Qwest tax error believed to be more widespread

Qwest may have collected too much sales tax from telephone customers throughout Washington, if not the company’s entire 14-state territory, according to documents obtained by The Spokesman-Review.

The telephone giant relies on tax information from a Pennsylvania company whose software reports only the highest sales tax rate in a county. But Spokane County and many others have more than one sales tax rate.

In Spokane County, Qwest charges all its customers the 0.6 percent sales tax for the “public transportation benefit area” that supports the Spokane Transit Authority even though much of the county is outside the transit district.

The overall sales tax for telephone customers outside the transit district is supposed to be 8.0 percent, but Qwest charges them 8.6 percent.

Jim Wallrabenstein said he noticed the overcharge on his bill last summer, and a Qwest representative told him, “We don’t set the rate; you need to talk to your county revenue person.”

The “county revenue person” turned out to be budget analyst Margaret Smith.

“What a sweetheart,” Wallrabenstein said. “She has just doggedly pursued this.”

Smith caught something Wallrabenstein missed: Residents of unincorporated parts of the county were being charged the 6 percent utility tax that should have applied only to residents of Spokane, Airway Heights, Cheney, Deer Park and Latah.

Smith spent months negotiating a utility tax refund that will appear on 11,698 long-distance and DSL Internet customers this month and next and week. She’s still pursuing the sales-tax overcharge.

The utility tax refund will total $42,835, an average of $3.62. DSL refunds haven’t yet been calculated but are expected to affect fewer people. The refunds are restricted by a two-year state statute of limitations on customers of public service companies.

DSL service was never subject to utility taxes, and Qwest quit collecting the tax from its DSL customers in November 2005. Also, the company told Smith, it quit collecting utility taxes in unincorporated portions of Spokane County last September.

Smith’s investigation revealed that Qwest received faulty sales tax information from Vertex, a Berwyn, Pa., company that provides tax information to companies all over the country. She obtained a copy of a Sept. 22 email in which a Vertex employee explained the error to a Qwest employee.

“In our current data structure, we can only support one rate per county,” the Vertex employee wrote. “Therefore, we support the highest rate … in Spokane County, which is the 8.6 percent total rate.”

The Vertex product support worker, identified only as Janet, said she would suggest changing the company’s software to distinguish between Washington customers who live in transportation benefit areas and those who don’t. However, she said she wasn’t “aware of any initiatives” to do so.

“This will not be resolved in the near future, but I will make the teams aware of the effect this is having on your customers,” the Vertex employee stated.

Vertex communications director Ed Sabato declined Friday to answer questions about the company’s sales and utility tax errors in Spokane County.

Instead, he endorsed the explanation offered Thursday by Qwest spokeswoman Shasha Richardson: “It has to do with how information is coded, what’s input, what’s provided, what the output is.”

Sabato said he couldn’t comment specifically about what went wrong because that’s confidential customer information.

Still, Sabato said, “We have every confidence our software product and our services are the most accurate on the market.”

He said Vertex has served some 10,000 customers nationwide in 30 years of operation.

Sabato declined to identify any other customers.

Smith said the problem of inaccurate tax billings includes other telephone companies, including Verizon.

Loita Musgrove told The Spokesman-Review Friday that Verizon has collected sales tax from her at the Liberty Lake rate even though she lives six miles outside the city.

Like the Washington Utilities and Transportation Commission, which launched an investigation Thursday, Musgrove wants to know how long telephone companies have been collecting too much tax from some customers.

She also wants to know where the money went. Did the overcharges go to governments, or did phone companies keep the money?

“I get really angry about big people stomping on little people,” Musgrove said.