Lawsuit claims AT&T illegally charging tax on Internet service
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By Bruce Edwards STAFF WRITER - Published: February 4, 2010
An AT&T wireless customer has taken the company to court alleging that he and thousands of other Vermont customers have been charged the state's sales tax on their cellular Internet service in violation of federal and state law.
William J. Rogers, a Chittenden County resident, sued AT&T Mobility this week in federal court in Burlington alleging in his class action complaint that the company has levied Vermont's 6 percent sales tax on the data portion of the bill. The data plan allows customers to access the Internet on their smart phones, including the iPhone and Blackberry.
AT&T's monthly data plans are priced at $30 and $45 per month, the lawsuit stated.
The lawsuit is the latest filed in more than a dozen states since last month alleging the company has illegally collected state sales tax.
In total, the Vermont lawsuit claims damages incurred by customers are in excess of $1 million.
Vermont's sales tax applies to telecommunications services but the lawsuit goes on to state that the federal Internet Tax Fairness Act of 1998 prohibits "… state and local governments from imposing taxes on Internet access."
The amended law remains in effect until Nov. 1, 2014.
Burlington lawyer Jerome O'Neill, who represents Rogers, wrote in the nine-page lawsuit that, "despite the prohibition on taxation of Internet access under Vermont and federal law, AT&T improperly and illegally charges its Vermont customers state and local sales tax on Internet access on its monthly bills."
Asked to comment on the lawsuit, an AT&T spokesman responded in an e-mail: "AT&T recognizes that the federal Internet Tax Freedom Act prohibits the imposition of most state and local taxes on Internet access. AT&T continues to review the application of this law to its various wireless data plans. AT&T cannot otherwise comment on the pending litigation."
O'Neill said in a phone interview that he's unsure how long AT&T has been collecting the sales tax. AT&T began operating in Vermont last January when it acquired Unicel. O'Neill also said AT&T has illegally levied the local sales tax on the bills of Burlington data plan customers.
Kenneth Jones, a policy analyst with the state Tax Department, said that in general the state's sales tax cannot be applied to Internet access. "It's pretty clear that charging a sales tax on Internet access is not a policy of the state of Vermont," Jones said.
The state receives sales tax from AT&T Mobility and other telecommunications providers. The tax applies to landline and cellular phone services but not Internet access.
However, Jones said the state does not analyze where the tax is generated unless there is a complaint.
A spokesman for Verizon Wireless, the other major cell phone company in the state, said in an e-mail customers who subscribe to its data plans are not charged a sales tax.
O'Neill asked the court to certify the lawsuit as a class action.
The complaint alleges breach of contract, good faith and fair dealing, violation of the state's consumer fraud law and seeks injunctive relief to stop AT&T from collecting state and local tax on the sales of its Internet service. The suit also seeks damages and refunds with interest as well as attorneys' fees.
bruce.edwards@rutlandherald.com
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