Title: QWEST CORPORATION V. STATE OF WYOMING, by and through the WYOMING DEPARTMENT OF REVENUE

State: wyoming

Issuer: Wyoming Supreme Court

Document:

QWEST CORPORATION V. STATE OF WYOMING, by and through the WYOMING DEPARTMENT OF REVENUE2006 WY 35130 P.3d 507Case Number: 05-7Decided: 03/22/2006
OCTOBER 
TERM, A.D. 2005

 
 
QWEST 
CORPORATION,

 
 
Appellant

(Petitioner),

 
 
v.

 
 
STATE OF 
WYOMING, by 
and through the WYOMING DEPARTMENT OF REVENUE,

 
 
Appellee

(Respondent).

 
 

 
 
Representing 
Appellant:

Ryan Schwartz and John E. Masters, 
Hathaway & Kunz, P.C., Cheyenne, Wyoming; Larry H. McMillin, Quest Services 
Corporation, Denver, Colorado; Robert R. Gunning and Neil I. Pomerantz, 
Silverstein & Pomerantz, LLP, Denver, Colorado.

 
 
Representing 
Appellee:

Patrick J. Crank, Attorney General; 
Michael L. Hubbard, Deputy Attorney General; Martin Hardsocg, Senior Assistant 
Attorney General; Catherine D. Parker, Assistant Attorney General.                                   

            

Before HILL, C.J., and GOLDEN, KITE, 
VOIGT, and BURKE, JJ.

 
 
BURKE, 
Justice.

 
 
[¶1]       Qwest 
Corporation (Qwest) appeals from a decision of the State Board of Equalization 
(SBOE) upholding a sales tax assessment.  
Qwest challenges the SBOE's finding that an End User Common Line charge 
(EUCL) constitutes a charge for intrastate telephone services that is subject to 
Wyoming sales and use tax.  Qwest 
claims that even if the charge is taxable, the majority of the assessment was 
barred by the statute of limitations.  
We find that the EUCL charge falls outside the scope of the tax 
imposition statute and accordingly, we reverse.

 
 

ISSUES

 
 
[¶2]       Qwest 
presents the following issues for review:

 
 
1.         
Whether the State Board of Equalization for the State of Wyoming ("SBOE") 
erred in concluding that an End User Common Line charge Qwest collected from its 
Wyoming customers on a monthly basis constitutes a charge for "intrastate 
telephone . . . services" subject to Wyoming state and local sales tax under 
Wyo. Stat. Ann. § 39-15-103(a)(i)(C).

 
 

2.                   
Whether 
the SBOE erred in concluding that the statute of limitations found in Wyo. Stat. 
Ann. § 39-15-110(b) does not bar that portion of the sales/use tax assessment 
issued to Qwest by the Wyoming Department of Revenue ("Department" or 
"Respondent") for the period [of] July 1997 through May 
2000.

 
 
The Department of Revenue restates 
the first two issues and presents a third issue for review:  

 
 

1.                   
Did the 
State Board correctly conclude that the "End User Common Line Charge" paid by 
Wyoming consumers to Qwest for local telephone service was subject to sales tax 
pursuant to Wyo. Stat. § 39-15-103(a)(i)(C) (Lexis 2001)?

 
 

2.                   
Did the 
State Board properly conclude that Wyo. Stat. § 39-15-110(b) (Lexis 2001) did 
not operate as a bar on the portion of the assessment from July 1997 through May 
2000?

3.                   
Did the 
State Board violate its own rules, when it failed to recite the Department's 
burden of proof?

 
 
FACTS

 
 
[¶3]       This matter 
relates to the sales and use tax assessed against Qwest resulting from an audit 
for the period of July 1, 1997 through December 31, 2001.  The audit revealed that Qwest billed all 
of its customers for the EUCL charge but did not remit sales tax for amounts 
received.1  Qwest considered the charge as 
compensation for interstate telephone services not subject to Wyoming sales tax.  The EUCL charge is described as follows: 

 
 
Federal Access Charge.  $6.00 
per month.  The $6.00 [charge] 
reflects a charge in a month prior to July 1, 2003.  The charge as of July 1, 2003 has 
increased to $6.50 per month.  This interstate charge, which is imposed by 
the Federal Communications Commission, is meant to recover a portion of the 
customer's local loop (i.e., connection from the customer's [premises] to 
the telephone company's central office and switching equipment) that is used for providing interstate 
services.  In recent years, the 
recovery of these interstate assigned costs has been moving from a per minute 
charge[ ], paid by interstate, long distance providers, to a flat charge paid by 
customers, regardless of the amount of long distance service used.2

