Council weighs proposal for 6% municipal tax on cell-phone service

City legal staff and council discussed a draft ordinance on April 21 to impose a 6% municipal utility tax on cellular and telecommunications services.

Legal staff explained the proposed tax would generally be assessed on providers as a business-and-occupation style tax, then passed through on customer bills after providers obtain necessary approvals from the Washington Utilities and Transportation Commission. "The normal percentage rate that can be applied without voter consent is 6%," staff said, and noted the city would need to provide roughly 60 days' notice to providers to implement the charge.

Staff and council discussed exclusions required by state or federal law. A staff member warned that internet-delivered voice service can be statutorily non‑taxable under federal protections; the Internet Tax Freedom Act was cited in the hearing to underscore that taxing purely internet services may be prohibited. The draft ordinance also includes dispute-resolution language (for addresses that straddle jurisdictions) and a potential referendum provision so the tax can withstand legal challenge.

Council asked about revenue size and distributional effects. A rough preliminary estimate in the staff discussion put potential revenue on the order of "somewhere at about five grand a month," with councilmembers noting that prepaid and pay-as-you-go lines could complicate collection and that many small businesses now use internet-connected phone services exempt from utility tax.

No final ordinance vote occurred at this meeting; staff said they will return with clearer revenue estimates, final draft language and the implementation timetable for council consideration.