A Georgia appeals court denied certain AT&T subsidiaries’ attempt to recoup taxes they charged customers on wireless services, because the companies lacked standing to recoup the allegedly erroneous taxes on behalf of customers who paid them.
Georgia’s Court of Appeals ruled on Tuesday that the state’s Department of Revenue acted within its authority in enforcing a regulation requiring vendors seeking a tax refund on behalf of their customers to pay back the improperly collected tax to those customers before seeking a refund from the government, upholding a lower court’s ruling.
AT&T units New Cingular Wireless PCS LLC, Chattanooga MSA LP, Georgia RSA No. 3 LP and Northeastern Georgia RSA Limited Partnership did not dispute that they had not refunded the allegedly erroneous tax payments to their customers. But they argued the regulation is not supported by Georgia law, which doesn’t explicitly require vendors seeking such a refund to repay customers before they know whether the refund will be granted. But the issuance of the regulation falls within the department’s authority, the court ruled.
“The revenue commissioner has explicit statutory authority to ‘promulgate regulations for the enforcement of the Public Revenue Code and the collection of revenues thereunder’ with judicial deference afforded to ‘the agency’s interpretation of rules and regulations it has enacted to fulfill the function given it by the legislative branch,” the decision states. “We defer to the department’s interpretation of this regulation, which it enacted in order to fulfill the function delegated to it by our General Assembly.”
AT&T is trying to recover millions of dollars in taxes it charged customers for wireless services in multiple states, as part of a 2010 global settlement.
The terms of that settlement, the decision states, undercut AT&T’s argument that it would stand to incur a substantial loss if it repaid customers in advance for tax payments that the Department of Revenue ultimately failed to refund to the company. This is because the agreement stipulates that refunds made to AT&T customers would be put in an escrow account until a refund from the relevant tax authority is made, in jurisdictions with regulations requiring prepayment to customers, like the one addressed in the instant case.
The case is New Cingular Wireless PCS LLC et al. v. Georgia Department of Revenue et al., case number A16A2003, in the Court of Appeals of Georgia, Fifth Division.