Chapter 3.18
UTILITY TAX ON TELEPHONE, GAS, ELECTRIC, SOLID WASTE, WATER, SEWER AND DRAINAGE UTILITIES* Revised 7/18 Revised 1/19

Sections:

3.18.010    Definitions. Revised 7/18

3.18.020    Certain utilities subject to tax. Revised 1/19

3.18.025    Reserved.

3.18.030    Utility tax, when due.

3.18.040    Taxpayer’s records.

3.18.050    Tax – Payment failure – Penalty and collection.

3.18.060    Overpayment of tax.

3.18.070    Appeal to hearing examiner.

3.18.080    False returns.

3.18.090    Noncompliance – Civil penalty.

*Cross reference(s) – Application for and billing out utility services, ch. 7.01; water services, ch. 7.02; solid waste services, ch. 7.03; sanitary sewer services, ch. 7.04; storm and surface water utility, ch. 7.05; combined sewer and storm and surface water utility services, ch. 7.06; surface water and drainage, ch. 7.07; utility services outside the city, ch. 7.11.

State law reference(s) – Utility tax, RCW 82.16.010 et seq.; excise tax on telephone business, RCW 35A.82.060; network telephone service, RCW 35A.82.065; referendum procedure, RCW 35.21.706; minimum waiting period, RCW 35.21.865; tax limitation, RCW 35.21.870.

3.18.010 Definitions. Revised 7/18

The following words, terms, and phrases, when used in this chapter, shall have the meanings ascribed to them in this section, except where the context clearly indicates a different meaning:

Cable television business means:

1. A system providing service pursuant to a franchise issued by the city under the Cable Communications Policy Act of 1984, Public Law No. 98-549, 47 U.S.C. Section 521, as it may be amended or superseded; or

2. Any system that competes directly with such franchised system by employing antennas, microwaves, wires, wave guides, coaxial cables, or other conductors, equipment, or facilities designed, construed, or used for the purpose of:

a. Collecting and amplifying local and distant broadcast television signals and distributing and transmitting them;

b. Transmitting original cable cast programming not received through television broadcast signals; or

c. Transmitting television pictures, film, and videotape programs not received through broadcast television signals, whether or not encoded or processed to permit reception by only selected receivers; provided, however, that “cable television business” shall not include entities that are subject to charges as “commercial TV stations” under 47 U.S.C. Section 158, as it may be amended or superseded.

Cellular telephone service means any two-way voice and/or data telephone or similar communications system based in whole or in substantial part on wireless radio communications, including cellular mobile service, and which is not subject to regulation by the Washington State Utilities and Transportation Commission that conflicts with or overrides this chapter. Cellular telephone service includes other wireless radio communications services including, without limitation, specialized mobile radio, paging services, personal communications, and data services, and any other evolving wireless radio communications technology that accomplishes a purpose substantially similar to cellular telephone service. Cellular telephone service is included within the definition of “telephone business” for the purposes of this chapter.

Competitive telephone service means the providing by any person, firm, or corporation of telecommunications equipment or apparatus, or service related to that equipment or apparatus such as repair or maintenance service, if the equipment or apparatus is of a type which can be provided by persons that are not subject to regulation as telephone companies under RCW Title 80 and for which a separate charge is made.

Gross income means the value proceeding or accruing from the performance of the particular public service business involved, including operations incidental thereto, but without any deduction on account of the cost of the commodity furnished or sold, the cost of materials used, labor costs, interest, discount, delivery costs, taxes, or any other expense whatsoever paid or accrued and without any deduction on account of losses. In addition, when determining total gross income from cellular telephone service, “gross income” shall include all income from cellular telephone service (including roaming charges incurred outside this state) provided to customers whose “place of primary use” is in the city, regardless of the location of the facilities used to provide the service. The customer’s place of primary use is, with respect to each telephone: (a) the customer’s address shown on the telephone service company’s records; or (b) the customer’s place of residence if the telephone is for personal use, and in both cases must be located within the licensed service area of the home service provider. Roaming charges and cellular telephone charges to customers whose place of primary use is outside the city of Kent will not be taxable even though those cellular services are provided within the city of Kent. There is a rebuttable presumption that the address shown on the cellular telephone service company’s records is the place of primary use and is accurate. If the cellular telephone service company knows or should have known that a customer’s place of primary use address for a telephone is within the city, then the gross income from cellular telephone service provided to that customer with respect to that telephone is to be included in the company’s gross income.

