CC Resolution No. 09-120 Utility User Tax MeasureRESOLUTION N0.09-120
A RESOLUTION OF THE CUPERTINO CITY COUNCIL SUBMITTING TO
THE VOTERS AT THE NOVEMBER. 3, 2009 GENERAL MUNICIPAL
ELECTION AN ORDINANCE AMENDING TITLE 3 OF THE CUPERTINO
MUNICIPAL CODE REGARDING ACHE TELEPHONE USERS TAX
WHEREAS, since 1990 the residents of Cupertino have paid a Utility User Tax (UUT)
on telecommunications services. Like many otrier California cities, Cupertino uses this
funding to provide essential public services and., without this revenue, the City would be
forced to cut funding that supports:
• Neighborhood police patrols
• Library services
• School crossing guards
• City streets
• Open space and parks improvement projects; and
WHEREAS, communication advances ever the past two decades mean that the
City must update its UUT law to match today's technology, including definitions for new
communications technologies; and
WHEREAS, the changes are technical and do not change the rate, and most
residents will see no difference; and,
WHEREAS, the measure would clarify what can and cannot be taxed, close
unintended loopholes, and continue the exemption for seniors; and
WHEREAS, updating the existing, outdated UUT -with no change to the existing
rate or exemptions -will ensure that taxpayer; are treated the same regardless of the
type of technology used; and,
WHEREAS, the measure will safeguard local revenues already being received for
local needs, and this money cannot be taken away by the State; and,
Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
WHEREAS, many residents live in Cuf~ertino because it offers a higher level of
service, programs and quality of life than neighboring cities; and,
WHEREAS, the UUT is an important revenue source and preserving that revenue
will ensure that the City can maintain the high duality of public safety, support of the
community's excellent schools, maintain parks and open space, and provide the senior
programs that residents expect and deserve.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Cupertino as follows:
1. At the November 3, 2009 General Municipal Election called by previous
action of this Council, there shall be submitted to the qualified voters of the City of
Cupertino an ordinance amending Title 3 of the; Cupertino Municipal Code, to adopt
Chapter 3.35, the Telecommunications Users Tax.
2. The text of the ordinance is attached hereto as Exhibit A, and incorporated
herein by this reference.
3. The procedures for voting for acid against said question shall be those
established by Santa Clara County and the que:~tion shall be printed in substantially the
following form:
"MEASURE :Cupertino Vital Services Utility Users Tax
Update Measure. Without increasing the tax rate, shall an
ordinance be adopted to update Cupertino's e:risting telephone YES
utility users tax, to fund general city services, including
neighborhood police patrols, library services, city streets, parks
and open spaces, senior programs, and school crossing guards,
while maintaining senior citizens' tax exemptions, treating NO
taxpayers equally regardless of technology used, retaining local
control of revenues, and requiring annual audits and public
expenditure reviews?"
2
Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
4. The ballots to be used at the election shall be in form and content as
required by law.
5. The polls shall be open at 7:00 a.m. of the day of the election and shall
remain open continuously from that time until f;:00 p.m. of the same day when the polls
shall be closed, except as provided in Section 14401 of the California Elections Code.
6. Under separate resolution, the Board of Supervisors of Santa Clara County
shall cause the precincts, polling places and election officers for said election to be
established and cause the returns of said election to be canvassed and to certify the same
to the City Council of the City of Cupertino. T:he vote requirement for passage of the
measure is a majority of the votes cast (50% pl~zs 1).
7. In all particulars not recited in tl'iis resolution, the election hereby called
shall be as provided by law for holding municipal elections in the City.
8. Notice of the time and place of 1-olding the election is given and the City
Clerk is authorized, instructed and directed to give further or additional notice of the
election, in time, form and manner as required ley law.
9. Arguments in favor or against th e proposed measure shall be filed with the
City Clerk by Friday, August 7, 2009 at 5:00 p.m.
10. Rebuttals to arguments in favor ~or against the proposed measures shall be
filed with the City Clerk by Monday, August 1'1, 2009 at 5:00 p.m.
11. The City Attorney shall prepare an impartial analysis of the measure not to
exceed 500 words in length and which is to be i;iled with the County no later than
Wednesday, August 19, 2009.
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Resolution No. 09-120
Ordinance No. 09-2047 (DttAFT)
12. The City Clerk shall publish a n~~tice of election and synopsis of the
measure one time in a newspaper of general circulation.
PASSED AND ADOPTED at a regular meeting of the City Council of the City of
Cupertino this 21st day of July 2009, by the following vote:
Vote Council Members
AYES: Mahoney, Sando~~al, Santoro, Wang, Wong
NOES: None
ABSENT: None
ABSTAIN: None
ATTEST: APPRO
~ J~.
,~
l~-~ /. ir+~n,
City Clerk Mayor, City of
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Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
EXHIBIT A TO RESOLUTION NO. 09-120
ORDINANCE NO.O'9-2047 (DRAFT)
AN ORDINANCE OF THE CITE' OF CUPERTINO ADDING
CHAPTER 3.35 TO THE CUPERTINO MUNICIPAL CODE WITH
RESPECT TO A TELECOMMUNICATION USERS' TAX
WHEREAS, since 1990 the residents of Cupertino have paid a Utility User Tax (UUT)
on telecommunications services. Like many otr~er California cities, Cupertino uses this
funding to provide essential public services; an~i, without this revenue, the City would be
forced to cut funding that supports:
• Neighborhood police patrols
• Library services
• School crossing guards
• City streets
• Open space and parks improvement projects; and
WHEREAS, communication advances over the: past two decades mean that the City
must update its UUT law to match today's technology, including definitions for new
communications technologies; and
WHEREAS, the changes are technical and do not change the rate, and most residents
will see no difference; and,
WHEREAS, the measure would clarify what can and cannot be taxed, close unintended
loopholes, and continue the exemption for seniors; and
WHEREAS, updating the existing, outdated UUT -with no change to the existing rate
or exemptions -will ensure that taxpayers are treated the same regardless of the type of
technology used; and,
WHEREAS, the measure will safeguard local revenues already being received for local
needs, and this money cannot be taken away by the State; and,
WHEREAS, many residents live in Cupertino because it offers a higher level of service,
programs and quality of life than neighboring cities; and,
WHEREAS, the UUT is an important revenue source and preserving that revenue will
ensure that the City can maintain the high quality of public safety, support the
community's excellent schools, maintain parks and open space, and provide the senior
programs that residents expect and deserve.
