Chapter 3.26 UTILITY OCCUPATION TAX

In construing the provisions of this chapter, except when otherwise plainly declared or clearly apparent from the context, the following definitions shall be applied:

A. “Gross income” means the value proceeding or accruing from the sale of tangible property or service, and receipts (including all sums earned or charged, whether received or not) by reason of the investment of capital in the business engaged in, including rentals, royalties, fees or other emoluments, however designated (excluding receipts or proceeds from the use or sale of real property or any interest therein, and proceeds from the sale of notes, bonds, mortgages or other evidences of indebtedness, or stocks and the like) and without any deduction on account of losses.

B. “Telephone business” means the business of providing access to a local telephone network, local telephone network switching service, toll service, cellular telephone service, coin telephone services, telephonic, video, data, or similar communication, or transmission for hire, via a local telephone network, toll line or channel, cable, microwave, or similar communication or transmission system. It further includes cooperative or farmer line telephone companies or associations operating an exchange. “Telephone business” does not include the providing of competitive telephone service, the providing of cable television service, nor the providing of broadcast services by radio or television stations.

C. “Cellular telephone service” is a two-way voice and data telephone/telecommunications system based in whole or substantially in part on wireless radio communications and which is not subject to regulation by the Washington Utilities and Transportation Commission (WUTC). This includes cellular mobile service. The definition of cellular mobile service includes other wireless radio communications services such as specialized mobile radio (SMR), personal communications services (PCS), and any other evolving wireless radio communications technology which accomplishes a purpose similar to cellular mobile service.

D. “Competitive telephone service” means the providing by any person of telecommunications equipment or apparatus, or service related to that equipment or apparatus such as repair or maintenance service, if the equipment or apparatus is of a type which may be provided by persons not subject to regulation as telephone companies under RCW Title 80, and for which a separate charge is made. Transmission of communication through cellular telephones is classified as “telephone business” rather than “competitive telephone service.”

E. “Person” or “persons” means persons of either sex, firms, corporations, copartnerships and other associations of natural persons whether acting by themselves or by servants, agents or employees.

F. “Tax year” or “taxable year” means the year commencing January 1st and ending on December 31st of the same year, or, in lieu thereof, the taxpayer’s fiscal year when permission is obtained from the City Finance Director to use the same as the tax year.

G. “Customer” means the person, firm, corporation, business or other such entity which partakes of, utilizes, or subscribes for the services of a licensed utility.

H. “Taxpayer” means a utility required to have a license under the provisions of this chapter. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.030 Occupation license required.

No person, firm or corporation shall engage in or carry on any business, occupation, pursuit or privilege for which a license fee or tax is imposed by this chapter without first having obtained, and being the holder of, a valid and subsisting license to do so, to be known as a “utility occupation license.” Each person, firm, or corporation shall promptly apply to the City Finance Director for a license upon the appropriate form provided by the City Finance Director, giving such information as reasonably necessary for the administration and enforcement of this chapter; and upon acceptance, the City Finance Director shall thereupon issue such a license to the applicant. A utility occupation license shall be personal and nontransferable. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.040 Occupations subject to tax – Amount.

There is levied upon and shall be collected from persons, including the City, on account of certain business activities engaged in or carried on, license fees or occupation taxes in the amount to be determined by the application of rates given against gross income as follows:

A. Upon every person engaged in or carrying on the business of selling or furnishing electrical energy, a fee or tax equal to six percent of the total gross income derived from such business in the City during the period for which the license fee or tax is due.

B. Upon every person engaged in or carrying on the business of selling or furnishing natural gas for domestic, business or industrial consumption, a fee or tax equal to six percent of the total gross income derived from such business in the City during the period for which the license fee or tax is due.

C. Upon every person engaged in or carrying on a telephone business, excepting cellular telephone service, a fee or tax equal to six percent of the total gross income, excluding revenues from interstate toll, derived from such business in the City during the period for which the license fee or tax is due. For the purposes of this subsection, “gross income” shall not include charges which are passed on to the customer by a telephone company pursuant to tariffs required by regulatory order to compensate for the cost to the company of the tax imposed by this section, nor competitive telephone service which is of a type which can be provided by persons that are not subject to regulation as telephone companies under RCW Title 80 and for which a separate charge is made.

D. There is levied upon and shall be collected from persons engaged in the business or occupation of a cellular phone service provider an amount equal to six percent applied to the balance of gross income after allowance for adjustments and deductions as provided for in this chapter under FMC 3.26.065.

E. Upon every person, including the City, engaged in or carrying on the business of operating or conducting a potable water system for domestic, business or industrial consumption, a fee or tax equal to nine percent of the total gross income derived from such business in the City during the period for which the license fee or tax is due.

F. Upon every person, including the City, engaged in or carrying on the business of operating or conducting a sewerage system for domestic, business or industrial use, a fee or tax equal to nine percent of the total gross income derived from such business in the City during the period for which the license fee or tax is due.

