The city of Chula Vista is being sued in a class action lawsuit by two law firms who are claiming the local government has been illegally taxing residents’ cell phone usage. The suit is demanding restitution (plus interest) for the controversial tax, but it isn’t exactly clear how much money is at stake. While the law firms are seeking several years worth of tax collections, the city is arguing it can only be liable for just one year of taxes. Notably, one year of taxes on cell phone users is worth around $5.6 million. So what exactly is this phone tax? Reportedly it was first implemented back in 1970 and is levied on users of telephones, electricity and other utilities. But of course, back in the 70s there were no cell phones, so part of the dispute is whether or not the city can legally tax cell phones. The city tried to patch up the legal loophole with a ballot measure in November of 2010, but voters rejected it. While the city has made major cuts in services, it has been stashing away the revenue from the cell phone tax due to fears of litigation. The Voice of San Diego reports:
“[The lawsuit] could be a big blow to Chula Vista, which has slashed city services and laid off more than 100 employees in the face of a significant decrease in property taxes. The city used the threat of litigation over the tax as justification for further cutting back services late last year. It stopped spending the revenues in November and has been stashing it away in case it was ordered to pay it back.”
You can read the full complaint here. Co-lead counsel Thomas Penfield, a partner with Casey Gerry, commented the following about the case: “Through this class action, we seek a refund from the City for back taxes unlawfully collected over the years from Chula Vista residents.” Attorney James Capretz, with Capretz & Associates, added, “We believe all Chula Vista taxpayers are clearly entitled to a refund of all UUTs improperly collected for the maximum period permissible, along with the legal rate of interest.”
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