BILL ANALYSIS Ó 1 SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE ALEX PADILLA, CHAIR Bill No: AB 1717 - Author: Perea Hearing Date: June 17, 2014 A As Amended: May 28, 2014 FISCAL/Urgency B 1 7 1 7 DESCRIPTION Current law establishes the State Board of Equalization (BOE) with duties that include administering tax and fee programs that provide revenue for state and local government. Current law, the Fee Collection Procedures Law, specifies procedures for BOE collection of fees and taxes that fund programs administered by other state agencies, including taxes and fees that retailers collect from customers and remit to the BOE for transfer to another agency. Current law establishes the California Public Utilities Commission (CPUC) to regulate utilities, including telephone corporations, and establishes the CPUC Reimbursement Fee to be collected from utility customers and remitted to the CPUC to fund its operations. Current law requires the CPUC to administer several universal service programs, to ensure that all customers have communications service, funded by surcharges on intrastate communications service. Current law requires the Public Safety Communications Office (PSCO) within the Office of Emergency Services to administer the state's 911 emergency telephone system with funds derived from a surcharge on intrastate communication service that providers remit to the BOE, which transfers the funds to the PSCO. Current law authorizes cities and counties to collect User Utility Taxes (UUTs) on utility and communications service, which typically are revenues used for public safety and other general purposes. This bill establishes, effective January 1, 2016, a method for collecting all of these state and local fees on prepaid wireless communications service through a point-of-sale collection by retailers of a Mobile Telephony Services (MTS) surcharge, who are required to remit the fees to the BOE, which is required to transfer the revenue to the CPUC, the PSCO and local agencies. This bill requires the CPUC to annually compute and notify BOE of a CPUC Reimbursement Fee and cumulative universal service portion of the MTS surcharge, requires OES to notify BOE of the 911 portion of the MTS surcharge, and requires BOE to calculate and post on its web site no later than December 1 a combined surcharge that includes the local charges for each local jurisdiction, which shall be effective April 1 of the following year. This bill allows retailers to retain 2% of fees collected on prepaid service and allows the BOE to retain an uncapped amount of fees remitted for prepaid service as payment for their expenses incurred in administration and collection of the charges, with expenses allocated by BOE on a pro rata basis according to revenues collected for the CPUC, PSCO, and local agencies. This bill requires providers of prepaid service to guarantee not less than $9.9 million per year in prepaid surcharge revenue to the PSCO for the state 911 system, with BOE to bill each provider a pro rata share of any deficiency. This bill provides that payment of these prepaid fees is the liability of the consumer and not the seller or provider of service. This bill exempts the purchase of prepaid service from the prepaid surcharge if the consumer is certified as eligible for the state or federal lifeline program and the seller is an authorized lifeline provider. This bill is an urgency measure, stating that it is necessary to take effect immediately to provide a standardized collection mechanism for prepaid mobile service in order to permit needed financial support for programs necessary to serve the public or telecommunications users. BACKGROUND Prepaid Wireless Service Growing - Telephone service traditionally has been provided on a postpaid basis where customers get a monthly bill for calls made and services received in the prior month. With prepaid service, customers pay in advance for a predetermined amount of calling minutes, or for a fixed time period of use of unlimited minutes or data, typically loaded onto a calling card or directly onto a mobile phone, with options to reload once the calling minutes are used. According to CTIA the Wireless Association, prepaid wireless is an expanding multi-billion dollar business nationally, with nearly a quarter of the nation's 300 million wireless consumers currently using prepaid service. Prepaid service is popular for "backup" phones kept in the car for emergencies and "starter" phones for children so it is easy to control usage, and is increasingly an attractive option for all wireless consumers who do not want a fixed-term contract. About 30 to 40 percent of prepaid service is sold directly by a provider to a customer, either online, over the phone, or otherwise. The other 60 to 70 percent is sold through retailers such as grocery stores and big-box stores, to which providers sell prepaid cards on a wholesale national basis, typically not knowing in which state the cards will be sold or the service used. Statewide Fees and Surcharges - Current law imposes on intrastate communications service a fee to support the state 911 system administered by PSCO, a fee to pay for the CPUC's operations, and six separate surcharges to pay for the following state