Chapter 3.14 UTILITY USERS TAX

This chapter is enacted solely to raise revenue for the general governmental purposes of the city. All of the proceeds from the tax imposed by this chapter shall be placed in the city’s general fund and used for the usual current expenses of the city. (Ord. 04-1899 § 1, 2004.)

3.14.020 Definitions.

For the purpose of this chapter, the following definitions shall apply unless the context clearly indicates or requires a different meaning:

A. “Billing address” shall mean the mailing address of the service user where the service supplier submits invoices or bills for payment by the customer.

B. “Charges for mobile telecommunications services” has the same meaning and usage as set forth in the Mobile Telecommunications Sourcing Act (4 U.S.C. Sections 116 and 124) and the regulations thereunder.

C. “City” means the city of Covina.

D. “City manager” means the city manager of the city, or his or her authorized representative.

E. “Cogenerator” shall mean any corporation or person employing cogeneration (as defined in Section 218.5 of the California Public Utilities Code) for producing power for the generation of electricity for self-use or sale to others from a qualified cogeneration facility (as defined in the federal Public Utility Regulatory Policies Act of 1978 and regulations thereunder).

F. “Exempt wholesale generator” shall have the same meaning as set forth in the Federal Power Act (15 U.S.C. Section 79z-5a) and regulations thereunder.

G. “Gas” shall mean natural or manufactured gas or any alternate hydrocarbon fuel which may be substituted therefor.

H. “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.

I. “Month” means a calendar month.

J. “Nonutility supplier” shall mean:

1. A service supplier, other than a supplier of electric distribution services to all or a significant portion of the city, which generates electricity for sale to others, and shall include, but is not limited to, any publicly owned electric utility, investor-owned utility, cogenerator, municipal utility district, federal power marketing authority, electric rural cooperative, or other supplier or seller of electricity;

2. An electric service provider (ESP), electricity broker, marketer, aggregator, pool operator, or other electricity supplier other than a supplier of electric distribution services to all or a significant portion of the city, which sells or supplies electricity or supplemental services to electricity users within the city; and

3. A gas service supplier, aggregator, marketer, or broker, other than a supplier of gas distribution services to all or a significant portion of the city, which sells or supplies gas to users within the city.

K. “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 nonprofit), municipal district or municipal corporation (other than the city), cooperative, receiver, trustee, guardian, or other representative appointed by order of any court.

L. “Place of primary use” has the same meaning and usage as set forth in the Mobile Telecommunications Sourcing Act (4 U.S.C. Section 116, et seq.) and the regulations thereunder.

M. “Service address” means the residential street address or the business street address of the service user, and in the case of mobile telecommunications service, the service user’s place of primary use.

N. “Service supplier” shall mean any entity or person, including the city, that provides telephone communication, electric, or gas service to a user of such services within the city, and includes an entity or person required to collect, or self-collect under CMC 3.14.060, and remit a tax as imposed by this chapter, including its billing agent in the case of electric, gas, water or video service suppliers.

O. “Service user” shall mean a person required to pay a tax imposed under the provisions of this chapter.

P. “State” shall mean the state of California.

Q. “Tax administrator” means the finance director of the city or his or her designee.

R. “Telephone communication services” shall include “communications services” as defined in Sections 4251 and 4252 of the Internal Revenue Code, and the regulations thereunder, and shall include teletypewriter exchange and similar data services, and any service that is capable of transmitting telephonic quality communications (including the use of Internet Protocol (IP)) or other similar means for digitalization and/or packetization of telephonic quality communications for transmission over digital networks, such as voice over internet (or VoIP), by analog, digital, electronic, radio or similar means through “interconnected service” with the “public switched network” (as these terms are commonly used in the Federal Communications Act and the regulations of the Federal Communications Commission – see 47 U.S.C. Section 332(d)), whether such transmission occurs by wire, teletypewriter, cable, cable modem or digital subscriber line (DSL), internet, fiber-optic, light wave, laser, microwave, switching facilities, satellite, radio wave (including, but not limited to, mobile telecommunications service, cellular service, commercial mobile service and commercial mobile radio service (see 47 U.S.C. Section 332(d)(1) and Part 20.3 of Title 47 of the Code of Federal Regulations), personal communications service (PCS), specialized mobile radio (SMR), and other similar services regardless of radio spectrum used), or any other similar facilities.

