$36 million. That’s how much California’s cities and counties are expected to receive each year following the passage of AB 1717 – the Prepaid Mobile Telephony Service Surcharge Collection Act. Through the law, which went into effect on January 1 of this year, cities and counties will collect a surcharge on each retail transaction involving a prepaid wireless service.
Before its passage in 2014, MuniServices, one of the nation’s leading providers of tax audit and revenue recovery services for local municipalities, worked diligently with industry stakeholders, and the offices of then-Assemblyman Henry Perea and Governor Jerry Brown to craft and pass the legislation. The law created a mechanism for the collection and remittance of tax revenues from the sale and use of prepaid telecommunications services.
“The passage of AB 1717 was a huge step in protecting revenue for California’s cities and counties,” said Fran Mancia, Vice President for MuniServices. “Utility user taxes provide a significant amount of revenue that goes towards essential services like public safety and infrastructure repair.”
Depending on the city or county the prepaid mobile minutes are purchased in, charges can range from 9-18% of the sale. Surcharge rates are calculated by adding: prepaid 911 surcharge rate as determined by the Office of Emergency Services; California Public Utilities Commission reimbursement fee and telecommunications universal service surcharges; and local UUT charges, if applicable.
“The reality is that prepaid wireless is a trend that is crossing every socioeconomic segment. Two out of every three new cell phone plans are prepaid. What that means is a crucial revenue stream is flat lining in many cities,” explained Julia Erdkamp, MuniServices Client Services Manager in Southern California. “Laws are not easy to change, but the coordination with our local government partners was phenomenal. Now we get to see the results through AB 1717 – more revenue for municipalities.”
During the first quarter of this year, MuniServices helped some of its clients collect up to an additional $1 million in revenue from the prepaid wireless surcharge. While a boon for now, the law is not permanent, and is expected to sunset at the end of 2019.
With more than 900 cities, counties, and special districts as clients, MuniServices is the nation’s leading provider of proprietary revenue recovery, audit and administration services encompassing all general sources of municipal tax revenue. To learn more about updating or implementing a utility user tax and MuniServices, visit www.muniservices.com.