universal service programs administered by the CPUC: California High Cost Fund A; California High Cost Fund B; Deaf and Disabled Telecommunications Program; California Teleconnect Fund; California Advanced Services Fund; and Lifeline Telephone Service. All of these fees are assessed as a percentage of a customer's intrastate communications service. These state and local surcharges are easily determined and collected for post-paid service and included on customer bills after service is used. In a 1996 decision, the CPUC adopted an all-end-user-surcharge mechanism in which surcharges are itemized on the customer's bill in order to promote transparency so customers know what they are paying to support universal service programs (D.96-10-066). With prepaid service, neither providers nor retailers selling prepaid service know ahead how many minutes will be intrastate calls or whether they will be made within the city or county where the transaction occurs. For prepaid service sold by a retailer that is not the provider, there is no direct billing relationship between the seller and the user. Local Fees and Charges - Local 911 fees and UUTs are assessed on service provided within the jurisdiction of the city or county imposing the tax. About 100 cities and three counties have utility tax ordinances imposing charges on communications service at about 35 different rates, some up to 11%. The total UUT revenue currently remitted to local agencies on all wireless service is estimated to be about $400 million. Service providers, local agencies, and the BOE generally concur that UUTs are largely unpaid for prepaid service. National Strategy for Point-of-Sale Legislation - Given growing customer demand for prepaid service, and lack of a convenient way to determine intrastate use and bill prepaid customers, the wireless industry has advocated nationwide a point-of-sale collection methodology with model legislation endorsed in 2009 by the National Conference of State Legislatures. According to CTIA, 32 states and the District of Columbia have adopted point-of-sale legislation based on the model statute. However, most of these other states have only a statewide 911 fee, although Minnesota, Maine, and Nebraska have multiple statewide surcharges like California, and several states also have local 911 fees. Point-of-sale legislation has been introduced in California since 2009 but failed passage. All Carriers Now Pay State Surcharges - TracFone is the nation's, and California's, largest provider of prepaid wireless service and provides only prepaid service, unlike other carriers that offer both postpaid and prepaid wireless service. In 2003, TracFone sought clarification through CPUC staff about whether CPUC fees and surcharges apply to its service. TracFone claims to have relied on staff indicating that it was exempt. The CPUC opened a formal investigation against TracFone in 2009, and in November 2011 issued a decision concluding that TracFone is a telephone corporation subject to its jurisdiction and is required to pay CPUC fees and surcharges (D.12-02-032). In March 2013, a state appellate court denied TracFone's petition for review of that decision. In a second phase of the proceeding, the CPUC ordered TracFone to pay about $24.4 million in past-due surcharges and interest to the public purpose programs. TracFone has appealed that penalty decision. As a result of this proceeding, according to the CPUC, TracFone and all other prepaid providers are now collecting and remitting all necessary state surcharges and fees from their postpaid and prepaid customers. The CPUC denied requests of carriers during the TracFone proceeding to review the obligations of all prepaid service providers to pay CPUC fees and surcharges and establish a collection mechanism. The CPUC maintains that it "intentionally does not prescribe any collection method for any kind of wireless service, leaving carriers complete discretion to implement the method that best meets their business needs," which may include embedding the surcharges and fees into the rates for service. Estimating Intrastate Minutes - Because California has authority to impose surcharges only on communications within its state borders, a customer's intrastate minutes of use must be estimated in connection with certain services. The Federal Communication Commission (FCC) allows for three different methods to make this allocation, including books and records (actual data), traffic studies, or a "safe harbor" estimates that about 63 percent of service revenues are for intrastate calling and 37% interstate. AB 841 (Buchanan, 2011), which required VoIP providers to pay state universal service program surcharges, endorsed these same three methods for determining intrastate VoIP service subject to the surcharge. Although prepaid service can be used for voice or data, only the voice service is subject to the surcharges because data is considered an unregulated "information service." Thus, the providers use an estimate to separate out the data (and texting) usage of prepaid service and remit only on the estimated voice service. For all wireless service, data usage is increasing while voice usage is decreasing. COMMENTS 1. Author's Purpose. According to the author, this bill