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Chula Vista settles cell phone tax case for $8 million

May 2, 2013 News Articles

By Douglas Sherwin, The Daily Transcript

The city of Chula Vista has agreed to pay up to $8 million in refunds to settle a class-action dispute over a telephone tax it applies to wireless phone users in the city.

The settlement has been preliminarily approved by a San Diego court.

A pair of Chula Vista residents brought the lawsuit in 2011, claiming the city was illegally billing cellphone customers for a tax meant for landline phones and other utilities.

City officials disagreed with the lawsuit’s claim that certain aspects of the tax are unlawful, but decided it was in the best interests of its citizens to settle because the issues were complex and continued litigation would be expensive.

The settlement makes cash rebates available to Chula Vista residents who paid taxes on their wireless phone bills from April 2010 through April 2013. And, once the court has finally approved the settlement, the tax will be reduced from 5 percent to 4.75 percent.

Chula Vista also will clarify how its telephone user’s tax ordinance applies to wireless phone services.

Jeremy K. Robinson, an attorney with San Diego’s Casey Gerry Schenk Francavilla Blatt & Penfield who helped represent the plaintiffs, said it was a fair settlement.

“It really provides a lot for the citizens of Chula Vista, as much as we could’ve hoped for, for sure,” he said. “It provides a variety of different benefits.”

Residents can either receive a flat $35 rebate; get $50 for each year they paid the tax up to a maximum of three years; or receive an estimated full refund for the tax paid from April 2010-April 2013.

While the lead plaintiff, Carla Villa, estimates she has paid the city more than $1,200 in telephone taxes since 1994, the statute of limitations only allows people to collect for the past three years.

The dispute centers on the Utilities Users Tax (UUT), which was enacted by the city in 1970 to pay for the implementation and upkeep of certain infrastructure, including telephone service.

The plaintiffs claimed the tax is not applicable to mobile phone users, but the city said wireless service was never specifically prohibited under the municipal code because cellphones weren’t invented at the time.

The plaintiffs also argued that since the Internal Revenue Service stopped collecting an excise tax on wireless communications in the late 2000s after numerous challenges in court, then the city of Chula Vista shouldn’t.

The city countered, claiming there are other provisions of the federal excise tax code that would still allow them to collect on cellphones — legal theories the IRS didn’t use.

Most municipalities in California have a similar tax, according to Robinson, and many have received voter approval for the taxes.

It will be up to the city of Chula Vista whether to continue the tax as it is or put it to a vote of the people.

The Chula Vista city attorney’s office has yet to respond to call by The Daily Transcript.

The plaintiffs were represented by CaseyGerry and attorneys from the Newport Beach law firm Capretz & Associates.

All Chula Vista residents should receive claim forms in the mail soon. Anyone with a wireless phone service billing address in Chula Vista may be eligible to make a claim.

Additional information about who is qualified to receive refunds and the claims process is available at Claim forms will be available online and can be submitted electronically at the same Web address.