S. “Telephone corporation,” “electrical corporation,” “gas corporation,” and “water corporation” shall have the same meanings as defined in Sections 234, 218, 222, and 241, respectively, of the Public Utilities Code of the state except, “electrical corporation,” “gas corporation” and “water corporation” shall also be construed to include any municipality, public agency, broker/marketer, person or franchised agency engaged in the selling or supplying of electrical power, gas or water to a service user. (Ord. 04-1899 § 1, 2004.)

3.14.030 Telephone users tax.

A. There is hereby imposed a tax upon every person in the city, other than a telephone corporation, water corporation, electrical corporation, or gas corporation, using telephone communication services, including intrastate and interstate telephone communication services. The tax imposed by this section shall be at the rate of six percent of all charges made for such telephone communication services. There is a rebuttable presumption that telephone communication 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. Charges for mobile telecommunications services are subject to taxation under this chapter if the customer’s place of primary use is in the city, regardless of where the mobile telecommunications service may originate, terminate, or pass through.

B. As used in this section, the term “telephone communication services” shall not include “private mobile radio service,” as defined in Part 20 of Title 47 of the Code of Federal Regulations, or “private mobile service,” as defined in 47 U.S.C. Section 332(d)(3). The tax imposed under subsection (A) of this section shall not be imposed upon any person for using telecommunication services to the extent that, pursuant to Sections 4252 and 4253 of the Internal Revenue Code, or Division 2, Part 20 of the California Revenue and Tax Code, the amounts paid for such communication services are exempt from or not subject to the tax imposed under Section 4251 of the Internal Revenue Code or the California Revenue and Tax Code. In the event that the federal excise tax on “communication services” as provided in Sections 4251, 4252 and 4253 of the Internal Revenue Code is subsequently repealed, any reference in this section and in CMC 3.14.020(R) to such law, including any related federal regulations, private letter rulings, case law, and other opinions interpreting these sections, shall refer to that body of law that existed immediately prior to the date of repeal, as well as to any judicial or administrative decision interpreting such federal excise tax law which is published or rendered after the date of repeal.

C. 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 telephone communication services. “Charges” shall not include charges for services paid for by inserting coins in coin-operated telephones except that where such coin-operated telephone service is furnished for a guaranteed amount, the amounts paid under such guarantee plus any fixed monthly or other periodic charge shall be included in the base for computing the amount of the tax due.

D. The tax administrator, from time to time, 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 that are subject to the tax of subsection (A) of this section. This administrative ruling shall not impose a new tax, revise an existing tax methodology as stated in this chapter, or increase an existing tax. An administrative ruling shall not constitute a new tax or an increase in an existing tax if such administrative ruling is:

1. Consistent with the existing ordinance language; and

2. Merely reflects a change in, clarification to, or new rendition of:

a. The definition, interpretation, or application of substantial nexus by a court of competent jurisdiction or by preemptive state or federal law, for purposes of taxation; or

b. The definition, interpretation, or application of the federal excise tax rules, regulations, and laws pertaining to “communications services” (Sections 4251, 4252 and 4253 of the Internal Revenue Code) by the Internal Revenue Service, or by a state or local agency that assumes an interpretative role of those rules, regulations, and laws in the event that the federal excise tax on telecommunications is repealed.

E. To prevent actual multi-jurisdictional taxation of telephone communication 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 telephone communication service, 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 telephone communication services imposed by this section shall be collected from the service user by the service supplier. The amount of the tax collected in one month shall be remitted to the tax administrator and must be received by the tax administrator on or before the twentieth day of the following month. (Ord. 04-1899 § 1, 2004.)

3.14.040 Electricity users tax.

A. There is hereby imposed a tax upon every person, other than a telephone corporation, water corporation, electrical corporation, or gas corporation, using electricity in the city. The tax imposed by this section shall be at the rate of six percent of the charges made for such electricity, and for any supplemental services or other associated activities directly related and/or necessary for the provision of electricity to the end user, which are provided by a service supplier or nonutility supplier to a service user. The tax shall be collected from the service user by the service supplier or nonutility service supplier, or its billing agent.

