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S.B. 214

             1     

TAXATION OF MOBILE

             2     
TELECOMMUNICATIONS SERVICE AND TASK

             3     
FORCE ON TELECOMMUNICATIONS

             4     
TAXATION

             5     
2001 GENERAL SESSION

             6     
STATE OF UTAH

             7     
Sponsor: Curtis S. Bramble

             8      This act amends the Revenue and Taxation Code and the Utah Municipal Code to prohibit
             9      cities or towns from imposing a charge on mobile telecommunications service for a one-year
             10      period beginning on July 1, 2001. The act creates the Task Force on Telecommunications
             11      Taxation. The act provides for the membership of the task force, task force chairs,
             12      compensation of task force members, task force duties and responsibilities, the task force
             13      meeting schedule, task force reporting requirements, and staff support. The act requires the
             14      task force to follow interim rules. The act appropriates $45,000 from the General Fund for
             15      fiscal year 2000-01 to the Senate, the House of Representatives, and the Office of Legislative
             16      Research and General Counsel to fund the task force. Certain provisions of this legislation
             17      are repealed on June 30, 2002.
             18      This act affects sections of Utah Code Annotated 1953 as follows:
             19      AMENDS:
             20          10-1-203, as last amended by Chapter 172, Laws of Utah 2000
             21      ENACTS:
             22          59-1-1201, Utah Code Annotated 1953
             23          59-1-1202, Utah Code Annotated 1953
             24          59-1-1203, Utah Code Annotated 1953
             25          59-1-1204, Utah Code Annotated 1953
             26          59-1-1205, Utah Code Annotated 1953
             27          59-1-1206, Utah Code Annotated 1953


             28      Be it enacted by the Legislature of the state of Utah:
             29          Section 1. Section 10-1-203 is amended to read:
             30           10-1-203. License fees and taxes -- Application information to be transmitted to the
             31      county auditor.
             32          (1) For the purpose of this section, "business" means any enterprise carried on for the
             33      purpose of gain or economic profit, except that the acts of employees rendering services to
             34      employers are not included in this definition.
             35          (2) Except as provided in Subsections (3) through (5), the governing body of a
             36      municipality may license for the purpose of regulation and revenue any business within the limits
             37      of the municipality and may regulate that business by ordinance.
             38          (3) (a) The governing body of a municipality may raise revenue by levying and collecting
             39      a municipal energy sales or use tax as provided in Part 3, Municipal Energy Sales and Use Tax
             40      Act, except a municipality may not levy or collect a franchise tax [or fee] as defined in Subsection
             41      10-1-303 (7) or fee on an energy supplier other than the municipal energy sales and use tax
             42      provided in Part 3, Municipal Energy Sales and Use Tax Act.
             43          (b) (i) Subsection (3)(a) does not affect the validity of a franchise agreement as defined
             44      in Subsection 10-1-303 (6), that is in effect on July 1, 1997, or a future franchise.
             45          (ii) A franchise agreement as defined in Subsection 10-1-303 (6) in effect on January 1,
             46      1997, or a future franchise shall remain in full force and effect.
             47          (c) A municipality that collects a contractual franchise fee pursuant to a franchise
             48      agreement as defined in Subsection 10-1-303 (6) with an energy supplier that is in effect on July
             49      1, 1997, may continue to collect that fee as provided in Subsection 10-1-310 (2).
             50          (d) (i) Subject to the requirements of Subsection (3)(d)(ii), a franchise agreement as
             51      defined in Subsection 10-1-303 (6) between a municipality and an energy supplier may contain a
             52      provision that:
             53          (A) requires the energy supplier by agreement to pay a contractual franchise fee that is
             54      otherwise prohibited under Part 3, Municipal Energy Sales and Use Tax Act; and
             55          (B) imposes the contractual franchise fee on or after the day on which Part 3, Municipal
             56      Energy Sales and Use Tax is:
             57          (I) repealed, invalidated, or the maximum allowable rate provided in Section 10-1-305 is
             58      reduced; and


