LA Taxpayers May Be Awarded in Phone Tax Settlement

Good news Los Angeles taxpayers, you could be making some money over a lawsuit settlement. But, you can also stand to suffer if the lawsuit doesn’t apply to you.

According to an article in the Los Angeles Times, the city could be responsible for up to $92.5 million in costs to resolve an old lawsuit over a city telephone tax, as part of a class-action settlement that was granted preliminary approval by a Superior Court judge.

The actual figure that the city would be responsible for is contingent on how many people both seek and obtain refunds over payments on telephone taxes over a more than 21-year period that ended in 2008.

The battle over the taxes has been going strong for nearly nine years. Estuardo Ardon, a taxpayer, filed a suit against Los Angeles, claiming that the taxes imposed on telephone users was collected illegally because it was levied on services that were not subject to federal taxes. As a result, Ardon sought not only a refund on the taxes for himself, but for fellow taxpayers as well.

The $92.5 million is just a shadow of what the city was initially estimated to pay in the settlement if Ardon won in court. Lost Angeles was previously expected to pay as much as $750 million.

As part of the settlement plan, the city would deposit $50 million into an escrow account. If the demand for refunds is more than said amount, the city will have to raise more money. And, when a city has to raise more money, this often means an increase in taxes. Oh the irony.

It’s not clear how many locals could be eligible for the settlement. Taxpayers will have to submit a claim in order to obtain either a flat rate or full refund. The flat rate is proposed at $30 for those who have residential land line service and $50 for those holding either a business land line or mobile service. In order to get a full refund, taxpayers will have to submit copies of their telephone bills.

Refunds will only be offered to people who paid the telephone taxes between Oct. 19, 2005, and March 15, 2008.

Anyone who isn’t part of the class action lawsuit and who is worried about whether or not their own pockets will be dented because of the settlement can contact a California tax lawyer for help.

Tax attorneys can put the details of the settlement into perspective and help taxpayers who are part of the lawsuit and those who may be threatened with heftier taxes as a way for the city to compensate for the loss.