NOW, THEREFORE, the People of the City of Cupertino do ordain as follows:
Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
SECTION 1: Title 3 of the Cupertino P/Iunicipal Code is hereby amended by
adding a new Chapter 3.35, which shall read a:. follows:
CHAPTER 3.35
TELECOMMUNICATION USERS' TAX
3.35.010 Short Title.
3...35.020 Adoption.
3.35.030 Definitions.
3.35.040 Constitutional, Statutory, and Other Exemptions.
3.35.050 Telecommunication Users' Tax.
3.35.060 Bundling Taxable Items with Non-taxable Items
3.35.070 Substantial Nexus /Minimum Contacts.
3.35.080 Duty to collect -Procedures.
3.35.090 Collection Penalties -Service Supplif;rs.
3.35.100 Actions to Collect.
3.35.110 Deficiency Determination and Asses:~ment -Tax Application Errors.
3.35.120 Administrative Remedy -Non-Payin~; Service Users.
3.35.130 Additional Powers and Duties of the Tax Administrator.
3.35.140 Records.
3.35.150 Refunds.
3.35.160 A,p eals.
3.35.170 No Injunction/Writ of Mandate.
3.35.180 Notice of Changes to Ordinance.
3.35.190 Effect of State and Federal Reference/Authorization.
3.35.200 Independent Audit of Tax Collection, Exemption, Remittance, and Expenditure.
3.35.210 Interaction with Prior Tax.
3.35.220 Remedies Cumulative
3.35.230 Duration.
3.35.010 Short Title.
This Chapter shall be known as the "Telecommunication Users' Tax Ordinance" of the
City.
3.35.020 Adoption.
This Chapter is adopted pursuant to the powers of the City of Cupertino as authorized
by California Government Code Section 37100.5.
3.35.030 Definitions.
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Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
The following words and phrases whenever used in this chapter shall be construed as
defined in this Section.
A. "Ancillary telecommunication services" means services that are associated with or
incidental to the provision, use or enjoyment of telecommunications services, including
but not limited to the following services:
(1) "Conference bridging service" meads an ancillary service that links two or
more participants of an audio or video conference call and may include the
provision of a telephone number. Conference bridging service does not include
the telecommunications services used to reach the conference bridge.
(2) "Detailed telecommunications billing service" means an ancillary service of
separately stating information pertaining; to individual calls on a customer's
billing statement.
(3) "Directory assistance" means an ancillary service of providing telephone
number information, and/or address information.
(4) "Vertical service" means an ancillary service that is offered in connection
with one or more telecommunications sE~rvices, which offers advanced calling
features that allow customers to identify callers and to manage multiple calls and
call connections, including conference t~ridging services.
(5) "Voice mail service" means an ancillary service that enables the customer to
store, send or receive recorded messages. Voice mail service does not include any
vertical services that the customer may lie required to have in order to utilize the
voice mail service
B. "Billing Address" shall mean the mailing address of the service user where the
service supplier submits invoices or bills for payment by the customer.
C. "City" shall mean the City of Cupertino.
D. "City Manager" shall mean the City Manager or his or her designee.
E. "Telecommunication Services" means "telecommunication services" and "ancillary
telecommunication services."
F. "Mobile Telecommunications Service" has the same meaning and usage as set forth in
the Mobile Telecommunications Sourcing Act •;4 U.S.C. Section 124) and the regulations
thereunder.
G. "Month" shall mean a calendar month.
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Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
H. "Paging Service " means a "telecommunications service" that provides transmission
of coded radio signals for the purpose of activating specific pagers; such transmissions
may include messages and/or sounds.
I. "Person" shall mean, without limitation, any natural individual, firm, trust, common
law trust, estate, partnership of any kind, association, syndicate, club, joint stock
company, joint venture, limited liability company, corporation (including foreign,
domestic, and non-profit), municipal district or municipal corporation (other than the
City) cooperative, receiver, trustee, guardian, or other representative appointed by order
of any court.
J. "Place of Primary Use" means the street address representative of where the
customer's use of the telecommunications service primarily occurs, which must be the
residential street address or the primary business street address of the customer.
K. "Post paid telecommunication service" means the telecommunication service
obtained by making a payment on acommunication-by-communication basis either
through the use of a credit card or payment mechanism such as a bank card, travel card,
credit card, or debit card, or by charge made to a service number which is not associated
with the origination or termination of the telecommunication service.
L. "Prepaid telecommunication service" means the right to access telecommunication
services, which must be paid for in advance and which enables the origination of
communications using an access number or au~:horization code, whether manually or
electronically dialed, and that is sold in predetermined units or dollars of which the
number declines with use in a known amount.
M. "Private telecommunication service" means a telecommunication service that entitles
the customer to exclusive or priority use of a communications channel or group of
channels between or among termination points, regardless of the manner in which such
channel or channels are connected, and includes switching capacity, extension lines,
stations, and any other associated services that are provided in connection with the use of
such channel or channels. A communications ~;hannel is a physical or virtual path of
communications over which signals are transmitted between or among customer channel
termination points (i. e., the location where the customer either inputs or receives the
communications).
N. "Service Address" means either:
(1) The location of the service user's telecommunication equipment from which
the communication originates or terminates, re;~ardless of where the communication is
billed or paid; or,
(2) If the location in subsection (1) of this definition is unknown (e.g., mobile
telecommunications service or VoIP service), the service address means the location of
the service user's place of primary use.
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Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
(3) For prepaid telecommunication service, "service address" means the location
associated with the service number.
O. "Service Supplier" shall mean any entity or person, including the City, that provides
communication service to a user of such servicc; within the City.
P. "Service User" shall mean a person requireci to pay a tax imposed under the
provisions of this Chapter.