 
 
(Emphasis added.)  The charge is assessed to all of Qwest's 
customers on a non-transactional basis.  
The charge is imposed regardless of whether the customer chooses to 
obtain interstate long distance service from a provider such as AT&T, MCI, 
or Sprint.3  

 
 
[¶4]       The 
Department of Audit deliberated for several months before deciding that the EUCL 
charge was subject to Wyoming sales tax.  Dan Noble, administrator of the Excise 
Tax Division, testified that:

 
 
            
From May until probably September, I think we probably deliberated over 
this because I wanted to kind of get a feel for whether this is an issue that we 
had had an audit for in the past, any kind of information had been provided 
associated with, you know - - and like I said, we searched through our own 
rules, through our own publications to try to figure out if we had even ever 
dealt with this issue.

 
 
            
Really what it boiled down to 
after all of that was basically I had to make a call.  Does the statute as it was written 
encompass the EUCL charge . . . ?  
And I felt that it did absent anything, any information to the 
contrary.

 
 
(Emphasis added.)  On July 11, 2003, the Department of 
Audit issued its final findings on the matter, ultimately concluding the EUCL 
charge was taxable.  

 
 
[¶5]       Pursuant to 
the results of the audit, the Department of Revenue (Department) issued an 
assessment on July 21, 2003.  The 
Department found that Qwest owed $3,428,102.95 in additional tax plus 
$1,553,797.16 in interest.  No 
penalty was assessed.  Qwest 
objected and a hearing was held before the SBOE beginning on May 10, 2004.  The hearing lasted two days.

 
 
[¶6]       On 
September 8, 2004, the SBOE issued its decision affirming the Department's 
assessment as it related to the EUCL charge.  Qwest filed a Petition for Review in the 
district court.  The district court 
certified the case to this Court, and we agreed to review the SBOE's decision. 

 
 

STANDARD OF 
REVIEW

 
 
[¶7]       When 
reviewing cases certified pursuant to W.R.A.P. 12.09(b), we apply the appellate 
standards which are applicable to the court of the first instance.  Powder River Coal v. State Bd. of 
Equalization, 2002 WY 5, ¶ 5, 38 P.3d 423, 426 (Wyo. 2002).  Our review is governed by Wyo. Stat. 
Ann. § 16-3-114(c) (LexisNexis 2005), which provides:

 
 
(c)        To 
the extent necessary to make a decision and when presented, the reviewing court 
shall decide all relevant questions of law, interpret constitutional and 
statutory provisions, and determine the meaning or applicability of the terms of 
an agency action.  In making the 
following determinations, the court shall review the whole record or those parts 
of it cited by a party and due account shall be taken of the rule of prejudicial 
error.  The reviewing court 
shall:

 
 
(i)         
Compel agency action unlawfully withheld or unreasonably delayed; 
and

(ii)         
Hold unlawful and set aside agency action, findings and conclusions found 
to be:

(A)        
Arbitrary, capricious, an abuse of discretion or otherwise not in 
accordance with law;

(B)        
Contrary to constitutional right, power, privilege or 
immunity;

(C)        In 
excess of statutory jurisdiction, authority or limitations or lacking statutory 
right;

(D)        
Without observance of procedure required by law; or

(E)        
Unsupported by substantial evidence in a case reviewed on the record of 
an agency hearing provided by statute.

 
 
We affirm an agency's conclusions of 
law when they are in accordance with the law.  Powder River Coal, ¶ 6.  However, when the agency has failed to 
properly invoke and apply the correct rule of law, we correct the agency's 
error.  Id.

 
 
[¶8]       The 
paramount issue in this case is whether the EUCL charge is subject to taxation 
under Wyoming 
law.  This determination necessarily 
involves the interpretation of Wyoming's tax imposition statute and the 
Department's rules. This presents a question of law which we review de novo.  Chevron U.S.A., Inc. v. State, 918 P.2d 980, 983 
(Wyo. 
1996).  Our rules of statutory 
interpretation are well established. 

