California Utility User Taxes
About 146 California cities and 4 counties have a UUT. In nearly all these cases, the UUT was adopted prior to 1996 through a vote of the city council or the County Board of Supervisors. However, after the 1996 passage of Prop 218, to pass such a tax, the voters who would be paying the tax had to approve it directly through voting on a ballot measure.
About half of all California residents pay a UUT, because although the tax only applies in a relatively small minority of California cities, the cities in which it does apply includes nearly all of the cities in the state with higher populations.
Voter approval of UUTs
From June 2002 through June 2008, 83 utility user tax measures were placed before voters by cities and counties. Two of these were county measures and 81 were for cities.
- 30 proposals were for new or increased UUTs. Only six of these proposals were approved.
- 19 of the 30 were for an increase in the UUT tax rate. Only two of those passed.
- 19 measures asked to increase an existing UUT past a built-in sunset period. 16 of those measures passed.
There has been a trend in recent years for cities with UUTs to change their ordinances to ensure that it applies to all modern forms of telecommunications (wireless and internet) and billing methods (flat rates).
- 23 cities proposed such changes between June 2002 and June 2008. 22 of those requests were approved.
- Citizens placed 14 referenda placed on the ballot seeking to repeal or alter local UUTs.
- Seven measures seeking total repeal failed.
- Four out of five measures seeking to reduce the UUT tax rate failed.
- In Greenfield, voters reduced their UUT from 6% to 3%.
- A referendum to restrict the use of UUT revenues to law enforcement services passed in Seaside (Monterey County) in November 2002.
The list of utilities that can be taxed with a UUT includes:
- Telephone (including cell phones and long distance services)
- Cable television.
UUT tax rates
City UUTs range from a low of 1% to a high of 11%.
The rate of a UUT is set by the city in which it is levied. UUT's can be imposed:
- As a special tax.
- Earmarked for a specific purpose.
- As a general tax to be used for a variety of municipal service needs at the discretion of the city council.
The tax is levied by the city, and then collected by the relevant utility as a part of its regular billing procedure. The utility then sends the tax it has collected on behalf of the city to the city.
Some cities charge different tax rates for residential usage versus commercial usage.
Counties with a UUT
Just four of California's 58 counties levy a UUT. They are:
- Alameda. (See Alameda County Unincorporated Areas Utility Users Tax, Measure F (June 2008)).
- Los Angeles
- San Francisco
UUTs and the FET
Many of the UUTs in California refer to the Federal Excise Tax (FET) in defining which utilities are covered by the tax. The FET does not cover certain telecommunications services. FET, for instance, does not cover:
- Telephone calls which are not charged based on both time and distance (those paid by coin in phone booths, for example).
- Any cell phone bills which are based on a package which provides a mix of local and long-distance calling for a flat rate. (In 2007, the IRS ruled that telephone service packages which provide a mix of local and long-distance calling for a flat rate or a fixed fee are not subject to the FET.)
When California cities realized that the wording of their UUT ordinance, by tying which utilities are covered by the tax to the FET's definition, did not allow them to extend their UUT to charging the tax on cell phone usage. Since cell phone usage is becoming more common, even replacing landline use, especially for younger people, cities feared loss of UUT revenues.
As a result, a number of city councils began putting before voters ballot measures to change the ordinance defining which telecommunications services could be taxed with their local UUT so that they could tax cell phone usage.
|City of Vernon Utility Users Tax, Measure M||Los Angeles||Pending|
|City of Monterey Park Utility Users Tax, Measure MP-DD||Los Angeles|
|City of Rialto Utility User Tax Extension, Measure W||San Bernardino|
Ten utility tax measures were on the November 6, 2012 ballot in nine different counties.
|City of Vernon, Measure A||Los Angeles|
|Foresthill PUD, Measure C||Placer|
|Parlier, Measure S||Fresno|
|Stanton, Measure J||Orange|
|Bradbury, Measure A||Los Angeles|
|Sierra Madre, Measure 12-1||Los Angeles|
|Sierra Madre, Measure 12-2||Los Angeles|
|Brawley, Measure K||Imperial|
|Holtville, Measure M||Imperial|
|Holtville, Measure N||Imperial|
|Holtville, Measure O||Imperial|
|Modesto, Measure N||Stanislaus|
|South Pasadena, Measure UT||Los Angeles|
|Rio Vista Rollback, Measure A||Solano|
- See also June 8, 2010 election in California
|Coachella, Measure I||Riverside|
|Mammoth Lakes, Measure U||Mono|
|Winters, Measure W||Yolo|
|El Segundo, Measure M||Los Angeles|
|City of Arcadia Utility Users Tax, Measure A (June 2009)||Los Angeles|
|City of Hayward Utility Users Tax, Measure A (May 2009)||Alameda|
|City of Desert Hot Springs Utility Users Tax, Measure A (May 2009)||Riverside|
|City of Rancho Cordova Utility Users Tax, Measure B (May 2009)||Sacramento|
|Culver City Utility Users Tax, Measure W (April 2008)||Los Angeles|
|Malibu Utility Users Tax, Measure D (April 2008)||Los Angeles|
|Sierra Madre Utility Users Tax, Measures U and UA (April 2008)||Los Angeles|
- CaliforniaCityFinance.Com Utility User Tax facts
- UUT Info
- CalTax May 19 local tax measures
- June 3, 2008 UUT election results
- CaliforniaCityFinance.Com Local revenue measures on the February 5, 2008 ballot
- CaliforniaCityFinance.Com Utility user taxes on November 6, 2007 ballot (scroll to page 4]
- Utility user taxes on November 7, 2006 ballot (scroll to page 18)
- Utility user taxes on November 8, 2005 ballot
- California Debt and Investment Advisory Commission, Results of the February 5 election