Verizon Northwest is asking local cities for a nearly $2 million refund in utility taxes, but it turns out company officials were improperly taxing thousands of its Snohomish County customers during the same time period.
In the past two years, Verizon passed on a city tax to at least 4,784 customers in the state who lived in unincorporated areas, according to the Washington Utilities and Transportation Committee, which regulates the rates, services and practices of privately-owned utilities.
Most of those customers, nearly 4,700, are in Snohomish County.
Verizon, with headquarters in New York City, sent letters to 10 Snohomish County cities requesting a refund of about $2 million in utility taxes paid between Jan. 1, 2005, and June 30, 2008.
The company says it should never have paid the city taxes on sales of its digital subscriber line service, which crosses state lines. Company officials cited two rulings by the Washington State Supreme Court that found cities can only tax telecommunication services that stay within the state.
The state commission began looking into the city tax matter in 2008 after Verizon customers complained, spokeswoman Amanda Maxwell said. The commission eventually reached a settlement agreement with Verizon that required the company to investigate complaints and issue customers credit. Verizon also agreed to alert neighbors of customers who complained to make sure they weren’t wrongly charged either.
In total, the company paid back about $6,000.
The state commission also fined Verizon $58,000 and that penalty was later reduced to $39,900 and suspended, pending Verizon’s compliance with the agreement, Maxwell said.
It’s common practice for utilities to pass on utility taxes set by cities and the state to their customers, she said. The problem is many utilities — not just Verizon — use software that bills by ZIP code. Reliance on those programs renders companies unable to see who lives in unincorporated areas of the county.
Jon Davies, the Verizon spokesman, said it’s challenging for the company to determine the correct tax jurisdiction for all of its customers. If they find a problem, they issue a customer credit and correct the problem promptly, he said.
When customers are billed city taxes inappropriately, the company doesn’t make any money — it’s passed onto cities, he said.
There also may be Snohomish County customers who have a county tax mislabeled as a “city tax.”
In either case, if you believe there’s a problem with your bill, the state commission suggests you first try to resolve the issue with the company. If you don’t get relief, you can file a complaint with the commission.
Debra Smith: 425-339-3197, dsmith@heraldnet.com.
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