 
 
. . . [W]e look first to the plain 
and ordinary meaning of the words to determine if the statute is ambiguous. A 
statute is clear and unambiguous if its wording is such that reasonable persons 
are able to agree on its meaning with consistency and predictability.  Conversely, a statute is ambiguous if it 
is found to be vague or uncertain and subject to varying interpretations. We 
have said that divergent opinions among parties as to the meaning of a 
statute may be evidence of ambiguity.  
However, the fact that opinions may differ as to a statute's meaning is 
not conclusive of ambiguity. Ultimately, whether a statute is ambiguous is a 
matter of law to be determined by the court.

 
 

State ex rel. Wyo. Dept. of Revenue 
v. UPRC, 2003 WY 
54, ¶ 12, 67 P.3d 1176, 1182 (Wyo. 2003) (internal citations omitted).  "Once the court determines a statute is 
ambiguous the court will resort to general principles of statutory 
construction in the effort to ascertain legislative intent.'"  Richards v. Board of CountyCom'rs, 6 P.3d 1251, 1253 (Wyo. 
2000).   

 
 
In ascertaining the legislative 
intent in enacting a statute . . . the court . . . must look to the mischief the 
act was intended to cure, the historical setting surrounding its enactment, the 
public policy of the state, the conditions of the law and all other prior and 
contemporaneous facts and circumstances that would enable the court 
intelligently to determine the intention of the lawmaking body. 

 
 
We generally defer to the 
construction placed on a statute by the agency that is charged with its 
execution, provided, however, that the agency's construction does not 
conflict with the legislature's intent.  
In this case, we are also cognizant of the principle that statutes which 
are penal in character are generally strictly construed.

 
 

Petroleum Inc. v. State Bd. of 
Equalization, 983 P.2d 1237, 1240 (Wyo. 1999) (internal citations omitted).  We also apply these rules when 
interpretating administrative rules and regulations.  Powder River Coal, ¶ 6 (citing State ex rel. Dept. of Rev. v. Buggy 
Bath, 2001 WY 27, ¶ 6, 18 P.3d 1182, 1185 (Wyo. 
2001)).

 
 
[¶9]       We are 
further guided by principles related to tax imposition statutes.  "Tax statutes are to be construed in 
favor of the taxpayer and are not to be extended absent clear intent of the 
legislature."  Chevron U.S.A., Inc., 918 P.2d  at 985. 

In the interpretation of statutes 
levying taxes it is the established rule not to extend their provisions, by 
implication, beyond the clear import of the language used, or to enlarge their 
operations so as to embrace matters not specifically pointed out.  In case of doubt they are construed most 
strongly against the government and in favor of the citizen. 

 
 

Amoco Production Co. v. Dept. of 
Revenue, 2004 WY 
89, ¶ 18, 94 P.3d 430, 438 (Wyo. 2004).  
Thus, taxes may not be imposed by any means other than a clear, definite 
and unambiguous statement of legislative authority.  Chevron U.S.A., 
Inc., 918 P.2d  at 984; Amoco 
Production Co., ¶ 18.  See also Wyo. Const. art. 15, § 13 
(stating "[n]o tax shall be levied, except in pursuance of law, and every law 
imposing a tax shall state distinctly the object of the same, to which only it 
shall be applied.").  

DISCUSSION

 
 
[¶10]     Qwest argues that the 
EUCL charge is not subject to taxation in Wyoming.  
The Department disagrees and contends that the services Qwest provides 
forming the basis for the EUCL charge occur within the state and should be 
taxed.  The parties assert a 
different reading of the imposition statute to support their claims.  However, before we analyze the statute, 
it would be helpful to gain an understanding of the nature and purpose of the 
EUCL charge as it relates to telephone services provided to Wyoming customers.  

 
 
EUCL Charge/Access 
Service

 
 
[¶11]     Many important aspects 
of modern telecommunications law developed in the wake of the breakup of the 
AT&T monopoly.  In 1982, a 
Modified Final Judgment (MFJ) entered in the case United States v. AT&T, 552 F. Supp. 131 (D.D.C. 1982), aff'd sub nom., 
460 U.S. 1001 (1983) changed the telecommunications industry by requiring 
the breakup of telephone companies so that no one company can provide both 
interstate and intrastate services.  
"In compliance with the MFJ, the United States was divided into 161 
local access and transport areas' (LATAs) which are geographic zones drawn 
around major metropolitan areas for the provision and administration of 
telecommunication services."4  AT&T Com. v. Dept. of Revenue, 778 P.2d 677, 678 (Colo. 1989).  Consequently, under the MFJ, a single 
company can no longer provide telephone services both within LATAs and between LATAs.5  Qwest is a local exchange carrier that 
is restricted to providing telephone service only within a LATA.6  As such, it is not permitted to sell 
interstate long distance telephone services.  Id.  

