FILED

U.S. COURT OF APPEALS

ELEVENTH CIRCUIT

MAY 10, 2005

THOMAS K. KAHN

CLERK

 [PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

 

No. 04-10720

 

D. C. Docket No. 03-21822 CV-PCH

AMERICAN BANKERS INSURANCE GROUP,

Plaintiff-Appellant,

versus

UNITED STATES OF AMERICA,

Defendant-Appellee.

 

Appeal from the United States District Court

for the Southern District of Florida

 

(May 10, 2005)

Before ANDERSON, DUBINA and BLACK, Circuit Judges.

DUBINA, Circuit Judge:
26 U.S.C. § 4252(a) provides:

1

(a) Local telephone service. For purposes of this subchapter, the term “local

telephone service” means -

(1) the access to a local telephone system, and the privilege of telephonic quality

communication with substantially all persons having telephone or radio telephone

stations constituting a part of such local telephone system and

(2) any facility or service provided in connection with a service described in

paragraph (1).

The term “local telephone service” does not include any service which is a “toll

telephone service” or a “private communication service” as defined in subsections

(b) and (d).

26 U.S.C. § 4252(b) provides:

2

(b) Toll telephone service. For purposes of this subchapter, the term “toll telephone

service” means -

(1) a telephonic quality communication for which (A) there is a toll charge which

varies in amount with the distance and elapsed transmission time of each individual

communication and (B) the charge is paid within the United States, and

(2) a service which entitles the subscriber, upon payment of a periodic charge

(determined as a flat amount or upon the basis of total elapsed transmission time), to

the privilege of an unlimited number of telephonic communications to or from all or

a substantial portion of the persons having telephone or radio telephone stations in

a specified area which is outside the local telephone system area in which the station

provided with this service is located.

2

American Bankers Insurance Group, Inc. (“ABIG”) appeals the district

court’s grant of summary judgment to the United States, finding the long distance

telephone services ABIG purchased from AT&T subject to an excise tax under

Internal Revenue Code § 4252(b)(1). For the reasons that follow, we reverse the

district court’s judgment and hold that the long distance telephone services at issue

are not subject to taxation under § 4252(b)(1) or § 4252(b)(2) .

1 2

I. BACKGROUND 

A. Facts
3

Between October 1, 1998, and March 31, 2002, taxpayer, ABIG, purchased

interstate, international, and (in five states) intrastate long distance service from

AT&T. ABIG paid a uniform toll rate for all interstate calls made within the

United States, uniform toll rates for all intrastate long distance calls made within

the five states in which it purchased service, and toll rates for international calls

(other than calls to and from Mexico) that varied only according to which country

the calls were being placed. AT&T collected federal excise taxes from ABIG on

the services pursuant to § 4252(b)(1) of the Internal Revenue Code (“I.R.C.”), and

remitted the taxes collected to the Internal Revenue Service (“IRS”). 

Subsequently, ABIG filed claims with the IRS for a refund of $288,496.10,

representing the federal excise taxes collected on services rendered between

October 1, 1998, and September 30, 2001. ABIG later filed claims for an

additional refund in the amount of $73,267.14 for the taxes on telephone calls

placed between October 1, 2001, and March 31, 2002. ABIG sought the refunds,

contending that the federal excise tax on long distance telephone calls does not

apply to calls for which the rate does not vary based upon the distance of the call. 

B. Procedural History

The IRS did not respond to either of ABIG’s refund claims. ABIG then 
4

brought suit in the Southern District of Florida seeking a refund in the amount of

$361,763.24 in communications excise taxes and interest. The parties filed crossmotions for summary judgment, and the district court ruled in favor of the

government finding that the word “and” as used in § 4252(b)(1) is ambiguous and

in the context of the statute means “or.” According to the district court, the excise

tax at issue applies to toll telephone service varying by distance or elapsed

transmission time. ABIG then perfected this appeal.

II. ISSUE

Whether Internal Revenue Code § 4252(b)(1), defining “toll telephone

service” as a service for which there is a “toll charge which varies in amount with

the distance and elapsed transmission time” of each call, is applicable to a toll

charge varying with elapsed transmission time, but not distance. 

