BILL ANALYSIS Ó
AB 300
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CONCURRENCE IN SENATE AMENDMENTS
AB 300 (Perea)
As Amended September 6, 2013
2/3 vote. Urgency
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|ASSEMBLY: |65-1 |(June 6, 2013) |SENATE: |31-4 |(September 11, |
| | | | | |2013) |
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Original Committee Reference: U. & C.
SUMMARY : Establishes a uniform, statewide retail point-of-sale
collection mechanism for prepaid wireless services. Specifically,
this bill :
1)Enacts the Prepaid Mobile Telephony Service Surcharge and
Collection Act (MTS).
2)Establishes a prepaid MTS surcharge based upon a percentage of the
sales price of each retail transaction that occurs in the state
for prepaid wireless service. The prepaid MTS surcharge would
include the 911 user surcharge, and California Public Utilities
Commission (PUC) surcharges and any applicable local user utility
tax.
3)Requires a retail seller to collect the prepaid MTS surcharge from
a prepaid consumer and remit the amounts collected to the State
Board of Equalization (BOE).
4)Requires the taxes to be separately stated on an invoice, receipt,
or other similar document provided to the prepaid consumer, or
otherwise disclosed electronically to the prepaid consumer.
5)Provides that a seller that collects an amount that exceeds the
MTS surcharge and local charges owing may refund those amounts to
the prepaid consumer.
6)Provides that all retailers that sell prepaid telephones receive
2% compensation of the MTS surcharge and local charges for each
sale.
7)Requires BOE administer and collect the MTS surcharge, establish
procedures for a seller to document when a sale is not a retail
transaction, and establish procedures for sharing specified MTS
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surcharge collection information upon the request of the PUC or
Office of Emergency Services (OES).
8)Requires OES to prepare a summary of the calculation of the
proposed surcharge and make it available on its Internet Web site.
9)Requires PUC to annually compute, commencing October 1, 2014,
PUC's reimbursement fee and six universal service program fees, to
post notice of those fees on its Internet Web site and to notify
the BOE of the amounts, which would be adjusted, as specified.
10)Requires BOE to calculate the MTS surcharge rate annually by
combining the state 911 surcharge rate, all the end user PUC
rates, and the PUC reimbursement fee.
11)Creates statewide uniformity for user utility taxes (UUTs)
assessed on prepaid mobile phone services and preempts existing
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 telephone services, to the extent
those provisions are inconsistent with the new provisions, as
specified.
12)Provides that any local taxes, pursuant to the eight rates in
this bill, must be paid at the same time and in the manner as that
described in the "point of sales" provisions, provided that on or
before September 1, 2014, the local agencies enters into a
contract with BOE.
13)Specifies that a local agency must certify to BOE:
a) Its ordinance applies its local charge to prepaid MTS and
that the local agency agrees to indemnify, and hold harmless
BOE for any and all liability for damages that may results from
collection pursuant to the contract.
b) The amount of the local 911 charge or the applicable tiered
rate for a utility user tax.
1)Requires BOE to post on its Internet Web site annually the
combined total of the rates of the MTS surcharge and the rate or
rates of local charges for each local jurisdiction. The posted
combined rate applies to all retail transactions during the
calendar year beginning April 1 following the posting.
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2)Prescribes various ways that a sale occurs in the state, both an
in-store purchase and if the consumer's address is in the state.
3)Allows the seller to collect the MTS surcharge and local charges
that corresponds to the prepaid consumer's five digit postal zip
code.
4)States the MTS surcharge applies to the entire prices where
prepaid mobile telephony services are sold in combination with
mobile data services or any other services or products for a
single price with certain exceptions.
5)Specifies how BOE must deposit the funds.
6)Requires BOE to perform all functions incident to the collection
of the local charges of a city or county. BOE must collect the
local charges in the same manner as the MTS surcharge, as
specified.
7)Applies existing disclosure laws to any third party contract, and
prohibits contingent fee arrangements as payment for services
rendered.
