Mo. judge says cities don't have to repay taxes

COLUMBIA, Mo. -- A group of more than 250 Missouri municipalities and St. Louis County don't have to repay AT&T customers for improperly collected taxes on Internet access, a federal judge ruled this week.

Local governments across the state have been defending themselves for years against a class-action lawsuit that sought millions of dollars for AT&T surcharges that plaintiffs claimed were used to pay an illegal tax.

Judge Nanette Laughrey ruled Monday that the local governments merely collected money given to them in error, and that the plaintiffs did not show that the local governments caused their injuries, the Columbia Daily Tribune reported.

Wireless carriers did not collect business license taxes until 2008, when a settlement between local governments and wireless providers required the carriers to pay a lump sum for back taxes and start collecting taxes on gross receipts from telecommunications services.

Internet access was supposed to be excluded from the taxable services because of a federal law that bars taxes for online access. But because of an error, AT&T collected money for the settlement based on all of its revenue, including Internet access.

After AT&T customers sued the company, the carrier reached an agreement with them in 2010 in which it stopped taxing Internet access and sought refunds from the local governments.

After the governments refused to refund the money, AT&T customers filed a lawsuit to collect the funds directly from the entities.

In her ruling, Laughrey said the settlement payments by AT&T were not a tax and thus not an illegal collection of Internet service taxes.

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Information from: Columbia Daily Tribune, http://www.columbiatribune.com