Q. "State" shall mean the State of California.
R. "Streamlined Sales and Use Tax Agreement" shall mean the multistate agreement
commonly known and referred to as the Streamlined Sales and Use Tax Agreement as it
is amended from time to time.
S. "Tax Administrator" means the City Treasurer of the City or his or her designee.
T. "Telecommunications services" means the transmission, conveyance, or routing of
voice, data, audio, video, or any other information or signals to a point, or between or
among points, whatever the technology used. The term "telecommunications services"
includes such transmission, conveyance, or routing in which computer processing
applications are used to act on the form, code or protocol of the content for purposes of
transmission, conveyance or routing without regard to whether such services are referred
to as voice over internet protocol (VoIP) services or are classified by the Federal
Communications Commission as enhanced or value added, and includes video and/or
data services that are functionally integrated with "telecommunication services."
"Telecommunications services" include, but arc; not limited to the following services,
regardless of the manner or basis on which such services are calculated or billed:
ancillary telecommunication services; mobile telecommunications service; prepaid
telecommunication service; post-paid telecommunication service; paging service; 800
service (or any other toll-free numbers designated by the Federal Communications
Commission); and 900 service (or any other similar numbers designated by the Federal
Communications Commission for services whereby subscribers who call in to pre-
recorded or live service).
U. "VoIP (Voice Over Internet Protocol)" mesons the digital process of making and
receiving real-time voice transmissions over any Internet Protocol network.
V . "800 Service" means a "telecommunications service" that allows a caller to dial a
toll-free number without incurring a charge for the call. The service is typically marketed
under the name "800", "855", "866", "877", and "888" toll-free calling, and includes any
subsequent numbers designated by the Federal Communications Commission for such
services.
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Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
W. "900 Service" means an inbound toll "telecommunications service" purchased by a
subscriber that allows the subscriber's customers to call in to the subscriber's prerecorded
announcement or live service. "900 service" does not include the charge for collection
services provided by the seller of the "telecommunications services" to the subscriber, or
service or product sold by the subscriber to the subscriber's customer. The service is
typically marketed under the name "900" servi~:e, and includes any subsequent numbers
designated by the Federal Communications Cor°nmission.
3.35.040 Constitutional, statutory, and other exemptions.
A. Nothing in this Chapter shall be construed as imposing a tax upon any person or
service when the imposition of such tax upon such person or service would be in
violation of a federal or state statute, the Constitution of the United States or the
Constitution of the State. Residential service users of sixty-five years or older shall be
exempt from tax payments under this Chapter.
B. Any service user who is exempt from the tax imposed by this Chapter pursuant to
subsection A. of this Section shall file an application with the Tax Administrator for an
exemption; provided, however, this requirement shall not apply to a service user that is a
state or federal agency or subdivision with a commonly recognized name for such
service. Said application shall be made upon a norm approved by the Tax Administrator
and shall state those facts, declared under penalty of perjury, which qualify the applicant
for an exemption, and shall include the names of all utility service suppliers serving that
service user. If deemed exempt by the Tax Administrator, such service user shall give the
Tax Administrator timely written notice of any change in utility service suppliers so that
the Tax Administrator can properly notify the new utility service supplier of the service
user's tax exempt status. A service user who fails to comply with this Section shall not be
entitled to a refund of utility users' taxes collected and remitted to the Tax Administrator
from such service user as a result of such noncompliance.
The decision of the Tax Administrator may be appealed pursuant to Section 3.35.160 of
this Chapter. Filing an application with the Tax Administrator and appeal to the City
Manager pursuant to Section 3.35.160 of this Chapter is a prerequisite to a suit thereon.
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Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
C. The City Council may, by resolution, establish one or more classes of persons or one
or more classes of utility service otherwise sut-ject to payment of a tax imposed by this
chapter and provide that such classes of persons or service shall be exempt, in whole or in
part from such tax for a specified period of tirrie.
D. The Tax Administrator shall prepare a list of the persons exempt from the provisions
of this Chapter by virtue of this Section and furnish a copy thereof to each service
supplier.
3.35.050 Telecommunication Users' Tax.
A. There is hereby imposed a tax upon every person in the City using
telecommunication services. The maximum tax imposed by this Section shall be at the
rate of two and forty hundredths percent (2.40°,io) of the charges made for such services
and shall be collected from the service user by the telecommunication services supplier or
its billing agent. There is a rebuttable presumf~tion that telecommunication services,
which are billed to a billing or service address in the City, are used, in whole or in part,
within the City's boundaries, and such services are subject to taxation under this Chapter.
If the billing address of the service user is different from the service address, the service
address of the service user shall be used for purposes of imposing the tax. As used in
this Section, the term "charges" shall include the value of any other services, credits,
property of every kind or nature, or other consideration provided by the service user in
exchange for the telecommunication services.
B. "Mobile Telecommunications Service" shall be sourced in accordance with the
sourcing rules set forth in the Mobile Telecommunications Sourcing Act (4 U.S.C.
Section 124). The Tax Administrator may issue and disseminate to telecommunication
service suppliers, which are subject to the tax collection requirements of this Chapter,
sourcing rules for the taxation of other telecorrnnunication services, including but not
limited to post-paid communication services and prepaid communication services,
provided that such rules are based upon custom and common practice that further
administrative efficiency and minimize multi jurisdictional taxation (e.g., Streamlined
Sales and Use Tax Agreement).
C. The Tax Administrator may issue and disseminate to telecommunication service
suppliers, which are subject to the tax collection requirements of this Chapter, an
administrative ruling identifying those telecommunication services, or charges therefore,
that are subject to or not subject to the tax of subsection A. above.
D. As used in this Section, the term "telecommunication services" shall include, but are
not limited to charges for: connection, reconnection, termination, movement, or change
of telecommunication services; late payment feE;s; detailed billing; central office and
custom calling features (including but not limited to call waiting, call forwarding, caller
identification and three-way calling); voice mail and other messaging services; directory
assistance; access and line charges; universal service charges; regulatory, administrative
and other cost recovery charges; local number portability charges; and text and instant
11
Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
messaging. "Telecommunication services" shall not include: i) digital downloads that are
not "ancillary telecommunication services" such as books, music, ringtones, games, and
similar digital products; and ii) private telecommunication service.