would establish a statewide system for point-of-sale collection of state and local fees imposed on communications service that are currently paid by end users of postpaid customers, thereby ensuring that the prepaid wireless sector of the communications market equitably shares in the responsibility to fund the state 911 system, state universal service programs, and CPUC operations paid with the CPUC Reimbursement Fee, and also contribute to the revenue of cities and counties generated by local fees and UUTs. 2. Last Year's Bill Vetoed. This bill is the fourth measure sponsored by the wireless industry attempting to establish a point-of-sale collection of surcharges for prepaid service in California. It is substantially similar to AB 300 (Perea, 2013), which the Governor vetoed with the following message: I am returning Assembly Bill 300 without my signature. This bill would establish an additional system for collecting and remitting fees, surcharges and taxes applicable to prepaid mobile services. These charges would be collected from prepaid customers and remitted to the Board of Equalization, while fees collected from postpaid customers would continue to be remitted directly to the CPUC, State 911 Fund and local governments. There is no question that the state needs an effective system for capturing local taxes related to the sale of prepaid phones. The solution, however, proposed by this bill is duplicative, complex and will result in significant and unnecessary costs to the state. I encourage the author to partner with the local governments and State Agencies affected by these revenues and craft a bill with a more cost effective solution. 3. BOE Now Estimates Significant Local Revenue Collections. Although much of the debate over this bill is the same as last year, a major new development is that BOE's estimate of costs and revenues for the first time includes an estimate that the bill will generate about $72 million in revenue for local agencies that today is largely uncollected. Thus, even though BOE's annual costs in implementing the bill remain at about $11.4 million, the bill requires that these costs will be deducted on a pro rata basis from each category of charges - CPUC, state 911, and local UUTs. The result is that the bill appears to generate a net revenue increase for each category. 4. New Funding Guarantee for 911 Emergency Service. Another new provision in this year's legislation is a guarantee that the point-of-sale collection mechanism will generate no less than $9.9 million for the state 911 fund. This number is based on BOE's estimate that the bill will generate $9.9 million for the 911 fund in 2014-15. The bill requires BOE to annually determine whether $9.9 million is generated for the 911 fund and, if not, requires BOE to bill each prepaid service provider its pro rata share of the deficiency. This funding guarantee was added to the bill in amendments on the Assembly floor. Since then, BOE and the author have agreed on amendments necessary to ensure that the guarantee is an aggregate amount minus retailer and BOE expenses, and that BOE can obtain data from the CPUC to bill the appropriate service providers their pro rata portion of any deficiency. In addition, the bill is blank as to the expiration of the 911 funding guarantee, which the author intends be through the end of 2019. Thus, the author and committee may wish to consider amending the bill to ensure the effectiveness of the 911 funding guarantee through 2019, as set forth in Appendix A. 5. Ensuring Long-Term Support for the State's 911 System. All revenues from the 911 fee are deposited into the State Emergency Telephone Number Account (SETNA), which funds the state 911 system including about 458 local Public Safety Answering Points (PSAPs) that receive 911 calls and dispatch first responders. The SETNA has been in a structural deficit for years, with annual surcharge revenue declining from about $133 million in 2005-06 to about $80 million in 2012-13. The 911 fee was increased effective 2014 to the statutory maximum of 0.75 percent. Nonetheless, the state faces an enormous challenge to fund PSAP upgrades to enable text to 911 (already available from the carriers) and Next Generation 911 services. While the 911 funding guarantee helps mitigate this challenge, the BOE analysis of this bill recommends a thorough review of the 911 fee to determine a more up-to-date surcharge mechanism to provide a sufficient revenue stream for the statewide 911 system. In addition to impact from the decline of landline telephone service and increased prepaid wireless usage, certain security, medical, and telemetry devices directly access the 911 system with no intrastate service subject to the 911 fee. ECaTS, the PSCO vendor that manages data and analytics on all 911 uses, reports that it can identify all of these 911 uses that are not paying the fee. In addition, SB 1211 (Padilla), now pending in the Assembly, amends provisions also in this bill in order to help establish transparency and accountability for the 911 fee, laying the foundation for necessary funding increases for texting and Next Gen upgrades and long-term sustainability of the system. Thus, the author and committee may wish to consider supplementing