The Georgia Supreme Court on Monday, upending what it called an “illogical” decision by the state Department of Revenue, ruled that five AT&T subsidiaries can apply for a refund of sales tax overpayments without first sending money back to customers.

The decision removes a roadblock to $6 million in sales tax being refunded to cellphone customers. Presiding Justice Harold Melton said it was reasonable to allow the company to first find out if it can obtain the refund before paying the sums back to customers.

On the losing end of the decision is the Georgia Department of Revenue, defended by the Office of Attorney General Chris Carr. Carr declined to comment.

The winners are New Cingular Wireless, Chattanooga MSA, Georgia RSA and Northeastern Georgia RSA. Their local counsel is Bryan Vroon. Vroon referred an inquiry to AT&T spokesman Marty Richter.

” We're pleased with the ruling,” Richter said by email. “We don't stand to benefit from this lawsuit in any way. Any refunded taxes will be passed along to our Georgia customers, who initially paid the taxes.”

According to the court, the revenue department took five years to deny a request for a refund from the AT&T companies that had collected and paid sales tax for internet data services that were exempt. In the original denial, the department offered no reason, Melton said in a footnote on his first page. The AT&T subsidiaries sued. The department moved to dismiss the case for several reasons, one of which was its interpretation of a global settlement agreement to mean the companies would have to repay the tax collections to customers before applying for a refund from the state.

Melton said that position was unreasonable and made no sense.

“A simple hypothetical highlights the unfairness of the Department's interpretation,” Melton said. “Assume Dealer X collected $100 million in sales tax from customers and paid this amount to the Department erroneously. Later, Dealer X wished to seek a refund of these erroneously paid taxes. Dealer X would be required to refund $100 million to its customers just to initiate the process of seeking a refund from the Department. This would have to be done long before Dealer X knew whether the Department would approve any refund at all—an answer that the Department might not give for years.”

Even then, the hypothetical example continues, the company “would have to prepay $100 million to its customers to potentially be told by the Department that no refund was due at all. If the actual amount of the refund turned out to be less than $100 million, the Department would offer no real solution that would make Dealer X whole.”

Melton said the revenue department's position is “illogical, and creates a strong disincentive for dealers to seek refunds on behalf of customers,” which “undercuts the clear intent” of the law.

The law in question is OCGA § 48-2-35, which ensures that overpaid or illegally collected taxes are returned to taxpayers, Melton said.

The decision was unanimous but different from the usual vote. Justice Nels Peterson did not participate. Justice Britt Grant was disqualified. Both justices formerly served as solicitor general in the Office of Attorney General. Substituting for the missing justices were Atlantic Judicial Circuit Judge D. Jay Stewart and Southern Judicial Circuit Judge James Tunison. They concurred.

The case is Cingular v. Georgia Department of Revenue, No. S17G1256.