Bill would cap tax levied by cities on telecom companies
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Bill would cap tax levied by cities on telecom companies

Date: May 3, 2007
By: Cliff Ainsworth
State Capitol Bureau
Links: HB 165

JEFFERSON CITY - A years-long dispute between cell phone companies and Missouri cities would be swept away under legislation currently before the Missouri Senate.

At issue is a tax that cities and municipalities charge telephone companies for operating within their boundaries.  For years, cell phone companies have not paid the tax, claiming the mobile phone industry is distinctly different from the land line telephone business and the rates levied by cities are discriminatory because they are higher than most sales tax rates.

But local governments have charged that cell companies owe them millions of dollars in back taxes.

While the dispute between wireless phone companies and Missouri cities has so far played out in the courtroom, Rep. Shannon Cooper, R-Clinton, is sponsoring legislation that would nullify the issue by throwing out the lawsuits and capping the amount of the business license tax that cities levy on phone companies. 

Cooper said constituents have complained about fees put on their phone bills that result from telecommunications companies passing the business license tax onto consumers.  He dismissed concerns raised by critics of his bill that it will reduce local tax revenue.

"When constituents complain, the legislature steps in," Cooper said.  "They're just tired of their phone bills going higher and higher."  His bill would limit the tax at 5 percent - seven percent less than what Cooper said some municipalities charge now.

Under Cooper's bill, back taxes that cities believe they are owed by cell phone companies would not have to be paid.  Many city and municipal governments are opposed to the legislation and have gone to court to try and force mobile phone providers to pay the taxes.

Cooper's bill cleared the House earlier this year and is pending before the full Senate.

There is currently a case pending over the taxes in the St. Louis County Circuit Court between about 45 Missouri cities and wireless provider Sprint Spectrum.

Gary Markenson, Executive Director of the Missouri Municipal League, which is opposed to Shannon's bill, said if cell phone companies in Missouri payed the business license taxes statewide, it would total $70 million a year in local government tax revenue.  He said 300 Missouri cities levy the tax on telephone companies.

"If big corporations could just not pay their taxes and let it coast for eight years, and then when they're getting read to get nailed, go to the legislature and get all their back taxes forgiven, we're going to be in a mess," said Markenson.

The cell phone industry, however, argues that it should not have to pay the license tax because the wireless business is vastly different than that of traditional telephones.

"We're not the rotary phone that's stuck to the wall of my mother's kitchen," said Joe Farren, Director of Public Affairs for CTIA-The Wireless Association, an industry lobby group.  "We are a innovative, high-tech and vibrantly competitive industry."

As people have increasingly turned away from land line phones in favor of cell phones in recent years, local tax revenues have declined because cell companies have not paid the business license tax.

Last August, a bill enacted two years ago similar to Cooper's measure was ruled unconstitutional on a technicality by the Missouri Supreme Court. 

The broader questions of whether cell phone companies should have to pay the business license tax and whether the legislature can forgive back taxes and dismiss lawsuits were not taken up by the court.

Cooper said the legislature has dismissed lawsuits in the past relating to school funding and gun manufacturers, but said he was not sure whether his bill, if enacted, would stand up in court. 

"I can't even pretend to fathom what the courts will do," Cooper said.