III. STANDARD OF REVIEW

This court reviews the district court’s disposition of cross-motions for

summary judgment de novo, applying the same legal standards used by the district

court, viewing the evidence and all factual inferences therefrom in the light most

favorable to the non-movant, and resolving all reasonable doubts about the facts in

favor of the non-moving party. Gerling Global Reinsurance Corp. of America v.

Gallagher, 267 F.3d 1228, 1233-34 (11th Cir. 2001). Statutory interpretation is a
5

question of law that we also review de novo. Smith v. Bellsouth Telecomm., Inc.,

273 F.3d 1303, 1305 (11th Cir. 2001). 

IV. DISCUSSION

A. The plain meaning of § 4252(b)(1)’s requirement that rates vary by 

“distance and elapsed transmission time” uses “and” conjunctively

1. The phrase is unambiguous

The IRS collects taxes for toll telephone service, defined as “(1) a

telephonic quality communication for which (A) there is a toll charge which varies

in amount with the distance and elapsed transmission time of each individual

communication.” 26 U.S.C. § 4252(b)(1)(A) (emphasis added). ABIG contends

that the statutory language quoted above is unambiguous, requiring the word

“and” in the phrase “distance and elapsed transmission time” to be interpreted

according to its ordinary, natural meaning. Accordingly, ABIG asserts “and” is

used conjunctively. ABIG urges that to be taxable toll telephone service under

this provision, the toll service must vary by both distance and elapsed transmission

time.

The government contends that the statue is ambiguous and does not plainly

require variation by both time and distance. Contending that the word “and” can

be read conjunctively or disjunctively, the government argues that the district
6

court was correct in determining that Congress did not intend to use the

conjunctive meaning of “and” in requiring under § 4252(b)(1) that taxable toll

telephone service “var[y] in amount with the distance and elapsed transmission

time.” 

In construing a statute, “[t]he preeminent canon of statutory interpretation

requires us to ‘presume that [the] legislature says in a statute what it means and

means in a statute what it says there.’” BedRoc Ltd., LLC v. United States, 541

U.S. 176, 183, 124 S. Ct. 1587, 1593, 158 L. Ed. 2d 338 (2004) (second alteration

in original) (quoting Connecticut Nat’l Bank v. Germain, 503 U.S. 249, 253-54,

112 S. Ct. 1146, 1149, 117 L. Ed. 2d 391 (1992)). This inquiry requires the court

to “begin[] with the statutory text, and end[] there as well if the text is

unambiguous.” Id. Furthermore, words are given their ordinary, plain meaning

unless defined otherwise. Id. at 183, 124 S. Ct. at 1593-94; see also In re

Paschen, 296 F.3d 1203, 1207 (11th Cir. 2002). More specifically, unless the

context dictates otherwise, the word “and” is presumed to be used in its ordinary

sense, that is, conjunctively. Crooks v. Harrelson, 282 U.S. 55, 58, 51 S. Ct. 49,

50, 75 L. Ed. 156 (1930) (construing taxing statute and concluding that “nothing

in the context or in other provisions of the statute . . . warrants the conclusion that

the word ‘and’ was used otherwise than in its ordinary sense [,conjunctively]; and
7

to construe the clause [disjunctively,] would be to add a material element . . . , and

thereby to create, not to expound, a provision of law”); see also Bruce v. First

Fed. Sav. and Loan Ass’n of Conroe Inc., 837 F.2d 712, 715 (5th Cir. 1988) (“The

word ‘and’ is therefore to be accepted for its conjunctive connotation rather than

as a word interchangeable with ‘or’ except where strict grammatical construction

will frustrate clear legislative intent.”) (citing, inter alia, Peacock v. Lubbock

Compress Co., 252 F.2d 892, 893-95 (5th Cir. 1958) (construing “and” in the

phrase “an employer engaged in . . . the ginning and compressing of cotton” as

meaning “or” because “it is an acknowledged undisputed fact . . . that compressing

is an operation entirely removed from ginning and that the two are never carried

on together.”) (emphasis added)).