[¶12]     However, Qwest does 
play a role in interstate long distance calls.  An interstate long distance call 
involves three discrete steps in the transmission from caller to 
receiver:

 
 
The originating call begins at the 
caller's telephone and is carried over transmission and switching facilities to 
the entry point of a long-distance network.  This is known as the originating 
link.  The long-distance carrier 
then transmits the call over its facilities to the exit point of the network in 
the area where the call is to be received.  
This is the intermediate link.  
Finally, the call is transmitted over the facilities of a local telephone 
company to the receiving telephone.  
This is known as the terminating link.  

 
 

GTE Sprint Com. v. Dept. of 
Treasury, 445 N.W.2d 476, 477 (Mich.App. 1989).  
Long-distance telephone communications companies must contract with local 
telephone companies, such as Qwest, to provide the originating or terminating 
links in order to complete the interstate call.  Id.

 
 
[¶13]     Qwest maintains a local 
loop which is the connection or circuit between the consumer and its central 
office, or switching point.  By 
connection with Qwest's local loop, customers simultaneously have:  (1) access for intrastate local 
services; (2) access for intrastate long distance services; and (3) access for 
interstate long distance services.  
Thus, Qwest provides the integral link needed to complete an interstate 
call.  See, e.g., AT&T Com., 778 P.2d 677 
passim.  Stated another way, Qwest connects 
its individual customers to its local exchange system.  Qwest's central office then connects 
calls from the local exchange to an interexchange network.  The use of the facilities and equipment 
of a local telephone company to establish the integral link to local customers 
is known as access service.  GTE Sprint Com., 445 N.W.2d  at 477.  Access service is defined by the Federal 
Communications Commission (FCC) as including "services and facilities provided 
for the origination or termination of any interstate or foreign 
telecommunication."  FCC Access 
Charges, 47 C.F.R. § 69.2(b) (1990).

  

[¶14]     The costs Qwest incurs 
in maintaining the local loop are not readily attributable to either intrastate 
or interstate activity because the loop is involved in local, intrastate long 
distance, and interstate long distance telephone communications.  However, the FCC requires that 
twenty-five percent of the cost of maintaining the local loop be subject to 
federal jurisdiction and that reimbursement for this cost be recovered from 
interstate rates.7  Historically, this cost was collected 
from the long distance carriers.  As 
explained by an expert witness who testified, on behalf of Qwest, at the 
hearing:

 
 

Q.                                                                 
Why 
doesn't Qwest recover the costs of providing the interstate calls from the long 
distance providers?

 
 

A.      
Actually, 
they did at one time.  The FCC chose 
to move from a charge assessed to long distance carriers to recovering the cost 
of providing that service in two ways:  
There is a flat rate and a usage rate, much like the Wyoming Commission 
has chosen to recover the cost of the access to the intrastate Wyoming long 
distance network on a flat rate in the local charges and the usage rate in the 
usage long distance charges.  

 
 
Presently, Qwest charges a flat fee 
established by the FCC that represents the cost of providing access service for 
interstate long distance.  This flat 
fee is the EUCL charge.  The amount 
of the EUCL charge is determined by the FCC based on the amount of interstate 
telephone traffic that flows through Qwest's facilities.  The amount of interstate traffic is 
determined by information contained in the tariffs that Qwest files with the FCC 
for the interstate telephone services it provides.  At all pertinent times, Qwest filed 
tariffs with the FCC regarding the EUCL charge.  Prior to the audit, Qwest did not remit 
sales tax to the State of Wyoming on the amounts it billed or received as EUCL 
charges.

 
 
Wyoming's Imposition 
Statute

 
 
[¶15]     The question before us 
is whether an access charge for connection to the local network for the ability 
to make or receive an interstate call is subject to Wyoming sales and use 
tax.  The imposition statute levies 
an excise tax on "[t]he sales price paid for intrastate telephone and telegraph 
services including the consideration paid for the rental or leasing of any 
equipment or services incidental thereto[.]"  Wyo. Stat. Ann. § 39-15-103(a)(i)(C) 
(LexisNexis 2001).  While this 
statutory language clearly indicates that intrastate telephone services are to 
be taxed, it is not clear what constitutes an intrastate telephone service.  "Intrastate telephone services" is not 
further defined in the statute.   