E. To prevent actual multi jurisdictional taxation of telecommunication services subject
to tax under this Section, any service user, upon proof to the Tax Administrator that the
service user has previously paid the same tax in another state or city on such
telecommunication services, shall be allowed a credit against the tax imposed to the
extent of the amount of such tax legally imposed in such other state or city; provided,
however, the amount of credit shall not exceed the tax owed to the City under this
Section.
F. The tax on telecommunication services unposed by this Section shall be collected
from the service user by the service supplier. The amount of tax collected in one (1)
month shall be remitted to the Tax Administrator on or before the last day of the
following month or, at the option of the service supplier, an estimated amount of tax
collected, measured by the tax bill in the pre~~ious month, shall be remitted to the Tax
Administrator on or before the last day of each month.
3.35.060 Bundling Taxable Items with Non= Taxable Items.
If any nontaxable charges are combined with ar-d not separately stated from taxable
service charges on the customer bill or invoice ~~f a service supplier, the combined charge
is subject to tax unless the service supplier identifies, by reasonable and verifiable
standards, the portions of the combined charge that are nontaxable and taxable through
the service supplier's books and records kept in the regular course of business, and in
accordance with generally accepted accounting principles, and not created and
maintained for tax purposes. The service supplier has the burden of proving the proper
apportionment of taxable and non-taxable charges. If the service supplier offers a
combination of taxable and non-taxable services, and the charges are separately stated,
then for taxation purposes, the values assigned the taxable and non-taxable services shall
be based on its books and records kept in the regular course of business and in
accordance with generally accepted accounting principles, and not created and
maintained for tax purposes. The service supplier has the burden of proving the proper
valuation of the taxable and non-taxable services.
3.35.070 Substantial Nexus /Minimum Conl:acts.
For purposes of imposing a tax or establishing ~i duty to collect and remit a tax under this
Chapter, "substantial nexus" and "minimum contacts" shall be construed broadly in favor
of the imposition, collection and/or remittance of the telecommunications users tax to the
fullest extent permitted by state and federal law, and as it may change from time to time
by judicial interpretation or by statutory enactment. Any telecommunication service
(including VoIP) used by a person with a service address in the City, which service is
capable of terminating a call to another person on the general telephone network, shall be
subject to a rebuttable presumption that "substantial nexus/minimum contacts" exists for
purposes of imposing a tax, or establishing a duty to collect and remit a tax, under this
Chapter. A service supplier shall be deemed to have sufficient activity in the City for tax
12
Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
collection and remittance purposes if its activities include, but are not limited to, any of
the following: maintains or has within the City, directly or through an agent or
subsidiary, a place of business of any nature; solicits business in the City by employees,
independent contractors, resellers, agents or other representatives; solicits business in the
City on a continuous, regular, seasonal or systematic basis by means of advertising that is
broadcast or relayed from a transmitter with the City or distributed from a location with
the City; or advertises in newspapers or other periodicals printed and published within the
City or through materials distributed in the City by means other than the United States
mail; or if there are activities performed in the City on behalf of the service supplier that
are significantly associated with the service supplier's ability to establish and maintain a
market in the City for the provision of commwiication services that are subject to the tax
under this Chapter.
3.35.080 Duty to Collect -Procedures.
A. Collection by Service Sup liers. The duty of service suppliers to collect and remit the
taxes imposed by the provisions of this Chapter shall be performed as follows:
(1) The tax shall be collected by service suppliers insofar as practicable at the
same time as, and along with, the collection of the charges made in accordance
with the regular billing practice of the service supplier. Where the amount paid by
a service user to a service supplier is le:;s than the full amount of the charge and
tax which was accrued for the billing pc;riod, a proportionate share of both the
charge and the tax shall be deemed to have been paid. In those cases where a
service user has notified the service supplier of refusal to pay the tax imposed on
said charges, Section 3.35.120 shall apf~ly.
(2) The duty of a service supplier to collect the tax from a service user shall
commence with the beginning of the first regular billing period applicable to the
service user where all charges normally included in such regular billing are
subject to the provisions of this Chapter. Where a service user receives more than
one billing, one or more being for different periods than another, the duty to
collect shall arise separately for each billing period.
B. Filing Return and Pa}~ment. Each person required by this Chapter to remit a
tax shall file a return to the Tax Admini;~trator, on forms approved by the Tax
Administrator, on or before the due date. The full amount of the tax collected
shall be included with the return and filed with the Tax Administrator. The Tax
Administrator is authorized to require such additional information as he or she
deems necessary to determine if the tax is being levied, collected, and remitted in
accordance with this Chapter. Returns a~•e due immediately upon cessation of
business for any reason. Pursuant to Revenue and Tax Code Section 7284.6, the
Tax Administrator, and its agents, shall maintain such filing returns as
confidential information that is exempt from the disclosure provisions of the
Public Records Act.
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Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
3.35.090 Collection Penalties -Service Supliliers.
A. Taxes collected from a service user are delinquent if not received by the Tax
Administrator on or before the due date. Should the due date occur on a weekend or legal
holiday, the return must be postmarked on the first regular working day following the
weekend or legal holiday. A direct deposit, including electronic fund transfers and other
similar methods of electronically exchanging monies between financial accounts, made
by a service supplier in satisfaction of its obligations under this subsection shall be
considered timely if the transfer is initiated on or before the due date, and the transfer
settles into the City's account on the following business day.
B. If the person required to collect and/or rerr~it the telecommunication users' tax fails to
collect the tax (by failing to properly assess thf; tax on one or more services or charges on
the customer's billing) or fails to remit the tax collected on or before the due date, the
Tax Administrator shall attach a penalty for su~;,h delinquencies or deficiencies at the rate
of fifteen (15%) percent of the total tax that is ~~elinquent or deficient in the remittance,
and shall pay interest at the rate of one (1 %) percent per month, or any fraction thereof,
on the amount of the tax, exclusive of penalties;, from the date on which the remittance
first became delinquent, until paid.