             59          (II) is not superseded by a law imposing a substantially equivalent tax.
             60          (ii) A municipality may not charge a contractual franchise fee under the provisions
             61      permitted by Subsection (3)(b)(i) unless the municipality charges an equal contractual franchise
             62      fee or a tax on all energy suppliers.
             63          (4) [Subject to the provisions of] Except as provided in Section 59-1-1203 , and subject to
             64      Title 11, Chapter 26, Local Taxation of Utilities Limitation, a municipality may impose upon,
             65      charge, or collect from a public utility engaged in the business of supplying telephone service or
             66      other person or entity engaged in the business of supplying telephone service any tax, license, fee,
             67      license fee, license tax, or similar charge, or any combination of any of these, based upon the gross
             68      revenues of the utility, person, or entity derived from sales or use or both sales and use of the
             69      telephone service within the municipality.
             70          (5) (a) The governing body of a municipality may by ordinance raise revenue by levying
             71      and collecting a license fee or tax on:
             72          (i) a parking service business in an amount that is less than or equal to:
             73          (A) $1 per vehicle that parks at the parking service business; or
             74          (B) 2% of the gross receipts of the parking service business;
             75          (ii) a public assembly facility in an amount that is less than or equal to $1 per ticket
             76      purchased from the public assembly facility; and
             77          (iii) subject to the limitations of Subsections (5)(c) and (d), a business that causes
             78      disproportionate costs of municipal services or for which the municipality provides an enhanced
             79      level of municipal services in an amount that is reasonably related to the costs of the municipal
             80      services provided by the municipality.
             81          (b) For purposes of this Subsection (5):
             82          (i) "Municipal services" include:
             83          (A) public utilities; or
             84          (B) services for:
             85          (I) police;
             86          (II) fire;
             87          (III) storm water runoff;
             88          (IV) traffic control;
             89          (V) parking;


             90          (VI) transportation;
             91          (VII) beautification; or
             92          (VIII) snow removal.
             93          (ii) "Parking service business" means a business:
             94          (A) that primarily provides off-street parking services for a public facility that is wholly
             95      or partially funded by public moneys;
             96          (B) that provides parking for one or more vehicles; and
             97          (C) that charges a fee for parking.
             98          (iii) "Public assembly facility" means a business operating an assembly facility that:
             99          (A) is wholly or partially funded by public moneys; and
             100          (B) requires a person attending an event at the assembly facility to purchase a ticket.
             101          (c) Before the governing body of a municipality imposes a license fee or tax on a business
             102      that causes disproportionate costs of municipal services under Subsection (5)(a)(iii), the governing
             103      body of the municipality shall adopt an ordinance defining for purposes of the tax under
             104      Subsection (5)(a)(iii) what constitutes disproportionate costs and what amounts are reasonably
             105      related to the costs of the municipal services provided by the municipality.
             106          (d) Before the governing body of a municipality imposes a license fee or tax on a business
             107      for which it provides an enhanced level of municipal services under Subsection (5)(a)(iii), the
             108      governing body of the municipality shall adopt an ordinance defining for purposes of the tax under
             109      Subsection (5)(a)(iii) what constitutes the basic level of municipal services in the municipality and
             110      what amounts are reasonably related to the costs of providing an enhanced level of municipal
             111      services in the municipality.
             112          (6) All license fees and taxes shall be uniform in respect to the class upon which they are
             113      imposed.
             114          (7) The governing body shall transmit the information from each approved business license
             115      application to the county assessor within 60 days following the approval of the application.
             116          (8) If challenged in court, an ordinance enacted by a municipality before January 1, 1994,
             117      imposing a business license fee or tax on rental dwellings under this section shall be upheld unless
             118      the business license fee or tax is found to impose an unreasonable burden on the fee or tax payer.
             119          Section 2. Section 59-1-1201 is enacted to read:
             120     
Part 12. Taxation of Telecommunications Act


