State & Local Tax Blog

AOL Wins in District Court in Iowa

Iowa seems to be in the sales tax news a lot lately. Their amnesty offer just expired, they issued the landmark ruling thwarting pumkin buyers and now they lose this case to AOL.

This case (America Online, LLC v. Iowa Department of Revenue, Iowa District Court for Polk County, No. CV 6482, September 18, 2007) is interesting because of the arguments AOL used. Basically, it went like this: IA taxes intrastate telecom which is when the call originates and terminates in IA. AOL subscribers are given a local IA telephone number to dial to hook up to the Internet. IA argued that was intrastate telecom. Seems like a pretty decent argument.

AOL succeeded in arguing that while the users called a local number, they were actually calling into servers in VA that authenticated them and got them hooked up. There would be no Internet access without the VA servers.

The District Court agreed with them. No word if Iowa is going to appeal it. We can get you a copy of the case if you’d like it.

Leave a Reply

Your email address will not be published.

What You Should Do Next

Have a state or local tax issue or question? Need help? Want peace of mind? We can help! Sign up for a free "What's Next" call and let us get to work for you.