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Georgia Supreme Court Ends Stand-off Between Cellphone Companies and DOR on Data Tax Refunds

Between 2005 and 2010, four AT&T subsidiary cellphone companies collected and remitted to the Georgia Department of Revenue (DOR) $6 million in sales tax on internet data services. The problem is, these services were exempt from sales tax under Georgia law, so the taxes were collected in error.

The companies filed for a refund with the DOR in 2010, and the DOR officially refused to pay the requested refund claims. The companies sued and lost before the Georgia Court of Appeals. Now, the Georgia Supreme Court has reversed that case and told the DOR to pay up.

In Cingular v. Georgia Department of Revenue, the Georgia high court reviewed the DOR’s position that it would not refund any of the collected sales taxes until the cellphone companies refunded the money to their customers. Both the trial court and the Georgia Court of Appeals held that the companies had to refund the taxes to the customers before the companies could seek a refund from the DOR.

In reversing the earlier courts, the Georgia Supreme Court found this position unreasonable and unfair. The opinion gives a hypothetical example that, under the DOR’s position, a company could have to prepay $100 million in refunds to its customers only to potentially be told later by the DOR that it was denying the refund claim.

“This is illogical and creates a strong disincentive for dealers to seek refunds on behalf of customers,” the Court said. The Court also noted that the DOR took five years to deny the companies’ refund claims. It is estimated that consumers in Georgia are owned over $6 million in refunds from the erroneously-collected tax. The decision clears the way for the wireless companies to set the refund process in motion. AT&T spokesman Marty Richter has said that any refunded taxes will be passed along to the Georgia customers who initially paid the taxes.

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