the 911 funding guarantee by amending this bill to also incorporate those provisions of SB 1211, as set forth in Appendix B. 6. Why Not Just a Local Collection Mechanism? Since the CPUC's success in its legal action against TracFone, all providers of prepaid service currently remit surcharges to the CPUC. Similarly, providers of prepaid service currently remit the 911 fee to the BOE. Local agencies, however, report that they receive very little UUT revenue on prepaid service. Both service providers and BOE report that the exact amount of uncollected UUT revenue is unknown. BOE states that some unknown small amount of its estimated $72 million per year that would be collected if this bill is enacted is currently remitted by providers to local agencies. Muni Services states that in many cities the UUT is the second highest source of general fund revenue after the sales tax and their revenue loss is growing as prepaid service expands: "California agencies with existing UUT are losing revenues from prepaid wireless and in some cases the loss is as high as 25% in last 3 years. Extrapolating the increased use of prepaid wireless over time, over $100 million a year of local taxes is at risk without corrective legislation." Reasons cited for why local agencies have not found an effective way to enforce collection of their UUTs include lack of resources and risk of litigation with ordinances based on post-paid billing. In addition, TracFone's pending legal action against the City of Los Angeles seeking a refund of UUTs remitted for prepaid service before TracFone ceased remitting "places a dark cloud over the enforceability of our UUT ordinance," according to MuniServices. 7. Who Benefits From This Bill? After several years of prepaid legislation that has failed passage, this bill still faces opposition because it provides financial benefits or compensation to some stakeholders but appears likely to cause financial harm to others. Here's the breakdown: Customers of all postpaid and prepaid landline, wireless and VoIP communications service who pay all the surcharges will benefit if the net revenue estimates hold true for the long-term. If they do not, all customers will need to pay increased surcharges or receive reduced benefits from the programs these surcharges support; Service providers benefit because they will no longer be required to pay surcharges out of profits, and prepaid customers will instead pay the surcharges on top of the price for service; Local governments benefit because they will have a new revenue stream from UUTs and local fees that have been largely unpaid by prepaid service providers to date, thereby providing increased funding for local services and programs. BOE estimates local revenue at about $72 million in 2014-15; Retailers benefit by keeping two percent of all surcharges collected as reimbursement for their expenses. Although retailers currently have no legal obligation to collect state and local taxes and fees on communications service, some retailer groups have agreed to collect them at point-of-sale for prepaid service provided they collect a single aggregated charge statewide, remit all funds to BOE (with which they are familiar for remitting sales tax) rather than to different agencies, and get reimbursed for their administrative costs; The BOE benefits somewhat by being reimbursed for actual costs for their administrative costs in collecting the MTS surcharge from retailers and distributing it to the CPUC, PSCO, and local agencies, plus other duties; BOE currently is compensated for its actual costs in collecting the 911 fee; and Ï The PSCO may benefit because the newly estimated local revenues will offset its costs, likely producing net revenue, and because of the 911 funding guarantee. 1. Will Low-Income Customers Bear the Burden? The group that definitely will not benefit from this bill are customers of prepaid service because they will be required to pay an additional amount on top of the price of service, which they do not currently pay. As pointed out by The Utility Reform Network (TURN), The Greenlining Institute, and the Office of Ratepayer Advocates (ORA), this will especially affect low-income people who are a significant portion of the prepaid market. TURN states: "AB 1717 creates a mandated mechanism of surcharges and a convenient excuse for all carriers to shift the burden directly to the consumer." According to Greenlining, the lowest cost prepaid plans will have the highest per-minute surcharge, creating a disproportionate burden on consumers who can only afford to buy additional minutes in smaller bundles. On the other hand, low-income customers eligible for lifeline service will not be required to pay the new surcharge for prepaid service from an authorized lifeline provider, although that would not include prepaid service from a retailer that is not a provider. 