9 percent.

(b) Subdivision (a) is a self-executing provision that operates without regard to any decision or act on the part of any city, county, or city and county. A change in a utility user tax rate resulting from either the suspension of, or the termination of the suspension of, a utility user rate adopted by a city, county, or city and county set forth in subdivision (a) is not subject to voter approval under either statute or Article XIII C of the California Constitution.

(c) Notwithstanding subdivision (a), a city, county, or city and county may levy, increase, or extend a utility user tax at any rate on the consumption of communication services, including a utility user tax on the consumption of prepaid mobile telephony service, except that during the period on and after January 1, 2016, any utility user tax rate on prepaid mobile telephony service under any ordinance as so adopted shall be the applicable rate specified in subdivision (a).

(d) On and after January 1, 2016, this part shall be all of the following:

(1) The exclusive method for both of the following:

(A) Collecting the local utility user taxes, local 911 charges, and any other local charges imposed on consumers using prepaid mobile telephony services.

(B) Defining the scope of the tax or charge with respect to prepaid mobile telephony services.

(2) For the taxation of prepaid mobile telephony services only, the complete substitute for the utility user tax rate set out in the local ordinance with the applicable tiered rate as established by the Legislature.

(3) This part shall not preempt, limit, or affect the general authority of local jurisdictions to impose a utility user tax, local 911 charge, or any other local charges.

History.—Added by Stats. 2014, Ch. 885 (AB 1717), in effect September 30, 2014.


42102.5. Suspension of authority to impose charge for access to communication services or local "911" emergency telephone systems at rate specified in ordinance; Applicable charge rates. (a) Notwithstanding any other law, on and after January 1, 2016, the authority of a city, county, or city and county, which includes a charter city, county, or city and county, to impose a charge, that applies to prepaid mobile telephony service, for access to communication services or access to local "911" emergency telephone systems in the city, county, or city and county at the rate as specified in an ordinance is suspended, and the rate to be applied instead during that period under any ordinance as so adopted is the applicable of the following:

(1) In the case of a city, county, or city and county that has adopted an ordinance to impose a charge that applies to prepaid mobile telephony service for access to communication services or access to local "911" emergency telephone systems in the city, county, or city and county at the rate of less than one dollar ($1) per month per access line, including any adjustments for inflation, the rate shall be 0 percent.

(2) In the case of a city, county, or city and county that has adopted an ordinance to impose a charge that applies to prepaid mobile telephony service for access to communication services or access to local "911" emergency telephone systems in the city, county, or city and county at a specified percentage or at the rate of one dollar ($1) per month per access line, including any adjustments for inflation, or more, the rate shall be the specified percentage or the rate obtained by dividing the dollar amount by 50, rounded to the nearest one-tenth of 1 percent.

(b) Subdivision (a) is a self-executing provision that operates without regard to any decision or act on the part of any city, county, or city and county. A change in an access charge rate resulting from either the suspension of, or the termination of the suspension of, a charge adopted by a city, county, or city and county set forth in subdivision (a) is not subject to voter approval under either statute or Article XIII C of the California Constitution.

(c) Notwithstanding subdivision (a), a city, county, or city and county may levy, increase, or extend a charge at any rate, that applies to prepaid mobile telephony services, for access to communication services or access to local "911" emergency telephone systems in the city, county, or city and county, except that during the period on and after January 1, 2016, any charge on prepaid mobile telephony service under any ordinance as so adopted shall be the applicable rate specified in subdivision (a).

History.—Added by Stats. 2014, Ch. 885 (AB 1717), in effect September 30, 2014.


