HCS HB 165 -- 2007 MUNICIPAL TELECOMMUNICATIONS BUSINESS LICENSE
TAX SIMPLIFICATION ACT

SPONSOR:  Sutherland (Cooper, 120)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Ways and
Means by a vote of 4 to 2 with 1 present.

This substitute establishes the 2007 Municipal Telecommunications
Business License Tax Simplification Act and changes the laws
regarding the telecommunications business license tax.  The
substitute limits a business license flat tax amount to $27,500
or less.  After July 1, 2008, any municipality may impose this
tax on a telecommunications company for the privilege of doing
business within its borders if the municipality amends its
business license tax ordinance to include the new tax rate, tax
base definitions, and provisions.

The maximum rate of the gross receipts percentage for any
municipality is 5% unless the actual calculated rate is greater
than 5%.  If the calculated rate is greater than 5%, the maximum
rate of the gross receipts percentage for the municipality is
adjusted to be revenue neutral based on revenues collected and
forecasted for July 1, 2008, to June 30, 2009; half of the
difference between the determined rate and 5% for July 1, 2009,
to June 30, 2010; and 5% for July 1, 2010, and thereafter.

If a telecommunications company pays its deemed past liability to
a municipality by January 1, 2008, the telecommunications company
is entitled to full immunity and any pending lawsuits with
respect to all periods up to and including July 1, 2008, will be
dismissed.

FISCAL NOTE:  No impact on state funds in FY 2008, FY 2009, and
FY 2010.

PROPONENTS:  Supporters say that the bill provides fairness in
taxation for phone customers and telecommunication companies.
The telecommunication tax is a business license tax that is
passed on to the customer.  Changes in technology have caused
reduced receipts for municipalities except for Jefferson City and
Clayton.  Many Missouri cities impose business license taxes on
the local revenue of wire-line phone companies for the privilege
of doing business in their city.  These taxes range from 2% to
11% of gross receipts.  These rates are well in excess of the
business license taxes imposed on other types of businesses
because the telephone company is a monopoly and can be taxed
higher without affecting the demand for service.  The telephone
company should pay a rental fee for the use of the cities' rights
of way.  With newer technology, these reasons no longer apply.
Cities have tried to collect taxes on wireless carriers with
ordinances that are out-of-date, and a group of these cities
filed a class action lawsuit in December of 2001.  Multiple
lawsuits have since been filed.  The wireless industry
reluctantly agreed to this new tax since the cost would
ultimately pass on to the customer and the customer might file a
lawsuit because that would violate the Hancock amendment since it
wasn't approved by voters.  House Bill 209 was passed in 2005 to
address this issue, but was ruled unconstitutional by the
Missouri Supreme Court since it exempted Jefferson City and
Clayton from the 5% rate cap.  The bill removes the
unconstitutional language of the bill, adds compromise language,
increases revenues for municipalities in the future, rolls back
any rates found too high, requires payment of three months back
taxes at the existing rates for the dismissal of lawsuits,
requires all surcharges collected from customers to be returned
to the customers, and adds a severability clause.  The bill
provides cities with a stable growing tax base in the future,
simplifies the filing process, protects consumers from excessive
tax rates, equalizes the local tax rate on both wireless and
wire-line, and keeps Missouri from being one of the highest
telecommunications tax states in the nation.

Testifying for the bill were Representative Cooper (120); Sprint
Nextel; Missouri Chamber of Commerce and Industry; Missouri
Telecommunications Industry Association; AT&T; Scott Mackey,
Kimbell Sherman Ellis; Verizon; and Associated Industries of
Missouri.

OPPONENTS:  Those who oppose the bill say that every city has a
telephone tax.  Most cities oppose the bill because this issue is
currently being litigated, and cities need a meaningful
settlement.  While industry revenues have increased
substantially, cities have seen gross receipts tax revenue
decrease.  The wireless industry is not paying, and land lines
are only paying on select billings.  Various cities filed
lawsuits to collect the tax.  The tax rate for telecommunications
is about the same as other utilities pay.  Some cities have
changed their ordinances to include wireless in the definition of
a telephone.  Wireless services use land lines.  The bill should
reflect the compromise between cities and the telecommunications
industry, not dismiss the current lawsuits, nor give the tax
receipts in question back to the industry.

Testifying against the bill were John Mulligan; Dan Wichmer;
Missouri Municipal League; and St. Louis County Municipal League.

Missouri House of Representatives
94th General Assembly, 1st Regular Session
Last Updated July 25, 2007 at 11:18 am