Many Cities received telephone gross receipts tax payments from CenturyLink in February containing two checks; one that is being paid under protest (as indicated in the letter accompanying the payments) and one not under protest.
CenturyLink has started making telephone gross receipts tax payments under protest statewide in response to two lawsuits, City of Aurora v. Spectra Communications Group, LCC (St. Louis Co. Cir. Ct.) and City of O’Fallon v. CenturyLink, Inc. (E.D.Mo.). The Aurora case was filed by CVR on behalf of five Cities (not a class action) against CenturyLink and subsidiaries and the O’Fallon case is a class action lawsuit filed on behalf of all cities with a telephone gross receipts tax, similar to previous lawsuits against various other landline and wireless phone companies. While these two cases each have unique issues, both cases essentially claim that CenturyLink has been underpaying gross receipt taxes and seek payment of delinquent back taxes and correct full payment of taxes going forward. The protested amount constitutes new gross receipts tax revenue that the lawsuits allege CenturyLink was required to pay.
Amounts received not under protest can be immediately deposited as any other tax payment. The protested tax payment needs to be sequestered away from other City funds in an interest bearing account under § 139.031 RSMo. This can either be in a separate account or a line item in a general account as long as protested amounts can be separately accounted for apart from other City money. Protest payments needs to be kept separate and unspent for 90 days, until CenturyLink files a tax protest lawsuit in your local county. If and when CenturyLink files such a lawsuit, the protested amount will need to be continued to be kept separate until the lawsuit is resolved. It is also anticipated that these protest payments will continue to come in on a monthly basis until the litigation is resolved, regardless of whether your ordinance requires quarterly, semi-annual or annual payments of taxes, so the sequestration process will need to be repeated when new protest payments come in each month.