AT&T Settles In Class Action Over Mobile Internet Taxes


AT&T (NYSE: T) customers that have data plans for iPhones, Blackberries and other smartphones and wireless devices got a surprise text message late last week: they would soon be receiving a refund from AT&T for taxes that were charged on mobile internet services between November 1, 2005 and September 7, 2010. The message, it turns out, was the result of a settlement of a below-the-radar class action lawsuit filed against the operator, from plaintiffs who claimed that AT&T had violated the federal Internet Tax Freedom Act. This act prohibits state and local governments from levying taxes on Internet access between November 2003 and November 2014, but apparently AT&T kept collecting.

The settlement however raises more questions than it gives answers. For one, the website set up for plaintiffs doesn’t list how much AT&T had collected wrongly. It also does not spell out whether it affects all of its mobile data users, or just some of them: the suit had originally be filed in federal courts across several states; later these individual cases were all transferred to the United States District Court for the Northern District of Illinois, Eastern Division.

Nor is it clear any other mobile operators have been taxing their users as well.

At AT&T alone, we could be talking about a sizeable amount: one blogger on points out that he has been paying at least a few dollars/month in these taxes on a data bill of $70/month for himself and his wife’s devices. The operator in the last quarter alone reported revenues of $4.8 billion from wireless data services, and this settlement covers the last five years.

Other questions about costs to AT&T:
Vendor’s compensation. The settlement site notes that vendor’s compensation “is the amount of money AT&T Mobility was allowed to retain from the sales tax it collected as compensation for collecting the taxes for some (but not all) taxing jurisdictions.” AT&T will be required also to pay this into the settlement pot, but again no value has been assigned to this yet.

Legal fees. The settlement also notes that legal fees related to the case – amount not yet determined – will be paid both from the refund claims and AT&T Mobility.

Are you eligible? The settlement website notes that users that take Data Connect Plans (wireless Internet on your PC), Smart-phone Data Features bolt-ons, smartphone data plans, iPhone data plans, personal Blackberry plans, or enterprise smartphone plans are all potentially included in the settlement. There are instructions for how to object to or exclude yourself from the settlement, but if you do nothing you will receive the refund.

As part of the settlement, AT&T has not admitted any wrong doing. This has a precedent in the carrier’s previous class action settlements – for example, a 2008 case that involved disputed fees over third-party content.

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