G. Upon every person, including the City, engaged in or carrying on the business of operating or maintaining a storm drainage and flood control system for domestic, business or industrial use, a fee or tax equal to nine percent of the total gross income derived from such business in the City during the period for which the license fee or tax is due. (Ord. 1800 § 1, 2013; Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.050 License tax year.

All utility occupation licenses and the fee for the tax therefor shall be for the tax year for which issued and shall expire at the end of the tax year. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.060 Exemptions and deductions – General.

There shall be excepted and deducted from the total gross income upon which the license fee or tax is computed so much thereof as is derived from transactions in interstate or foreign commerce, or from business done for the government of the United States, its officers or agents, or any amount paid to the federal, state and local governmental entities as excise taxes levied or imposed upon the sale or distribution of property or services or business which the City is prohibited from taxing under the Constitution or laws of the state. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.065 Exemptions and deductions – Cellular telephone service.

A. In addition to the general exemptions and deductions provided for in FMC 3.26.060, for cellular telephone service there shall also be excluded from the total gross income upon which the license fee or tax is computed the following:

1. That portion of the gross income derived from charges to another telecommunications company, as defined in RCW 80.04.010, for connecting fees, switching charges, or carrier access charges relating to intrastate toll telephone services, or for access to, or charges for, interstate services.

2. Charges by a taxpayer engaging in a telephone business to a telecommunications company, as defined in RCW 80.04.010, for telephone service that the purchaser buys for the purpose of resale.

3. Adjustments made to a billing or to a customer account or to a telecommunications company accrual account in order to reverse a billing or charge that had been made as a result of third-party fraud or other crime and was not properly a debt of a customer.

B. A deduction from gross income shall be allowed, only to cellular phone service providers which keep their regular books of account on an accrual basis, for credit losses actually sustained by a taxpayer as a result of cellular telephone service business which shall be phased in as follows: 40 percent of the credit losses occurring in 1996; 60 percent of the credit losses occurring in 1997; 80 percent of the credit losses occurring in 1998; and a complete deduction for the credit losses occurring in 1999 and thereafter. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.070 Allocation of income – Cellular telephone service.

The allocation of income by cellular telephone service providers shall be as follows:

A. Service Address. Payments by a customer for the telephone service from telephones without a fixed location shall be allocated among taxing jurisdictions to the location of the customer’s principal service address during the period for which the tax applies.

B. Presumption. There is a presumption that the service address a customer supplies to the taxpayer is current and accurate, unless the taxpayer has actual knowledge to the contrary.

C. Roaming Phones. When the service is provided while a customer is roaming outside the customer’s normal cellular network area, the gross income shall be assigned consistent with the taxpayer’s accounting system to the location of the originating cell site of the call, or to the location of the main cellular switching office that switched the call.

D. Dispute Resolution. If there is a dispute between or among the City and another city or cities as to the service address of a customer who is receiving cellular telephone services and the dispute is not resolved by negotiation among the parties, then the dispute shall be resolved by the City and the other city or cities by submitting the issue for settlement to the Association of Washington Cities (AWC). Once taxes on the disputed revenues have been paid to one of the contesting cities, the cellular telephone service company shall have no further liability with respect to additional taxes, penalties, or interest on the disputed revenues so long as it promptly changes its billing records for future revenues to comport with the settlement facilitated by AWC. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.075 Authority of Administrator.

The City Administrator is authorized to represent the City in negotiations with other cities for the proper allocation of taxes due under FMC 3.26.040. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.076 Rate change.

No change in the rate of tax upon persons engaging in occupations subject to the tax herein shall apply to business activities occurring before the effective date of the change and, except for a change in the tax rate authorized by RCW 35.21.870, no change in the rate of the tax may take effect sooner than 60 days following the enactment of the ordinance establishing the change. The City Finance Director shall send to each person, at the address on its license, a copy of any ordinance changing the rate of tax promptly upon its enactment. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.077 Remittance required bimonthly.

Commencing with January 1st of the tax year, each two-month period constitutes a bimonthly period, at which on or before the last day of the month following the end of such bimonthly period the license fee or tax for said bimonthly period is due. A monthly installment is permissible with the approval of the City Finance Director; provided, that said installments are likewise due on or before the last day of the succeeding month; and further, that said monthly installments may not be converted to bimonthly installments except on January 1st of the next tax year. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.080 Collection and remittance authorization for public funds.

The City-operated utility occupations tax shall be billed to each customer and paid in addition to the applicable water and sewer rates into the appropriate water or sewer operating fund by each customer within the time and in the manner required by the ordinances applicable to collection of water and sewer charges and fees. Insofar as the state requires the City to pay a public utilities tax on its water services in excess of the tax to be collected from water customers pursuant to this chapter and on its sewer services in an amount slightly less than the amount to be collected from sewer customers pursuant to this chapter, the bills evidencing this tax may advise customers of such fact by designating this tax as a “state/local utilities tax” or other such designation deemed appropriate by the City Finance Director. Regardless of the time and manner of collection through payment of this tax by each customer into the water or sewer operating fund in accordance with the ordinances applicable to collection of water and sewer charges and fees, the remittance due by City-operated utility occupations subject to this tax shall be paid by means of a bimonthly transfer of funds from the water or sewer operating fund to the general or current expense fund of the City, and the City Finance Director is authorized and directed to make such transfer as set forth above. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.090 Remittance upon sale or transfer of business.

