Title: Mountain Cable Co. v. Department of Taxes

State: vermont

Issuer: Vermont Supreme Court

Document:

Mountain Cable Co. v. Department of Taxes (97-290); 168 Vt. 454; 721 A.2d 507

[Filed 13-Nov-1998]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.

                                 No. 97-290

       Mountain Cable Co. and	                   Supreme Court
       Better TV. Inc., of Bennington
                                                   On Appeal from
       v.		                           Washington Superior Court

       State Department of Taxes	           February Term, 1998

       Alan W. Cheever, J.

       Wm. Roger Prescott and Christopher D. Roy of Downs Rachlin & Martin,
  PC, Burlington, for Appellants.

       William H. Sorrell, Attorney General, and John M. Bagwell, Special
  Assistant Attorney General, Montpelier, for Appellee.
       

  PRESENT:  Morse, Johnson and Skoglund, JJ., and Allen, C.J.
            (Ret.) and Wesley, Supr. J., Specially Assigned

       WESLEY, Supr. J., Specially Assigned.   At issue in this appeal is
  whether installation and connection fees charged by cable television
  companies are subject to sales tax under Vermont law.  We affirm the
  superior court's order upholding the Commissioner of Taxes' determination
  that such fees are taxable amusement charges.

       The facts are not in dispute.  From 1989 to 1992, Mountain Cable
  Company and Better TV, Inc. of Bennington ("taxpayers"), two commonly owned
  cable television providers, charged customers a flat one-time installation
  or initiation fee for connecting them to the cable network.  In the typical
  case involving a new customer without a cable-ready home, taxpayers'
  technicians would run aerial or underground coaxial wire from a telephone
  pole outside the customer's residence to one or more outlets installed in
  the customer's home.  Although the $20 to $25 installation fee recovered
  only about fifty percent of the actual cost of a first-time installation,
  taxpayers recouped the rest of the costs by charging the same amount for
  initiating service in 

   

  previously-wired homes, which would involve merely engaging a switch on a
  telephone pole.

       During the relevant period, taxpayers took the position that the fees
  they charged for installation or initiation of cable television service
  were not "amusement charges," and thus not subject to sales tax.  See 32
  V.S.A. § 9771(4) (sales tax shall be paid upon receipts from amusement
  charges).  In November 1992, the Department of Taxes notified taxpayers
  that they were required to collect and turn over sales taxes imposed on
  their installation and initiation fees.  Taxpayers filed an administrative
  appeal, and the Commissioner issued a determination upholding the
  Department's position, ordering taxpayers to pay uncollected sales taxes on
  installation or service initiation charges required of their customers for
  the commencement, or reconnection, of cable television signals.  Noting
  that customers could not choose to forgo the installation fees and still
  obtain cable programming, the Commissioner reasoned that the fees were
  merely one component of the transaction for the provision of cable
  television services, and thus should be considered "service charges" under
  32 V.S.A. § 9701(10) ("amusement charges" include "service charges of cable
  television systems").  The superior court upheld the Commissioner's
  determination, in turn, concluding that § 9701(10) does not limit "service
  charges" to just the monthly programming fee.

       On appeal, taxpayers argue that the superior court erred (1) by
  according the Commissioner an undue degree of deference on a purely legal
  question of statutory interpretation, (2) by improperly imposing upon them
  the burden of proving that the installation fees were not subject to sales
  tax, and (3) in concluding that the installation fees were "amusement
  charges" subject to sales tax.

       It is undisputed that "amusement charges," as defined by § 9701(10),
  are subject to sales tax.  Under that statutory provision, the term
  "amusement charges" means:

       the admission charge (including any subsidiary, service or cover 
       charge) to, and any charge for the use of any place of recreation or 
       amusement . . . including specifically service charges of cable 
       television systems or other audio or video programming systems that
       operate by wire, coaxial cable, lightwave, microwave, satellite

  

        transmission or by other similar means.
   
  32 V.S.A. § 9701(10) (emphasis added).  The key issue, then, is whether
  "service charges" include installation and initiation fees.

       Without question, the common, ordinary meaning of the term "service
  charges" would include any fee charged for installing a product or system. 
  See Cable Television Ass'n v. Finneran, 954 F.2d 91, 99 (2d Cir. 1992)
  (term "cable services" is not limited to cable programming, but includes
  both provision of equipment necessary to receive service and charge for
  installation to obtain service).  Indeed, in the context of the sale of
  tangible personal property, fees designated as "service charges" most often
  denote charges associated with the installation or delivery of the product. 
  Because the term "service charges" is not defined in the statute, we must
  presume that the Legislature intended the everyday commonly understood
  meaning that would certainly encompass installation and initiation fees. 
  See Shetland Properties, Inc. v. Town of Poultney, 145 Vt. 189, 194,