*

The Honorable Dan Aaron Polster, United States District Judge for the Northern District of Ohio, sitting by

designation. 

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 08a0343p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT _________________

BELLSOUTH TELECOMMUNICATIONS, INC., et al.,

 Plaintiffs-Appellees,

v.

JOHN FARRIS, Secretary of the Finance and

Administration Cabinet, Commonwealth of

Kentucky, et al.,

 Defendants-Appellants.

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Nos. 07-5397/5424

Appeal from the United States District Court

for the Eastern District of Kentucky at Frankfort.

Nos. 06-00039; 06-00016—Karen K. Caldwell, District Judge.

Argued: March 12, 2008

Decided and Filed: September 9, 2008 

Before: DAUGHTREY and SUTTON, Circuit Judges; POLSTER, District Judge.*

_________________

COUNSEL

ARGUED: Laura M. Ferguson, FINANCE AND ADMINISTRATION CABINET, Frankfort,

Kentucky, for Appellants. Geoffrey M. Klineberg, KELLOGG, HUBER, HANSEN, TODD,

EVANS & FIGEL, Washington, D.C., for Appellees. ON BRIEF: Laura M. Ferguson, Douglas

M. Dowell, FINANCE AND ADMINISTRATION CABINET, Frankfort, Kentucky, for Appellants.

Geoffrey M. Klineberg, Daniel G. Bird, Michael K. Kellogg, KELLOGG, HUBER, HANSEN,

TODD, EVANS & FIGEL, Washington, D.C., for Appellees. Helgi C. Walker, WILEY REIN,

Washington, D.C., Douglas R. Cole, JONES DAY, Columbus, Ohio, Bruce V. Griffiths, OFFICE

OF THE TEXAS ATTORNEY GENERAL, Austin, Texas, for Amici Curiae.

SUTTON, J., delivered the opinion of the court, in which POLSTER, D.J., joined.

DAUGHTREY, J. (pp. 12-14), delivered a separate opinion concurring in part and dissenting in part.

1
Nos. 07-5397/5424 BellSouth Telecomms. et al. v. Farris et al. Page 2

_________________

OPINION _________________

SUTTON, Circuit Judge. In 2005, Kentucky imposed a 1.3% tax on the gross revenues of

telecommunications providers. Ky. Rev. Stat. Ann. § 136.616(1), (2)(b). In connection with the

new tax, the legislature banned providers from “collect[ing] the tax directly” from consumers and

from “separately stat[ing] the tax on the bill.” Id. § 136.616(3). The providers filed this lawsuit

because they want to identify the new tax as a line item on all customer invoices to explain why they

have raised prices, while the Commonwealth says that the new law prevents them from doing so.

No one disputes Kentucky’s authority to impose this tax, the providers’ responsibility to pay

it or Kentucky’s authority to prevent providers from switching the legal incidence of taxation to their

customers. And no one disputes the providers’ right to raise prices to account for this additional cost

of doing business. The question is whether the Commonwealth may permit providers to raise prices

but prohibit them from using their invoices to say why without running afoul of the “freedom of

speech” protections of the First (and Fourteenth) Amendment. Whether the no-stating-the-tax

provision is more akin to a price-advertising ban (governed by the commercial-speech doctrine) or

to a ban on protesting a new tax in the forum most likely to get consumers’ attention (governed by

the political-speech doctrine) need not detain us. For it fails to satisfy even the intermediate scrutiny

that applies to restrictions on commercial speech. The district court having come to a similar

conclusion, we affirm. To the extent the district court also meant to invalidate the provision that

bars providers from collecting the tax directly from the consumer, a point not entirely clear from the

decision, we reverse that portion of its decision, as this provision regulates conduct, not speech.

I.

