Taxing Tech

Recently, a class of plaintiffs settled with City of Los Angeles over its alleged unlawful collection of telephone utility user tax (UUT). The class alleged that the Los Angeles Municipal Code exempted from UUT all amounts not subject to federal excise tax. The disputed taxes were collected between Oct. 19, 2005 and Mar. 15, 2008. Fighting all the way to the California Supreme Court, the plaintiffs proved that yes, California law allows for tax refund class actions against the city in this instance. After that defeat, Los Angeles settled without litigating the merits. Los Angeles estimated its potential exposure at $300M. The settlement amount, $92.5M, is a cap that assumes roughly 70% of eligible claimants will not submit a claim. Unclaimed funds will return to the city. Claimants will receive 70% of their actual UUT with documentation of their payments or, otherwise, $30 for residential landline service, or $50 for business landline or mobile service. Businesses that paid for many landlines and mobile phones may find it worth their time to submit a claim.