By Fran Mancia, VP Government Relations, MuniServices.
By now, we have all heard the news, Governor Brown signed AB 1717 (Perea), and it will take effect in cities and counties in California that have Utility Users Tax (UUT) ordinances for prepaid wireless services. This bill is the key to modernizing the way taxes are collected on prepaid wireless and mobile devices. Thirty-two states and the District of Columbia already passed similar legislation. Last year, the Governor vetoed similar legislation: AB 300 (Perea). However, this year MuniServices worked with a variety of stakeholders to address previous concerns related to the tax’s administrative efficiency, and the result was passage of AB 1717. AB 1717 marks a major legislative accomplishment for local government, and it takes effect immediately, with collections beginning in January 2016.
Why is AB 1717 so important to UUT public agencies In California? Each year, about $400 million of UUT comes from wireless services, and more than 50% of new wireless services are prepaid. So a lot of local tax revenue is at stake, and AB 1717 will protect that revenue stream now and in the future.
Although it is hard to predict how much new UUT revenue a city will receive from AB 1717, you can probably expect to see an initial 20% increase in your wireless UUT. However, this depends on the number of large retail stores in your city that sell prepaid wireless, and whether or not those wireless carriers are currently collecting UUT on prepaid wireless devices.
Again, the most important part of AB 1717 is that it protects future wireless UUT revenues for cities, as more and more postpaid wireless customers convert to prepaid.
So what happens during the first year? The Board of Equalization (BOE), wireless carriers, retail sellers (stores and online sellers), and UUT public agencies must work together to build the apparatus to make AB 1717 work. For UUT public agencies, it will mean verifying that their current UUT ordinances have updated definitions so they are eligible to participate under AB 1717. Next they enter into collection agreements with the BOE (similar to sales tax agreements) by September 2015, and after that they take responsibility for the local functions set out in AB 1717.
MuniServices will be hosting a series of “AB 1717 Implementation” webinars, for local agency staff, that will cover the provisions of the law, the regulatory process, statutory deadlines, and most important how AB 1717 can be implemented by local agency staff.
Contact Fran Mancia at Fran.Mancia@muniservices.com or (559) 288-7296 for more information and to sign-up for the “AB 1717 Implementation” webinars. You can also visit the MuniServices website to read about the California UUT Policy Update.