Here, there is nothing in the statutory context to suggest that “and” is used

in the provision as meaning “or.” The phrase is unambiguous. The plain meaning

is clear–“and” is used conjunctively. See also America Online, Inc. v. United

States, __ Fed. Cl. __, 2005 WL 741847, No. 03-2383-T, at *5 (March 30, 2005)

(“Section 4252(b)(1) unambiguously requires that a toll charge vary in amount

according to both the distance and duration of calls.”); accord Honeywell Int’l,

Inc. v. United States, 64 Fed. Cl. 188, 199 (Fed. Cl. 2005); Office Max, Inc. v.

United States, 309 F. Supp. 2d 984, 993 (N.D. Ohio 2004); Nat’l R.R. Passenger
8

Corp. v. United States, 338 F. Supp. 2d 22, 27 (D.D.C. 2004); Fortis, Inc. v.

United States, No. 03 Civ. 5137(JGK), 2004 WL 2085528, at *6 (S.D.N.Y. Sept.,

16, 2004); Reese Bros., Inc. v. United States, No. 03-CV-745, 2004 WL 2901579;

at *7 (W.D. Pa. November 30, 2004). The district court stated that even if it were

to find the statute unambiguous, “this is one of the rare cases where the legislative

intent is sufficiently clear that . . . the [c]ourt would still be entitled to rely on

extrinsic evidence of Congressional intent.” American Bankers Ins. Group, Inc. v.

United States, 308 F.Supp.2d 1360, 1367 n.7 (S.D. Fla. 2004). We respectfully

disagree with the district court’s analysis. Where the statutory text is

unambiguous the inquiry ends. BedRoc Ltd., LLC, 541 U.S. at 183, 124 S. Ct. at

1593. In fact, the statutory context supports the conjunctive use of “and” in §

4252(b)(1)’s requirement that the rate must vary “by distance and elapsed

transmission time.” Though resort to the legislative history is unnecessary, as we

conclude the statute is unambiguous, we note the legislative history supports our

conclusion. 

In defining taxable “toll telephone service,” both parties agree that

Congress, through the Excise Tax Reduction Act of 1965, Pub. L. No. 89-44, §

302, 79 Stat. 136 (“1965 Act”), sought to define the method of service provided by

AT&T, the company, at the time of enactment, holding a monopoly on all long-
9

distance telephone services. Prior to the 1965 Act, “toll telephone service” was

defined as “a telephone or radio telephone message or conversation for which (1)

there is a toll charge, and (2) the charge is paid within the United States.” Pub. L.

No. 85-859, § 133(a), 72 Stat. 1275, 1290 (1958). In 1965, it appears Congress

amended the definition to its current language in an effort to modify and update it

“in order to reflect and to meet the changing technology and market conditions of

the industry.” Trans-Lux Corp. v. United States, 696 F.2d 963, 967 (Fed. Cir.

1982). AT&T’s long distance service at that time charged long distance telephone

services on the basis of the elapsed time of each individual call, multiplied by a

rate determined through the use of distance mileage bands or for “Wide Area

Telephone Service,” commonly referred to as WATS, with a periodic charge for

unlimited access within a specified area outside of local service. Thus, at the time

of the 1965 Act, AT&T’s service, which Congress sought to define as taxable toll

service, did in fact utilize rates that varied by both elapsed transmission time and

distance. Moreover, at the time of the 1965 Act, it was likely inconceivable that

charges would be made without reference to distance as now exists. 

In addition, Congress was seeking to modify and narrow the definition and

to phase this excise tax out entirely by 1969. See America Online, 2005 WL

741847, at *6 (citing Trans-Lux Corp., 696 F.2d at 966). Congress could have
10

amended the language in 1965 to include broad terms able to adapt to

technological changes; instead, Congress specifically defined “toll telephone

service” with an eye toward the tax expiring four years later. See id. 