On March 18, 2005, Kentucky enacted a statute taxing “the gross revenues received by all

[telecommunications] providers.” Id. § 136.616(1). The statute makes providers responsible for a

tax of “[o]ne and three-tenths percent (1.3%) of the gross revenues received for the provision of

communications services . . . billed on or after January 1, 2006.” Id. § 136.616(2)(b). The law also

regulates the way providers may collect the tax and what they may say in doing so: “The provider

shall not collect the tax directly from the purchaser or separately state the tax on the bill to the

purchaser.” Id. § 136.616(3). A separate section of the Kentucky tax code penalizes those providers

who violate the provision with a fine “of twenty-five dollars ($25) per purchaser offense, not to

exceed ten thousand dollars ($10,000) per month.” Id. § 136.990(11). 

BellSouth and AT&T filed separate lawsuits against the Kentucky officials responsible for

administering the tax, each seeking a declaration that (1) § 136.616(3) and § 136.990(11) violate the

First (and Fourteenth) Amendment of the United States Constitution, (2) the two laws violate the

Commerce Clause of the United States Constitution and (3) the Federal Communications Act, 47

U.S.C. § 151 et seq., preempts both laws. In each case, the district court held that the Tax Injunction

Act did not bar the lawsuit, granted the providers’ motion for summary judgment on the First

Amendment claim, denied their motion on the Commerce Clause claim and declined to reach the

preemption claim. Kentucky challenged the adverse rulings, and we consolidated the cases on

appeal. 

II.

Before reaching the merits of the First Amendment question, we must consider our

jurisdiction to do so. Under the Tax Injunction Act, federal courts may not “enjoin, suspend or

restrain the assessment, levy or collection of any tax under State law where a plain, speedy and
Nos. 07-5397/5424 BellSouth Telecomms. et al. v. Farris et al. Page 3

efficient remedy may be had in the courts of such State.” 28 U.S.C. § 1341. The district court

concluded that the Act did not bar this lawsuit. We agree—for several reasons. 

First, the Act applies only when a claimant seeks to “enjoin” or otherwise hinder “the

assessment, levy or collection” of a state tax. Yet there is nothing about this lawsuit that seeks to

avoid paying taxes or to limit the amount of taxes due. In challenging § 136.616(3), the providers

do not disclaim responsibility for paying the 1.3% gross-receipts tax. To the contrary: the tax

appears in a separate part of the statute, see Ky. Rev. Stat. Ann. § 136.616(2), and the providers not

only have declined to challenge that provision but also have accepted its validity for purposes of this

case. If successful, this injunction thus will not hinder the Commonwealth’s interest in collecting

the tax.

Second, consistent with the language of the Act, the Supreme Court has construed it to apply

“only in cases . . . in which state taxpayers seek federal-court orders enabling them to avoid paying

state taxes.” Hibbs v. Winn, 542 U.S. 88, 107 (2004) (emphasis added). And what the Court has

said in construing the Act is consistent with what it has done: It has permitted lawsuits that do not

seek to avoid paying taxes, and it has barred lawsuits that do. Compare, e.g., id. at 112 (permitting

suit challenging tax credits for donations to private-school scholarship funds), and Jefferson County,

Ala. v. Acker, 527 U.S. 423, 435 (1999) (permitting suit brought by a State to collect taxes), with

Arkansas v. Farm Credit Servs. of Cent. Ark., 520 U.S. 821, 824 (1997) (barring suit that sought

exemption from sales and income taxes), California v. Grace Brethren Church, 457 U.S. 393, 411

(1982) (barring suit that sought to prevent a State from collecting unemployment-compensation

taxes), and Rosewell v. LaSalle Nat’l Bank, 450 U.S. 503, 512 (1981) (barring suit that sought to

disclaim liability for property taxes). The district court’s assumption of jurisdiction over this lawsuit

fully respects these precedents.

Third, what the providers want is something that neither the language of the Act nor the

Court’s cases cover: to invalidate a law that prevents them from “collect[ing] the tax directly from

the purchaser or separately stat[ing] the tax on the bill to the purchaser.” Ky. Rev. Stat. Ann.

