Tax News

CCH (cch.taxgroup.com) reports:

  The U.S. Court of Appeals for the Sixth Circuit has issued a ruling in consolidated cases challenging Kentucky's prohibition against identifying the 1.3% telecommunications provider tax imposed on the gross receipts of telecommunications providers as a line item on customer invoices, and challenging its prohibition against the direct collection of the tax from consumers. The actions, filed by telecommunications providers, also challenge the validity of penalties imposed on providers for failure to comply with the prohibitions. The tax applies to the provision of communications services billed on or after January 1, 2006. The appellate court affirmed the district court in finding that the federal Tax Injunction Act did not bar the lawsuits, and in finding that the clause prohibiting identifying the tax on invoices violates the First Amendment. It reversed the district court by finding that the clause prohibiting direct collection from consumers could be severed and that penalties could be imposed with respect to that clause.

  The district court opinions were previously reported in State Tax Day and can be found on CCH Tax Research NetWork as follows: AT&T Corp. et al. v. Rudolph et al. , U.S. District Court for the Eastern District of Kentucky, No. 06-16, February 27, 2007;
BellSouth Telecommunications, Inc. v. Farris et al. , U.S. District Court for the Eastern District of Kentucky, No. 3:06-39, February 27, 2007.