Developments on Telecommunication Industry Inclusion In Streamline Sales Tax

 

The Telecom industry is continuing its two-fold strategy to include itself in the Streamline Sales Tax (SST) via a proposed bill in congress and/or via inclusion in the SST governing agreement.  Following the SST Governing Board’s October 6 and 7, 2010 meeting in Indianapolis, action on the agreement is being deferred to the Board’s November 1, 2010 teleconference.  In the lame duck session following the November 2nd election federal lobbyists report the industry may attempt to add language to H.R. 5660, the Main Street Fairness Act, or insert their proposal in another bill. 

If the Telecom’s are successful in either forum, this could place many of Oklahoma’s local telecommunication and 9-1-1 fees in the SST requiring a single point of collection instead of these fees being paid directly to your community.  In addition, these fees vital to municipal operations and public safety would fall under the federal umbrella.

OML General Counsel Diane Pedicord is a National League of Cities appointee to a group of local government representatives focusing on the national lobbying effort.  They meet regularly by teleconference to craft the local response in these two fronts.

OML Report on Communication Taxes

As you know, for the past year, we have been working closely with Oklahoma Tax Commission Commissioner Jerry Johnson, the current president of the SST Governing Board, on this issue.  As a result of increased activity this fall, the Commissioner asked the League to formulate a position paper on Oklahoma’s local communication fees and advise whether they could, under Oklahoma law, be included in the Streamline Sales Tax (SST).

In addition, he asked for municipalities’ view on his proposed amendment to the SST agreement which makes Telcom fees inclusion in SST voluntary.  OML, working with the  9-1-1 municipal attorney group and the Municipal Liaison Board, wrote the attached documents.  We thank these municipal officials for their time in meeting on such short notice.

The attached documents evaluate each of the eight separate taxes/fees/assessments other than sales and use taxes which were identified by OML members in a survey several months ago.  Four of the levies fall within the category of franchise or right-of-way fees.  The remaining four levies fall within the category of fees related to 9-1-1 services.  These fees are landline, wireless/VoIP and prepaid wireless. 

Our conclusion was the inclusion of any of these levies could adversely impact Oklahoma’s continued participation in SST.  For the first four fees the legislature is under constitutional constraint from enacting changes necessary to adapt them to SST.  For the second four fees, the same legal impediments likely apply to landline and wireless fess approved by a vote of the people.  In addition, SST compliance appears fiscally and politically unfeasible due to likely net revenue losses for local governments and potential increased financial burdens on state government.

It is vital that state and federal officials understand that changing technologies historically create new citizen demands and new burdens on local governments.  Accordingly, we need flexibility and discretion to address the new challenges arising from emerging means of communication.  Both telecommunications industry and government representatives acknowledge that the nature and structure of these emerging technologies are not currently identifiable.  As stated in the report, municipalities believe it is simply not sound public policy to agree to the unknown.

Attachments:

Sept. 2010 Telecom Tax Report.doc

Sept. 2010 Revised Chart for Other Communications Taxes.doc

 

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