2. Will Surcharge Revenues Increase or Decrease in the Long Term? Although the BOE's estimate of local revenue collections appears to indicate that this bill will produce net revenue for the CPUC, 911, and local agencies, stakeholders still engage in somewhat of a numbers battle over whether this bill will result in more or less surcharge revenue than currently collected for prepaid service. The uncertainty inherent in any projection of future revenue is exacerbated by the fact that prepaid service is a rapidly growing market segment and the need to estimate what portion of service will be for calls within California versus interstate. Industry claims that revenue will increase because carriers now calculate surcharges based on wholesale cost of prepaid service, which is at least ten percent less than the retail price of service that the surcharge required by this bill will be based on. Industry also points to the bill requiring the surcharge to apply to an entire prepaid sale amount even if usage is for data or minutes are never used. This could create more revenue as customers' data use increases because the current system substracts an estimated data usage. The CPUC counters that the industry's prediction of increased revenue is misleading because carriers currently are required to remit based on retail sales revenue and because revenue needed for public purpose programs and user fees is a fixed sum, independent of the means of collection. The CPUC also points to the bill creating expenses to "split the rolls" between prepaid and post-paid revenues, which currently are remitted in a combined amount. 3. Local Government and Taxation Issues. This bill establishes a tiered approach for collecting UUTs and local fees similar to the provisions adopted last year in AB 300 in the Committee on Governance and Finance. Related issues are in the jurisdiction of that committee. 4. Related Legislation. AB 2545 (de La Torre, 2010) required a public process to recommend a prepaid wireless service collection mechanism and was essentially a study bill. Status: Failed passage on the Senate floor. AB 1050 (Ma, 2012) required a point-of-sale collection of state and local surcharges on prepaid service somewhat similar to this bill. Status: Died in the Senate Committee on Governance and Finance. AB 300 (Perea, 2013) established a prepaid surcharge collection mechanism substantially similar to this bill. Status: Vetoed by the Governor. 5. Double Referral. Should this bill be approved by the committee, it will be re-referred to the Senate Committee on Governance and Finance for its consideration. ASSEMBLY VOTES Assembly Floor (71-2) Assembly Appropriations Committee (15-0) Assembly Revenue & Taxation Committee (9-0) Assembly Utilities and Commerce Committee (9-0) POSITIONS Sponsor: CTIA - The Wireless Association Support: AT&T Blackhawk Network, Inc. Boost California Communications Association California Professional Firefighters California State Association of Counties California's Independent Telecommunications Companies City of Bellflower City of Burbank City of Cathedral City City of Culver City City of El Segundo City of Gardena City of Gilroy City of Glendale City of Hawthorne City of La Verne City of Lakewood City of Rancho Cordova City of Redwood City City of Sacramento City of San Gabriel City of San Luis Obispo City of Santa Barbara City of Santa Fe Springs City of Seal Beach Consolidated Communications Inc. George Runner, Member, State Board of Equalization, Second District Jerome E. Horton, Chairman, State Board of Equalization, Fourth District MuniServices Sprint T-Mobile TracFone Wireless, Inc. Virgin Mobile Oppose: California Police Chiefs Association California Public Safety 9-1-1 Coalition California Public Utilities Commission The Greenlining Institute The Utility Reform Network Jacqueline Kinney AB 1717 Analysis Hearing Date: June 17, 2014 Appendix A SEC. 2. Section 319 is added to the Public Utilities Code, to read: 319. (d) The commission shall have enforcement authority to ensure the proper remittances over retail transactions of a prepaid MTS provider, pursuant to the Prepaid Mobile Telephony Services Surcharge Collection Act (Part 21 (commencing with Section 42001) of Division 2 of the Revenue and Taxation Code), where the prepaid mobile telephony services (prepaid MTS) provider is also the seller. The commission shall collaborate with the State Board of Equalization in exercising its enforcement authority pursuant to this subdivision. (e) (1) Carriers providing prepaid mobile telephony servicePrepaid MTS providers shall remit to the commission the fee established for telephone corporations pursuant to subdivision (a) of Section 431 on the intrastate portion of the revenues received for prepaid mobile telephony service through December 31, 2015. (2) Carriers providing prepaid mobile telephony servicePrepaid MTS providers shall remit to the commission the telecommunications universal service surcharges established for telephone corporations on the intrastate portion of the revenues received for prepaid mobile telephony service through December 31, 2015. (f) (1) This section does not relieve carriers providing prepaid mobile telephony service prepaid MTS providers of their continuing obligation to report prepaid mobile telephony service revenues to the commission in a manner prescribed by the commission. (2) When reporting prepaid mobile telephony service revenues to the commission, carriers providing prepaid mobile telephony service prepaid MTS providers shall report the intrastate revenue portion subject to the reimbursement fee and the telecommunications