B. As used in this section, the term “charges” shall apply to all services, components and items that are: (a) necessary or common to the receipt, use and enjoyment of electric service; or (b) currently, or historically have been, included in a single or bundled rate for electric service by a local distribution company to a class of retail customers. The term “charges” shall include, but is not limited to, the following charges:

1. Energy charges;

2. Distribution and transmission charges;

3. Metering charges;

4. Stand-by, reserves, firming, ramping, voltage support, regulation, emergency, or other similar minimum charges for services;

5. Customer charges, service establishment or reestablishment charges, demand charges, fuel or other cost adjustments, power exchange charges, independent system operator (ISO) charges, stranded investment or competitive transition charges (CTC), public purpose program charges, nuclear decommissioning charges, trust transfer amounts (bond financing charges), franchise fee, franchise surcharge, annual and monthly charges, and other charges, fees and surcharges which are necessary to or common for the receipt, use and enjoyment of electric service; and

6. Charges, fees, or surcharges for electricity services or programs, which are mandated by the California Public Utilities Commission, or the Federal Energy Regulatory Commission, whether or not such charges, fees, or surcharges appear on a bundled or line-item basis on the customer billing.

D. The tax administrator, from time to time, may survey the electric service suppliers to identify the various unbundled billing components of electric retail service that they commonly provide to residential and commercial/industrial customers in the city, and the charges therefor, including those items that are mandated by state or federal regulatory agencies as a condition of providing such electric service. The tax administrator, thereafter, may issue and disseminate to such electric service suppliers an administrative ruling identifying those components and items which are: (1) necessary or common to the receipt, use or enjoyment of electric service; or (2) currently, or historically have been, included in a single or bundled rate for electric service by a local distribution company to a class of retail customers. Charges for such components and items shall be subject to the tax of subsection (A) of this section.

E. As used in this section, the term “using electrical energy” shall not be construed to mean the storage of such energy by a person in a battery owned or possessed by him or her for use in an automobile or other machinery or device apart from the premises upon which the energy was received; provided, however, that the term shall include the receiving of such energy for the purpose of using it in the charging of batteries; nor shall the term include electricity used and consumed by an electric public utility; nor shall the term include the mere receiving of such energy by an electric public utility or governmental agency at a point within the city for resale; or the use of such energy in the production or distribution of water by a public utility or a governmental agency.

F. The tax on electricity provided by self-production or by a nonutility supplier or an electric utility not under the jurisdiction of this chapter shall be collected and remitted in the manner set forth in CMC 3.14.060. All other taxes on charges for electricity imposed by this section shall be collected from the service user by the electric service supplier or its billing agent. The amount of the tax collected in one month shall be remitted to the tax administrator on or before the twentieth day of the following month or, at the option of the person required to collect or remit the tax, such person shall remit an estimated amount of the tax measured by the tax billed in the previous month or upon the payment pattern of the service user, which must be received by the tax administrator on or before the twentieth day of the following month; provided, that the service user shall submit an adjusted payment or request for credit, as appropriate, within 60 days following each calendar quarter. The credit, if approved by the tax administrator, may be applied against any subsequent tax bill that becomes due. (Ord. 04-1899 § 1, 2004.)

3.14.050 Gas users tax.

A. There is hereby imposed a tax upon every person other than a telephone corporation, water corporation, electrical corporation, or gas corporation using gas in the city, which is transported through a pipeline distribution system. The tax imposed by this section shall be at the rate of six percent of the charges made for such gas, including all services related to the storage, transportation, and delivery of such gas.

B. As used in this section, the term “charges” shall apply to all services, components and items for gas service that are: (1) necessary or common to the receipt, use and enjoyment of gas service; or (2) currently, or historically have been, included in a single or bundled rate for gas service by a local distribution company to a class of retail customers. The term “charges” shall include, but is not limited to, the following charges:

1. The commodity charges for purchased gas, or the cost of gas owned by the service user (including the actual costs attributed to drilling, production, lifting, storage, gathering, trunkline, pipeline, and other operating costs associated with the production and delivery of such gas), which is delivered through a gas pipeline distribution system;

2. Gas transportation charges (including interstate charges to the extent not included in commodity charges);

3. Storage charges; provided, however, that the service supplier shall not be required to apply the tax to any charges for gas storage services when the service supplier cannot, as a practical matter, determine the jurisdiction where such stored gas is ultimately used; but it shall be the obligation of the service user to self-collect the amount of tax not applied to any charge for gas storage by the service supplier and to remit the tax to the appropriate jurisdiction;

4. Capacity or demand charges, service establishment or reestablishment charges, administrative charges, marketing charges, transition charges, customer charges, minimum charges, annual and monthly charges, and any other charges which are necessary or common to the receipt, use and enjoyment of gas service; and

5. Charges, fees, or surcharges for gas services or programs, which are mandated by the California Public Utilities Commission or the Federal Energy Regulatory Commission, whether or not such charges, fees, or surcharges appear on a bundled or line-item basis on the customer billing.