[¶16]     The Department argues 
that Qwest is providing a telephone service --  access -- to its customers in 
Wyoming.  It reasons that because 
Qwest provides all of the switching within Wyoming and because all of the 
equipment used is located completely within Wyoming, that the EUCL charge should 
be subject to Wyoming sales and use tax. Furthermore, the Department claims that 
access to other networks is incidental to intrastate telephone service because 
Qwest's Wyoming telephone customers automatically receive interstate access 
along with their local or intrastate service.  On the other hand, Qwest claims that the 
EUCL charge is associated with interstate long distance and, therefore, cannot 
be compensation for an "intrastate telephone service."  While both interpretations of the 
statute appear plausible, we must construe the statute favorably to Qwest.  See, e.g., Amoco Production Co., ¶ 18 
(where statute is susceptible to more than one reasonable interpretation, it 
must be construed against government, and in taxpayer's 
favor).

 
 
[¶17]     By including the word 
intrastate to modify telephone services, the legislature expressed intent to 
limit the scope of the imposition statute.  
Use of the specific term "intrastate" signals that a distinction is to be 
made between intrastate telephone services and other services, i.e., interstate 
telephone services.  "Intrastate" is 
defined as "[s]ervices, traffic or facilities that originate and terminate 
within the same state.  Therefore, 
if related to telephone, falling under the jurisdiction of that state's 
telephone regulatory procedures."  
Newton's Telecom Dictionary 448 (21st ed. 2005).  It is significant that the EUCL charge 
is not regulated within Wyoming.  
The FCC retains jurisdiction over the EUCL charge and sets a cap on the 
EUCL rate.8  "Since the charges are ordered by the 
FCC as a means of making all customers share in the costs of interstate service, 
we conclude that the income is generated from interstate commerce."9  South Cent. Bell Telephone v. Celauro, 
735 S.W.2d 228, 231 (Tenn. 1987).

 
 
[¶18]     The Department does not 
dispute that the EUCL charge is federal for regulatory purposes, but claims that 
Qwest's role in switching interstate calls occurs within Wyoming, thus meeting 
the definition of an intrastate service for tax purposes.  The Department's rules define 
"intrastate telephone service" as "the intrastate two-way transmission of sound, 
data, or other forms of information by any means from one point to another 
within this state."  Rules, Wyoming 
Department of Revenue (2000), ch. 2, § 3(k).  The Department argues that the switching 
of interstate calls involves a two-way transmission within Wyoming, i.e., the 
switch from the customer's home to the central office or vice versa.    

[¶19]     Qwest argues that the 
Department's definition does not support its position because an interstate call 
does not occur entirely within the state of Wyoming.  Qwest urges us to look beyond the 
switching that takes place at its central office and to consider the call as 
being the transmission.  The call 
should be viewed from its starting point and ending point, not solely on how it 
might be routed within Wyoming's borders.  
Qwest reasons that if the purpose of interstate access service is to 
allow one end of a call to originate within one state and to terminate in a 
different state, then the service should not be considered an intrastate 
service. 

 
 
[¶20]     The Department's 
definition of intrastate telephone service supports Qwest's view.  "Two-way traffic" is defined as "[a] 
type of circuit operation that provides for both originating and terminating 
traffic."  Newton's Telecom 
Dictionary 876 (21st ed. 2005).  
The access service at issue fails this definition because, standing 
alone, it is not a two-way transmission.  
The access service provides a two-way transmission only when it is 
connected to the interstate network at which point the connection is not "from 
one point to another within Wyoming."

 
 
[¶21]     We agree with Qwest 
that we should look at the origination and termination point of the call to 
determine whether it comprises an intrastate telephone service.  The common understanding of intrastate 
telephone service would not include interstate long distance calls.   A customer placing a call to 
Montana or receiving a call from Florida probably believes she is a party to an 
interstate long distance call.  At 
that point, she probably does not believe that she is receiving intrastate 
telephone service.  The distinction 
between an intrastate and interstate long distance call was recognized in Union Tel. Co. v. Qwest Corp., No. 
02-CV-209-D, 2004 U.S. Dist. LEXIS 28417, at *5 (D. Wyo. May 11, 2004).  In that case, the court identified an 
intrastate long distance call as 

 
 
one that originates and terminates in 
different local service areas, but within the borders of a single state.  Intrastate long distance service 
provided by wireline service is subject to the jurisdiction of and regulations 
by state public utility commissions, and is generally offered to subscribers 
pursuant to tariffs filed with and approved by the state commissions. 