universal service surcharges, as well as total state wireless revenue. (3) Reports made pursuant to this subdivision are subject to Section 583 and any related orders of the commission. SEC. 6. Section 41033 is added to the Revenue and Taxation Code, to read: 41033. (a) For purposes of this section, the following terms have the following meanings: (1) "Prepaid mobile telephony services" has the same meaning as defined in Section 42004. (2) "Prepaid MTS provider" has the same meaning as defined in Section 42004. (3) "Prepaid MTS 911 Account" means the Prepaid MTS 911 Account created in the Prepaid Mobile Telephony Services Surcharge Fund pursuant to Section 42023. (4) "Retail transaction" has the same meaning as defined in Section 42004. (5) "Seller" has the same meaning as defined in Section 42004. (b) Beginning with the calendar year beginning January 1, 2016, and ending with the calendar year ending December 31,_ , not less than nine million nine-hundred thousand dollars ($9,900,000) shall be paid to the Prepaid MTS 911 Account for each calendar year for prepaid mobile telephony services. Any deficiency in payment to the Prepaid MTS 911 Account, below this amount, resulting from retail transactions by sellers during each calendar year, shall be the responsibility of prepaid MTS providers. , (b) For each fiscal year, beginning with the fiscal year commencing July 1, 2016, and ending with the fiscal year commencing July 1, 2019, the board shall calculate the following on or before the November 1 following the end of such fiscal year: (1) The total collections for the fiscal year of that portion of the prepaid MTS surcharge that is for the emergency telephone users surcharge, net of any amounts that a seller was permitted to deduct and retain pursuant to subdivision (e) of section 42010; (2 ) Less the expenses incurred and reimbursed to the board for the fiscal year from that portion of the prepaid MTS surcharge that is for the emergency telephone users surcharge pursuant to subdivision (e) of section 42020. The board shall provide notification of whether the amount calculated in this section exceeds or is less than nine million nine-hundred thousand dollars ($9,900,000) on its Internet website by the December 15 following such calculation, along with the underlying calculations, assumptions, and methodology. (c) On November 15, 2017, and by November 15 of each year thereafter, the board shall determine whether nine million nine-hundred thousand dollars ($9,900,000) was paid to the Prepaid MTS 911 Account pursuant to Section 42023, for retail transactions occurring during the previous calendar year. If in any calendar year for any fiscal year the resulting calculation in (b) is less than nine million nine-hundred thousand dollars ($9,900,000) was paid to the Prepaid MTS 911 Account, the board shall , the deficiency shall be the responsibility, on a pro rata basis as provided in this paragraph, of each prepaid MTS provider. The board shall calculate the deficiency and bill each prepaid MTS provider its pro rata share of that deficiency A based on each prepaid MTS provider's pro rata share shall be calculated based upon each provider's percentage share of total California intrastate prepaid mobile telephony services revenues, as reported to the California Public Utility Commission pursuant to section 319(f) of the Public Utility Code. (d) A prepaid MTS provider shall remit the amount billed to it pursuant to subdivision (c) to the board, and the board shall deposit all amounts remitted to the Prepaid MTS 911 Account. (d) The California Public Utility Commission shall provide the board, within 45 days of request, the name and address of each prepaid MTS provider and each prepaid MTS provider's California intrastate prepaid mobile telephone services revenue, along with the provider's percentage share of total California intrastate prepaid mobile telephony services revenue, and any other information the board deems necessary. (e) The obligation of each prepaid MTS provider shall be enforced by serving a notice in the manner prescribed for service of a notice of a deficiency determination, not later than three years after the date the board determines that the calculation specified in subdivision (b) results in a deficiency for the previous fiscal year. Notwithstanding any provisions to the contrary in this part, a petition for a redetermination of a notice issued pursuant to this subdivision may be filed within 60 days after service upon the person of notice thereof. Solely for purposes of a notice issued pursuant to this subdivision, interest shall begin to accrue at the expiration of the 60-day period. If a petition for redetermination is not filed within the 60-day period, the determination becomes final at the expiration of that period. All determinations made by the board under this section are due and payable at the time they become final. If they are not paid when due and payable, a penalty of 10 percent of the amount of the determination, exclusive of interest and penalties shall be added thereto. Interest shall apply in accordance with Article 6 (commencing with Section 41095). The liability imposed by this section shall be collected by the board in accordance with the provisions of this part. (eg) This section shall remain in effect only until January 1, 2019, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, _, deletes or extends that date. SEC. 7. 