WASHINGTON-South Dakota citizens in November will be able to vote to repeal a 4-percent gross-receipts tax on wireless service after the South Dakota Supreme Court ruled the initiative could be placed on the ballot.
The decision is a victory for Verizon Wireless, which appealed a decision by the South Dakota attorney general and secretary of state to not place the initiative on the ballot. The S.D. attorney general and secretary of state were relying on former S.D. Supreme Court precedent that said ballot initiatives could not be used to repeal laws. The South Dakota legislature imposed the tax in 2003.
“Now the voters of South Dakota will have the opportunity to decide whether they want to pay double taxes for their wireless services,” said Steve Zipperstein, general counsel of Verizon Wireless. “Our position is that this tax is unfair. We wanted to create an opportunity for the citizens of South Dakota to either endorse or reject this tax.”
Verizon Wireless led the effort to have the initiative placed on the South Dakota ballot, said Zipperstein, noting that other carriers have expressed interest in the case.
“On May 1, Verizon Wireless filed petitions in the office of the secretary of state containing more than 23,900 signatures,” according to a brief Verizon Wireless filed in the case. Before Verizon Wireless filed the petitions, the legislature had failed to act on two bills that would have repealed the gross-receipts tax.
Verizon Wireless demonstrated that it has “a clear legal right to have its initiated measure placed on the ballot. The secretary of state has the definite legal obligation to place the measure on the ballot,” wrote David Gilbertson, chief justice of the South Dakota Supreme Court.
Zipperstein said Verizon Wireless believes the ballot initiative will pass in November. “Our sense is there will be overwhelming support when the election occurs in November,” he said.
Other states also impose a gross-receipts tax on wireless services, as well as other wireless taxes. In South Dakota, consumers pay a 4-percent state sales tax in addition to the 4-percent gross-receipts tax.
If South Dakota voters reject the gross-receipt tax, said Zipperstein, Verizon Wireless will study whether to pursue similar efforts elsewhere.
“We will be looking at 2008 for opportunities for customers to repeal this double taxation,” said Zipperstein.
The Senate Commerce Committee has stated it is against separate taxes. During its consideration in June of the Communications Act of 2006, the committee passed an amendment placing a moratorium on wireless-specific tax measures imposed by state and/or local governments for three years. Similar language was not included in the bill passed by the House.
The wireless-tax moratorium still allows states and localities to assess fees for 911 service. Verizon Wireless strongly fought and defeated a California ballot initiative in 2004 that would have imposed a 911 fee on wireless service. Zipperstein said the carrier voiced opposition because the fee was not going to be used for deploying, upgrading or maintaining enhanced 911 service, but rather to fund hospital emergency rooms.
