Hung Up in Court: Springfield/Cingular lawsuit

Springfield and other cities in Missouri are in legal disputes with cellular phone companies over what constitutes telecommunications service, and millions of dollars hang on a federal judge’s interpretation of the legal definition.

Cingular Wireless filed a lawsuit June 14 in Greene County Circuit Court against the cities of Springfield and Republic, arguing that the company should not have to pay city license taxes for providing telephone services in the cities.

The $63 billion cell phone company says it should not be required to pay the 6 percent of gross receipts charged to all telephone companies doing business in the cities because cell phone service does not fall under the cities’ or state’s legal definitions of “telephone service” due to its use of radio signals rather than physical wiring. Missouri law defines telecommunications service as “the transmission of information by wire, radio, optical cable, electronic impulses, or other similar means,” not including cable television or TV or radio stations.

Under protest

Since February, Cingular has slapped an “under protest” tag on its gross receipts tax payments totaling more than $300,000.

The payment protest and suit are merely procedural issues allowed under Missouri state law, according to Springfield Assistant City Attorney Nancy Yendes. She said Missouri law allows anyone who thinks they are being charged unfair taxes to pay under protest. As part of that process, the payer must file suit at least every 90 days; the money then goes into an escrow account until the case is settled.

Yendes, though, doesn’t see much to argue about.

“They’re here doing business, and they need to pay their taxes like everyone else,” she said.

Kerry Hibbs, a spokesman for Cingular’s parent company, AT&T, said the company is willing to pay some of the back taxes in dispute.

“The issue is the amount that we’re paying – that’s the sticking point,” Hibbs said. “It’s something that we’re going to have to go through individually with each city, because each city is a little different. But we’re definitely open to settling this kind of thing.”

Springfield City Manager Bob Cumley said the money in dispute in the lawsuit – between $300,000 and $400,000 – won’t impact the budget or the city’s ability to fund other services.

“It hasn’t been budgeted, because we can’t spend it,” Cumley said, noting that state law says the city cannot spend the money until the suit is settled. “It hasn’t been appropriated anyway – but once we got it, it sure would be appropriated.”

Springfield is not alone in the fight; several other communities, including some in the St. Louis area, face similar court battles over the license tax issue.

State legislators have tried to figure out a way to solve the problem. State Sen. John Griesheimer, R-Washington, sponsored Senate Bill 209 during the past session, which would have capped the amount companies must pay. The cities and the companies, though, could not come to an agreement, and the legislation stalled.

Similar legislation passed in 2004 that would have settled the issue, but it was ruled unconstitutional by the Missouri Supreme Court.

A federal case

Arguing over license taxes is nothing new between cities and cell phone companies – a case has been pending in U.S. District Court between Springfield and five wireless companies since 2003, regarding the payment of back taxes dating back as far as 1999. U.S. District Judge Nanette Laughrey is hearing the federal case in Springfield involving Cingular, Sprint, Nextel, SBC and Alltel.

The federal suit and others like it across Missouri have huge financial implications. Springfield and more than 40 cities would lose out on “tens of millions” of dollars, according to the financial study accompanying SB 209. Yendes said the city is prevented from listing the exact amount in dispute in each case because the suit is ongoing.

The Missouri Municipal League, meanwhile, estimates that cellular companies in Missouri would be forced to pay more than $300 million collectively in taxes, interest and penalties if they lose the case.[[In-content Ad]]