42103. Administration of local charges by board; Local Charges for Prepaid Mobile Telephony Services Fund; Transmittals of local charges; Adoption of rules and regulations; Audit duties; Third-party contracts for performance of specified board duties. (a) The board shall perform all functions incident to the collection of the local charges of a local jurisdiction or local agency and shall collect and administer the local charges in the manner prescribed for the collection of the prepaid MTS surcharge in the Prepaid Mobile Telephony Services Surcharge Collection Act (Part 21 (commencing with Section 42001)), subject to the limitations set forth in Section 42105. For purposes of this part, the references in the Fee Collection Procedures Law to "fee" shall include the local charge imposed by this part, and references to "feepayer" shall include a person required to pay the local charge imposed by this part, which includes the seller.

(b) All local charges collected by the board shall be deposited in the Local Charges for Prepaid Mobile Telephony Services Fund which is hereby created in the State Treasury, and shall be held in trust for the local taxing jurisdiction, and shall not be used for any other purpose. Local charges shall consist of all taxes, charges, interest, penalties, and other amounts collected and paid to the board, less payments for refunds and reimbursement to the board for expenses incurred in the administration and collection of the local charges. The board shall transmit the funds to the local jurisdictions periodically as promptly as feasible. The transmittals required under this section shall be made at least once in each calendar quarter. The board shall furnish a quarterly statement indicating the amounts paid and withheld for expenses of the board and subject to subdivision (e) of Section 42020.

(c) The board shall prescribe and adopt rules and regulations as may be necessary or desirable for the administration and collection of local charges and the distribution of the local charges collected.

(d) The Board's audit duties under this part shall be limited to verification that the seller complied with this part.

(e) Subject to the confidentiality requirements of Sections 7284.6, 7284.7, and 19542, the board shall make available to a requesting local jurisdiction or local agency any information that is reasonably available to the board regarding the proper collection and remittance of a local charge of the local jurisdiction or local agency by a seller, including a direct seller.

(f) The board may contract with a third party for purposes of this part, solely in connection with the following board duties:

(1) To allocate and transmit collected local charges in the Local Charges for Prepaid Mobile Telephony Services Fund pursuant to subdivision (b) to the appropriate local jurisdictions.

(2) To audit proper collection and remittance of the local charge pursuant to this part.

(3) To respond to requests from sellers, consumers, boards, and others regarding issues pertaining to local charges that are within the scope of the Board's duties.

(g) For purposes of this part, any third-party contract under subdivision (e) shall be subject to the following limitations:

(1) Any third party shall, to the same extent as the board, be subject to subdivision (b) of Section 55381, relating to unlawful disclosures.

(2) A third-party contract shall not provide, in whole or in part, in any manner a contingent fee arrangement as payment for services rendered. For purposes of this section, "contingent fee" includes, but is not limited to, a fee that is based on a percentage of the tax liability reported on a return, a fee that is based on a percentage of the taxes owed, or a fee that depends on the specific tax result attained.

(h) Except for sharing of information pursuant to subdivision (e), this section does not apply to direct sellers.

History.—Added by Stats. 2014, Ch. 885 (AB 1717), in effect September 30, 2014.


42104. Short-term loan for administration and collection expenses. (a) To provide adequate cashflow for expenses incurred by the board in the administration and collection of the local charges, the Director of Finance may approve a short-term loan in the 2015–16 fiscal year from the General Fund to the Local Charges for Prepaid Mobile Telephony Services Fund.

(b) For the purposes of this section, a short-term loan is a transfer that is made subject to the following conditions:

(1) Any amount loaned is to be repaid in full during the same fiscal year in which the loan was made, except that the repayment may be delayed until a date not more than six months after the date of enactment of the annual Budget Act for the subsequent fiscal year.

(2) Loans shall be repaid whenever the funds are needed to meet cash expenditure needs in the loaning fund or account.

History.—Added by Stats. 2015, Ch. 25 (SB 84), in effect June 24, 2015.


42105. Responsibilities of local jurisdiction or local agency imposing local charge; Claim by consumer to rebut presumed location of retail transaction; Limitations on actions or claims relating to local tax ordinance or local charge. (a) The local jurisdiction or local agency that has adopted an ordinance to impose a local charge that applies to prepaid mobile telephony service shall be solely responsible for:

(1) Defending any claim regarding the validity of the ordinance in its application to prepaid mobile telephony service.

