Verizon seeking $150,000 tax refund from Arlington

SNOHOMISH COUNTY — The cities of Arlington and Marysville could join 16 other cities in legal action to defend themselves from a tax refund being sought by Verizon Northwest.

The wireless phone company and Internet service provider is seeking city utility tax refunds from a group of Northwest cities, and notified involved municipalities through a letter in early January.

According to a letter sent by Robert Mahon of Perkins Coie, LLP, which represents Verizon, the firm cites two Washington state laws that prohibit cities from imposing taxes on any charges "for access to, or charges for, interstate services."

Citing evidence from the Washington State Supreme Court, Mahon wrote that the sale of telecommunications services that are part of a taxpayer's Federal Communications Commission tariff are "interstate" and cannot be taxed by cities.

Mahon also cites other legal cases in the letter, which is dated Dec. 31, 2009.

A number of cities that have received a letter have created a joint defense agreement with Seattle-based law firm Ogden Murphy Wallace, PLLC.

Doug Buell, public information officer for the city of Marysville, said that the Marysville City Council agreed to take part in the agreement during a recent Council executive session.

The Arlington City Council also recently discussed the refund during its Feb. 22 work session, and could approve the joint agreement at its March 1 Council meeting.

Arlington city attorney Steve Peiffle said that the tax refund request deals with a relatively arcane part of the law, and said he recommended that the Council should move forward with joining the joint collaboration among cities.

"We wanted to do it in a way that was cost-effective," Peiffle said, adding that the initial amount being spent on having Ogden Murphy Wallace on retainer would be less than $3,000 to begin with. "That's depending on whether there's a lawsuit in the future."

Verizon is seeking approximately $150,000 from the city of Arlington and about $244,000 from the city of Marysville.

Other cities that were invited to participate in the defense agreement include Anacortes, Bothell, Kirkland, Lake Stevens, Monroe, Mount Vernon, Mountlake Terrace, Mukilteo, Oak Harbor, Redmond, Snohomish Stanwood, Wenatchee and Woodinville.

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