Consequently, now, forty years later, ‘if the statutory language no

longer fits the infrastructure of the industry, the IRS needs to ask for

congressional action to bring the statute in line with today’s reality. It

cannot create an ambiguity that does not exist or misinterpret the

plain meaning of statutory language to bend an old law toward a new

direction.’

America Online, 2005 WL 741847, at *6 (quoting Nat’l R.R., 338 F. Supp. 2d at

27-28). 

Based on the foregoing, we agree with the numerous courts that have

concluded the language in the phrase at issue is clear and unambiguous. See

America Online, 2005 WL 741847, at *5 (“Section 4252(b)(1) unambiguously

requires that a toll charge vary in amount according to both the distance and

duration of calls.”); Honeywell Int’l, Inc. v. United States, 64 Fed. Cl. at 199

(finding § 4252(b)(1)’s phrase “distance and elapsed transmission time”

unambiguous and noting that “and” can be construed in certain contexts

cumulatively, but finding the clearly conjunctive use in § 4252(b)(1) “‘supported

by the fact that both distance and time were . . . factors in determining charges for

toll telephone service at the time of the 1965 amendments[;] in this context, it is
11

only logical to conclude that when Congress wrote the phrase, . . . it meant for the

word ‘and’ to be read conjunctively.’”) (quoting Office Max, 309 F. Supp. 2d at);

Nat’l R.R. Passenger Corp., 338 F. Supp. 2d at 27-28 (finding phrase

unambiguous; “and” intended conjunctively); Fortis, Inc. 2004 WL 2085528, at

*6 (same), Reese Bros., Inc. v. United States, 2004 WL 2901579, slip op. at *7

(same). Although “and” may be used cumulatively in some contexts, here, the

statutory language is plain and unambiguous–the provision requires that to come

within the definition of “toll telephone service” the rate must vary by both

“distance and elapsed transmission time.” 

While true that the plain meaning rule is not to be blindly applied if

application leads to an absurd or futile result, Hughey v. JMS Development Corp.,

78 F.3d 1523, 1529 (11th Cir. 1996), here the plain meaning of the statute does not

lead to such a result. See America Online, 2005 WL 741847, at *7. “[T]o justify a

departure from the letter of the law upon that ground, the absurdity must be so

gross as to shock the general moral or common sense.” Crooks, 282 U.S. at 60, 51

S. Ct. at 50. Here, no gross absurdity results from a plain meaning interpretation

of the provision. The plain meaning is not an “unreasonable [interpretation]

plainly at variance with the policy of the legislation as a whole.” See United

States v. American Trucking Assoc., 310 U.S. 534, 543, 60 S. Ct. 1059, 1063, 84
12

L. Ed. 1345 (1940) (internal quotation marks omitted). Instead, using the plain

meaning furthers the Congressional intent at the time it was adopted. Moreover,

we note “that in statutes levying taxes the literal meaning of the words employed

is most important for such statutes are not to be extended by implication beyond

the clear import of the language used.” Crooks, 282 U.S. at 61, 51 S. Ct. at 51

(internal quotation omitted). 

 “The Court must presume that Congress meant what it said when it tailored

the definition of taxable ‘toll telephone service’ to include distance and time

requirements, particularly in light of the overall goal of the Act to reduce and

restrict the application of federal excise taxes.” Office Max, 309 F. Supp. 2d at

1000; see also Honeywell Int’l, Inc., 64 Fed.Cl. at 199-200; America Online, __

Fed. Cl. __, 2005 WL 741847, at *6. “While it may have been short-sighted of

Congress to define ‘toll telephone service’ to specifically address the charging

scheme used by AT&T in 1965, . . . ‘[i]t is beyond [the court’s] province to rescue

Congress from its drafting errors.” Honeywell Int’l, Inc., 64 Fed. Cl. at 199 (first

alteration in original) (quoting Lamie v. United States Tr., 540 U.S. 526, 542, 124

