T-Mobile Collected Mo. Utility Taxes It Wasn't Entitled to Collect, Alleges Class Action

T-Mobile collected from customers a “city license” or "utility” tax it wasn't authorized to collect under ordinances of various Missouri municipalities, alleged a class action Wednesday (docket 4:23-cv-00561) in U.S. District Court for Western Missouri in Kansas City.

T-Mobile’s services aren't subject to the tax it describes on its statements as a city license tax because the scope of the various ordinances by which Missouri municipalities assess and collect the taxes doesn't "describe or encompass the services provided by T-Mobile," said the complaint. The tax "is illegal and unauthorized,” it said.

Plaintiff Michelle Blankenship of Kansas City, Missouri, a T-Mobile customer since 2002, asserts many of T-Mobile’s terms and conditions for customers “are substantively and procedurally unconscionable, are contained in and comprise an illusory agreement, and are unenforceable.”

Various municipalities, including Kansas City, located in Jackson County, Missouri, impose on T-Mobile a tax that the carrier describes on customer statements as a city license tax. “If that tax was legally and properly imposed by the municipality on T-Mobile, then T-Mobile, not T-Mobile’s customer, is the taxpayer responsible for paying that tax to the municipality,” said the complaint.

T-Mobile paid that tax under protest to those Missouri municipalities, then sued them to recover the tax paid under protest, said the complaint. In the lawsuits, T-Mobile claimed it was entitled to a refund of all amounts that it describes as a “Utility Tax” because the collection of that tax was “unconstitutional, illegal, unenforceable and otherwise unlawful.”

The carrier acknowledged it’s the residents of the municipalities who buy its services who ultimately shoulder the tax burden the municipalities seek to impose, said the complaint. The utility tax that’s the subject of the T-Mobile lawsuits, and that T-Mobile sought to be refunded, "is the same as the ‘City License Tax’" shown on customers' statements, it said. T-Mobile’s statements show it's passing the amount it has paid as a tax to municipalities on to its customers by describing the charge as a city license tax, “which is imposed on the customer by the municipality,” it said.

In its lawsuits, T-Mobile sought to have refunded over $8 million, said the complaint. It collected that amount from customers like Blankenship based on each customer’s “gross receipts” as reflected on each customer’s cell phone statement, it said. Gross receipts on which T-Mobile based the tax collected from customers included carrier access revenue and revenue derived from interstate service, it said.

This class action represents all T-Mobile customers who were Missouri citizens and were charged a license or utility tax on a T-Mobile cellular phone statement from Dec. 1, 2007 to April 30, 2010 -- “and which T-Mobile subsequently collected such tax from the customer and paid such tax under protest” to Missouri municipalities Grain Valley, Grandview, Kansas City, Lee’s Summit, Oak Grove or Raytown, said the complaint. T-Mobile sought to recover a refund of that tax from each of these municipalities in the lawsuits, it said.

The number of members in the putative class exceeds 2,000, making joinder “impracticable,” said the complaint. The amount of damages suffered by each individual putative class member “is so small as to make a separate action for recovery by each class member individually economically unfeasible."

Ten putative class actions collectively asserting the same claims as in the present putative class action were filed in Jackson County, Missouri, Circuit Court Aug. 19, 2010, said the complaint. Blankenship was a member of the putative class in each of the 10 cases but wasn't a named plaintiff seeking to be certified as a class representative. Those cases were dismissed without prejudice on Sept. 6, 2017. She was also a member of a putative class in a similar class action filed in March 2016. In that case, a judgment was entered in 10 de novo cases on a jury verdict against the class representative, Susan Marple, on her individual claim only; no judgment was entered regarding a class.

Blankenship also filed 10 putative class actions collectively in Jackson County, Missouri, Circuit Court Jan. 4 asserting the same claims as the Wednesday action. Those cases are pending, and Blankenship was ordered to arbitrate.

Blankenship asserts claims of unjust enrichment and violation of the Missouri Merchandising Practices Act. She seeks legal costs and a declaration that “T-Mobile was not legally obligated to pay the tax” that’s the subject of the T-Mobile lawsuit and a declaration that T-Mobile is obligated to refund to Blankenship and each putative class member “all the money it collected as a City License Tax, Utility Tax, or similar tax which it claimed it did not owe and sought as damages in the T-Mobile lawsuits.” T-Mobile didn't comment.