D. The tax administrator, from time to time, may survey the gas service suppliers to identify the various unbundled billing components of gas retail service that they commonly provide to residential and commercial/industrial customers in the city, and the charges therefor, including those items that are mandated by state or federal regulatory agencies as a condition of providing such gas service. The tax administrator, thereafter, may issue and disseminate to such gas service suppliers an administrative ruling identifying those components and items which are: (1) necessary or common to the receipt, use or enjoyment of gas service; or (2) currently, or historically have been, included in a single or bundled rate for gas service by a local distribution company to a class of retail customers. Charges for such components and items shall be subject to the tax of subsection (A) of this section.

E. The following shall be excluded from the base on which the tax imposed in this section is computed:

1. Charges made for natural gas which is to be resold and delivered through mains and pipes;

2. Charges made for natural gas sold for use in the generation of electrical energy or for the production or distribution of water by a public utility or governmental agency;

3. Charges made by a gas utility for gas used and consumed in the conduct of business of gas public utilities;

4. Charges made for gas used in the propulsion of motor vehicles, as that phrase is defined in the Vehicle Code of the state, utilizing natural gas; and

5. Charges made for gas used by a nonutility supplier to generate electrical energy for its own use or for sale to others provided the electricity so generated is subject to the tax in accordance with CMC 3.14.060.

F. The tax on gas provided by self-production or by a nonutility supplier not under the jurisdiction of this chapter shall be collected and remitted in the manner set forth in CMC 3.14.060. All other taxes on charges for gas imposed by this section shall be collected from the service user by the gas service supplier or its billing agent. The amount of tax collected in one month shall be remitted to the tax administrator, and must be received by the tax administrator on or before the twentieth day of the following month; or, at the option of the person required to collect or remit the tax, such person shall remit an estimated amount of tax measured by the tax billed in the previous month or upon the payment pattern of the service user, which must be received by the tax administrator on or before the twentieth day of the following month; provided, that the service user shall submit an adjusted payment or request for credit, as appropriate, within 60 days following each calendar quarter. The credit, if approved by the tax administrator, may be applied against any subsequent tax bill that becomes due. (Ord. 04-1899 § 1, 2004.)

3.14.060 Collection of tax from service users receiving direct purchase of gas or electricity.

A. Any service user subject to the tax imposed by CMC 3.14.040 or 3.14.050, which produces gas or electricity for self-use, or which receives gas or electricity directly from a nonutility supplier not under the jurisdiction of this chapter, or which otherwise is not having the full tax due on the use of gas or electricity in the city that is directly billed and collected by the service supplier or its billing agent, shall report said fact to the tax administrator and shall remit the tax due directly to the tax administrator within 30 days of such use. In lieu of paying said actual tax, the service user may, at its option, remit to the tax administrator within 30 days of such use an estimated amount of tax measured by the tax billed in the previous month, or upon the pattern payment of similar customers of the service supplier using similar amounts of gas or electricity; provided, that the service user shall submit an adjusted payment or request for credit, as appropriate, within 60 days following each calendar quarter. The credit, if approved by the tax administrator, may be applied against any subsequent tax bill that becomes due.

B. The tax administrator may require said service user to identify its nonutility supplier and provide, subject to audit, invoices, books of account, or other satisfactory evidence documenting the quantity of gas or electricity used and the cost or price thereof. If the service user is unable to provide such satisfactory evidence, or, if the administrative cost of calculating the tax, in the opinion of the city, is excessive, the city may determine the tax by applying the tax rate to the equivalent charges the service user would have incurred if the gas or electricity used had been provided by the service supplier, which is the primary supplier of gas or electricity. (Ord. 04-1899 § 1, 2004.)

3.14.070 Water users tax.

A. There is imposed a tax upon every person, other than a telephone corporation, water corporation, electrical corporation, or gas corporation, using water in the city which is transported and delivered through a pipeline distribution system. The tax imposed by this section shall be at the rate of six percent of the charges made for such water and shall be collected from the service user by the water service supplier, or its billing agent.