 
 

Id.  In contrast, "[a]n interstate long 
distance call is one that originates and terminates in different states.  Interstate long distance service is 
subject to the jurisdiction of and regulation by the FCC under the 
Communications Act of 1934.  See 47 U.S.C. § 151 et seq."  Id.  Under a reasonable and common sense 
interpretation of the statute and the Department's definitions, the EUCL charge 
does not represent an intrastate telephone service. Giving effect to the 
legislature's choice to tax only "intrastate telephone services" means that a 
charge for connecting customers to interstate long distance calls is not subject 
to the tax. 

 
 
[¶22]     Our focus upon the 
two-way transmission of sound is similar to the analysis used by the court in GTE Sprint.  The issue before the Michigan Appellate 
Court was whether per-minute access fees charged by local exchange carriers 
(LEC's) to interexchange carriers were subject to a use tax imposed on 
"intrastate telephone, telegraph, leased wire and other similar communications, 
including local telephone exchange and long distance telephone service which 
both originates and terminates in Michigan. . . ."  GTE Sprint Com., 445 N.W.2d  at 477.  The Michigan Appellate Court upheld the 
Tax Tribunal's conclusion that "access services are not in and of themselves 
communications, but merely a part of the communication."  Id. at 478.  The court concluded that the Michigan 
use tax required a complete, end-to-end communication to constitute a taxable 
communication.  Id. at 480.  See also In the Matter of Petition for 
Emergency Relief and Declaratory Ruling Filed by the BellSouth Corporation, 
No. FCC 92-18, 7 FCC Rcd. 1619, 1992 FCC LEXIS 2915 (Jan. 16, 1992) (rejecting 
state's contention that the local access portion of interstate voicemail service 
could be severed from interexchange company's service, finding instead that the 
end-to-end call produced the two-way transmission path).  

 
 
[¶23]     The Michigan court's 
focus on the scope of "intrastate telephone . . . communications" closely 
resembles our inquiry into the scope of the term "intrastate two-way 
transmission" under the Department's regulation.  See 47 U.S.C. § 153(22) (equating the 
terms "interstate communication" and "interstate transmission").  Like the Michigan court, we find that 
the tax imposition statute requires a complete, end-to-end communication.  Thus, the access service for which the 
EUCL charge compensates does not constitute an "intrastate two-way transmission 
of sound." 

 
 
[¶24]     We recognize that other 
cases have decided similar issues differently.  The Department points to AT&T to support its position that 
Qwest's location and switching within Wyoming subjects it to state tax.  The Colorado Supreme Court held that the 
sale of local telephone network access services used in connection with 
interstate telephone calls was subject to state sales tax under 16B Colo. Rev. 
Stat. § 39-26-104(1)(c) (Bradford 1982).10  However, we are not inclined to follow 
the reasoning of AT&T for several 
reasons.   

 
 
[¶25]     First, in reaching its 
decision, the Colorado Supreme Court relied on MCI Telecommunications v. Dept. of 
Treasury, 355 N.W.2d 627 (Mich.App. 1984).  The Michigan Court of Appeals 
subsequently determined that Michigan's imposition statute did not encompass 
charges for access service in GTE Sprint 
Communications Corp. v. Michigan Dept. of Tres., 445 N.W.2d 476 (Mich.App. 
1989).  The court in GTE specifically discussed its prior 
holding in MCI and concluded 
that:

 
 
[A]lthough we reach a different 
result than the MCI opinion, our 
decision does not necessarily contradict the MCI holding inasmuch as the MCI case considered a different attack 
on the applicability of the use tax to access services.  Specifically, MCI considered whether access services 
are intrastate or interstate in nature, as well as certain constitutional 
challenges.  The MCI decision did not, we believe, 
directly address the question whether access service fees come within the 
provisions of § 3a of the Use Tax Act; rather, the MCI Court assumed that they do. . . 
.

Id. at 480-81 n.7.  While the GTE court found that its holding was not 
necessarily in conflict with the prior holding in MCI, it indicated that to the extent 
there was contradiction, MCI reached 
the wrong result.11  Id.  

[¶26]     Next, the Colorado 
Supreme Court found the district court erred in focusing on the end-to-end user 
interstate nature of the call instead of on the specific activity being 
taxed.  Although our imposition 
statute is similar to Colorado's, the Department's definition of intrastate 
telephone services narrows the scope of these services to the "intrastate two-way transmission of 
sound, data, or other forms of information by any means from one point to another within this 
state."  In the absence of such 
a regulation, we might be more inclined to follow the rationale of the Colorado 
Supreme Court.

