Phone tax back in court

Missouri cities and wireless companies continue tax struggle
Wednesday, June 13, 2007 | 12:00 a.m. CDT; updated 1:26 p.m. CDT, Monday, July 21, 2008

KANSAS CITY — A nearly six year fight over taxes many Missouri cities charge to cell phone companies is headed back to court after legislation attempting to settle the issue stalled in the General Assembly.

About a quarter of Missouri cities charge the taxes, mostly by relying on ordinances written when all telephones moved calls along copper wires in the ground or on utility poles.

Many cell phone companies have refused to pay the taxes, or are paying them under protest, arguing that the laws don’t apply to them because they send calls through radio transmissions, not traditional phone lines.

That has led to a litigation crossfire between the cities, seeking to collect back taxes, and the wireless companies, wanting refunds of taxes paid in the past.

The stakes are high, with the Missouri Municipal League estimating the cell companies, which typically pass the costs on to subscribers, owe between $300 million and $600 million.

House members this year approved a bill that would have allowed the taxes, while placing a cap on how much cities could charge. It also would have required the wireless companies to pay back a portion of the back taxes.

When the bill got to the Senate, however, negotiations broke down and it died, said the sponsor, Sen. John Griesheimer, R-Washington.

Griesheimer said neither side would retreat on how much back taxes the cell phone companies should pay, with estimates up to $200 million. Clearly frustrated with both parties, he said he was “done with it” after shepherding legislation on the issue for the past two years.

“The only way I’m going to get something through is jam it through, and I’m not willing to do that,” he said. “As far as I care, both sides can fight it out. If they want to shoot each other, I don’t care.”

John Taylor, a spokesman for Sprint Nextel Corp., said his company and other cell phone providers weren’t able to get a promise that some cities wouldn’t continue to pursue in court back taxes beyond the $200 million in the compromise. But he also said lawmakers dropped the ball.

“We made an effort to convince the legislature that they would be the best venue to decide telecommunications policy in the state, but they chose not to act,” Taylor said. “This litigation has been going on for several years and will likely go on for several more years. Municipalities will have to decide how many taxpayer dollars they’re willing to spend fighting legal battles over a tax that they will ultimately lose.”

Gary Markenson, executive director for the Missouri Municipal League, dismissed Taylor’s claim of future lawsuits, saying all the cities represented by his group supported the compromise.

“The negotiators had what they thought was a reasonable deal, but a couple of the phone companies objected (to the back taxes) and it collapsed on that issue,” Markenson said. “It’s in the hands of the lawyers, God help us.”

Officials from Verizon Wireless and AT&T said they hope to reach a solution outside of the courts but acknowledged the lawsuits will likely continue.

“It was brought up because our customers don’t want to pay these taxes,” said Verizon spokeswoman Cheryl Bini Armbrecht. “I think that we’ll see the various carriers working at the local level, almost city by city to see if a resolution can be found.”

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