B. As used in this section, the term “charges” shall apply to all services, components and items that are: (a) necessary for or common to the receipt, use or enjoyment of water service; or (b) currently or historically have been included in a single or bundled rate for water service by a local distribution company to a class of retail customers. The term “charges” shall include, but is not limited to, the following charges:

1. Water commodity charges (potable and nonpotable);

2. Distribution or transmission charges;

3. Metering charges;

4. Customer charges, later charges, service establishment or reestablishment charges, franchise fees, franchise surcharges, annual and monthly charges, and other charges, fees and surcharges which are necessary for or common to the receipt, use or enjoyment of water service; and,

5. Charges, fees, or surcharges for water services or programs, which are mandated by a water district or a state or federal agency, whether or not such charges, fees, or surcharges appear on a bundled or line-item basis on the customer billing.

D. The tax administrator, from time to time, may survey the water service suppliers in the city to identify the various unbundled billing components of water retail service that they commonly provide to residential and commercial/industrial customers in the city, and the charges therefor, including those items that are mandated by a water district or a state or federal agency as a condition of providing such water service. The tax administrator, thereafter, may issue and disseminate to such water service suppliers an administrative ruling identifying those components and items which are: (1) necessary for or common to the receipt, use or enjoyment of water service; or (2) currently or historically have been included in a single or bundled rate for water service by a local distribution company to a class of retail customers. Charges for such components and items shall be subject to the tax of subsection (A) of this section.

E. There shall be excluded from the base on which the tax imposed in this section is computed charges made for water which is to be resold and delivered through a pipeline distribution system; and charges made by a municipal water department, public utility or a county or municipal water district for water used and consumed by such department, utility or district in the conduct of the business of such department, utility or district.

F. The tax on water service imposed by this section shall be collected from the service user by the water service supplier or its billing agent. The amount of tax collected in one month shall be remitted to the tax administrator, and must be received by the tax administrator on or before the twentieth day of the following month. (Ord. 04-1899 § 1, 2004.)

3.14.080 Constitutional and statutory exemptions.

A. The taxes imposed by this chapter shall not apply to:

1. Any person or service user if imposition of such tax upon that person or service user would be in violation of a federal or state statute or the Constitution of the United States or the Constitution of the State of California, or otherwise exempted by this chapter; and

2. The city.

B. Any service user that 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, or is a service user of telephone communication services that has received a federal excise tax exemption certificate for such service. Said application shall be made upon a form 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 that 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. Upon request of the tax administrator, a service supplier or nonutility supplier, or their billing agents, shall provide a list of names and addresses of those customers which, according to their billing records, are deemed exempt from the utility users tax. With respect to a service user of telephone communication services, a service supplier of such telephone communication services doing business in the city shall, upon request of the tax administrator, provide a copy of the federal or state exemption certificate for each exempt customer within the city that is served by such service supplier.

C. The decision of the tax administrator may be appealed pursuant to CMC 3.14.190. Filing an application with the tax administrator and appeal to the city manager pursuant to CMC 3.14.190 is a prerequisite to a suit thereon.

D. The city council reserves the power to, by order or resolution, establish classes of persons or classes of utility service otherwise subject to payment of a tax imposed by this chapter and provide that such classes of persons or services shall be exempt, in whole or in part, from such tax.

E. Following application and approval of any exemption by the city, 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. (Ord. 04-1899 § 1, 2004.)

3.14.090 Substantial nexus/minimum contacts.

For purposes of imposing a tax or establishing a 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 utility 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. (Ord. 04-1899 § 1, 2004.)

3.14.100 Duty to collect – Procedures.

The duty to collect and remit the taxes imposed by this chapter shall be performed as follows:

A. The tax shall be collected insofar as practicable at the time and along with the charges made in accordance with the regular billing practices of the service supplier. Where the amount paid by a service user to a service supplier is less than the full amount of the charge and tax which has accrued for the billing period, such amount and any subsequent payments by a service user may be applied to the utility service charge first until such charge has been fully satisfied. Any remaining balance shall be applied to the taxes due, except in those cases where a service user pays the full amount of the charges but notifies the service supplier of his or her refusal to pay the tax imposed on the charges.

B. The duty to collect tax from a service user shall commence with the beginning of the first full 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 person receives more than one billing, one or more being for different periods than another, the duty to collect shall arise separately for each billing. (Ord. 04-1899 § 1, 2004.)

