Louisville, KY: (Aug-15-07) A class action lawsuit was filed against BellSouth, a high speed Internet provider, alleging that the company illegally taxed customers for its service. BellSouth, which is now owned by AT&T, started collecting a 6% Kentucky sales tax from customers after it introduced the service in 1999, and then turned the money over to the Kentucky Department of Revenue. In April 2002, BellSouth questioned whether the Internet service was subject to the sales tax. The Revenue Department eventually instructed BellSouth to continue collecting the taxes. In 2005, Louisville resident Michael Clark and Kentucky Air Tool Inc., a hand tool company in Louisville, sued BellSouth. Clark and Kentucky Air Tool claimed that BellSouth's collection of the taxes was illegal.
In a settlement reached, a federal judge approved an $8.2 million class action settlement between BellSouth, its high speed Internet customers, and the state of Kentucky over taxes paid for the online service. The class comprises of about 177,000 people and businesses who paid taxes on BellSouth's Fast Access Internet service from 1999 through 2006. Under the terms of the settlement, customers will receive the amount they were billed as sales taxes plus interest from 1999 through 2006, minus attorney's fees. [FORBES: INTERNET SALES TAX]
