California Utility User Taxes
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Utility User Taxes (UUTs) in California are taxes that cities and counties are allow to impose on the consumption of certain utility services. As of September 2008, city and county UUTs generated about $2 billion per year in tax revenues.
About 146 California cities and 4 counties have a UUT. In nearly all these cases, the UUT was adopted prior to 1996 through a vote of the city council or the County Board of Supervisors. However, after the 1996 passage of Prop 218, to pass such a tax, the voters who would be paying the tax had to approve it directly through voting on a ballot measure.
About half of all California residents pay a UUT, because although the tax only applies in a relatively small minority of California cities, the cities in which it does apply includes nearly all of the cities in the state with higher populations.
Voter approval of UUTs
From June 2002 through June 2008, 83 utility user tax measures were placed before voters by cities and counties. Two of these were county measures and 81 were for cities.
- 30 proposals were for new or increased UUTs. Only six of these proposals were approved.
- 19 of the 30 were for an increase in the UUT tax rate. Only two of those passed.
- 19 measures asked to increase an existing UUT past a built-in sunset period. 16 of those measures passed.
There has been a trend in recent years for cities with UUTs to change their ordinances to ensure that it applies to all modern forms of telecommunications (wireless and internet) and billing methods (flat rates).
- 23 cities proposed such changes between June 2002 and June 2008. 22 of those requests were approved.
- Citizens placed 14 referenda placed on the ballot seeking to repeal or alter local UUTs.
- Seven measures seeking total repeal failed.
- Four out of five measures seeking to reduce the UUT tax rate failed.
- In Greenfield, voters reduced their UUT from 6% to 3%.
- A referendum to restrict the use of UUT revenues to law enforcement services passed in Seaside (Monterey County) in November 2002.
Taxable utilities
The list of utilities that can be taxed with a UUT includes:
- Electricity
- Gas
- Water
- Sewer
- Telephone (including cell phones and long distance services)
- Sanitation
- Cable television.
UUT tax rates
City UUTs range from a low of 1% to a high of 11%.
The rate of a UUT is set by the city in which it is levied. UUT's can be imposed:
- As a special tax.
- Earmarked for a specific purpose.
- As a general tax to be used for a variety of municipal service needs at the discretion of the city council.
The tax is levied by the city, and then collected by the relevant utility as a part of its regular billing procedure. The utility then sends the tax it has collected on behalf of the city to the city.
Some cities charge different tax rates for residential usage versus commercial usage.
Counties with a UUT
Just four of California's 58 counties levy a UUT. They are:
UUTs and the FET
Many of the UUTs in California refer to the Federal Excise Tax (FET) in defining which utilities are covered by the tax. The FET does not cover certain telecommunications services. FET, for instance, does not cover:
- Telephone calls which are not charged based on both time and distance (those paid by coin in phone booths, for example).
- Any cell phone bills which are based on a package which provides a mix of local and long-distance calling for a flat rate. (In 2007, the IRS ruled that telephone service packages which provide a mix of local and long-distance calling for a flat rate or a fixed fee are not subject to the FET.)
When California cities realized that the wording of their UUT ordinance, by tying which utilities are covered by the tax to the FET's definition, did not allow them to extend their UUT to charging the tax on cell phone usage. Since cell phone usage is becoming more common, even replacing landline use, especially for younger people, cities feared loss of UUT revenues.
As a result, a number of city councils began putting before voters ballot measures to change the ordinance defining which telecommunications services could be taxed with their local UUT so that they could tax cell phone usage.
Election results
November 3, 2009
June 9, 2009
| Measure | County | Outcome |
|---|---|---|
| Arcadia Utility Users Tax, Measure A, June 2009 | Los Angeles | 
|
May 19, 2009
March 3, 2009
November 4, 2008
June 3, 2008
April 8, 2008
February 5, 2008
External links
- Utility User Tax facts
- UUT Info
- CalTax May 19 local tax measures
- June 3, 2008 UUT election results
- Local revenue measures on the February 5, 2008 ballot
- Utility user taxes on November 6, 2007 ballot (scroll to page 4]
- Utility user taxes on November 7, 2006 ballot (scroll to page 18)
- Utility user taxes on November 8, 2005 ballot
- California Debt and Investment Advisory Commission, Results of the February 5 election
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