3.14.110 Filing return and payment.

Each person required by this chapter to remit a tax shall file a return to the tax administrator, 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/she deems necessary to determine if the tax is being levied, collected, and remitted in accordance with this chapter. Returns are due immediately upon cessation of business for any reason. Pursuant to Revenue and Tax Code Section 7284.6, the tax administrator, and his or her agents, shall maintain such filing returns as confidential information exempt from disclosure provisions of the Public Records Act. (Ord. 04-1899 § 1, 2004.)

3.14.120 Collection of penalties.

A. Taxes collected from a service user, or self-collected by a service user subject to CMC 3.14.060, 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 received by the tax administrator on or before 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 or before the following business day.

B. If a service supplier, or a service user subject to CMC 3.14.060, fails to remit any tax collected, on or before the due date, said person shall pay a penalty for such delinquencies at the rate as set forth by resolution of the city council of the total tax that is delinquent in the remittance, and shall pay interest at the rate as set forth by resolution of the city council, 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 power to impose additional penalties upon persons required to collect and/or remit taxes pursuant to the provisions of this chapter for fraud or gross negligence in reporting or remitting at the rate as set forth by resolution of the city council 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 penalty 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. (Ord. 04-1899 § 1, 2004.)

3.14.130 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 collect or self-collect taxes pursuant to the provisions of this chapter has failed to collect and remit the proper amount of tax by improperly or failing to apply the tax to one or more taxable services or charges.

B.1. The tax administrator shall mail a notice of 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 as set forth by resolution of the city council, on the amount of the tax from the date on which the tax should have been received by the city.

2. Within 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. 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.

C. If the person requests a hearing, the tax administrator shall cause the matter to be set for hearing, which shall be held within 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 administrator to such person at least 10 calendar days prior to the hearing, and, if the tax administrator desires said person to produce specific records at such hearing, such notice may 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 nonassessment), thereafter, by confirming, modifying or rejecting the original deficiency determination, and shall mail a copy of such final assessment to the person owing the tax. The decision of the tax administrator may be appealed pursuant to CMC 3.14.190. Filing an application with the tax administrator and appeal to the city council pursuant to CMC 3.14.190 is a prerequisite 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 day following the date of receipt of the notice of final assessment. The penalty for delinquency shall be at the rate as set forth by resolution of the city council on the total amount of the assessment, along with interest at the rate as set forth by resolution of the city council, 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 under this section shall commence from the date of delinquency as provided in this subsection.

F. All notices under this section may be sent by 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. (Ord. 04-1899 § 1, 2004.)

3.14.140 Administrative remedy – Nonpaying service users.

A. Whenever the tax administrator determines 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 person of the obligation to collect the taxes due under this chapter from certain named service users for specific billing periods. Whenever the service user has failed to pay the amount of tax owed for a period of two 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 amounts of taxes owed under the provisions of this chapter.

B. In addition to the tax owed, the service user shall pay a delinquency penalty at the rate as set forth by resolution of the city council of the total tax that is owed, and shall pay interest at the rate as set forth by resolution of the city council, on the amount of the tax, exclusive of penalties, from the due date, until paid.

C. The tax administrator shall notify the nonpaying 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 collect 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 30 days from the date of the service of the notice upon him or her, the tax administrator may impose an additional penalty of 15 percent of the amount of the total tax that is owed. (Ord. 04-1899 § 1, 2004.)

3.14.150 Actions to collect.

Any tax required to be paid by a service user under the provisions of this chapter shall be deemed a debt owed by the service user to the city. 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 and court costs. (Ord. 04-1899 § 1, 2004.)

3.14.160 Additional powers and duties of 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 chapter.

B. The tax administrator may adopt administrative rules and regulations not inconsistent with provisions of this chapter for the purpose of interpreting, clarifying, carrying out and enforcing the payment, collection and remittance of the taxes herein imposed. A copy of such administrative rules and regulations shall be on file in the tax administrator’s office.

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 (or service user subject to CMC 3.14.060) so long as said agreements 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 years next 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 determination pursuant to CMC 3.14.130 for all taxes, 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 entitled to a rebuttable presumption of correctness.

E. Upon receipt of a written request of a taxpayer, and for good cause, the tax administrator may extend the time for filing any statement required pursuant to this chapter for a period of not to exceed 45 days; provided, that the time for filing the required statement has not already passed when 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 three quarters of one percent per month, prorated for any portion 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.

