Class Fights Alameda’s Cellphone Tax

OAKLAND, Calif. (CN) - Alameda is illegally taxing its citizens' cellphone bills at 7.5 percent, an irate resident claims in a class action.

Lead plaintiff Clyde Grossman claims the city charges a utility users tax on services that were recently made nontaxable, such as communications billed at rates that do not vary with distance and transmission time.

Since the city adopted the federal excise tax definition of taxable telephone services in 2002, Grossman says, five federal appellate courts have held that "a telephonic communication for which there is a toll charge that varies with elapsed transmission time and not distance (time-only service) is not taxable toll telephone service."

The city's utility-users tax should not apply to mobile phone services or charges for "bundled service," according to the complaint. But the city continues to add a 7.5 percent tax to taxpayers' monthly cell phone bills, Grossman says.

He sued the city on Tuesday in Alameda County Court. Grossman claims that after 2006 the city's utility-users tax on telephone services not based on time and distance has been "illegal and unlawful."

He claims that taxpayers were unaware that the tax was illegal because the city represented it as proper. He says he "reasonably relied upon the city's misrepresentations and omissions by paying the properly imposed tax from 2006 to present," and that "the city's continued imposition and collection of the (tax) is an ongoing violation, constituting a new violation upon each collection."

He seeks class certification, refunds of all the improperly collected taxes, with interest, and an injunction against it.

He is represented by Thomas Girardi, with Girardi Keese in Los Angeles.

Neither Girardi nor Alameda's city attorney could be reached for comment Wednesday.

Alameda, pop. 76,000, is on an island in the East Bay, closer to Oakland than San Francisco.

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