C. The Tax Administrator shall have the pow:r to impose additional penalties upon
persons required to collect and remit taxes pur:;uant to the provisions of this Chapter for
fraud or gross negligence in reporting or remitting at the rate of fifteen (15%) percent of
the amount of the tax collected and/or required to be remitted, or as recomputed by the
Tax Administrator.
D. For collection purposes only, every penalt3~ imposed and such interest that is accrued
under the provisions of this Section shall become a part of the tax herein required to be
paid.
3.35.100 Actions to Collect.
Any tax required to be paid by a service user udder the provisions of this Chapter shall be
deemed a debt owed by the service user to the (~ity. Any such tax collected from a service
user which has not been remitted to the Tax Administrator shall be deemed a debt owed
to the City by the person required to collect and remit and shall no longer be a debt of the
service user. Any person owing money to the City under the provisions of this Chapter
shall be liable to an action brought in the name of the City for the recovery of such
amount, including penalties and interest as provided for in this Chapter, along with any
collection costs incurred by the City as a result of the person's noncompliance with this
Chapter, including, but not limited to, reasonable attorneys fees. Any tax required to be
collected by a service supplier or owed by a service user is an unsecured priority excise
tax obligation under 11 U.S.C.A. Section 507(a; (8)(C).
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Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
3.35.110 Deficiency Determination and Assessment -Tax Application Errors.
A. The Tax Administrator shall make a deficiency determination if he or she determines
that any person required to pay or collect taxes pursuant to the provisions of this Chapter
has failed to pay, collect, and/or remit the proper amount of tax by improperly or failing
to apply the tax to one or more taxable services or charges. Nothing herein shall require
that the Tax Administrator institute proceeding:; under this Section 3.35.110 if, in the
opinion of the Tax Administrator, the cost of collection or enforcement likely outweighs
the tax benefit.
B. The Tax Administrator shall mail a notice c-f such deficiency determination to the
person required to pay or remit the tax, which notice shall refer briefly to the amount of
the taxes owed, plus interest at the rate of one (l %) percent per month, or any fraction
thereof, on the amount of the tax from the date ~on which the tax should have been
received by the City. Within fourteen (14) calendar days after the date of service of such
notice, the person may request in writing to the Tax Administrator for a hearing on the
matter.
C. If the person fails to request a hearing within the prescribed time period; the amount
of the deficiency determination shall become a final assessment, and shall immediately
be due and owing to the City. If the person req~.rests a hearing, the Tax Administrator
shall cause the matter to be set for hearing, whi~~h shall be scheduled within thirty (30)
days after receipt of the written request for hearing. Notice of the time and place of the
hearing shall be mailed by the Tax Administrat~~r to such person at least ten (10) calendar
days prior to the hearing, and, if the Tax Administrator desires said person to produce
specific records at such hearing, such notice ma.y designate the records requested to be
produced.
D. At the time fixed for the hearing, the Tax Administrator shall hear all relevant
testimony and evidence, including that of any other interested parties. At the discretion of
the Tax Administrator, the hearing may be continued from time to time for the purpose of
allowing the presentation of additional evidencE;. Within a reasonable time following the
conclusion of the hearing, the Tax Administrator shall issue a final assessment (or non-
assessment), thereafter, by confirming, modifying or rejecting the original deficiency
determination, and shall mail a copy of such final assessment to person owing the tax.
The decision of the Tax Administrator may be ~ippealed pursuant to Section 3.35.160 of
this Chapter. Filing an application with the Taa: Administrator and appeal to the City
Manager pursuant to Section 3.35.160 of this Chapter are prerequisites to a suit thereon.
E. Payment of the final assessment shall become delinquent if not received by the Tax
Administrator on or before the thirtieth (30th) day following the date of receipt of the
notice of final assessment. The penalty for delinquency shall be fifteen percent (15%) on
the total amount of the assessment, along with interest at the rate of one (1%) percent per
month, or any fraction thereof, on the amount of the tax, exclusive of penalties, from the
date of delinquency, until paid. The applicable :statute of limitations regarding a claim by
the City seeking payment of a tax assessed undc;r this Chapter shall commence from the
date of delinquency as provided in this subsection E.
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Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
F. All notices under this Section may be sent ley regular mail, postage prepaid, and shall
be deemed received on the third calendar day following the date of mailing, as
established by a proof of mailing.
3.35.120 Administrative Remedy -Non-Paying Service Users.
A. Whenever the Tax Administrator determinc;s that a service user has deliberately
withheld the amount of the tax owed by the service user from the amounts remitted to a
person required to collect the tax, or whenever the Tax Administrator deems it in the best
interest of the City, he or she may relieve such ~~erson of the obligation to collect the
taxes due under this Chapter from certain named service users for specific billing periods.
To the extent the service user has failed to pay ~:he amount of tax owed for a period of
two (2) or more billing periods, the service supplier shall be relieved of the obligation to
collect taxes due. The service supplier shall provide the City with the names and
addresses of such service users and the amount:; of taxes owed under the provisions of
this Chapter. Nothing herein shall require that t:he Tax Administrator institute
proceedings under this Section 3.35.120 if, in the opinion of the Tax Administrator, the
cost of collection or enforcement likely outweil;hs the tax benefit.
B. In addition to the tax owed, the service user shall pay a delinquency penalty at the
rate of fifteen percent (15%) of the total tax that is owed, and shall pay interest at the rate
of one (1 %) percent per month, or any fraction thereof, on the amount of the tax,
exclusive of penalties, from the due date, until Maid.
C. The Tax Administrator shall notify the non-paying service user that the Tax
Administrator has assumed the responsibility to collect the taxes due for the stated
periods and demand payment of such taxes, including penalties and interest. The notice
shall be served on the service user by personal delivery or by deposit of the notice in the
United States mail, postage prepaid, addressed to the service user at the address to which
billing was made by the person required to collc;ct the tax; or, should the service user
have a change of address, to his or her last known address.
D. If the service user fails to remit the tax to the Tax Administrator within thirty (30)
days from the date of the service of the notice upon him or her, the Tax Administrator
may impose an additional penalty of fifteen percent (15%) of the amount of the total tax
that is owed.