Network telephone service means the providing by any person, firm, or corporation of access to a local telephone network, local telephone network switching service, toll service, or coin telephone services, or the providing of telephonic, video, data, or similar communication, or transmission for hire via a local telephone network, toll line or channel, cable, microwave, or similar communication or transmission system. “Network telephone service” includes interstate service, including toll service, originating from or received on telecommunications equipment or apparatus in this state if the charge for the service is billed to a person in this state. “Network telephone service” includes the provision of transmission to and from the site of an internet provider via a local telephone network, toll line or channel, cable, microwave, or similar communication or transmission system. “Network telephone service” does not include the providing of competitive telephone service, the providing of cable television service, the providing of broadcast services by radio or television stations, or the provision of internet service as defined in RCW 82.04.297, including the reception of dial-in connection, provided at the site of the internet service provider.

Solid waste means all putrescible and nonputrescible solid and semisolid wastes including, but not limited to, garbage, rubbish, ashes, industrial wastes, swill, sewage sludge, demolition and construction wastes, abandoned vehicles or parts thereof, and recyclable materials.

Solid waste collection service means receiving solid waste for transfer, storage, or disposal including, but not limited to, all residential and commercial collection services, public or private solid waste disposal sites, transfer stations, and similar operations.

Telephone business means the business of providing network telephone service and cellular telephone service as those terms are defined in this section and includes cooperative or farmer line telephone companies or associations operating an exchange. “Competitive telephone service” shall not be considered “telephone business.” Telephone business shall include 100 percent of the business and total gross income derived from calls originating and/or billed to subscribers within the city.

(Ord. No. 2758, § 1; Ord. No. 3091, § 1, 2-16-93; Ord. No. 3645, § 1, 6-3-03; Ord. No. 4061, § 1, 12-11-12; Ord. No. 4281, § 1, 6-19-18. Formerly Code 1986, § 3.04.040(1)(a))

Cross reference(s) – Definitions and rules of construction generally, § 1.01.030.

State law reference(s) – Similar provisions, RCW 82.04.065.

3.18.020 Certain utilities subject to tax. Revised 1/19

A. In addition to the other business and license fees required by the ordinances of the city, the city levies upon all persons, firms, or corporations (including the city) engaged in certain business activities a utilities tax to be collected as follows:

1. Upon every person, firm, or corporation engaging in or carrying on any telephone business within the city, an annual tax equal to six percent of the total gross income, including revenues from intrastate toll, derived from the operation of such business within the city. This six percent tax will be allocated as follows: 4.7 percent to the general fund, 0.3 percent to youth/teen programs, and one percent to street improvement programs.

2. Upon every person, firm, or corporation engaging in or carrying on a business of selling, wheeling, furnishing, distributing, or producing gas, whether manufactured or natural, for commercial or domestic use or purposes, a fee or tax equal to six percent of the total gross income from such business in the city during the tax year for which the license is required. This six percent tax will be allocated as follows: 4.7 percent to the general fund, 0.3 percent to youth/teen programs, and one percent to street improvement programs.

3. Upon every person, firm, or corporation engaged in or carrying on the business of selling, wheeling, furnishing, or distributing electricity for light and power, a fee or tax equal to six percent of the total gross income from such business in the city during the tax year for which a license is required. This six percent tax will be allocated as follows: 4.7 percent to the general fund, 0.3 percent to youth/teen programs, and one percent to street improvement programs.

4. Upon every person, firm, or corporation engaged in or carrying on the business of providing cable television services, a tax equal to six percent of the total gross income from that business in the city during the tax year for which the license is required. All revenue received from this tax must be applied only to funding the city’s information technology department operations and capital projects budgets in the proportion determined by the city council in its biennial budget, including all amendments.

5. Upon every person, firm, or corporation engaging in or carrying on a business providing solid waste collection services, a tax equal to 18.4 percent of the total gross income from such business in the city during the tax year for which the license is required. This 18.4 percent tax will be allocated as follows: 6.5 percent to the general fund, 0.3 percent to youth/teen programs, one percent to street improvement programs, and 10.6 percent to maintain and repair residential streets, including related impacts to curbs, gutters, sidewalks, and other road amenities, including crosswalks along with necessary appurtenances, and improvements related to residential traffic calming, but this 10.6 percent portion of the solid waste utility tax shall not be used to expand, extend, or widen existing residential streets or to build new residential streets. The amount used from this fund for neighborhood traffic calming devices and crosswalks shall not exceed $150,000 in any year.

