"The financial benefits that the Class Members will realize from the Settlement are far from academic," an Illinois District Court judge noted in his just released approval of a deal between tens of thousands of consumers and AT&T Wireless. That's putting it mildly. The settlement in question requires AT&T to refund or credit wireless customers based on an estimate of $1.152 billion. When various legalities kick in, the final cash payout will come to around $956,160,000.

Class-action attorneys charged that AT&T Mobility improperly collected millions of dollars in taxes from almost 2,000 state or territorial areas. All this was contrary to the Internet Tax Freedom Act, the lawyers contended. But as is so often the case, the matter never went to trial. Instead, the parties settled.

"Fair, reasonable, and adequate," United States District Court Judge Amy J. St. Eve calls the arrangement. "The Court thus finds that the expected cash value of the Settlement to the Class strongly counsels approval."

The deal may be the "largest class-action case in history in terms of the number of consumers affected," the class-action attorneys note.

What is this billion-dollar law? It's the reason why any time you see a message warning that Washington, DC is about to tax e-mail use, you can rest assured that it is bogus.

A service that lets you connect

Congress first enacted the Internet Tax Freedom Act in 1998. The key to the legislation is found in its opening provisions:

(a) Moratorium.—No State or political subdivision thereof shall impose any of the following taxes during the period beginning on October 1, 1998, and ending 3 years after the date of the enactment of this Act— (1) taxes on Internet access, unless such tax was generally imposed and actually enforced prior to October 1, 1998; and (2) multiple or discriminatory taxes on electronic commerce.

In other words, no new taxes on 'Net usage. Congress renewed the bill in 2001 and 2004, and reenacted it yet again in 2007. The latest iteration of the law extends the moratorium until November 1, 2014. And it creates a more detailed version of "Internet access," that would obviously extend to cable and DSL.

The legislation defines such access as "a service that enables users to connect to the Internet to access content, information, or other services offered over the Internet." And it covers features associated with that definition, including "a homepage, electronic mail and instant messaging (including voice- and video-capable electronic mail and instant messaging), video clips, and personal electronic storage capacity, that are provided independently or not packaged with Internet access."

But the ITFA specifically excludes other features. For example, it does not include "voice, audio or video programming, or other products and services" (besides the earlier mentioned) "that utilize Internet protocol or any successor protocol and for which there is a charge"—in other words, VoIP and IPTV services like AT&T's U-Verse.

And the bill does not deal with the taxation of products purchased over websites, a problem with which Capitol Hill is currently grappling.

Do nothing and receive

The Huge Law Firm and Bartimus, Frickleton, Robertson & Gorney acted as the consumer lawyers in this case. Participants are involved in the suit if they were taxed for wireless connection plans that allowed them to access websites and e-mail on their laptops or computer via a data card, "bolt-on" wireless Web access features, or iPhone, personal BlackBerry, and enterprise smartphone plans. The tax collecting had to have happened on bills from November 1, 2005 up through September 7, 2010.

How do people who fit this description join the suit? Actually, they have to unjoin to get out of it. Here are the four options for subscribers whose experience matches the above description, as explained by the law firms.

Exclude yourself and get no benefit. This is the only option that allows you to ever be part of any other lawsuit against AT&T Mobility about the legal claims in this case.

Write to the Court about why you don't like the Settlement.

Ask to speak in Court about the fairness of the Settlement.

Do nothing. Receive the Settlement benefits. This will end any further claims against ATT Mobility for the charging of taxes as claimed in the lawsuit.

In fact, a number of consumers protested the proposed settlement, contending the it was too lenient towards AT&T, or that class counsel attorneys "will neglect AT&T customers in certain states in favor of customers in those states in which counsel will receive large fees on refunds."

But Judge St. Eve concluded that the settlement "significantly exceeds" both what individual consumers would get if they took AT&T to court by themselves, and "expected return of proceeding to trial in the case."

Now it is up to the settlement attorneys and AT&T Mobility to figure out who is owed what in refunds or account credits. AT&T will, the Settlement FAQ explains, prepare and process refund claims for taxes it sent to various state or county municipal taxing agencies. The compromise requires AT&T to hand over its rights to the funds to the settlement class.

"Significantly, AT&T Mobility has agreed to pay the money owed up front, even if a taxing jurisdiction issues future tax credits to AT&T Mobility in lieu of a refund of monies sought on a refund claim for Internet Taxes," the settlement summary notes.

AT&T has also agreed to stop collecting the wireless taxes, by the way, "unless the applicable laws of the United States or a state change or such laws are interpreted to require or permit AT&T Mobility to begin collecting the taxes again."

Listing image by Photo by Tracy O