3.35.130 Additional Powers and Duties of thc~ Tax Administrator.
A. The Tax Administrator shall have the power and duty, and is hereby directed, to
enforce each and all of the provisions of this Cr~apter.
B. The Tax Administrator may adopt administrative rules and regulations consistent
with provisions of this Chapter for the purpose ~~f interpreting, clarifying, carrying out
and enforcing the payment, collection and remittance of the taxes herein imposed. The
administrative ruling shall not impose a new taa;, revise an existing tax methodology as
stated in this Section, or increase an existing tai:, except as allowed by California
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Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
Government Code Section 53750(h) or other applicable law. A copy of such
administrative rules and regulations shall be o~i file in the Tax Administrator's office. To
the extent that the Tax Administrator determines that the tax imposed under this Chapter
shall not be collected in full for any period of tame from any particular service supplier or
service user, that determination shall be considered an exercise of the Tax
Administrator's discretion to settle disputes and shall not constitute a change in taxing
methodology for purposes of Government Coa'e Section 53750(h) or otherwise. The Tax
Administrator is not authorized to amend the C;ity's methodology for purposes of
Government Code Section 53750(h) and the City does not waive or abrogate its ability to
impose the telecommunications users' tax in fiill as a result of promulgating
administrative rulings or entering into agreements.
C. Upon a proper showing of good cause, the Tax Administrator may make
administrative agreements, with appropriate conditions, to vary from the strict
requirements of this Chapter and thereby: (1) conform to the billing procedures of a
particular service supplier so long as said agre<;ments result in the collection of the tax in
conformance with the general purpose and scope of this Chapter; or, (2) to avoid a
hardship where the administrative costs of collection and remittance greatly outweigh the
tax benefit. A copy of each such agreement shall be on file in the Tax Administrator's
office, and are voidable by the Tax Administrator or the City at any time.
D. The Tax Administrator may conduct an audit, to ensure proper compliance with the
requirements of this Chapter, of any person required to collect and/or remit a tax pursuant
to this Chapter. The Tax Administrator shall notify said person of the initiation of an
audit in writing. In the absence of fraud or other intentional misconduct, the audit period
of review shall not exceed a period of three (3) years preceding the date of receipt of the
written notice by said person from the Tax Administrator. Upon completion of the audit,
the Tax Administrator may make a deficiency cetermination pursuant to Section 3.35.110
of this Chapter for all taxes (and applicable penalties and interest) owed and not paid, as
evidenced by information provided by such person to the Tax Administrator. If said
person is unable or unwilling to provide sufficient records to enable the Tax
Administrator to verify compliance with this Chapter, the Tax Administrator is
authorized to make a reasonable estimate of the: deficiency. Said reasonable estimate
shall be presumed correct unless and until rebutted by competent evidence.
E. Upon receipt of a written request of a taxpayer, and for good cause, the Tax
Administrator may extend the time for filing an.y statement required pursuant to this
Chapter for a period of not to exceed forty-five (45) days, provided that the time for filing
the required statement has not already passed ~-hen the request is received. No penalty
for delinquent payment shall accrue by reason of such extension. Interest shall accrue
during said extension at the rate of one (1%) percent per month, or any fraction thereof.
F. The Tax Administrator shall determine the eligibility of any person who asserts a
right to exemption from, or a refund of, the tax imposed by this Chapter.
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Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
G. Notwithstanding any provision in this Chapter to the contrary, the Tax Administrator
may waive any penalty or interest imposed upc-n a person required to collect and/or remit
for failure to collect the tax imposed by this Cr~apter if the non-collection occurred in
good faith. In determining whether the non-collection was in good faith, the Tax
Administrator shall take into consideration industry practice or other precedents.
3.35.140 Records.
A. It shall be the duty of every person required to collect and/or remit to the City any tax
imposed by this Chapter to keep and preserve, for a period of at least three (3) years, all
records as may be necessary to determine the amount of such tax as he or she may have
been liable for the collection of and remittance to the Tax Administrator, which records
the Tax Administrator shall have the right to inspect at any reasonable time.
B. The City may issue an administrative subp~~ena to compel a person to deliver, to the
Tax Administrator, copies of all records deemed necessary by the Tax Administrator to
establish compliance with this Chapter, including the delivery of records in a common
electronic format on readily available media if such records are kept electronically by the
person in the usual and ordinary course of busi~iess. As an alternative to delivering the
subpoenaed records to the Tax Administrator on or before the due date provided in the
administrative subpoena, such person may provide access to such records outside the City
on or before the due date, provided that such pe-rson shall reimburse the City for all
reasonable travel expenses incurred by the City to inspect those records, including travel,
lodging, meals, and other similar expenses, but excluding the normal salary or hourly
wages of those persons designated by the City to conduct the inspection.
C. The Tax Administrator is authorized to execute anon-disclosure agreement approved
by the City Attorney to protect the confidentiality of customer information pursuant to
California Revenue and Tax Code Sections 7284.6 and 7284.7.
D. If a service supplier uses a billing agent or billing aggregator to bill, collect, and/or
remit the tax, the service supplier shall: i) provide to the Tax Administrator the name,
address and telephone number of each billing agent and billing aggregator currently
authorized by the service supplier to bill, collect, and/or remit the tax to the City; and,
ii) upon request of the Tax Administrator, deliver, or effect the delivery of, any
information or records in the possession of such billing agent or billing aggregator that, in
the opinion of the Tax Administrator, is or are necessary to verify the proper application,
calculation, collection and/or remittance of such tax to the City.
E. Any person subject to record-keeping oblig,~tions under this Section unreasonably
denies the Tax Administrator access to such records, or fails to produce the information
requested in an administrative subpoena within the time specified shall be guilty of a
violation of this Code punishable under Section 1.12.010 of this Code or in any other
manner permitted by law. Such penalty shall be; in addition to any other penalties
provided by this Chapter.
