Pass: 10667 / 83.52% Yes votes ...... 2105 / 16.48% No votes

See Also: Index of all Measures

Impartial Analysis from City Attorney

Since 1972, the City of San Luis Obispo has imposed a 5% Utility Users Tax (UUT) on telephone, electricity, gas, water, and cable users within the City. The tax has been charged regularly by service providers and remitted to the City as provided by Municipal Code, Chapter 3.16. This City Council proposed Measure D-12 would replace the City's current UUT ordinance with a revised ordinance that: 1) reduces the City's current tax rate for telecommunications and cable/video users from 5% to 4.8%; 2) maintains the City's current tax rate of 5% for electricity, gas, and water users; 3) modernizes the language of the ordinance for clarity; 4) updates and expands definitions to address dramatic changes in telecommunications and video services technologies that have emerged since the current ordinance was adopted; 5) ensures uniform application of the video and telecommunications tax, regardless of the means of transmission or technology used; and 6) ensures the Telecommunications User's Tax is in compliance with current federal laws to avoid potential litigation.

The most significant changes proposed measure D-12 are to the telecommunications and video users tax provisions. Like most older UUT ordinances in California, the City's telephone UUT provisions defined the scope of the tax on telephone users partially by reference to the Federal Excise Tax (FET) (26 USC §4251). An IRS ruling in 2006 stated that the FET does not apply to most common billing plans currently in use, such as "one-rate" plans (which provide a mix of local and long-distance calling for a flat rate or fixed fee for unlimited dialing). The ruling did not prohibit cities from continuing to impose telecommunication taxes more broadly than the Federal government's interpretation of the FET. However, the ruling did create uncertainty regarding the continuation of longstanding tax practices and expanded application to new technologies of taxes, like the City's, which include an FET reference. One result of the ambiguity created has been significant litigation challenging the application of UUT ordinances with language similar to the City's ordinance. Many cities have sought voter approval of revised ordinances, like Measure D-12, to avoid potential lawsuits that could limit the continued collection of telecommunications UUT revenues.

The City's 1972 ordinance was written before new telecommunication technologies, like "smart" phones or Voice over Internet Protocol (VolP), and new video technologies, like internet protocol TV and Video, became available. The proposed measure would encompasses current technologies and allow the City's ordinance to remain current with evolving communications and video technologies. The tax would apply uniformly to all users of video and communications services, regardless of the means of transmission or technology used. The telecommunications UUT would not apply to charges for internet access or digital downloads, such as books, ringtones, games and similar products.

Measure D-12 requires approval of a majority of voters. A "yes" vote is a vote to adopt the revised UUT Ordinance. A "no" vote is a vote to reject the proposed UUT Ordinance, and continue the UUT in its current form.

s/ J. CHRISTINE DIETRICK
City Attorney

The above statement is an impartial analysis of Measure D-12. If you desire a copy of the measure, please call the City Clerk's office at 781-7000 and a copy will be mailed at no cost to you.