G. The tax administrator or the city council, with the written approval of the city attorney, may compromise a claim pursuant to this chapter where the portion of the claim proposed to be released is less than the amount set by separate resolution of the city council relating to the settlement of general liability claims against the city and, with the approval of the city attorney and the city council, may compromise such a claim where the portion proposed to be released is equal to or greater than the amount set by separate resolution of the city council relating to the settlement of general liability claims against the city by the city council.

H. Notwithstanding any provision in this chapter to the contrary, the tax administrator may waive any penalty or interest imposed upon a person required to collect and/or remit for failure to collect the tax imposed by this chapter if the noncollection occurred in good faith. In determining whether the noncollection was in good faith, the tax administrator shall take into consideration industry practice or other precedence. (Ord. 04-1899 § 1, 2004.)

3.14.170 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 years, all records as may be necessary to determine the amount of such tax as he/she may have been liable for the collection of and remittance to the tax administrator, which records the tax administrator, or the tax administrator’s designated representative, shall have the right to inspect at a reasonable time.

B. The city may issue an administrative subpoena 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 business. 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 person 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, or the tax administrator’s designated representative, is authorized to execute a nondisclosure agreement approved by the city attorney to protect the confidentiality of customer information pursuant to California Revenue and Taxation Code Sections 7284.6 and 7284.7. The tax administrator, or the tax administrator’s designated representative, may request from a person providing transportation services of gas or electricity to service users within the city a list of the names and addresses, and other pertinent information, of its transportation customers within the city pursuant to Section 6354(e) of the California Public Utilities Code.

D. If a service supplier uses a billing agent or billing aggregator to bill, collect, and/or remit the tax, the service supplier shall: (1) 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 (2) 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 necessary to verify the proper application, calculation, collection and/or remittance of such tax to the city.

E. If any person subject to record keeping under this section unreasonably denies the tax administrator, or the tax administrator’s designated representative, access to such records, or fails to produce the information requested in an administrative subpoena within the time specified, then the tax administrator may impose a penalty of $500.00 on such person for each day following: (1) the initial date that the person refuses to provide such access; or (2) the due date for production of records as set forth in the administrative subpoena. This penalty shall be in addition to any other penalty imposed under this chapter. (Ord. 04-1899 § 1, 2004.)

3.14.180 Refunds.

Whenever the amount of any tax has been overpaid or paid more than once or has been erroneously or illegally collected or received by the tax administrator under this chapter, it may be refunded as provided in this section:

A. The tax administrator or city council may refund any tax that has been overpaid, paid more than once, or has been erroneously or illegally collected or received by the tax administrator under this chapter; 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, under penalty of perjury, to the tax collector. The period for filing a claim for refund shall be one year from the time the tax was paid or erroneously or illegally collected; provided, however, that in no event shall the period to file such claim expire prior to the shortest period allowable for filing a tax refund claim under Title 1, Division 3.6, Part 3, Section 911.2 of the California Government Code. Such claim must clearly establish claimant’s right to the refund by written records showing entitlement thereto, and must clearly set forth the facts and legal theories under which the claimant believes he or she has right to a refund. Nothing herein shall permit the filing of a refund claim on behalf of a class or group of taxpayers. Where the amount of any individual refund claim is in excess of the amount set by separate resolution of the city council relating to the settlement of general liability claims against the city by the tax administrator or city council, city council approval shall be required.

B. It is the intent of the city that the one-year written claim requirement of this section be given retroactive effect; provided, however, that any claims which arose prior to the enactment of the one-year claims period of this section, and which are not otherwise barred by a then-applicable statute of limitations or claims procedure, must be filed with the tax administrator as provided in this subsection within 90 days following the effective date of this chapter.

C. Notwithstanding the notice provisions of subsection (A) of this section, a service supplier that has collected any amount of tax in excess of the amount of tax imposed by this chapter and actually due from a service user (whether due to overpayment or to erroneous or illegal collection of said tax) may refund such amount to the service user, or credit to charges subsequently payable by the service user to the service supplier, and claim credit for such overpayment against the amount of tax which is due upon any other monthly returns to the tax administrator; provided, such credit is claimed in a return dated no later than one year from the date of overpayment or erroneous or illegal collection of said tax. The tax administrator shall determine the validity of the service user’s claim of credit, and the underlying basis for such claim.

D. Notwithstanding other provisions of this section, whenever a service supplier, pursuant to an order of the California Public Utilities Commission, makes a refund to service users of charges for past utility services, the taxes paid pursuant to this chapter on the amount of such refunded charges shall also be refunded to service users, and the service supplier shall be entitled to claim a credit for such refunded taxes against the amount of tax which is due upon the next monthly returns. In the event the ordinance codified in this section is repealed, the amounts of any refundable taxes will be borne by the city.