§ 136.616(3). That is not a request for a tax injunction; that is a request to end a ban on what the

provider may say about the tax and on what the provider may do to collect the tax from someone

else. If granted, this relief would not interfere with the relationship between the body that imposed

the tax (the Commonwealth) and the bodies that owe the tax (the providers). It merely would allow

the providers to identify the tax on the bill and allow them in the process to explain to their

customers why they have raised prices. The Tax Injunction Act does not prevent such relief, relief

that does not halt the collection or assessment of taxes but that merely facilitates what businesses

have done for a long time—recover the costs of doing business (including paying new taxes) from

customers for as long as the market will bear it. 

Fourth, this application of the Act falls in line with several lower-court decisions, starting

with our own. In American Civil Liberties Union of Tennessee v. Bredesen, 441 F.3d 370 (6th Cir.

2006), while we did not have occasion to issue a holding on the point, we hinted that today’s

interpretation was the right one. Plaintiffs challenged the validity of a Tennessee law that permitted

them to choose certain license plate options but not others. “Plaintiffs in this case,” we said, “are

of course not seeking to avoid paying for a ‘Choose Life’ license plate, and it is therefore at least

questionable whether the [Act] would apply even if the payment for the license plates were a ‘tax.’”

Id. at 373 n.1. And in other cases, we have recognized that the Act operates “particularly” to protect

the States’ “revenue raising” mechanisms, Wright v. McClain, 835 F.2d 143, 144 (6th Cir. 1987),

and only to shield “taxes” defined in relevant part as “assessment[s] . . . for general revenue raising

purposes,” Hedgepeth v. Tennessee, 215 F.3d 608, 614 (6th Cir. 2000). All of this suggests that

when a lawsuit does not directly threaten the “ultimate . . . public benefit” of raising tax revenue,

Am. Landfill, Inc. v. Stark/Tuscarawas/Wayne Joint Solid Waste Mgmt. Dist., 166 F.3d 835, 838 (6th

Cir. 1999), as is true here, the Act does not apply. 
Nos. 07-5397/5424 BellSouth Telecomms. et al. v. Farris et al. Page 4

In a case not unlike this one, the Second Circuit held that the Act did not apply to a challenge

to a state law restricting a taxpayer’s efforts to recover the costs of a new tax from its customers.

“[T]he State,” the court explained, “has the right to place the legal incidence of the tax upon the oil

companies; it has selected its target. But in barring the targets of the tax from recovering their costs

from the consumer directly or indirectly, the State has gone beyond its taxing powers and has

employed its police powers. . . . We simply hold that the action is not insulated from federal

scrutiny by the [Act].” Mobil Oil Corp. v. Tully, 639 F.2d 912, 918 (2d Cir. 1981). In a companion

case challenging a similar state law, the court likewise permitted oil companies to challenge an antipass-through provision, which purported to prevent oil companies from raising prices to account for

a new tax. Mobil Oil Corp. v. Dubno, 639 F.2d 919, 922 (2d Cir. 1981) (“[I]t cannot seriously be

argued that the judgment of the court below has enjoined, suspended or restrained the assessment,

levy or collection of the gross receipts tax.”); see also Luessenhop v. Clinton County, N.Y., 466 F.3d

259, 266 (2d Cir. 2006); Wells v. Malloy, 510 F.2d 74, 77 (2d Cir. 1975).

The Commonwealth counters with several arguments—all unconvincing. Observing that the

Act prohibits injunctions against the “assessment, levy [and] collection” of taxes, 28 U.S.C. § 1341

(emphasis added), it points out that the providers seek to enjoin a provision that bans them from

“collect[ing] the tax directly from the purchaser,” Ky. Rev. Stat. Ann. § 136.616(3) (emphasis

added). It is not that simple. A ban on enjoining a State’s tax-collection efforts does not apply to

a law that purports to restrict a taxpayer’s efforts to collect those costs from others. “[A] phrase

gathers meaning from the words around it,” Hibbs, 542 U.S. at 101 (internal quotation marks and

alterations omitted) and the words “assessment” and “levy” show that “collection” refers to a State’s

“assessment, levy [and] collection” of taxes, see id., not a taxpayer’s efforts to recover the costs of

that tax from consumers, see Tully, 639 F.2d at 918; Dubno, 639 F.2d at 922.