S. Ct. 1023, 1034, 157 L. Ed. 2d 1024 (2004) (internal marks and citation

omitted). 
13

2. Revenue Ruling 79-404 does not provide support for abandoning §

4252(b)(1)’s plain meaning

The government also argues that in interpreting § 4252(b)(1) the district

court properly attributed “great weight” to Revenue Ruling 79-404. Revenue

Ruling 79-404 deals with whether communications services between onshore

facilities and offshore ships fall within § 4252(b)(1)’s definition of “toll telephone

service.” While acknowledging that “[l]iterally, the service provided in [the] case

does not come within the definition of . . . toll telephone service because the

charge for such services does not vary with distance and therefore does not meet

the requirement of section 4252(b)(1),” Rev. Rul. 79-404, 1979-2 C.B. 382 (1979)

(emphasis added), the IRS nonetheless concluded that “a statute may be given an

interpretation other than that which follows from its literal language where such

interpretation is required in order to comport with the legislative intent.” Id.; see

e.g. America Online, 2005 WL 741847, at *8.

The government argues that the court should give Revenue Ruling 79-404

Chevron deference . See Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc.,

467 U.S. 837, 104 S. Ct. 2278, 81 L. Ed. 2d 694 (1984). Under Chevron, the court

must first determine whether the congressional intent is clear. Chevron U.S.A.,

Inc., 467 U.S. at 843-44, 104 S. Ct. at 2781-82. If the intent is clear, the inquiry
14

ends; the court and agency “must give effect to the unambiguously expressed

intent of Congress.” Chevron, 467 U.S. at 843-44, 104 S. Ct. at 2781-82; see also

Ala. Power Co. v. United States Dep’t of Energy, 307 F.3d 1300, 1312-13 (11th

Cir. 2002) (holding agency interpretation did not overcome clear intent of statute

even if given Chevron deference). 

Accordingly, because we hold that § 4252(b)(1) is clear and directly

answers the question here, the inquiry ends; we need not give deference to

Revenue Ruling 79-404. Moreover, we need not determine the proper level of

deference to be given Revenue Ruling 79-404. See Wilderness Watch v. Mainella,

375 F.3d 1085, 1091 n. 7 (11th Cir. 2004) (noting “[b]ecause [the court] hold[s]

that the Wilderness Act speaks directly to the question at issue, we need not

resolve the question of the precise level of deference due the agency action under

the second prong of Chevron”). 

3. Re-enactment Doctrine is not applicable

The government contends that even if Revenue Ruling 79-404 is not

entitled to deference, under the re-enactment doctrine, Congress should be deemed

to have approved the Revenue Ruling because the federal communications excise

tax imposed under § 4251 has been amended and re-enacted since the publication

of Revenue Ruling 79-404. However, the re-enactment doctrine will serve to give
Unlike Cottage Savings Association v. Commissioner, 499 U.S. 554, 111 S. Ct. 1503, 113 3

L. Ed. 2d 589 (1991), in which the defendant relied on Treasury Department regulations and the

precise issue was not addressed by the statute, here the government seeks to use as determinative

Revenue Rulings where the statute and its context address the issue before the court. In addition,

the treasury regulations at issue in Cottage Savings were “consistent with [the Supreme Court’s]

precedents . . . [preceding enactment and the] decisions were part of the contemporary legal context

in which Congress enacted [the statute at issue]” Id., 499 U.S. at 562, 111 S. Ct. at 1508 (internal

quotation omitted). 

15

weight or approval to an agency interpretation only “[w]here an agency’s statutory

construction has been fully brought to the attention of the public and the Congress,

and the latter has not sought to alter that interpretation although it has amended the

statute in other respects, then presumably the legislative intent has been

discerned.” North Haven Bd. of Educ. v. Bell, 456 U.S. 512, 535, 102 S. Ct. 1912,

1925, 72 L. Ed. 2d 299 (1982) (quotations omitted). 

Here, not only is the statutory language clear under § 4252(b)(1), but there

is nothing to indicate that Congress was aware of Revenue Ruling 79-404 when it

subsequently amended and re-enacted this taxing statute. The legislative history

reveals no mention of Revenue Ruling 79-404 nor does the record reveal

consideration of the issue raised in the Ruling. See, e.g., Office Max, 309 F. Supp.

