The Massachusetts Appellate Tax Board held that charges for data services were exempt from Massachusetts sales tax under the Internet Tax Freedom Act (“ITFA”). New Cingular Wireless PCS LLC v. Commissioner of Revenue, Appellate Tax Board Docket No. C321816 (June 21, 2018). As a result of the Appellate Tax Board's (“the Board”) decision, New Cingular Wireless PCS LLC (“New Cingular”) is entitled to a refund of approximately $20 million in previously collected sales tax, bringing to close a lengthy litigation that has also been the subject of several other cases nationwide.
Background
New Cingular, an affiliate of AT&T Mobility, LLC (“AT&T”) that conducted AT&T’s business in Massachusetts, is a wireless telecommunications service provider that offers three primary lines of service: voice, text messaging, and data. Because Massachusetts sales tax law generally taxes telecommunications services, New Cingular collected and remitted sales tax on all three lines of service.
In 2011, New Cingular settled a federal class action lawsuit alleging that charges for data services were charges for internet access, and that New Cingular had improperly collected sales tax in multiple jurisdictions on charges for data services in violation of the ITFA, which generally exempts charges for internet access from sales taxation. In re AT&T Mobility Wireless Data Servs. Sales Tax Litigation, 789 F.Supp.2d 935 (N.D. Ill. 2011). Under the settlement agreement, New Cingular agreed to cease collection of sales tax on charges for data services and established an escrow...