[¶27]     Finally, AT&T was decided in the context of 
specific and long-standing administrative treatment of the tax issue.  In 1983, the Colorado Department of 
Revenue issued a bulletin advising of the taxable nature of the access charge in 
anticipation of the 1984 breakup of the American Telephone & Telegraph 
Company.  The bulletin stated, "It 
is the Department's position that the services being provided for which carrier 
access charges' and customer access line charges' are assessed constitute 
intrastate telephone service' and are therefore taxable."  AT&T Com., 778 P.2d  at 680.  The Wyoming Department of Revenue has 
not issued a similar bulletin or any other public form of written guidance such 
as a rule, regulation, or guideline that directly addresses the taxable nature 
of the access charge.

 
 
[¶28]     The Department claims 
that even if the EUCL charge is deemed to compensate for interstate telephone 
services, there is still a taxable retail event.  The Department's regulations provide 
that "[a]ll rentals of equipment or services incidental to intrastate telephone 
services including but not limited to . . . access to a telephone transmission 
system shall be considered retail in nature and shall be subject to the sales 
tax."  Rules, Wyoming Department of 
Revenue (2000), ch. 2, § 14(gg).  
According to the Department, the access service provided by Qwest is 
incidental to intrastate telephone services because local telephone service 
cannot be obtained without being assessed the EUCL charge for the ability to 
receive interstate telephone calls.  
We disagree and conclude that the EUCL charge is incidental to interstate telephone service.  "Incidental" is defined as 
"[s]ubordinate to something of greater importance; having a minor role."  Black's Law Dictionary 777 (8th ed. 2004).  If not for the interstate call, the 
charge would not exist.12  Given the legislature's clear intent to 
exclude interstate telephone services from Wyoming sales tax, we cannot extend 
the imposition statute to encompass the EUCL charge.13

CONCLUSION

 
 
[¶29]     The EUCL charge 
compensates Qwest for providing interstate long distance access to Wyoming 
customers.  As such, it is not a 
charge for intrastate telephone services as contemplated by Wyo. Stat. Ann. § 
39-15-103(a)(i)(C) and the Department's Rules and Regulations.  Because the statute does not clearly, 
definitely, and unambiguously tax the EUCL charge, we must construe the statute 
in favor of the taxpayer and find that the access service is not properly 
taxable.  Having reached this 
result, we need not consider the parties' remaining 
contentions.

 
 
[¶30]     
Reversed.

 
 

FOOTNOTES

1The EUCL charge is also known as a 
federal access charge.

 
 

2This definition was developed by the 
Office of Consumer Advocate, an independent division within the Wyoming Public 
Service Commission.  Both parties 
generally agreed to this definition during proceedings before the 
SBOE.

 
 

3All of Qwest's customers have the 
ability to receive interstate calls and to make toll free, credit card, calling 
card, or collect telephone calls.

 
 

4Wyo. Stat. Ann. § 37-15-103(a)(vi) (LexisNexis 2001) defines a LATA to be 
"geographic regions created as part of the divestiture of [AT&T] which 
defined the areas where regional Bell operating companies were permitted to 
provide telecommunication services[.]"  

 
 

5InterLATA is defined as "[s]ervices, 
traffic or facilities that originate in one LATA, crossing over and terminating 
in another Local Access and Transport Area. . . .  This can be either Interstate or 
Intrastate service, traffic or facilities."  Newton's Telecom Dictionary 437 
(21st ed. 2005).  In 
contrast, intraLATA is defined as "[t]elecommunications services that originate 
and terminate in the same Local Access and Transport Area. . . . This can be 
either Interstate or Intrastate service, traffic or facilities."  Id.  at 447.

 
 
Wyoming is comprised of only one 
LATA.  Union Tel. Co. v. Qwest Corp., No. 
02-CV-209-D, 2004 U.S. Dist. LEXIS 28417, at *3 (D. Wyo. May 11, 
2004).

