AT&T not a tax collector, Md. court rules

John O'Brien Jun. 13, 2008, 2:54pm


ANNAPOLIS, Md. (Legal Newsline) - AT&T is off the hook for more than $5 million, finally finding a court to agree with its contention that it shouldn't have to be responsible for collecting a Maryland tax on 1-900 calls.

Maryland's Court of Appeals, the highest court in the state, decided Thursday that the state Treasury Comptroller can not collect the $5,160,899.45, plus interest, that it said AT&T owed in May 2001.

Justice Glenn Harrell wrote that holding AT&T responsible for including sales and use tax on calls made to out-of-state 1-900 numbers on callers' phone bills violated the U.S. Constitution's Commerce Clause. Other courts to side with the Comptroller were the Court of Special Appeals, Baltimore City Circuit Court and state Tax Court.

"The uncontested factual findings in this case establish only that AT&T acted as a common carrier with regard to the 900 number transactions at issue," Harrell wrote.

"Thus, under Bellas Hess and Quill (two U.S. Supreme Court decisions), AT&T may not be held responsible for the 900 number sales and use tax on transactions between Maryland consumers and the information services vendors without violating the Commerce Clause of the U.S. Constitution. The Comptroller's assessment against AT&T in this case is not permissible."

Over AT&T's long-distance lines were the 1-900 calls transmitted. AT&T claimed the 1-900 business should be the one responsible for collecting the tax, implemented by the state's legislature in 1992, in its fee.

AT&T posed the following question to the Court:

"Whether, in light of the Supreme Court's 'bright-line' test in National Bellas Hess[ Inc. v. Department of Revenue of Illinois, 386 U.S. 753, 87 S. Ct. 1389, 18 L . Ed. 2d 505 (1967)] and Quill[ Corp. v. North Dakota, 504 U.S. 298, 112 S. Ct. 1904, 119 L. Ed. 2 d 91 (1992)], substantial nexus is created, thereby permitting Maryland to require a common carrier to collect a use tax on a sale from an out-of-state seller to a Maryland customer, when the out-of-state seller uses the common carrier to deliver its product (or service), and when the common carrier provides the out-of-state seller with services ancillary to, and in addition to, the delivery of the product (or service)."

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