3.35.150 Refunds.
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Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
Whenever the amount of any tax has been ovei7~aid or paid more than once or has been
erroneously or illegally collected or received b~~ the Tax Administrator under this Chapter
from a person or service supplier, it may be refi.tnded as provided in this Section as
follows:
A. The Tax Administrator may refund any tax that has been overpaid or paid more than
once or has been erroneously or illegally collected or received by the Tax Administrator
under this Chapter from a person or service supplier, provided that no refund shall be
paid under the provisions of this Section unless the claimant or his or her guardian,
conservator, executor, or administrator has submitted a written claim to the Tax
Administrator within one year of the overpayment or erroneous or illegal collection of
said tax. Such claim must clearly establish claimant's right to the refund by written
records showing entitlement thereto. Nothing herein shall permit the filing of a claim on
behalf of a class or group of taxpayers unless e~ich member of the class has submitted a
written claim under penalty of perjury as provided by this subsection.
B. The filing of a written claim pursuant to Government Code Section 935 is a
prerequisite to any suit thereon. Any action brought against the City pursuant to this
Section shall be subject to the provisions of Government Code Sections 945.6 and 946.
The Tax Administrator, or the City Council where the claim is in excess of five thousand
dollars ($5,000), shall act upon the refund claim within the time period set forth in
Government Code Section 912.4. If the Tax Administrator/City Council fails or refuses to
act on a refund claim within the time prescribed by Government Section 912.4, the claim
shall be deemed to have been rejected by the City on the last day of the period within
which the City was required to act upon the claim as provided in Government Code
Section 912.4. The Tax Administrator shall give notice of the action in a form which
substantially complies with that set forth in Government Code Section 913.
C. Notwithstanding the notice provisions of subsection A. of this Section, the Tax
Administrator may, at his or her discretion, give written permission to a service supplier,
who has collected and remitted any amount of tax in excess of the amount of tax imposed
by this Chapter, to claim credit for such overpayment against the amount of tax which is
due the City upon a subsequent monthly return(s) to the Tax Administrator, provided
that: i) such credit is claimed in a return dated no later than one year from the date of
overpayment or erroneous collection of said tax:; ii) the Tax Administrator is satisfied that
the underlying basis and amount of such credit has been reasonably established; and, iii)
in the case of an overpayment by a service user to the service supplier that has been
remitted to the City, the Tax Administrator has received proof, to his or her satisfaction,
that the overpayment has been refunded by the service supplier to the service user in an
amount equal to the requested credit.
D. Notwithstanding subsections A, B, and C above, a service supplier shall be entitled to
take any overpayment as a credit against an underpayment whenever such overpayment
has been received by the City within the three (3) years preceding a deficiency
determination or assessment by the Tax Administrator in connection with an audit
instituted by the Tax Administrator pursuant to Section 3.35.130 D. A service supplier
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Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
shall not be entitled to said credit unless it first clearly establishes, to the satisfaction of
the Tax Administrator, the right to the credit b~~ written records showing entitlement
thereto. Under no circumstances shall an over)~ayment taken as a credit against an
underpayment pursuant to this subsection qualify a service supplier for a refund to which
it would not otherwise be entitled under the on~~-year written claim requirement of this
Section.
3.35.160 Appeals.
A. The provisions of this Section apply to any decision (other than a decision relating to
a refund pursuant to Section 3.35.150 of this Chhapter), deficiency determination,
assessment, or administrative ruling of the Tax Administrator (other than the adoption of
rules and regulations for the implementation of'this Chapter to be implemented
prospectively). Any person aggrieved by any such decision may appeal to the City
Manager by filing a notice of appeal with the City Clerk within fourteen (14) days of the
date of the decision, deficiency determination, ~~ssessment, or administrative ruling of the
Tax Administrator from which appeal is taken. Compliance with this Section shall be a
prerequisite to a suit thereon. Nothing herein sriall permit the filing of a claim or action
on behalf of a class or group of taxpayers.
B. The matter shall be scheduled for hearing h~efore an independent hearing officer
selected by the City Manager no more than thirty (30) days from the receipt of the appeal.
The appellant shall be served with notice of the time and place of the hearing, as well as
any relevant materials, at least five (5) calendar days prior to the hearing. The hearing
may be continued from time to time upon mutual consent. At the time of the hearing, the
appealing party, the Tax Administrator, and an~r other interested person may present such
relevant evidence as he or she may have relating to the determination from which the
appeal is taken.
C. Based upon the submission of such evidence and the review of the City's files, the
hearing officer shall issue a written notice and order upholding, modifying or reversing
the determination from which the appeal is taken. The notice shall be given within
fourteen (14) days after the conclusion of the hearing and shall state the reasons for the
decision. The notice shall specify that the decision is final and that any petition for
judicial review shall be filed in accordance witl•i Code of Civil Procedure Section 1094.6.
D. All notices under this Section may be sent ley U.S. mail, postage prepaid, and shall be
deemed received on the third calendar day following the date of mailing, as established
by a proof of mailing.
3.35.170 No Injunction/Writ of Mandate.
No injunction or writ of mandate or other legal ~r equitable process shall issue in any
suit, action, or proceeding in any court against this City or against any officer of the City
to prevent or enjoin the collection under this Chapter of any tax or any amount of tax
required to be collected and/or remitted.
3.35.180 Notice of Changes to Ordinance.
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Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
If a tax under this Chapter is added repealed, increased, reduced, or the tax base is
changed, the Tax Administrator shall follow the notice requirements of California Public
Utilities Code Section 799.
3.35.190 Effect of State and Federal Reference/Authorization
Unless specifically provided otherwise, any reference to a state or federal statute in this
Chapter shall mean such statute as it may be amended from time to time, provided that
such reference to a statute herein shall not include any subsequent amendment thereto, or
to any subsequent change of interpretation thereto by a state or federal agency or court of
law with the duty to interpret such law, to the extent that such amendment or change of
interpretation would require voter approval under California law, or to the extent that
such change would result in a tax decrease (e.g., as a result of excluding all or a part of a
communication service, or charge therefore, from taxation). Only to the extent voter
approval would otherwise be required or a tax decrease would result, the prior version of
the statute (or interpretation) shall remain applicable; for any application or situation that
would not require voter approval or result in a decrease of a tax, provisions of the
amended statute (or new interpretation) shall bey applicable to the maximum possible
extent. To the extent that the City's authorization to collect or impose any tax imposed
under this Chapter is expanded or limited as a result of changes in state or federal law, no
amendment or modification of this Chapter shall be required to conform the tax to those
changes, and the tax shall be imposed and collected to the full extent of the authorization
up to the full amount of the tax imposed under this Chapter.
