AT&T Says Cell Tax Class Action Should Move to Federal Court

A series of class action lawsuits were filed against the California Board of Equalization, as well as cell service providers AT&T Inc., Sprint Corp., T-Mobile US Inc., and Verizon Communications Inc. alleging that an illegal sales tax from 1999 was levied on discounted cell phones.

Lead plaintiffs allege that the California Board of Equalization promulgated a sales tax on cell phones in 1999, but charged the tax for the full price of the phones even though they were sold at a discount.

The plaintiffs were required to include top cell service providers in the lawsuit because they are barred from filing the lawsuit against the state. Instead, the cell phone companies will have to ask the state board for refunds.

According to the class action lawsuits, a sales tax was charged on the full value of mobile phones that were discounted in return for entering into multi-year service contracts as a part of service deals offered by cell phone companies.

The plaintiffs allege that reduced price mobile phones sold as a part of these contracts at cell phone service provider retail locations should not have been subject to the sales tax. The plaintiffs point out that that the California Board of Equalization assumed that the retailers were receiving a rebate or commission based on the difference between the full prices of the phones and the discounted price; however, this was not the case, argue the plaintiffs.

The plaintiffs allege that the California Board of Equalization illegally taxed the full price of cell phones that were discounted as a part of a multi-year service contract at cell phone service providers’ retail locations. They claim that the Board potentially owes billions in overpayment of this sales tax.

On Monday, AT&T filed a motion to move the class action to federal court. AT&T argues in its motion that the case should be heard on the federal level because the proposed Class is so large and because AT&T does business in other states.

A representative for the plaintiffs stated that the case should remain in state court because the phone companies shouldn’t need to pay damages. The representative also pointed out that the case is seeking repeal of the allegedly illegal tax law and damages for improper enforcement of the law. Since California already has a process for refunding taxes to California residents, said the representative, the case should stay in state court.

Class representatives Alina Bekkerman, Brandon Griffith, Jenny Lee and Charles Lisser are represented by Daniel M. Hattis of Hattis Law, Tony J. Tanke of Law Offices of Tony J. Tanke and Jeffrey Burke of Burke Law Group.

The California Illegal Cell Phone Sales Tax state cases are Bekkerman, et al. v. California Board of Equalization, et al., Case No. 34-2015-80002242 and Bekkerman, et al. v. California Board of Equalization, et al., Case No. 34-2015-80002287 in the Sacramento Superior Court.

The federal case is Bekkerman, et al. v. California Board of Equalization, et al., Case No. 2:16-cv-00709, in the U.S. District Court for the Eastern District of California.