             121          59-1-1201. Title.
             122          This part is known as the "Taxation of Telecommunications Act."
             123          Section 3. Section 59-1-1202 is enacted to read:
             124          59-1-1202. Definitions.
             125          As used in this part:
             126          (1) "Charge" means one or more of the following amounts:
             127          (a) a tax, including a tax imposed on the basis of gross revenues;
             128          (b) a license;
             129          (c) a fee;
             130          (d) a license fee;
             131          (e) a license tax;
             132          (f) an amount similar to Subsections (1)(a) through (e).
             133          (2) (a) "Customer" means:
             134          (i) except as provided in Subsection (2)(a)(ii), a person that contracts with a home service
             135      provider for mobile telecommunications service; or
             136          (ii) notwithstanding Subsection (2)(a)(i), the end user of the mobile telecommunications
             137      service if the person described in Subsection (2)(a)(i) is not the end user of the mobile
             138      telecommunications service.
             139          (b) "Customer" does not include:
             140          (i) a reseller of mobile telecommunications service; or
             141          (ii) a serving carrier under an arrangement to serve a customer outside the home service
             142      provider's licensed service area.
             143          (3) "Home service provider" means a facilities-based carrier or reseller with which a
             144      customer or an end user contracts for the provision of mobile telecommunications service.
             145          (4) S [ (a) ] s "Mobile telecommunications service" means S ONE OR MORE OF THE
             145a      FOLLOWING: (a ) s commercial mobile radio service as
             146      defined in 47 C.F.R. Sec. 20.3 S [ . ] ;
             147           [ (b) "Mobile telecommunications service" does not include: ]
             148           [ (i) ] (b) s a pager service using mobile devices that does not allow for two-way voice
             149      communication;
             150           S [ (ii) ] (c) s narrowband personal communications services; S [ and ]
             151           [ (iii) ] (d) s short message services S [ . ] ; OR
     (e) A SERVICE SIMILAR TO SUBSECTIONS (4)(a) THROUGH (d). s


             152          (5) "Task force" means the Task Force on Telecommunications Taxation.
             153          Section 4. Section 59-1-1203 is enacted to read:
             154          59-1-1203. Prohibition on county, city, or town imposing a tax on mobile
             155      telecommunications service.
             156          (1) Except as provided in Subsection (2), beginning on July 1, 2001, through June 30,
             157      2002, a city or town may not impose a charge on:
             158          (a) a customer for a mobile telecommunications service; or
             159          (b) a home service provider for a mobile telecommunications service.
             160          (2) This section may not be interpreted to limit the authority of a city or town to impose
             161      a tax under Chapter 12, Sales and Use Tax Act.
             162          Section 5. Section 59-1-1204 is enacted to read:
             163          59-1-1204. Task Force on Telecommunications Taxation -- Creation -- Membership
             164      -- Chairs -- Interim rules followed -- Compensation.
             165          (1) There is created the Task Force on Telecommunications Taxation consisting of the
             166      following nine members:
             167          (a) three members of the Senate appointed by the president of the Senate, no more that two
             168      of whom may be from the same political party; and
             169          (b) six members of the House of Representatives appointed by the speaker of the House
             170      of Representatives, no more than four of whom may be from the same political party.
             171          (2) (a) The president of the Senate shall designate a member of the Senate appointed under
             172      Subsection (1)(a) as a cochair of the task force.
             173          (b) The speaker of the House of Representatives shall designate a member of the House
             174      of Representatives appointed under Subsection (1)(a) as a cochair of the task force.
             175          (3) If the Legislative Management Committee authorizes the task force to establish a
             176      subcommittee, the cochairs of the task force may appoint legislators or persons who are not
             177      legislators to the subcommittee.
             178          (4) In conducting its business, the task force shall comply with the rules of legislative
             179      interim committees.
             180          (5) (a) Legislators on the task force shall receive compensation and expenses in accordance
             181      with Section 36-2-2 and Legislative Joint Rule 15.03.
             182          (b) (i) A member of a subcommittee of the task force who is not a legislator or a


