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Gazette Two Maryland jurisdictions are ready to fight cellular phone companies that have threatened them over the taxes they levy on cell phones. Officials in Montgomery County and Baltimore city sent clear signals Thursday that they would fend off the challenge from T-Mobile, Sprint, Cingular and Verizon Wireless. The issue comes down to whether the governments are collecting an excise tax or a sales tax, and whether they have the authority to tax cell phone lines. "I think we're perfectly within our authority. ... I think we will be able to defend the issue," said Montgomery County Councilwoman Marilyn J. Praisner (D-Dist. 4) of Calverton. "Our legal team crafted the legislation to stand up to legal challenge," said Raquel Guillory, a spokeswoman for Baltimore Mayor Martin O'Malley (D). At issue are millions of dollars for the treasuries of the two Maryland jurisdictions. Although the sums are small amounts compared to the companies' bottom lines, the companies are concerned about other jurisdictions across the country seeking to cash in on the explosion of mobile phones. "They don't want their customers to have to pay the cost of everyone's government. That cost should be shared by everyone, not just cellular customers," said Kenneth H. Silverberg, the Washington attorney representing the phone companies. Montgomery County Attorney Charles W. Thompson Jr. would not comment on the legal arguments aimed at the tax, but he trained an evil eye on the companies. "Most good corporate citizens realize the taxes they pay go to make the community a better place," Thompson said Thursday. "These companies do not want to participate to make the community a better one." Before officially challenging the taxes in court, the companies first must seek a refund on the taxes; that came earlier this week. The companies are seeking nearly $12.9 million from Montgomery and about $2 million from Baltimore. "The tax on wireless telephone companies is well within the authority of Montgomery County government, and we do not plan to honor the companies' request for a refund," Timothy L. Firestine, the county's finance director, said in a prepared statement. If the jurisdictions refuse to pony up the money, the case will move to Maryland Tax Court in Baltimore. That court's decision may be appealed to local circuit courts. If the tax court agrees the cell phone levy is a sales tax, it could be ruled illegal. In Maryland, only the state holds the authority to collect sales taxes, which are a percentage of a bill. "We're saying their authority is not good enough for applying that kind of tax," Silverberg said. But Montgomery and Baltimore officials said what they levy is an excise tax, which is the same for all cell phone users. In Montgomery, the tax is a flat $2 a month per phone line. In Baltimore, the tax is $3.50 a month. J. Michael Yarborough, an analyst with the General Assembly, said Montgomery County and Baltimore city have very broad taxing authorities granted to them by the state legislature. Prince George's County, for example, has a cell phone sales tax specifically approved by the state. Silverberg said the companies do not object to that tax. The cell phone companies also contend that the governments are improperly collecting for services that can occur outside their borders. Michael E. Faden, the Montgomery County Council's senior legislative attorney, dismissed that claim because the county has the right to pin the tax to the billing address. Silverberg said there is also an issue of fairness. Cell phone customers, he said, live alongside people who do not own cell phones. But people enjoy government services whether they own a phone or not. "That's a remarkably stupid argument," Faden said. Two homes side by side might pay different tax bills because of different assessments, yet the owners would enjoy the same government services, he said. If the companies win, the refunds will be passed on as savings to consumers, and possibly to the consumers who paid the tax even if they left the country, Silverberg said. "It's one of the troublesome things, we'd rather find the guy down in Peru and get the money to him," he said. "It's a tough problem, but one way or another, that money will go back to the customer." An independent agency, the Maryland Tax Court represents the highest administrative level to hear appeals to state and local tax issues. Appeals to rulings are made to the Circuit Court. The court consists of five judges appointed by the governor for six-year terms. One judge must reside on the Eastern Shore, one on the Western Shore, and one in Baltimore city. Two must be residents of the state at large. No more than
three may be of the same political party. All must be qualified voters
of Maryland. At least two must be members of the Maryland Bar; the
governor names one of these chief judge. |
