Yarber v. City of Rancho Palos Verdes CA2/3
In 1996, the voters of the City of Rancho Palos Verdes approved a three percent user tax on all municipal utilities, including telephone service. As adopted, the telephone user tax applied to most telephone service, but expressly excluded services “exempt from or . . . not subject to . . . the tax imposed under Section 4251 of Title 26 of the United States Code.” When the voters approved the telephone user tax in 1996, Internal Revenue Code section 4251 exempted some very limited categories of telephone users, but otherwise applied to all telephone service. By 2006, however, the federal courts and the Internal Revenue Service had interpreted section 4251 to exclude most cell phone plans from the federal tax.
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