Cell phone taxes—court to make the call

South Dakota State Roundup

Published March 1, 2005  | March 2005 issue

The state's tax on cellular phone companies, passed by the 2003 Legislature, has been challenged by Verizon before the state Supreme Court. Verizon argued that the tax disregards federal telecommunications laws, which prohibit a state from doing anything to regulate the entry of wireless companies into a state market. While Verizon's lawyer acknowledged that the state has a right to tax cell phone companies, currently 4 percent on gross receipts, the licensing agreements and other provisions of the state tax law are a barrier to entry in the market. In addition, Verizon claimed that the state Constitution was violated because the bill included more than one subject; that is, it covered levying the tax, distributing the tax revenue and setting regulations on cell phone companies.

State Assistant Attorney General David Wiest countered that the state is in compliance with federal law in that it does not regulate which companies can do business in the state, and that the licensing and other procedures are in place to assure that the tax will be paid. The tax was adopted to help balance the state budget and is expected to bring in $5 million to $6 million a year, with 60 percent going to the state and the balance going to counties. The Supreme Court will issue a written decision, but no timetable was announced.

Kathy Cobb