by Jessica Legge
Times West Virginian
FAIRMONT — Nearly $12 million in settlement monies from a lawsuit could provide sales tax relief for the state.

On Monday, the West Virginia Office of the Attorney General received preliminary approval of a court settlement with two credit card companies from Judge Ron Wilson in Ohio County. Under the settlement, approximately $11.6 million is to be held in a trust and used for tax relief through a sales tax holiday for citizens, said Fran Hughes, chief deputy for Attorney General Darrell McGraw’s office.

“It’s going to help the citizens,” she said of the proposed tax relief. “With the price of gasoline and food, people need every penny they can get. It encourages retail activities. People will tend to shop more if they know they’re not going to have to pay taxes.”

The office filed a case in 2003 against MasterCard International Inc. and Visa U.S.A. Inc. under West Virginia’s antitrust and consumer protection laws. Hughes said the lawsuit closely parallels a case that Target, Sears and other major retailers brought against MasterCard and Visa in 1996 and settled in 2003.

The attorney general’s lawsuit concerned MasterCard and Visa’s debit and credit cards, and the higher costs that resulted for businesses and consumers. Merchants that wanted to accept MasterCard and Visa credit-card payments were also forced to accept the debit cards of those companies.

“When merchants had to pay for the processing of the credit card or for services rendered by MasterCard and Visa, they were charged the same amount for the debit card and the credit card even though the risks and the costs were not the same, but the merchants were charged as if they were,” Hughes said.

Merchants were not permitted to pass the costs on to the card holder, so instead they had to increase product prices for consumers.

Hughes said it wouldn’t make sense for a private citizen to pursue his or her own case because it’s only pennies, but the money adds up when the extra costs from everyone’s purchases are combined. West Virginia has a law that allows the state to obtain relief on behalf of indirect purchasers, she said.

Hughes said the parties have reached an agreement and have been notified of the settlement, and now legislation must be passed in order to implement it. The duration, scope, and type of tax relief is up to the West Virginia Legislature.

Lawmakers will probably use information from past years to look at tax revenues generated on a given day. At the end of the process, any remaining money must go back to the general revenue, she said.

“The agreement contemplates that the trust fund will be extinguished to the extent possible for tax relief,” Hughes said.

“We’ve got the money. It’s available, and now it’s up to the other branch of government to do their role.”

State Sen. Roman Prezioso, who is the Health & Human Resources Chair and serves on the Senate Finance Committee, said conceptually he agrees with the tax credit.

“Sounds like it’s a pretty good concept,” he said. “I’m not sure it’s the right vehicle to use settlement monies to do something like this.”

Prezioso hasn’t seen any legislation on the tax relief or the particulars on the proposal. He suggested that it may not be the responsibility of a settlement case to provide tax relief, and perhaps other means should be considered.

“The Constitution is pretty clear in saying the Legislature appropriates state dollars,” he said. “That money actually is state dollars. There may be some constitutional questions there on how the money’s spent.”

Earlier this week, House Majority Leader Joe DeLong told The Associated Press that many times settlements call for a portion of the funds to go toward a designated purpose. Without these requirements, more lawsuits could move to trials and would cost more time and money, he said.

E-mail Jessica Legge at jlegge@timeswv.com.