City reaches $2M settlement with Sprint Nextel Corp.

Sprint Nextel Corp. last week began making payments to the city for the $2,375,000 in back taxes and the 6 percent gross receipts tax on wireless services, according to city officials. The agreement was approved by Springfield City Council during a Sept. 24 closed session.

The settlement stems from two lawsuits the city filed – one in U.S. District Court in Jefferson City against SBC, Sprint, Alltel, Cingular and Nextel; and one in Greene County Circuit Court against Sprint. Since then, Sprint has merged with Nextel, and SBC has merged with AT&T, which owns Cingular, now called AT&T Mobility.

After attorneys’ fees and other litigation expenses, the city expects to realize about $1.54 million from the settlement on back taxes, according to the release.

“We have always believed the wireless companies were subject to this tax on telephone service, which was confirmed by the U.S. District Court’s ruling in our favor on July 3, 2007,” City Manager Bob Cumley said in the release. “We appreciate Sprint Nextel’s efforts to reach a settlement on its back-tax liability and to begin paying its taxes.”

The city currently collects about $2.5 million each year from the tax that goes into the General Revenue Fund. About 30 telephone companies collect and remit the tax. Under federal law, they are permitted to pass the tax to customers as a surcharge.

Council will determine how to allocate the settlement money based on a recommendation from Cumley’s office. The city is now waiting to begin settlement negotiations with other wireless companies named in the suit, according the release.

This story originally appeared in SBJ’s Sept. 28 free e-news Daily Update. Click here to register.