City officials provide update on class action suit

During last month's council meeting, aldermen voted on and approved an ordinance to accept payment from T-Mobile.

Essentially, what this case is about and how it got started is due to one simple thing, according to local officials-- the wireless carriers thought that since they weren't landlines, they should be exempt from paying any franchise taxes.

It has been the contention of many towns in Missouri that wireless phone companies should be expected to pay the same business licenses and taxes as the landline telephone companies.

The wireless companies in turn did not agree with this viewpoint. They contend that the services that the companies offer and the facilities that are used aren't subject to municipal taxes since they refer to themselves as "commercial mobile radio services."

Lawyers from both sides have come to terms and agree that settlement serves the best interests of the parties involved. Both sides have entered into a settlement agreement concerning this matter. The St. Louis County Circuit Court has given preliminary approval for the settlement.

Although the telephone companies have agreed to pay any back taxes owed and any future taxes incurred, they do not admit to the fact that their services are considered "telephone" nor do they admit that they owe any back taxes.

Any towns in Missouri that have established a "business license tax," on or before June 28, 2010 or the wireless companies have provided services through their facilities and earned revenue are included in this settlement class action suit and are entitled to receiving payment of any back taxes and payment of any future taxes, according to officials.

The following reflects back taxes paid to the city since February of 2008. However, these amounts reflect tax money owed to the city since Sept. 1, 2005. The following wireless companies listed have a larger customer base than T-Mobile and since the money owed is based on gross receipts, the amount would be larger. According to officials, T-Mobile does not have as large a customer base in the city. Kennett has settled with the following wireless companies for the amounts owed in back taxes.

* Verizon - $25,688. 85

* AT&T Mobility - $313,005.40

* Sprint Nextel - $11,006.18

* AT&T/SBC Communications - $192,496.62

T-Mobile has been the only outstanding wireless company since Dec. 29, 2009.

According to City Clerk Brenda Privett, the funds previously received from the carriers listed above, were applied to the city's General Revenue Fund upon receipt, and have already been spent. Privett noted that had it not been for the funds sourced through the lawsuit, the City of Kennett would be in much worse conditions that it presently is in terms of money available within its budget. Privett also added that the funds spent covered expenses such as monthly bills, and various department salaries, in addition to other miscellaneous expenses.

To determine how much back taxes a city is entitled to is determined by gross receipts from the beginning of service through Dec. 31, 2007. If it has been decided that a city has a Business License tax , it is entitled to at least 27 percent of that tax based on gross receipts.

The wireless companies agreed to pay to the city any money due from the Business License Tax, encompassing tax periods and those partial tax periods that began on or after Jan, 1, 2008.

Taxes established on revenue from "commercial mobile radio services" (CMRS) are subject to being taxed by the city if a telephone company has a local address or a local business address within the city limits.

This is considered to be a "sourcing rule" and is mandated by the Mobile Telecommunications Sourcing Act. Due to this sourcing act , telephone companies will pay taxes on revenue from the provision of Telecommunications Service.

After the court enters in the final order for dismissal, a city that is involved in the class action suit can expect to receive its money within 30 days, However, to receive this money, the dismissal order needs to be finalized by the Court.