2d at 1004-1005. Thus, there is nothing to indicate Congress was aware of

Revenue Ruling 79-404 when the taxing provisions were re-enacted. See id. 

3

“When the ‘congressional discussion preceding re-enactment makes no reference

to the . . . regulation, and there is no other evidence to suggest that Congress was
16

even aware of the . . . interpretive position[,] ‘we consider the . . . reenactment to

be without significance.’” America Online, 2005 WL 741847, at *9 (quoting

Brown v. Gardner, 513 U.S 115, at 121, 115 S. Ct. 552, 556, 1130 L. Ed. 2d 462

(1994) (quoting United States v. Calamaro, 354 U.S. 351, 359, 77 S. Ct. 1138, 1

L. Ed. 2d 1394 (1957)). Accordingly, Congressional approval cannot be inferred

from re-enactment of this statute. See America Online, 2005 WL 741847, at * 9;

Honeywell Int’l, Inc., 64 Fed. Cl. at 201; Office Max, 309 F. Supp. 2d at 1004-

1005; Fortis, 2004 WL 2085528, at *12; Reese, 2004 WL 2901579, at *12. 

B. The services at issue are not within the statute

1. Services at issue do not vary by “distance”

The rates at issue vary according to whether the call is intrastate, interstate

or international. The government argues that “distance” as used in § 4252(b)(1),

includes the services at issue because the toll bands used (intrastate, interstate and

international) are based on distance. ABIG contends that the toll bands are not

based on distance, but are based on political units, i.e. the governmental entity

having regulatory authority over the services.
As argued by ABIG counsel at oral argument, similarly, there is some correlation between

4

weight and belt size, however, weight does not necessarily coincide with belt size. See America

Online, 2005 WL 741847, at *9 (“A call from Dulles, Virginia to Toronto covers a shorter distance

than a call from Dulles to Seattle, and a call from Dulles to Philadelphia would be shorter than both,

yet the rate for calls to Seattle and Philadelphia would be the same, while the rate to Toronto would

be different.”).

17

While there may be some correlation between distance and the geopolitical

subdivisions, the rates themselves do not vary by distance per se. The 4

jurisdictional boundaries–interstate, intrastate, and international–are divisions of

regulatory authority between the Federal Communications Commission and state

regulators. See Louisiana Pub. Serv. Comm’n v. FCC, 476 U.S. 355, 360, 106 S.

Ct. 1890, 1894, 90 L. Ed 2d 369 (1986). In Honeywell International, the

government made the same argument it makes here. See 64 Fed. Cl. at 201, at

*14. The Honeywell court, relying on the several other courts faced with this

issue, aptly reasoned that the rates at issue, similar to those at issue here, do not

vary by “distance” within the meaning of § 4252(b)(1).

‘Section 4252(b)(1) presumes a formula where the charge correlates

to both the elapsed time of the call and the distance–that is, the

mileage–that the call travels.’ Fortis, 2004 WL 2085528 at *13. 

‘[T]elephone calls are designated according to geopolitical units due

to the federalist regulatory scheme and the demarcation of jurisdiction

between the Federal Communications Commission and state

regulatory agencies.’ Id.; see Office Max, 309 F. Supp. 2d at 995. 

‘The distinctions between intrastate and interstate do not necessarily

correlate to distance because, for example, an intrastate call may well

travel a longer distance than certain interstate or even international

calls.’ Fortis, 2004 WL 2085528 at *13; see Office Max, 309 F.
18

Supp. 2d at 996; Reese, 2004 WL 2901579 at *12. . . . ‘[T]he

jurisdictional classifications employed in the long distance service at

issue does not amount to service where charges vary in amount with

distance and thus do not place the service within § 4252(b)(1)’s

definition of toll telephone service.’ Fortis, 2004 WL 2085528 at

*13; see Reese, 2004 WL 2901579 at *13. 