3.35.200 Independent Audit of Tax Collection, Exemption, Remittance, and
Expenditure.
The City shall annually verify that the taxes owed under this Chapter have been properly
applied, exempted, collected, and remitted in accordance with this Chapter, and properly
expended according to applicable municipal lave. The annual verification shall be
performed by a qualified independent third party and the review shall employ reasonable,
cost-effective steps to assure compliance, including the use of sampling audits. The
verification shall not be required of tax remitters where the cost of the verification may
exceed the tax revenues to be reviewed.
3.35.210 Interaction with Prior Tax.
A. Satisfaction of Tax Obli atg_ion by Service t~sers. Any person who pays the tax levied
pursuant to Section 3.35.050 of this Code with respect to any charge for a
telecommunication service shall be deemed to have satisfied his or her obligation to pay
the tax levied pursuant to Section 3.34.030 of this Code with respect to that charge.
Likewise, prior to April 1, 2010, any person wh~~ pays the tax levied pursuant to Section
3.34.030 of this Code with respect to any charge; for a service subject to taxation pursuant
to this Chapter shall be deemed to have satisfied his or her obligation to pay the tax
levied pursuant to Section 3.35.050 of this Code with respect to that charge. The intent
of this paragraph is to prevent the imposition of multiple taxes upon a single utility
charge during the transition period from the prior telephone users' tax to the new
21
Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
telecommunication users' tax (which transition period ends April 1, 2010) and to permit
telecommunications service providers, during that transition period, to satisfy their
collection obligations by collecting either tax.
B. Collection of Tax by Service Providers. Sc;rvice providers shall begin to collect the
tax imposed by this Chapter as soon as feasible after the effective date of the Chapter, but
in no event later than permitted by Section 799 of the California Public Utilities Code.
C. Judicial Determinations. In the event that ~~ final court order should determine that
the election enacting this Chapter 3.35 is invalid for whatever reason, or that any tax
imposed under this Chapter 3.35 is invalid in v~•hole or in part, then the taxes imposed
under Section 3.34.030 shall automatically continue to apply with respect to any service
for which the tax levied pursuant to this Chapter has been determined to be invalid. Such
automatic continuation shall be effective begimling as of the first date of service (or
billing date) for which the tax imposed by this ~~hapter is not valid. However, in the event
of an invalidation, any tax (other than a tax that: is ordered refunded by the court or is
otherwise refunded by the City) paid by a person with respect to a service and calculated
pursuant to this Chapter shall be deemed to satisfy the tax imposed under Section
3.34.030 on that service, so long as the tax is p~iid with respect to a service provided no
later than six months subsequent to the date on which the final court order is published.
3.35.220 Remedies Cumulative.
All remedies and penalties prescribed by this Chapter or which are available under any
other provision of law or equity, including but riot limited to the California False Claims
Act (Government Code Section 12650 et seq.) rind the California Unfair Practices Act
(Business and Professions Code Section 17070 et seq.), are cumulative. The use of one
or more remedies by the City shall not bar the Lase of any other remedy for the purpose of
enforcing the provisions of this Chapter.
3.35.230 Duration.
The tax shall be levied until November 6, 2030 at which time, the tax levied hereinunder,
unless further extended, shall cease.
SECTION 2. Effective Date. This Chapter shall become effective if approved
by a majority vote of the electorate voting on the issue, at the General Municipal Election
to be held on November 3, 2009 within the Cit}• of Cupertino. If so approved, the City
Clerk shall certify to adoption of this OrdinancE;, which shall take effect 10 days upon
such certification.
SECTION 3. Amendment or Repeal. Chapter 3.35 of the Cupertino Municipal
Code may be repealed or amended by the City (~ouncil without a vote of the people.
However, as required by Article XIIIC of the California Constitution, voter approval is
required for any amendment provision that would increase the rate of any tax levied
22
Resolution No. 09-120
Ordinance No. 09-2047 (DRAFT)
pursuant to this Ordinance. The People of the City of Cupertino affirm that the following
actions shall not constitute an increase of the r<<te of a tax:
1. The restoration of the rate of the tax to a rate that is no higher than that set by this
Ordinance, if the City Council has acted to reduce the rate of the tax;
2. An action that interprets or clarifies the methodology of the tax, or any definition
applicable to the tax, so long as interpretati~~n or clarification (even if contrary to
some prior interpretation or clarification) is not inconsistent with the language of this
Ordinance.
3. The establishment of a class of person that is exempt or excepted from the tax or
the discontinuation of any such exemption ~~r exception (other than the
discontinuation of an exemption or exception specifically set forth in this Ordinance);
and
4. The collection of the tax imposed by this Ordinance, even if the City had, for some
period of time, failed to collect the tax.
SECTION 4. Severability. If any section, subsection, sentence, clause, phrase,
or portion of this Ordinance is for any reason held to be invalid or unenforceable by a
court of competent jurisdiction, the remaining I~ortions of this Ordinance shall
nonetheless remain in full force and effect. The people hereby declares that they would
have adopted each section, subsection, sentence;, clause, phrase, or portion of this
Ordinance, irrespective of the fact that any one or more sections, subsections, sentences,
clauses, phrases, or portions of this Ordinance lie declared invalid or unenforceable.
SECTION 5. Ratification of Prior Tax. The voters of the City of Cupertino
hereby ratify and approve the past collection of the Telephone Users Tax under Chapter
3.34 of the Cupertino Municipal Code as it existed prior to the effective date of this
Ordinance.
SECTION 6. Certification. The Mayor is hereby authorized to sign where
indicated below to certify to the adoption of thi;~ Ordinance.
PASSED, APPROVED and ADOPTED by the People of the City of Cupertino
this 3`d day of November 2009.
Orrin Mahoney
MAYOR
ATTEST:
Kim Smith
CITY CLERK
23