Clark V. Bellsouth Telcoms, No. 3:04-cv-735h (2006)

The Defendant, BellSouth Telecoms (hereafter "BellSouth"), provided Fast-Access DSL high speed Internet access to subscribers. From the beginning, BellSouth collected a 6% Kentucky sales tax from its customers. Although initially the Revenue Department allowed the collection of sales tax, the Department later prohibited its collection. Customers of BellSouth sued BellSouth for collecting sales tax for the period before it sought permission from the Revenue Department, and asserted that the Internet Tax Freedom Act and Kentucky law clearly prohibited imposing a tax on Internet services, including DSL. The District Court dismissed the conversion claim for lack of jurisdiction and maintained the fraud claim.

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