Upon the sale or transfer during any tax year of a business on account of which a fee or tax is required, the purchaser or transferee shall, if the fee or tax has not been paid in full for said year by the seller, be responsible for the entire outstanding payment owing, and remit said liability to the City prior to receiving a new utility occupation license. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.100 Taxpayer records.

Each taxpayer shall keep accurate records reflecting the amount of gross income on services and disclosing all information necessary to determine the taxpayer’s tax liability hereunder during each tax base period. Such records shall be kept and maintained for a period of not less than three years. All books, records and other items required to be kept under this section shall be subject to and immediately made available for inspection and audit at any time, with or without notice, at the place where such records are kept, by the City or its designee, for the purpose of enforcing the provisions of this taxing chapter. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.110 Applications and returns confidential.

The applications, statements or returns made to the City pursuant to this chapter shall not be made public, nor shall they be subject to inspection of any person except the City Administrator, City Attorney, City Finance Director or his designate, and members of the City Council; provided, the foregoing shall not be construed to prohibit the City Finance Director from making known or revealing facts contained in any return in any examination or proceeding for official purposes. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.120 City Finance Director to make rules.

The City Finance Director shall have the power, and it shall be his duty, from time to time, to adopt, publish and enforce rules and regulations not inconsistent with this chapter or with the law for the purpose of carrying out the provisions thereof, and it shall be unlawful to violate or fail to comply with any such rule or regulation. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.130 Failure to make return or pay full tax.

If any taxpayer fails, neglects or refuses to apply for a license, or make his return, or pay the tax in full as required herein, the City may require the taxpayer to produce all pertinent books and records in order to determine the amount of the tax payable and by mail shall notify such taxpayer of the amount so determined. The amount so affixed shall thereupon be the tax and be immediately due and payable. The burden shall be with the taxpayer to demonstrate compliance with the provisions of this chapter. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.140 Overpayment or underpayment of tax.

If, upon application by a taxpayer for a refund or for an audit of his records, or upon any examination of the returns of any taxpayer, it is determined by the City that within three years immediately preceding the above that an error has occurred, then:

A. If a tax or other fee has been paid in excess of that properly due, the total excess paid over all amounts due to the City within a period of three years shall be credited to the taxpayer’s account or shall be paid directly to the taxpayer at the City’s option.

B. If a tax or other fee has been paid which is less than that properly due, or no tax or fee has been paid, the City shall mail a statement to the taxpayer showing the balance due, including the tax amount and penalty assessments and fees, and it shall be a separate, additional violation of this chapter, both civil and criminal, if the taxpayer fails to make such payment in full within 15 calendar days of mailing, or fails to appeal said payment per the provisions of this chapter. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.150 Delinquent payment – Penalty.

For each bimonthly or monthly period that payment is due under the terms of this chapter, if such payment is not made by the persons subject to the tax by the due date thereof, there shall be added a penalty as follows:

A. If payment in full is received within 30 days from the due date, 10 percent of the accrued tax;

B. If payment in full is received between 31 and 60 days from the due date, 20 percent of the accrued tax; and

C. If payment in full is received beyond 60 days from the due date, 30 percent of the accrued tax. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.160 Taxes, penalties and fees constitute debt to municipality.

Any tax due and unpaid under this chapter, and all penalties or fees unpaid, shall constitute a debt to the City and may be collected by court proceedings the same as any other debt in like amount which shall be in addition to all other existing remedies. On any civil action, the City shall recover reasonable attorneys’ fees and audit costs if the City is the prevailing party. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.170 Limitation on right to recovery.

The right of recovery by the City from the taxpayer for any tax provided hereunder shall be barred after the expiration of three calendar years from the date said tax became due. The right of recovery against the City because of overpayment of tax by any taxpayer shall be barred after the expiration of three calendar years from the date such payment was made. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)

3.26.180 False returns.

It is unlawful for any person subject to this chapter to make any false or fraudulent application or return or any false statement or representation in, or in connection with, any such application or return, or to aid or abet another in any attempt to evade payment of the fee or tax, or any part thereof, or to fail to appear at or testify falsely upon any investigation of the correctness of a return or in any manner to hinder or delay the City or any of its officers in carrying out the provisions of this chapter. Any person who violates or refuses to comply with the foregoing provisions shall be deemed guilty of a misdemeanor, and each such person is guilty of a separate offense for each and every day or portion thereof during which any violation is committed, continued or permitted, and upon any conviction of any such violation, such person shall be punished by a fine not to exceed $1,000 for each day or portion thereof when such person is found guilty of noncompliance. (Ord. 1607 § 1, 2010; Ord. 802 § 1, 1986)