Court sides with city, not Sprint

The city’s quest to collect roughly $40 million in unpaid gross receipt taxes began in late 2004, when Springfield sued Sprint after the telecommunications company claimed its wireless service was exempt from the business license tax because it wasn’t a telephone service.

For more than 30 years, Springfield has levied a 6 percent tax of gross receipts on companies that supply telephone and telecommunications services. Annual collections of about $2.5 million are deposited in the city’s general revenue fund to pay for basic government services and public works.

In its suit, the city argued that four wireless companies – Alltel, Nextel, Cingular and Sprint – and AT&T are subject to the tax.

But while the suit was pending, Missouri lawmakers passed House Bill 209 – a law that prohibited litigation seeking unpaid business license taxes on wireless telephone service and dropped the city’s tax to 4.1 percent. The bill also forgave all back taxes and capped the tax at 5 percent.

The state Supreme Court, however, deemed the legislation unconstitutional. In its opinion, the court suggested HB 209 was an invalid “special law” that exempted certain cities while discriminating against others – including Springfield – without any substantial justification.

“We appreciate the decision by the Missouri Supreme Court to uphold the right of local municipalities to collect long-standing telephone license taxes according to their own ordinances rather than letting the General Assembly supercede local control on this issue,” City Attorney Dan Wichmer said in a news release.

Springfield attorneys John Housley and Angela Drake with Lowther Johnson LLC represented the city in the license tax dispute.