The Tempe City Council unanimously approved a settlement with Cox Communications that could cost the city more than $1 million to refund customers who subscribed with the cable television service between 1998 and 2002.
City officials expect the average refund will be $15.
The decision makes Tempe the first municipality in the state to reach an agreement with Cox, which alleges its customers have been unfairly charged a sales tax for their television services.
Scottsdale, Mesa, Chandler, Gilbert and Paradise Valley are continuing to battle Cox’s efforts to recoup past sales taxes collected from customers in those communities.
"We certainly hope that what Tempe has done tonight will prompt them to take another look at the issue," said Cox spokeswoman Susan Anable. "We think that would be in everybody’s best interest, especially the customers’."
For years, a number of Arizona municipalities required Cox and other cable companies to charge a local sales tax on their services.
In May 2002, though, an Arizona Supreme Court ruling barred Tucson from imposing a sales tax on microwave television services, which Cox officials said applied to them.
The company stopped charging its customers the tax in November 2002, contending cities and towns cannot charge tax on cable services. But many municipalities are appealing, saying it does not apply to cable television.
A tax hearing officer’s ruling in an October hearing with Gilbert and Paradise Valley reaffirmed Cox’s position. The tax officer found that the Arizona Supreme Court’s decision did apply to cable.
"I wish the other cities best of luck, but I think they will come out on the losing end of this," Tempe City Councilman Ben Arredondo said during the meeting.
As part of the deal, the city would send notification letters to cable customers giving them an option of accepting the refund or donating the amount to the Tempe Community Council, a charitable organization.