(2) Interpreting any provision of the ordinance, except to the extent specifically superseded by this statute.

(3) Responding to any claim for refund by a customer arising under subdivision (b), (c), or (d). The claim shall be processed in accordance with the provisions of the local enactment that allows the claim to be filed.

(4) Certifying that the local jurisdiction's or local agency's ordinance applies the local charge to prepaid mobile telephony services and agreeing to indemnify and hold harmless the board, its officers, agents, and employees for any and all liability for damages that may result from collection of the local charge.

(5) Reallocation of local charges as a result of correcting errors relating to the location of the point of sale of a seller or the known address of a consumer, for up to two past quarters from the date of knowledge.

(6) Enforcement, including audits, of the collection and remittance of local charges by direct sellers pursuant to the local jurisdiction's or local agency's ordinance.

(b) A consumer may rebut the presumed location of the retail transaction to the city or county clerk of the local jurisdiction, as provided in subdivision (b) of Section 42014, by filing a claim and declaration under penalty of perjury on a form established by the city or county clerk of the local jurisdiction or local agency indicating the actual location of the retail sale. The claim shall be processed in accordance with the provisions of the local enactment that allows the claim to be filed.

(c) A consumer that is exempt from the local charge under the local enactment may file a claim for a refund from the local jurisdiction or local agency in accordance with the refund provisions of the local enactment that allows the claim to be filed.

(d) In connection with any actions or claims relating to or arising from the invalidity of a local tax ordinance, in whole or in part, the seller shall not be liable to any consumer as a consequence of collecting the tax. In the event a local jurisdiction or local agency is ordered to refund the tax, it shall be the sole responsibility of the local jurisdiction or local agency to refund the tax. In any action seeking to enjoin collection of a local charge by a seller, in any action seeking declaratory relief concerning a local charge, in any action seeking a refund of a local charge, or in any action seeking to otherwise invalidate a local charge, the sole necessary party defendant in the action shall be the local jurisdiction or local agency on whose behalf the local charge is collected, and the seller collecting the local charge shall not be named as a party in the action. There shall be no recovery from the state for the imposition of any unconstitutional or otherwise invalid local charge that is collected pursuant to this part.

History.—Added by Stats. 2014, Ch. 885 (AB 1717), in effect September 30, 2014.


42106. Transmittal of offset portion of refund to city, county, or city and county. (a) For purposes of this section:

(1) "Quarterly local charges" means the total amount of local charges transmitted by the board to a city, county, or city and county for a calendar quarter.

(2) "Refund" means the amount of local charges deducted by the board from a city's, county's, or city and county's quarterly local charges in order to pay the city's, county's, or city and county's share of a local charge refund due to one taxpayer.

(3) "Offset portion" means that portion of the refund which exceeds the greater of fifty thousand dollars ($50,000) or 20 percent of the city's, county's, or city and county's quarterly local charges.

(b) Except as provided in subdivision (c), if the board has deducted a refund from a city's, county's, or city and county's quarterly local charges which includes an offset portion, then the following provisions apply:

(1) Within three months after the board has deducted an offset portion, the city, county, or city and county may request the board to transmit the offset portion to the city, county, or city and county.

(2) As promptly as feasible after the board receives the city's, county's, or city and county's request, the board shall transmit to the city, county, or city and county the offset portion as part of the Board's periodic transmittal of local charges.

(3) The board shall thereafter deduct a pro rata share of the offset portion from future transmittals of local charges to the city, county, or city and county over a period to be determined by the board, but not less than two calendar quarters and not more than eight calendar quarters, until the entire amount of the offset portion has been deducted.

(c) The board shall not transmit the offset portion of the refund to the city, county, or city and county if that transmittal would reduce or delay either the Board's payment of the refund to the taxpayer or the Board's periodic transmittals of local charges to other cities, counties, or city and county.