Honeywell Int’l, Inc., 64 Fed. Cl. at 201; see also America Online, 2005 WL

741847, at *8. We agree with the above reasoning. Accordingly, we conclude

that the services at issue do not vary by “distance” as required under § 4252(b)(1). 

2. Services at issue do not fall within § 4252(b)(2)

The government argues that even if the services at issue are not taxable 

under § 4252(b)(1), the services fall within § 4252(b)(2) and are taxable under this

provision. The government urges that under a plain reading of this provision, the

services are taxable because the charge for the services at issue is “periodic.” 

Section 4252(b)(2) applies to WATS service and provides:

[A] service which entitles the subscriber, upon payment of a periodic

charge (determined as a flat amount or upon the basis of total elapsed

transmission time), to the privilege of an unlimited number of

telephonic communications to or from all or a substantial portion of

the persons having telephone or radio telephone stations in a

specified area which is outside the local telephone system area in

which the station provided with this service is located.
19

26 U.S.C. § 4252(b)(2). Again, the government has made the very same argument

it makes here to several courts previously faced with this particular issue. We

agree with the reasoning of those earlier decisions.

Instead of paying for the “total elapsed transmission time” of the call, the

duration of each call is rounded up to the next highest billing increment and

multiplied by a postalized rate to produce a per call charge. Based upon the

foregoing, the services at issue are not subject to a “periodic charge.” ABIG’s

long distance services do not fall within the meaning of “toll telephone service” as

provided in § 4252(b)(2). 

3. Services at issue are not “local” telephone service under § 4252(a)

Finally, the government contends, alternatively, that the services AT&T

provided to ABIG are taxable as local telephone services pursuant to § 4252(a). 

Section 4252(a) defines “local telephone service” as:

(1) the access to a local telephone system, and the privilege of

telephonic quality communication with substantially all persons

having telephone or radio telephone stations constituting a part of

such local telephone system, and

(2) any facility or service provided in connection with a service

described in paragraph (1).

The term “local telephone service” does not include any service

which is a “toll telephone service” or a “private communication

service” as defined in subsection (b) and (d).
20

While conceding that “local” is not defined by the I.R.C., the government argues

that the legislative history demonstrates that the term is broad enough to cover the

services at issue. The government asserts that Congress used the term “local

telephone service” as a catchall in rearranging the telephone tax provision in the

1954 Internal Revenue Code defining “local telephone service” as telephone

service not taxable under § 4252. See 1954 I.R.C. § 4252(a). Thus, the

government argues that all services not specifically exempted under § 4253 are to

be taxed. In addition, the government contends that the 1958 redesignation of

local telephone service as “general telephone service” did not remove local

telephone service from the tax base. 

The government’s interpretation of “local telephone service” would make

the statute a nullity. “It is hardly a plain or natural reading of the statute to claim

that the entire United States is part of one ‘local telephone system.’” Honeywell

Int’l, Inc., 64 Fed. Cl. at 203 (quoting Fortis, 2004 WL 2085528 at *15); see also

Office Max, 309 F. Supp. 2d at 1007 (finding the government’s argument that the

services should be deemed local telephone service because Congress had to intend

to tax the service at issue, “entirely unpersuasive” and holding “[t]here is

absolutely no basis upon which to find that the long-distance service at issue

herein falls within the statutory definition of ‘local telephone service’). Moreover,
21

“[t]he government’s argument mischaracterizes the structure of the statute[.]

Section 4251 sets out which items will be taxed, . . . Section 4252 defines those

terms[, and] Section 4253 grants exemptions to certain services . . . . The fact that

certain exemptions are specified does not mean that anything not expressly

exempted is taxed.” America Online, 2005 WL 741847, at *11. Accordingly, we

conclude that the services at issue are not taxable as “local” telephone service

under § 4252(a). 

V. CONCLUSION

For the foregoing reasons, we reverse the district court’s grant of the

government’s cross-motion for summary judgment and remand this case with

instructions that the district court enter judgment in favor of ABIG.

REVERSED and REMANDED.

 
22