6. Upon every person (including the city) engaging in or carrying on the business of selling, furnishing, or distributing water services, a tax equal to 13 percent of the total gross income from that business in the city during the tax year; upon every person (including the city) engaging in or carrying on the business of selling, furnishing, or distributing sewer services, a tax equal to 9.5 percent of the total gross income from that business in the city during the tax year; and upon every person (including the city) engaging in or carrying on the business of selling, furnishing, or distributing drainage services, a tax equal to 19.5 percent of the total gross income from such business in the city during the tax year. Unless otherwise directed by the city council in its budget process, the total of these tax revenues will be allocated as follows: 43.85 percent to the general fund for the use as allocated in the city’s budget; 30.77 percent to the capital resources fund, subject to the limitations provided in subsection (A)(6)(a) of this section; 15.38 percent dedicated solely to the repayment and elimination of debt in the city’s “other capital projects” fund subject to the limitations provided in subsection (A)(6)(b) of this section; 7.69 percent to street improvement programs; and 2.31 percent to youth/teen programs.

a. Unless otherwise allocated by council, these funds must be applied equally to (i) information technology capital programs directed at funding long- and short-term hardware and software replacement, and (ii) street capital programs, but further restricted to funding street maintenance, repair, and signage only.

b. The 15.38 percent internal tax allocation will be dedicated to the city’s capital resources fund for the sole purpose of retiring all debt in the city’s other capital projects fund; provided, starting January 1, 2023, or the first day of the year following the date the debt in the other capital projects fund is fully retired, whichever occurs first, this internal tax allocation will be dedicated to the general fund for use as provided for in the city’s budget.

B. In computing the tax provided in subsection (A) of this section, the taxpayer may deduct from total gross income the following items:

1. The actual amount of credit losses and uncollectible receivables sustained by the taxpayer.

2. Amounts derived from transactions in interstate and foreign commerce which the city is prohibited from taxing under the laws and Constitution of the United States.

(Ord. No. 2390, § 1; Ord. No. 2514, § 1; Ord. No. 3274, § 1, 1-2-96; Ord. No. 3314, § 1, 10-1-96; Ord. No. 3319, § 2, 10-15-96; Ord. No. 3321, § 1, 11-6-96; Ord. No. 3370, § 1, 11-18-97; Ord. No. 3456, § 1, 5-4-99; Ord. No. 3489, § 1, 11-16-99; Ord. No. 3594, § 1, 2-19-02; Ord. No. 3645, § 1, 6-3-03; Ord. No. 4020, § 1, 12-13-11; Ord. No. 4061, § 1, 12-11-12; Ord. No. 4128, § 1, 11-4-14; Ord. No. 4134, § 1, 12-16-14; Ord. No. 4213, § 1, 8-16-16; Ord. No. 4217*, § 1, 10-18-16; Ord. No. 4293, § 1, 11-20-18. Formerly Code 1986, § 3.04.040(2))

*Code reviser’s note – Ord. No. 4217 inadvertently omitted amendments from Ord. No. 4213. The amendments from Ord. No. 4213 have been retained at the direction of the city.

3.18.025 Reserved.

Editor’s note – Ord. No. 3274, § 1, adopted Jan. 2, 1996, repealed § 3.18.025, which pertained to certain utilities subject to interim tax.

3.18.030 Utility tax, when due.

The utility tax imposed by KCC 3.18.020 shall be due and payable in monthly installments and remittance thereof shall be made on or before the last day of the following month in which the tax accrued. On or before said due date, the taxpayer shall file with the finance department a return upon a form to be prescribed and provided by the finance department, which return shall contain a statement by the taxpayer, stating that the amount of tax for which it is liable for the preceding monthly period, that the information therein given and the amount of tax liability therein reported are full and true, and that the taxpayer knows the same to be true. This statement shall be signed by the taxpayer or its authorized agent. Taxpayers expected to owe less than one thousand dollars ($1,000) per month may submit taxes on a quarterly basis; taxes shall be due on the last day of the month following the end of the quarter in which the tax accrued. Quarterly period for the purpose of this chapter shall mean each three (3) month period of the calendar year, commencing on January 1st.

