TRIBUNAL REMANDS $100 MILLION SALES TAX REFUND CASE TO ALJ -

After the New York State Appellate Division reversed the Tax Appeals Tribunal’s earlier decision denying a sales tax refund of over $100 million, the Tax Appeals Tribunal has now remanded the case for a further hearing before an Administrative Law Judge to consider evidence of the funding of a pre-refund escrow account set up to facilitate repayment to customers of improperly collected sales tax. Matter of New Cingular Wireless PCS LLC, DTA No. 825318 (N.Y.S. Tax App. Trib., Mar. 8, 2018).

Background. In order to resolve litigation claiming that New Cingular Wireless, now known as AT&T Mobility (“ATTM”), improperly collected and remitted sales tax on charges for Internet access, ATTM entered into a nationwide class-action settlement agreeing to reimburse its customers, including New York customers, for the overcollected tax by filing refund claims on their behalf. Escrow accounts were created to receive sales tax refunded by the states, with funds to be distributed to the customers by an escrow agent under court supervision. In states like New York that require a vendor to refund the overcollected sales tax to its customers prior to receiving a refund from the state, ATTM agreed to fund a pre-refund escrow fund. However, ATTM had not made any payments to the pre-refund escrow fund with respect to the overcollected New York sales tax before claiming the refund for New York customers. The Department denied ATTM’s refund claim on the grounds that the amounts had not been refunded to customers.