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Published on Friday, March 1, 2013

Telecommunications tax parity bills

Another bill has been introduced to address cell phone sales tax issues raised in lawsuits by communications companies against the state.

We previously wrote about Senate bill SB 5422, which provides a fix for the issues raised in the 2011 Sprint Spectrum v. Washington State Department of Revenue case and allows DOR to continue levying sales tax on all cell phones. It also removes the sales tax exemption for residential phone lines.

Today, a similar bill was introduced in the House, HB 1971. The House bill adds a section articulating the intent that sales tax provisions apply retroactively to be consistent with DOR’s long-standing interpretation of the residential sales tax exemption. It also adds a retroactive exemption from sales tax for Voice over Internet Protocol (VoIP) service.

In late January, Verizon Long Distance filed a lawsuit against the state Department of Revenue, which, like the Sprint Spectrum case, asserts the sales tax exemption has not been appropriately applied to some of their services. If Verizon is successful, there could be a significant financial impact to the state and local governments, and this recent lawsuit may compel the Legislature to enact one of these bills.

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