(Ord. No. 2390, § 1; Ord. No. 2758, § 1; Ord. No. 3074, § 1(3.04.080), 11-3-92; Ord. No. 3645, § 1, 6-3-03; Ord. No. 4061, § 1, 12-11-12. Formerly Code 1986, § 3.04.110)

3.18.040 Taxpayer’s records.

Each taxpayer shall keep records reflecting the amount of total gross income on its business within the city, and such records shall be retained for at least six (6) years and shall be open at all reasonable times to audit by the finance director or his or her duly authorized representative for verification of said tax returns and supporting records or for the filing of a tax of a taxpayer who fails to make such a return.

(Ord. No. 3074, § 1(3.04.090), 11-3-92; Ord. No. 3645, § 1, 6-3-03; Ord. No. 4061, § 1, 12-11-12)

3.18.050 Tax – Payment failure – Penalty and collection.

If any person, firm, or corporation subject to this chapter fails or neglects to pay any tax required by this chapter within thirty (30) days from the date the tax is due to the city, a penalty of ten (10) percent of the amount of that tax will be imposed. Delinquent taxes, including any penalties, are also subject to an interest charge of one (1) percent per month (twelve (12) percent per annum) on any unpaid balance from the date the tax payment became due, as provided in KCC 3.18.030, until all past due taxes and penalties are paid in full. Any unpaid tax, penalty, or interest due under this chapter and unpaid shall constitute a debt to the city. The city may, pursuant to Chapter 19.16 RCW, use a collection agency to collect taxes, interest, and penalties owed or assessed, or it may seek collection by court proceedings, which remedies shall be in addition to all other remedies.

(Ord. No. 3074, § 1(3.04.100), 11-3-92; Ord. No. 3645, § 1, 6-3-03; Ord. No. 4061, § 1, 12-11-12)

3.18.060 Overpayment of tax.

Any money paid to the city through error, or otherwise not in payment of the tax imposed by this chapter, or in excess of such tax, shall, upon request of the taxpayer, be credited against any tax due or to become due from such taxpayer hereunder, or, upon the taxpayer ceasing to do business in the city, be refunded to the taxpayer.

(Ord. No. 3074, § 1(3.04.110), 11-3-92; Ord. No. 3645, § 1, 6-3-03; Ord. No. 4061, § 1, 12-11-12)

3.18.070 Appeal to hearing examiner.

Any taxpayer aggrieved by the amount of tax, interest, or penalties determined by the finance director to be due under the provisions of this chapter may appeal such determinations to the city hearing examiner in accordance with, and subject to, the provisions set forth in Chapter 2.32 KCC. Taxpayers shall be required to remit the amounts determined to be due under this chapter prior to filing an appeal.

(Ord. No. 3074, § 1(3.04.120), 11-3-92; Ord. No. 3645, § 1, 6-3-03; Ord. No. 4061, § 1, 12-11-12)

3.18.080 False returns.

It is unlawful for any person, firm, or corporation subject to this chapter to fail or refuse to pay the tax when due, or for any person, firm, or corporation to make any false or fraudulent application or return or any false statement or representation in, or in connection with, such return, or to aid or abet another in any attempt to evade payment of the tax, or any part thereof, or to testify falsely upon any investigation of the correctness of a return upon the hearing of an appeal or in any manner hinder or delay the city or any of its officers in carrying out the provisions of this chapter.

(Ord. No. 3074, § 1(3.04.130), 11-3-92; Ord. No. 3645, § 1, 6-3-03; Ord. No. 4061, § 1, 12-11-12)

3.18.090 Noncompliance – Civil penalty.

Any person, firm, or corporation subject to this chapter, who fails or neglects to make tax returns or who makes a false statement or representation in or in connection with a utility tax return, or who otherwise violates or refuses to comply with this chapter, is subject to a cumulative penalty in the amount of one hundred dollars ($100) per day for each violation, in addition to the nonpayment penalty imposed under KCC 3.18.050. All penalties imposed under this chapter shall constitute a debt to the city. The city may, at its discretion, pursuant to Chapter 19.16 RCW, use a collection agency to collect taxes, interest, and penalties owed or assessed pursuant to this chapter, or the city may seek collection by court proceedings, which remedies shall be in addition to all other remedies.

(Ord. No. 3074, § 1(3.04.140), 11-3-92; Ord. No. 3645, § 1, 6-3-03; Ord. No. 4061, § 1, 12-11-12)