42004. For purposes of this part, the following terms have the following meanings: (f) "Mobile data service" has the same meaning as defined in Section 224.4 of the Public Utilities Code. (g) "Mobile telephony service" or "MTS" has the same meaning as defined in Section 224.4 of the Public Utilities Code. (h) "Person" includes any individual, firm, partnership, joint venture, limited liability company, association, social club, fraternal organization, corporation, estate, trust, business trust, receiver, assignee for the benefit of creditors, trustee, trustee in bankruptcy, syndicate, the United States, this state, any city, county, city and county, municipality, district, or other political subdivision of the state, or any other group or combination acting as a unit. (i) "Prepaid consumer" or "consumer" means a person who purchases prepaid mobile telephony services in a retail transaction. (j) "Prepaid mobile telephony services" means the right to utilize a mobile device authorized by the Federal Communications Commission for mobile telecommunications services or information services, including the download of digital products delivered electronically, content, and ancillary services, or both telecommunications services and information services, that must be purchased in advance of usage in predetermined units or dollars. For these purposes, "telecommunications service" and "information service" have the same meanings as defined in Section 153 of Title 47 of the United States Code. (k) "Prepaid MTS provider" means a person telephone corporation pursuant to California Public Utilities Code Section 234 that provides prepaid mobile telephony services pursuant to a license issued by the Federal Communications Commission. (l) "Prepaid MTS surcharge" means the surcharge that consists of the emergency telephone users surcharge and the Public Utilities Commission surcharges, as calculated pursuant to subdivision (b) of Section 42010, that is required to be collected by a seller from a prepaid consumer. (n) "Retail transaction" means the purchase of prepaid mobile telephony services, either alone or in combination with mobile data or other services, from a seller for any purpose other than resale in the regular course of business. For these purposes, a "purchase" means any transfer of title or possession, exchange, or barter, conditional or otherwise. (o) "Seller" means a person that sells prepaid mobile telephony service to a person in a retail transaction. 42010. (e) A seller who is not a prepaid MTS provider shall be permitted to deduct and retain an amount equal to 2 percent of the amounts that are collected by the seller from prepaid consumers in a retail transaction for the prepaid MTS surcharge and local charges, except in a retail transaction that involves both of the following:, on a pro rata basis according to the amount of revenues collected by the retailer for: (1) that portion of the prepaid MTS surcharge that is for the emergency telephone users surcharge, (2) that portion of the prepaid MTS surcharge that is for the Public Utilities Commission surcharges, and (3) local charges. (1) The seller is the provider of prepaid mobile telephony services pursuant to Section 224.4 of the Public Utilities Code, or a telephone corporation pursuant to Section 234 of the Public Utilities Code. (2) The seller sells the prepaid mobile telephony services directly to the prepaid consumer. Appendix B SB 1211 -- SEC. 2. Section 41030 of the Revenue and Taxation Code is amended to read: (a) The Office of Emergency Services shall determine annually, on or before October 1, a surcharge rate that it estimates will produce sufficient revenue to fund the current fiscal year's 911 costs. The surcharge rate shall be determined by dividing the costs (including incremental costs) the Office of Emergency Services estimates for the current fiscal year of 911 plans costs approved pursuant to Section 53115 of Article 6 (commencing with Section 53100) of Chapter 1 of Part 1 of Division 2 of Title 5 of the Government Code, less the available balance in the State Emergency Telephone Number Account in the General Fund, by its estimate of the charges for intrastate telephone communications services and VoIP service to which the surcharge will apply for the period of January 1 to December 31, inclusive, of the next succeeding calendar year, but in no event shall such surcharge rate in any year be greater than three-quarters of 1 percent nor less than one-half of 1 percent. (b) When determining the surcharge rate, the office shall include the costs it expects to incur to plan, test, implement, and operate Next Generation 911 technology and services, including text to 911 service, consistent with the plan and timeline required by Section 53121 of the Government Code. (c) At least one month before determining the surcharge rate pursuant to subdivision (a), the office shall prepare a summary of the calculation of the proposed surcharge and make it available to the Legislature and the 911 Advisory Board, and on the office's Internet Web site.