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Class Action Filed Against City Of Chula Vista Over Cell Phone Tax

San Diego: A class action lawsuit has been filed against the City of Chula Vista, CA, demanding restitution as a result of continued collection of a controversial tax on cell phone calls.

The lawsuit was filed in the San Diego Superior Court on behalf of Chula Vista residents seeking a refund of taxes arising from the City of Chula Vista’s improper collection and administration of a “Utility Users Tax” (UUT) collected on mobile phone use.

The lawsuit seeks a refund from the City for back taxes unlawfully collected over the years from Chula Vista residents. The controversy stems from a now outdated tax, levied on users of telephones, electricity and other utilities, which was introduced in 1970 and accounts for more than $9 million in revenue for the city each year -- $5.6 million of that from cell phone users. The lawyers representing the plaintiffs maintaint that the tax on cell phones is “illegal, as the law introducing it was passed before the invention of cell phones.” Moreover, “the UUT is automatically added to the monthly charges and embedded in billing statements, so most tax payers are not even aware of the tax – or the fact that it has been illegally collected.”

Additionally, in 2006, the I.R.S. acknowledged that bundled service, where local and long distance are not separately billed (including landline and cellular telephone service), and all long distance service are also non-taxable.

Realizing that there are a host of thorny legal – and financial -- issues related to the tax, The City of Chula Vista last year introduced a ballot proposition, Proposition H, which if passed and the UUT found to be constitutional, would have legalized the City’s right to collect fees on cell phone calls. The proposition, which Capretz called “a failed attempt to retroactively authorize UUTs” did not pass, intensifying the controversy and solidifying the illegal status of cell phone taxes.

Despite the conclusive defeat of Proposition H, the City continues to date to levy and collect the UUT -- and taxes continue to flow into the City’s coffers.

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Last updated on Jun-24-11