City of Palo Alto to Get Day in Court in Verizon Tax Case

By Kimra McPherson, San Jose Mercury News, Calif.

Mar. 22–A judge has ordered Verizon Wireless and Palo Alto to trial to decide whether the phone company should continue to pay a local tax on cell phone calls.

Santa Clara County Superior Court Judge Jamie Jacobs-May reversed her previous judgment that had dismissed the city’s case against Verizon. A trial could be set for later this year, said Mark Strombotne, the attorney representing Palo Alto.

Palo Alto voters passed a utility users tax in 1987, which requires phone companies to pay taxes on calls if they are also paying a federal tax.

One aspect of the federal tax — which dates back more than 100 years — requires call charges to be calculated according to time and distance. Most of today’s cell phone plans calculate charges according only to time, and numerous federal court rulings have sided with the phone companies who argue they shouldn’t have to pay.

The judge’s ruling indicates that some Verizon services might be taxable under another provision of the federal tax that applies to local services, Strombotne said.

If Verizon were ordered to stop paying the tax, Palo Alto could lose millions of dollars in revenue, officials have said.

Contact Kimra McPherson at kmcpherson@mercurynews.com or (408) 920-5928.

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