Newspaper article The Florida Times Union

Phone Tax Funds Lead to Lawsuit

Newspaper article The Florida Times Union

Phone Tax Funds Lead to Lawsuit

Article excerpt

ATLANTA -- No matter where they're calling, cellular phone

customers in some rural Georgia counties are paying

long-distance taxes.

As in, another county's taxes.

Because of a quirk in the way phone prefixes are assigned to

mobile telephones, customers in some sparsely populated counties

get numbers from a nearby county.

Placing and receiving calls from those numbers works just fine.

But deciding how those calls are taxed -- and who gets the money

-- is turning into a headache for cell-phone companies and state

officials.

It's also reviving questions about the bookkeeping ability of

the state Revenue Department, which admitted after a critical

1996 audit that its overworked staff lost track of how much

local-option tax money was due each county and instead used

estimates.

LOST REVENUE: $2 M

The cell-phone problem came to light in a suit filed by Emanuel

County to recover about $25,000 in local-option taxes that,

according to county lawyers, were paid to Bulloch and Toombs

counties by mistake.

No one is certain how widespread the tax inequity is, but one

company involved in the Emanuel case estimated its statewide

liability at $2 million to $2.5 million over a three-year period.

Georgia has about 1 million cellular telephones, according to

industry estimates.

"If in fact it is a statewide problem and it encompasses all

cellular phone companies doing business, it would have to be in

excess of $50 million. It could be much higher than that," said

Swainsboro attorney J. Franklin Edenfield, who represents

Emanuel County.

CUSTOMERS OVERCHARGED

County governments aren't the only affected parties.

Because of the way cellular calls are taxed, some customers

have been overcharged a penny per dollar -- and, unlike

shortchanged county governments, the Revenue Department has no

plan to compensate them.

Edenfield uses the Treutlen County prefix, where customers,

according to court filings, paid Toombs County's 1-cent higher

sales tax for years.

"The lack of concern or redress on the part of the Revenue

Department is incredible," Edenfield said. "It's a huge

embarrassment to them."

Revenue Department officials declined to talk about the dispute

yesterday, citing the ongoing court case with Emanuel County.

The situation stems from the way cell-phone companies report

taxes to the government.

Although Revenue Department policy says taxes should be

assessed at the home address of the consumer, phone companies

sometimes use the location of the telephone exchange instead. In

rural communities, that exchange often is in the nearest urban

center.

One company that serves eastern and southern Georgia, Alltel

Mobile, acknowledged in court that it has cellular service in 81

counties but reports sales taxes from only 26 of them. …

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