History.—Added by Stats. 2014, Ch. 885 (AB 1717), in effect September 30, 2014.


42107. Payment of collection and administration costs by local jurisdiction or local agency. A local jurisdiction or local agency shall pay to the board its pro rata share of the Board's cost of collection and administration as established pursuant to subdivision (e) of Section 42020.

History.—Added by Stats. 2014, Ch. 885 (AB 1717), in effect September 30, 2014.


42109. Annual report by board of costs incurred in administering collection of local charges. The board shall annually prepare a report showing the amount of both reimbursed and unreimbursed costs incurred by it in administering the collection of local charges pursuant to this part.

History.—Added by Stats. 2014, Ch. 885 (AB 1717), in effect September 30, 2014.


42110. Unlawful retention of information contained in records of the board; Request by resolution for specified person to examine records of the board; Conditions for access to Board's records; Directly interested persons who may be given information relating to unpaid local charges. (a) Notwithstanding Section 55381, it is unlawful for any person, other than an officer or employee of a county, city and county, city, or district, who obtains access to information contained in, or derived from, prepaid mobile telephony services surcharge and local charge records of the board pursuant to subdivision (b), to retain that information after that person's contract with the county, city and county, city, or district has expired.

(b) (1) When requested by resolution of the legislative body of any county, city and county, city, or district, the board shall permit any duly authorized officer or employee of the county, city and county, city, or district, or other person designated by that resolution, to examine all of the prepaid mobile telephony services surcharge and local charge records of the board pertaining to the ascertainment of those prepaid mobile telephony services surcharge and local charges to be collected for the county, city and county, city, or district by the board pursuant to contract entered into between the board and the county, city and county, city, or district pursuant to this part. Except as otherwise provided in this section, this subdivision does not allow any officer, employee, or other person authorized or designated by a county, city and county, city, or district to examine any sales or transactions and use tax records of any taxpayer. The costs that are incurred by the board in complying with a request made pursuant to this subdivision shall be deducted by the board from those revenues collected by the board on behalf of the county, city and county, city, or district making the request.

(2) The resolution of the legislative body of the county, city and county, city, or district shall certify that any person designated by the resolution, other than an officer or employee, meets all of the following conditions:

(A) Has an existing contract with the county, city and county, city, or district to examine those prepaid mobile telephony services surcharge and local charge records.

(B) Is required by that contract to disclose information contained in, or derived from, those prepaid mobile telephony services surcharge and local charge records only to an officer or employee of the county, city and county, city, or district who is authorized by the resolution to examine the information.

(C) Is prohibited by that contract from performing consulting services for a seller during the term of that contract.

(D) Is prohibited by that contract from retaining the information contained in, or derived from, those prepaid mobile telephony services surcharge and local charge records, after that contract has expired.

(3) Information obtained by examination of board records pursuant to this subdivision shall be used only for purposes related to the collection of the prepaid mobile telephony services surcharge and local charges by the board pursuant to the contract, or for purposes related to other governmental functions of the county, city and county, city, or district set forth in the resolution.

(c) If the board believes that any information obtained pursuant to subdivision (b) has been disclosed to any person not authorized or designated by the resolution of the legislative body of the county, city and county, city, or district, or has been used for purposes not permitted by subdivision (b), the board may impose conditions on access to its local charge records that the board considers reasonable, in order to protect the confidentiality of those records.

(d) Predecessors, successors, receivers, trustees, executors, administrators, assignees, and guarantors, if directly interested, may be given information as to the items included in the measure and amounts of any unpaid local charges or amounts of local charges required to be collected, interest, and penalties.

History.—Added by Stats. 2014, Ch. 885 (AB 1717), in effect September 30, 2014.


42111. Repeal of part. This part shall remain in effect only until January 1, 2020, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2020, deletes or extends that date.

History.—Added by Stats. 2014, Ch. 885 (AB 1717), in effect September 30, 2014.