 
 

6A "local exchange company" is defined as 
"a telecommunications company that provides telephone access lines to members of 
the general public who are its customers[.]"  Wyo. Stat. Ann. § 16-9-201(a)(v) 
(LexisNexis 2001).  "Local exchange" 
is defined as "[t]he telephone company exchange where subscriber[']s lines are 
terminated.  Also called an End 
Office."  Newton's Telecom 
Dictionary 497 (21st ed. 2005).  "Exchange access" is defined as 

 
 
the provision of exchange services for 
the purpose of originating or terminating interexchange telecommunications.  Such services are provided by facilities 
in an exchange area for the transmission, switching, or routing of interexchange 
telecommunications originating or terminating within the exchange area.  The Telecommunications Act of 1996 
defined exchange access as . . . the offering of access to telephone exchange 
services or facilities for the purpose of the origination or termination of 
telephone toll services.

 
 
Id. at 
320.

 
 

7Accordingly, the remaining 
seventy-five percent of Qwest's costs of providing access to its local loop are 
deemed to be incurred in providing access for local and intrastate long distance 
telephone communications.  This 
portion is regulated by the Wyoming Public Service Commission (PSC) and is 
included in the basic monthly service rate Qwest bills to its customers.  Qwest files tariffs with the PSC and 
remits sales tax for these services.  
This appeal does not involve the amount Qwest bills or receives for 
providing access for local or intrastate long distance.

 
 

8FCC Access Charges, 47 C.F.R. § 69.1(a) 
(1990) states, "[t]his part establishes rules for access charges for interstate 
or foreign access services provided by telephone companies on or after January 
1, 1984."  

 
 

9The Tennessee court ultimately concluded 
the access charge was subject to its sales tax.  As discussed more fully below, however, 
the Tennessee imposition statute clearly encompasses interstate telephone 
services.  See infra footnote 
13.

 
 

1016B Colo. Rev. Stat. § 
39-26-104(1)(c) (Bradford 1982) imposes a sales tax "[u]pon telephone and 
telegraph services, whether furnished by public or private corporations or 
enterprises for all intrastate telephone and telegraph service[.]" 

 
 

11In any event, we find the dissenting 
opinion in MCI more persuasive.  

 
 
I am unable to find that the final leg 
of an interstate call can be characterized as "intrastate communication". "The 
business of conducting telecommunications between persons in different states 
constitutes interstate commerce."  
State ex rel Utilities Comm. v. 
Southern Bell Telephone & Telegraph Co., 288 N.C. 201, 208; 217 S.E.2d 543, 548 (1975). As stated by the North Carolina Court of Appeals in Petition of Carolina Telephone & 
Telegraph Co., 1 N.C.App. 133, 137; 160 S.E.2d 128, 131 (1968): 

 
 
   Although all of respondent's 
facilities are located in North Carolina, in performing the service involved in 
this proceeding, said facilities connected with those of another company to 
transmit intelligence between this State and other states and the intelligence 
transmitted was interstate from its origin to its 
termination.

 
 
MCI Telecommunications, 355 N.W.2d  at 633 (Burns, J., 
dissenting).

 
 

12We also note that the access service 
referenced in the Department's regulation applies to the intrastate local access 
service of which Qwest already pays state sales tax.  Rules, Wyoming Department of Revenue 
(2000), ch. 2, § 14(gg).  We find 
nothing in this regulation that also permits taxation on the interstate access 
services Qwest provides.

 
 

13Although we reach the conclusion 
that Wyo. Stat. Ann. § 39-15-103(a)(i)(C) does not encompass the EUCL charge, 
this is not to say that the legislature could not impose a tax on the EUCL 
charge if it so desired.  See, e.g., South Cent. Bell Telephone, 
735 S.W.2d  at 231 (stating that while the end user charges are derived entirely 
from interstate commerce the State may base a tax on that income by a 
properly-drawn statute).  See also ALM GL c 64H § 1(d) (LexisNexis 
Supp. 2005) (stating that the "sale of such services shall be deemed a sale 
within the commonwealth if the telecommunication is either originated or 
received at a location in the commonwealth and the services are either paid for 
in the commonwealth or charged to a service address located in the 
commonwealth"); SDCL § 10-45-6.1 (West 2004) (imposing a tax on "any 
telecommunication service that originates or terminates in this state and that 
is billed or charged to a service address in this state, or that both originates 
and terminates in this state"); Tenn. Code Ann. § 
67-6-102(a)(25)(F)(iii)(a) (LexisNexis 2003) (Imposing a sales tax on "[t]he 
furnishing, for a consideration, of either intrastate or interstate 
telecommunication services.  Except 
as otherwise provided in subdivision (a)(25)(F)(iii)(b), only those charges for 
interstate telecommunication which are originated or received in this state and 
which are billed or charged to a service address in Tennessee shall be included 
in the tax base.").