City of Sacramento
City Council - 5PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2023-01552 12/12/2023 Consent Item 1.
Administrative Subpoena to MCI Communication Services, LLC for Business Records Related to the City’s Communications User Tax Compliance Audit
File ID: 2023-01552
Location: Citywide
Recommendation: Adopt a Resolution authorizing the City Attorney to issue a subpoena to MCI Communication Services, LLC requiring the production of records necessary for an audit of its compliance with the City’s utility user tax.
Contact: Jackie Rice, Finance Manager, (916) 808-5844, [email protected]; Julie Coffeen, Program Manager, (916) 808-1259, [email protected] Presenter: None.
Attachments:
1-Description/Analysis
2-Resolution
Description/Analysis
Issue Detail: A comprehensive compliance audit of MCI Communications Services, LLC (MCI), a telecommunications provider, will be conducted to determine whether MCI is complying with and has paid the City’s utility user tax (UUT). The audit will also identify any reporting and payment errors and solutions to help ensure that the UUT is properly reported and paid in the future. To conduct a comprehensive and thorough audit, it is necessary that specific documents and business records be obtained from MCI. To produce these records, MCI requires the receipt of a subpoena ordering the production of such records.
Policy Considerations: The collection and recovery of tax revenues due to the City is consistent with the City Council’s policy of collecting funds due the City to provide essential City services.
Economic Impacts: None.
Environmental Considerations: This action is not subject to the California Environmental Quality Act (CEQA) because it does not constitute a “project” as defined in section 15378 of the CEQA
File ID: 2023-01552 12/12/2023 Consent Item 1.
Guidelines, and otherwise exempt pursuant to section 15061(b)(3) of CEQA Guidelines (no significant effect on the environment).
Sustainability: There is no sustainability consideration associated with this report.
Commission/Committee Action: Not applicable.
Rationale for Recommendation: The compliance audit will test internal controls and accounting procedures related to MCI’s classification of products, plans and bundled services, exemptions and any other such services as they relate to the calculation of the City’s UUT. This approach will ascertain that the taxes remitted are accounted for, calculated, and collected on a sound and consistent basis in compliance with the City’s UUT ordinance.
Geocode sampling will also be performed to verify the accuracy of the accounts coded within MCI’s systems by determining that customer accounts within the City boundaries and in the immediate vicinity are properly coded and assessed. Tests on customer addresses in potentially vulnerable areas of the City, such as annexed areas, overlapping zip codes, adjacent city boundary areas, etc. will be performed to verify MCI’s use of correct jurisdictional designations for customers within the City and in the immediate surrounding areas.
The compliance audit and testing can only be conducted if MCI provides the City with customer account information in an electronic format for requested customer locations in the City and surrounding areas. MCI has indicated that they cannot release customer personal identifying information without a subpoena.
Financial Considerations: The City will not incur any out-of-pocket costs associated with the audit.
The City’s contracted audit consultant, Avenu Insights & Analytics, will receive a 20% contingency fee on any new revenue realized as a result of this audit.
Local Business Enterprise (LBE): None
RESOLUTION NO. 2023-
Adopted by the Sacramento City Council
December 12, 2023
RESOLUTION AUTHORIZING THE CITY ATTORNEY TO
ISSUE A SUBPOENA TO MCI COMMUNICATION
SERVICES, LLC REQUIRING THE PRODUCTION OF
RECORDS NECESSARY FOR A CITY UTILITY USER TAX
COMPLIANCE AUDIT
BACKGROUND
A. The Sacramento City Code imposes a Utility User Tax (UUT) on users of certain communication services, including telecommunications services.
B. The City Code requires Communication Service Suppliers to collect the UUT and remit the collected tax to the City. MCI is a Communication Service Supplier.
C. As a Communication Service Supplier, MCI is required under the City Code to keep and preserve, for a period of three years, all records as may be necessary to determine the amount of UUT it may have been required to collect and remit to the City.
D. The City, through the Revenue Division of the Department of Finance and its designated agents, desires to perform a UUT compliance audit of records maintained by MCI.
E. California Government Code, section 37104, empowers the City Council to authorize the issuance of a subpoena requiring the attendance of witnesses or production of documents in connection with a City UUT compliance audit.
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. The City Council authorizes the City Attorney, or designee, to issue a subpoena to MCI requiring the production of witnesses or records necessary for the City to perform a UUT compliance audit.