Judge Sides With Governments in AT&T Tax Dispute

A federal judge says governments won't have to repay AT&T customers who claim they were illegally taxed for Internet access.

January 16, 2014

1 Min Read
Judge Sides With Governments in AT&T Tax Dispute

By Kimberly Koerth

Missouri’s most populous county and more than 250 city governments around the Show-Me State won’t have to repay AT&T customers who said the wireless carrier improperly collected Internet access taxes, a federal judge has ruled.

The decision comes after years of legal disputes between the governments, and AT&T and its customers, the Columbia (Mo.) Tribune reported. The class-action lawsuit sought millions of dollars for AT&T surcharges that the plaintiffs said were used to pay an illegal tax.

Wireless carriers didn’t collect business-license taxes until 2008, when the operators were required to pay a lump sum for back taxes and begin collecting taxes on receipts from telecommunications services after a settlement between local governments and the wireless providers; however, Internet-access revenue was excluded from the list of taxable services because of a federal law that bars taxes on online access.

But AT&T collected money for the settlement based on all of its revenue, including Internet access, the court said. After its customers sued the company, the carrier reached an agreement with them in 2010 and stopped taxing Internet access.

The local governments refused to give refunds to AT&T, so its customers filed suit to collect the money directly. The judge ruled in the governments’ favor, though, saying the local governments simply collected money given to them in error. Furthermore, the plaintiffs simply didn’t prove that the governments were responsible for their loss.

The court ruled the payments were not a tax and therefore not an illegal collection of Internet service taxes because AT&T paid the governments as part of a settlement agreement.

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