Had the taxpayers sought to use their invoices to switch the legal incidence of

taxation—saying to customers, “This is your legal responsibility, not ours”—that might be another

matter. For that would seem to alter the Commonwealth’s “assessment, levy, or collection” of taxes

by altering the legal burden of taxation. Yet because this challenged provision neither generates tax

revenue for the Commonwealth nor alters the relationship between the Commonwealth and the party

obligated to pay the tax, the Act does not apply. 

Neither does the Act apply whenever a taxpayer seeks to enjoin a law that happens to be part

of a tax bill. “The mere fact that the anti-passthrough section is contained in a tax law of the State

should not lead to automatic sanctuary under [the Act].” Tully, 639 F.2d at 918; cf. Hibbs, 542 U.S.

at 104; Jefferson County, 527 U.S. at 435.

Without this provision, Kentucky adds, it will be unclear “that the legal incidence of the

gross revenue tax rests upon the provider and not the customer.” Br. at 17. But the providers do

not deny responsibility for the tax, nor do they seek to avoid it. Even when § 136.616 is read

without the challenged provision, the statute contains ample, indeed undeniable, evidence that the

providers bear the legal burden of the tax. See Ky. Rev. Stat. Ann. § 136.616(1) (“A tax is hereby

imposed on the gross revenues received by all providers.”) (emphasis added); id. § 136.602(6)

(“Gross revenues means all amounts received in money, credits, property, or other money’s worth

in any form, by a provider . . . .”) (emphases added). 

Nor may Kentucky evade federal jurisdiction on the ground that “[t]he relief sought . . . has

the potential [of] reduc[ing] state revenues” by exposing the Commonwealth to litigation and to the

administrative burden of processing (and rejecting) potential refund claims. Br. at 19. The Act does

not strip federal courts of jurisdiction over all claims that might, after this or that happens, have

some negative impact on local revenues; it strips jurisdiction over claims seeking to enjoin the

collection of State “tax revenue.” Wilbur v. Locke, 423 F.3d 1101, 1110 (9th Cir. 2005); see also

Oklahoma ex rel. OK Tax Comm’n v. Int’l Registration Plan, Inc., 455 F.3d 1107, 1111–12 (10th
Nos. 07-5397/5424 BellSouth Telecomms. et al. v. Farris et al. Page 5

Cir. 2006); Ben Oehrleins & Sons & Daughter, Inc. v. Hennepin County, 115 F.3d 1372, 1383 (8th

Cir. 1997).

Kentucky persists that, if the court invalidates § 136.616(3), that would render the penalty

provision, § 136.990(11), ineffective. “Any provider who violates the provisions of KRS

136.616(3),” the penalty provision says, “shall be subject to a penalty of twenty-five dollars ($25)

per purchaser offense, not to exceed ten thousand dollars ($10,000) per month.” The elimination

of this civil penalty provision might well decrease state revenue, but because it is not a “tax under

State law,” the Act does not apply. See Bredesen, 441 F.3d at 375; see also RTC Commercial Assets

Trust 1995-NP3-1 v. Phoenix Bond & Indem. Co., 169 F.3d 448, 457–58 (7th Cir. 1999). In the final

analysis, the providers do not disclaim responsibility for the tax, and nothing about this lawsuit seeks

relief from legal responsibility for the underlying tax, whether through an injunction or otherwise.

The Tax Injunction Act does not apply.

III.

Next question: does the provision—either the no-stating-the-tax clause or the no-directcollection clause—violate the First Amendment? Yes, we conclude, as to the first but not as to the

second. 

A.