8)Requires wireless carriers providing prepaid mobile telephony
service to continue to remit to the PUC the surcharges established
for telephone corporations on the intrastate portion of the
revenues received for prepaid mobile telephony service through
December 31, 2015, in addition to the any amounts collected and
remitted to the PUC pursuant to the MTS.
9)Beginning January 1, 2016, only the new total tax will be
collected until January 1, 2018, when all provisions of this bill
will be repealed.
10)States the intent of the Legislature that prepaid customers, who
qualify for the Universal Lifeline Telephone Service, shall not
pay the prepaid MTS surcharge when purchasing prepaid mobile
telephony services at a carrier-owned retail location.
The Senate amendments :
1)Change the rate and method of computation and collection of taxes
and surcharges for mobile prepaid wireless services in California.
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2)Impose the MTS surcharge and local charges on a prepaid consumer
rather than a seller; however, requires the seller to collect and
remit the MTS surcharge and local charges.
3)Provide that all retailers that sell prepaid telephones shall
receive 2% compensation of the MTS surcharge and local charges for
each sale.
4)Provide that carriers waive the right to the 2% vendor
compensation when they are the seller of the prepaid mobile
services.
5)Require OES to prepare a summary of the calculation of the
proposed surcharge and make it available on its Internet Web site.
6)Create statewide uniformity for UUTs assessed on prepaid mobile
phone services.
7)Prescribe, to account for Internet sales, various ways that a sale
occurs in the state, both an in-store purchase and if the
consumer's address is in the state.
8)Allow the seller to collect the MTS surcharge and local charges,
for a known-address transaction, that corresponds to the prepaid
consumer's five digit zip postal zip code.
9)Impose a three-year sunset.
10)State legislative intent that for the sunset to be extended, the
provisions of the bill must generate as much revenue as the
current collection method.
11)Require carriers to pay as they do today until December 31, 2015,
while the new tax begins.
12)Change the intrastate percentage on which the tax is based to be
calculated by the PUC on real intrastate numbers.
13)Extend the exemption of the prepaid MTS surcharge to eligible
LifeLine consumers.
14)Strike the reseller language in the Lifeline section and moved
the LifeLine exemption to the Revenue and Taxation Code.
FISCAL EFFECT : According to the Senate Appropriations Committee,
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the Board of Equalization (BOE) estimates that it would incur annual
costs of at least $9 million to $11 million (special funds) to
administer and collect the new tax beginning in 2014-15 not
including certain costs yet to be determined. PUC estimates annual
costs of $350,000 for four permanent positions. PUC would also need
approximately $250,000 in start-up costs in 2014-15. The bill
permits MTS sellers to retain 2% of collected surcharges for
reimbursement of costs. The annual cost would be $800,000 to $1
million. Unknown annual costs to OES to determine the state 911
system surcharge. Additional revenues approximately $40.3 million
in 2015 for the double-collection of surcharges from consumers.
Annual costs, likely in the hundreds of thousands of dollars, from
the General Fund and various special funds to the state as a user of
telephony services.
COMMENTS :
1)Background : The state's current system for collecting taxes and
fees is based on carriers
having a contractual relationship with customers and collecting
those taxes and fees on a monthly bill. These consumers pay 911
fees that help fund the network costs associated with the delivery
of wireless 911 services. They also pay state-imposed fees to
fund telephone service for low-income households, broadband for
underserved areas and more, and local government services such as
police, fire, parks and libraries through local utility user
taxes.
According to CTIA-The Wireless Association, the prepaid wireless
market is anticipated to grow at a rate of 10% per year. Out of
300 million nationwide wireless consumers, it is estimated that
20% use prepaid services and California's share of the national
wireless market is 20%.
2)Collection of fess and surcharges for prepaid wireless services :
Current law imposes the state 911 user surcharge on intrastate
communications service, administered by the California Technology
Agency, a PUC Reimbursement Fee to pay for PUC's operations, and
several surcharges to pay for state universal service programs
administered by PUC as follows:
a) California High Cost Fund A and B;
b) Deaf and Disabled Telecommunications program;
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c) California Teleconnect Fund;
d) California Advanced Services Fund;
e) Lifeline Telephone Service.
