NY Court Orders Cingular, Tax Officials to Resolve Refunds

ALBANY, N.Y. (CN) – A state appeals court showed frustration Thursday that more than a decade later, New York customers of New Cingular Wireless still haven’t received a refund for a sales-tax overcharge they paid for internet services.

The $106 million pre-refund escrow account is now available and awaiting distribution, “if only petitioner and the Division [of Taxation] could get out of each other’s way long enough to make that happen,” Justice John Egan Jr. wrote in an eight-page ruling from the New York Supreme Court’s Third Appellate Division.

New Cingular Wireless, a subsidiary of AT&T Mobility LLC, erroneously billed and collected sales tax for internet services between November 2005 and September 2010.

In 2009, 54 separate class-action lawsuits challenging the charges were filed in 44 states, before being consolidated in Northern Illinois federal court.

In June 2011, a federal judge approved a global settlement agreement with state-specific subclasses, including a New York subclass, consisting of current and former customers who had paid taxes during the five-year period.

New Cingular submitted a claim for a sales-tax refund on behalf of its customers, but the New York Tax Appeals Tribunal’s Division of Taxation rejected the claim, finding that the company failed to reimburse its customers and its supporting documentation did not include enough information for the division “to determine how the refund amounts shown for each customer were determined.”

Now that New Cingular has placed the funds in an escrow account, the two sides can’t agree on how to issue the refunds, according to the ruling.

Granting New Cingular’s motion to reopen the case record, Justice Egan wrote that in their “zeal to advance their competing interpretations of Tax Law § 1139 (a) and the corresponding regulations, the parties appear to have lost sight of one salient fact – namely, that petitioner’s customers are owed in excess of $106 million.”

The New York Supreme Court’s Third Appellate Division remitted the case to the commissioner of taxation and finance for further proceedings.

“To our analysis, all that remains is the physical act of distributing the subject funds, i.e., tendering to petitioner’s customers the moneys to which they are due and owing and remitting to petitioner whatever refund to which it may be entitled, and the parties would be well-served to proceed in a fashion that accomplishes those tasks in as expeditious a manner as possible,” Egan wrote for a unanimous five-judge panel.

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