E. Notwithstanding subsections (A) and (B) of this section, 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 years next preceding a notice of tax deficiency or assessment by the tax administrator pursuant to CMC 3.14.130, during any year for which the service supplier, at the request of the tax administrator, has executed a waiver of the defense of the statute of limitations with regard to any claim the city may have for a utility users tax. Under no circumstances shall an overpayment 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 one-year written claim requirement of this section. (Ord. 04-1899 § 1, 2004.)

3.14.190 Appeals.

A. The provisions of this section apply to any decision (other than a decision relating to a refund pursuant to CMC 3.14.180), deficiency determination, assessment, or administrative ruling of the tax administrator. Any person aggrieved by any decision (other than a decision relating to a refund pursuant to CMC 3.14.180), deficiency determination, assessment, or administrative ruling of the tax administrator, shall be required to comply with the appeals procedure of this section. Compliance with this section shall be a prerequisite to a suit thereon. (See Government Code Section 935(b).) Nothing herein shall permit the filing of a claim or action on behalf of a class or group of taxpayers.

B. If any person is aggrieved by any decision (other than a decision relating to a refund pursuant to CMC 3.14.180), deficiency determination, assessment, or administrative ruling of the tax administrator, he or she may appeal to the city council by filing a notice of appeal with the city clerk within 14 days of the date of the decision, deficiency determination, assessment, or administrative ruling of the tax administrator which aggrieved the service user or service supplier.

C. The matter shall be set for hearing no more than 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 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, the city council, and any other interested person may present such relevant evidence as he or she may have relating to the determination from which the appeal is taken.

D. Based upon the submission of such evidence and the review of the city’s files, the city council 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 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 within 90 days from the date of the decision in accordance with Code of Civil Procedure Section 1094.6. If the city council fails or refuses to act on a refund claim within the 14-day period, the claim shall be deemed to have been rejected by the city council on the fourteenth day.

E. All notices under this section may be sent by 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. (Ord. 04-1899 § 1, 2004.)

3.14.200 No injunction/writ of mandate.

No injunction or writ of mandate or other legal or 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. (Ord. 04-1899 § 1, 2004.)

3.14.210 Remedies cumulative.

All remedies and penalties prescribed by this chapter or which are available under any other provision of law or equity, including but not limited to the California False Claims Act (Government Code Section 12650 et seq.) and 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 use of any other remedy for the purpose of enforcing the provisions of this chapter. (Ord. 04-1899 § 1, 2004.)

3.14.220 Notice of changes to chapter.

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. Prior to the effective date of the chapter change, the service supplier shall provide the tax administrator with a copy of any written procedures describing the information that the service supplier needs to implement the chapter change. If the service supplier fails to provide such written instructions, the tax administrator, or his or her agent, shall send, by first-class mail, a copy of the chapter change to all collectors and remitters of the city’s utility users taxes according to the latest payment records of the tax administrator. (Ord. 04-1899 § 1, 2004.)

3.14.230 Penalties.

Any person violating any of the provisions of this chapter shall be deemed guilty of a misdemeanor, or an infraction at the discretion of the city attorney. (Ord. 04-1899 § 1, 2004.)

3.14.240 Future amendment to cited statute.

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. (Ord. 04-1899 § 1, 2004.)

3.14.250 Operative date.

This chapter shall become effective the first day of January 2004. It is noted that this chapter only provides clarifying provisions with respect to the imposition and collection of the city’s existing utility users tax, which current tax was confirmed to be approved by the voters of Covina on March 16, 1999, in accordance with California Propositions 62 and 218. This chapter does not increase or extend the life of the city’s current utility users tax. (Ord. 04-1899 § 1, 2004.)

3.14.260 Sunset of tax.

The tax imposed by this chapter shall automatically be terminated, without further action by the city council, or the electors of the city, on March 16, 2029. As part of the yearly budget process, the city council shall conduct an annual review of the tax to determine potential downward adjustment. After March 16, 2029, the tax imposed by this chapter can only be continued or reestablished by a majority vote of the city council following required public hearings and a majority vote of Covina voters pursuant to California Propositions 62 and 218. (Ord. 17-05 § 1, 2017; Ord. 08-1956 § 1, 2008; Ord. 04-1899 § 1, 2004.)