The city and county of San Francisco has agreed to settle a civil lawsuit brought by the software service provider Twilio Inc. for $18 million for previously charging the company two telephone taxes, as well as penalties and interest.
Part of the settlement stipulates that Twilio will pay the taxes moving forward after a two-month grace period.
It marked the city’s largest settlement of a lawsuit this year that was not in its favor. It was approved by the Board of Supervisors during its regular meeting Tuesday and now goes to Mayor London Breed to be signed into law and finalized.
Twilio is registered in Delaware and based in San Francisco. The company sued the city in May 2021, objecting to being forced to pay telephone user taxes and access line taxes, referred to as TUT and ALT, for customers using the company’s cloud services for communication and other software tools. The taxes were imposed in 2019 for the period from June 2009 through December 2018 and totaled more than $38 million.
The company reluctantly made the payment but immediately sought legal relief after the city tax collector did not grant a petition to refund the money. Twilio argued in court filings that it was a software services provider that did not directly provide voice calls and should not be covered by the local law. Twilio further said that it had already paid service providers it worked with that did directly provide calling services.
“For the Tax Periods at Issue, Twilio paid in full all invoices received from third party telecommunications services, including all TUT charges billed. Therefore, taxing Twilio on the same services results in multiple taxation,” the company said in its initial complaint.
The city’s attorneys said in their legal response that the company had waited too long to file its complaint and further argued that it believed that the services were covered by both taxes, and denied the claims made by Twilio.
The agreement appeared to be a compromise that would grant less than half the amount Twilio sought as a refund, and the company will resume paying the taxes starting two months after the settlement is finalized by the court.
The case had been scheduled to go to trial this past March but was delayed as the parties worked out a settlement.
The city has settled 50 lawsuits in 2023 totaling more than $45 million, including three passed by the Board of Supervisors on Tuesday.
The city has also settled 36 unlitigated claims this year for roughly $65 million.