             183      government employee may not receive compensation or benefits for the member's services, but
             184      may receive per diem and expenses incurred in the performance of the member's official duties at
             185      the rates established by the Division of Finance under Sections 63A-3-106 and 63A-3-107 .
             186          (ii) A member of a subcommittee of the task force may decline to receive per diem and
             187      expenses for their services.
             188          Section 6. Section 59-1-1205 is enacted to read:
             189          59-1-1205. Duties and responsibilities -- Meeting schedule -- Task force reporting
             190      requirements -- Staff support.
             191          (1) The task force shall:
             192          (a) study the overall structure of the taxes or fees that the state or political subdivisions of
             193      the state impose on telecommunications equipment, facilities, or services;
             194          (b) study individual taxes or fees that the state or political subdivisions of the state impose
             195      on telecommunications equipment, facilities, or services, including:
             196          (i) a sales and use tax;
             197          (ii) a franchise tax;
             198          (iii) a fee imposed on telecommunications companies for the use of:
             199          (A) rights-of-way S , OTHER THAN RIGHTS-OF-WAY OWNED AND OPERATED BY THE
             199a      STATE s ; or
             200          (B) other publicly owned property;
             201          (iv) a charge imposed on telecommunications companies for other purposes; or
             202          (v) other taxes or fees as determined by the task force;
             203          (c) study the telecommunications tax policy of:
             204          (i) the state; and
             205          (ii) political subdivisions of the state;
             206          (d) make recommendations regarding whether the telecommunications tax policy or tax
             207      structure should be changed with respect to:
             208          (i) the state; or
             209          (ii) a political subdivision of the state;
             210          (e) study short-term and long-term impacts of any proposed changes to the
             211      telecommunications tax structure of:
             212          (i) the state; or
             213          (ii) a political subdivision of the state.


             214          (2) The task force may study any other issue as determined by the task force relating to:
             215          (a) the telecommunications tax structure of:
             216          (i) the state; or
             217          (ii) a political subdivision of the state; or
             218          (b) state or local revenue sources that depend on the telecommunications industry.
             219          (3) The task force shall meet no more than eight times during the 2001 interim.
             220          (4) The task force shall report its findings and recommendations on the issues the task
             221      force studies in accordance with this section:
             222          (a) to the Revenue and Taxation Interim Committee; and
             223          (b) on or before the October interim meeting.
             224          (5) The Office of Legislative Research and General Counsel shall provide staff support to
             225      the task force.
             226          (6) The task force may request information from the governor's Office of Planning and
             227      Budget, the Utah League of Cities and Towns, and the Utah Association of Counties in conducting
             228      the study required by this section.
             229          Section 7. Section 59-1-1206 is enacted to read:
             230          59-1-1206. Appropriation.
             231          There is appropriated from the General Fund for fiscal year 2000-01 to pay for the task
             232      force:
             233          (1) $5,000 to the Senate to pay for the compensation and expenses of senators on the task
             234      force;
             235          (2) $10,000 to the House of Representatives to pay for the compensation and expenses of
             236      representatives on the task force; and
             237          (3) $30,000 to the Office of Legislative Research and General Counsel to pay for staffing
             238      the task force.
             239          Section 8. Repeal date.
             240          Sections 59-1-1201 through 59-1-1206 are repealed on June 30, 2002.





Legislative Review Note
    as of 2-12-01 10:28 AM



This legislation prohibits for a one-year period a city or town from imposing certain charges on
a customer or home service provider for mobile telecommunications service. This prohibition
could potentially be subject to challenge because it is unclear whether a city is given direct power
to tax under Utah Constitution Article XI, Section 5, or whether under Utah Constitution Article
XIII, Section 5, a city may only tax if the Legislature by statute delegates this power to the city.
If a court finds that a city does not have direct power to tax and may only tax if the Legislature
grants this power to the city by statute, the prohibition would likely be upheld.

Office of Legislative Research and General Counsel


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