These state fees total about 2.5% of intrastate service. Local
911 fees and UUTs are assessed on service provided within the
jurisdiction of the city or county imposing the tax. UUTs vary by
jurisdiction but not all cities and counties impose them.
Post-paid fees and surcharges are easily assessed as they are
reflected on customer bills after service is used. With prepaid
service, there is no billing process. It is impossible for
providers or retailers selling prepaid service to determine ahead
of time how many minutes will be intrastate calls, nor where the
transaction will occur.
3)Proposed collection method : Starting January 1, 2015, this bill
imposes on prepaid consumers a prepaid MTS surcharge, which
sellers shall collect at the time of each retail transaction.
Specifically, this surcharge shall be imposed as a percentage of
the sales price. Beginning January 1, 2016, this prepaid MTS
surcharge shall be imposed in lieu of any charges imposed under
the Emergency Telephone Users Surcharge Act for prepaid MTS. The
new MTS surcharge shall also be imposed in lieu of the Public
Utilities Commission surcharges for prepaid MTS. Sellers shall be
required to register with the State Board of Equalization (BOE)
and the prepaid MTS surcharge shall be due and payable to the BOE
quarterly.
This bill also enacts the Local Prepaid Mobile Telephony Services
Collection Act. Specifically, on and after January 1, 2015, local
charges imposed by a local agency on prepaid MTS shall be
collected by sellers in the same manner as the prepaid MTS
surcharge described above. Specifically, this bill suspends the
authority of cities and counties to impose a utility user tax on
the consumption of prepaid MTS at the rate specified by ordinance.
Instead, the local agency shall use a tiered rate structure, with
rates ranging from 0 to 9%. The bill also suspends the authority
of cities and counties to impose a 911 charge applicable to
prepaid MTS at the rate specified by ordinance. Instead, the city
or county shall use a statutorily specified rate structure.
Applicable charges will be collected by the BOE and held in trust
for the local taxing jurisdiction. The BOE is authorized to
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contract with a third party for purposes of administering this
act.
In addition, the bill authorizes third-party sellers to deduct and
retain 2% of the amounts collected from prepaid consumers for the
prepaid MTS surcharge and local charges. Carriers waive the right
to the 2% vendor compensation in their stores when they are the
seller of the prepaid mobile services.
4)Impact on surcharge revenue : Proponents of this measure predict
this measure will bring a revenue windfall to the state. Thus
opponents argue against this claim noting that because carriers
currently are required to remit based on retail sales revenue,
administrative costs would outweigh any best-case revenue increase
and estimates do not accurately account for the 30% of prepaid
service the providers currently sell directly to the consumer.
To address many of these concerns and provide some consumer
safeguards, this bill imposes a three-year sunset. The bill will:
1) express legislative intent that for the sunset to be extended,
the provisions of the bill must generate as much as revenue as the
current collection methods, 2) require carriers pay as they do
today for one year while the new tax begins, and 3): change the
intrastate percentage on which the tax is based to be calculated
by the PUC on real intrastate numbers.
5)Treatment of eligible LifeLine consumers : The LifeLine program
provides discounted basic telephone service to eligible low-income
California households. Presently there is no LifeLine program for
wireless though the PUC has an open proceeding to develop the
rules for such a program. Earlier versions of this bill did not
contemplate taxes and fees on lifeline services. The bill extends
the exemption of the prepaid MTS surcharge to eligible LifeLine
consumers. The exemption is applied only to the amount paid for
the portion of the prepaid mobile telephony service that the
lifeline program specifies is exempt from the surcharges and fees
that comprise the prepaid MTS surcharge.
6)Sunset provision : Finally, the provisions of the Prepaid Mobile
Telephony Services Surcharge Collection Act and the Local Prepaid
Mobile Telephony Services Collection Act automatically sunset on
January 1, 2018, to evaluate the program.
Analysis Prepared by : DaVina Flemings / U. & C. / (916) 319-2083
AB 300
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David Ruff / REV. & TAX. / (916) 319-2098
FN: 0002786