While the no-stating-the-tax clause by its terms restricts speech, the question is what kind:

Does it regulate commercial speech or other protected speech? Should we thus apply the four-part,

commercial-speech test, see Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n, 447 U.S. 557,

566 (1980), or the more rigorous scrutiny that applies to content-based regulations of other types of

protected speech, see, e.g., Boos v. Barry, 485 U.S. 312, 321 (1988); cf. R.A.V. v. City of St. Paul,

Minn., 505 U.S. 377, 391 (1992)? 

In one sense, the law looks like it regulates commercial speech, which the Court variously

has defined as “expression related solely to the economic interests of the speaker and its audience,”

Cent. Hudson, 447 U.S. at 561, or as “speech proposing a commercial transaction,” id. at 562. The

Commonwealth does not wish to regulate the providers’ speech about the new tax in any venue but

one: a commercial invoice. And that venue suggests that the law concerns just “the economic

interests” of the parties or just the means to describe a completed commercial transaction or to

propose a new one. That the law primarily regulates “economic interests” also is suggested by our

suspicion that the providers would not offer to provide a line item on an invoice if the

Commonwealth lowered or eliminated this tax. The providers, like most businesses, are pursuing

their economic interest in preserving their shareholders’ return on their investment. And one honest,

yet market-savvy, way to do that is to raise prices to offset the 1.3% tax while telling customers that

the price increase will permit them to maintain, not expand, profits. 

In another sense, the law looks like a ban on core political speech. Just because an

“economic motivation” underlies speech, we know, does not “by itself” convert it into “commercial

speech.” Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 67 (1983). And what is going on here

is more than just a debate about how best to sell toothpaste or, as here, telephone services. It is

about announcing who bears political responsibility for a new tax and about doing so in the forum

most likely to capture voters’ attention: an invoice that displays a predictable consequence of the

tax. At the same time that the law limits the providers’ efforts to duck economic responsibility for

a price increase, it permits legislators to duck political responsibility for the new tax. It takes little

imagination to envision why an elected official would prefer to evade accountability for a tax

increase—whether that official has taken a “Taxpayer Protection Pledge,” as one of the amicus

curiae alleges some Kentucky legislators have taken, or not. See Amicus Curiae Br. of CTIA—The
Nos. 07-5397/5424 BellSouth Telecomms. et al. v. Farris et al. Page 6

Wireless Association, at 28 & n.10. Either way, the no-stating-the-tax provision, passed at the same

time as the underlying tax, facilitates keeping consumers (and voters) in the dark about the tax and

its impact on their wallets. 

Perhaps our difficulty in placing a label on the law suggests it is a hybrid, one that implicates

commercial and political speech, that implicates the interests of consumers and voters and that

draws its heritage as much from protests over the Townshend Acts as from the Wealth of Nations. If that is the case, we presumably would apply the more rigorous scrutiny. All laws, for example,

must satisfy the Equal Protection Clause’s ban on irrational line-drawing. Yet that does not mean

rational-basis review governs a lawsuit challenging legislative lines drawn on racial or gender

grounds. The more rigorous scrutiny would apply, just as one might say it ought to apply here. Cf.

R.A.V., 505 U.S. at 384; Riley v. Nat’l Fed’n of the Blind of N.C., Inc., 487 U.S. 781, 796 (1988).

While it may often be the case that a “‘commonsense’ distinction” will divide commercial

speech from other speech, Cent. Hudson, 447 U.S. at 562, this is not one of those cases. It remains

difficult to pin down where the political nature of these speech restrictions ends and the commercial

nature of the restrictions begins. Yet because Kentucky’s regulation does not survive even the lessstringent intermediate level of scrutiny applicable to commercial speech and because a choice

between these categories thus would not affect the outcome of the case, we can save the issue for

another day and decide only what we must to resolve this dispute. “[I]f it is not necessary to decide

more, it is necessary not to decide more . . . .” PDK Labs. Inc. v. DEA, 362 F.3d 786, 799 (D.C. Cir.

2004) (Roberts, J., concurring in part and concurring in judgment).

Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748

(1976), broke with nearly 200 years of tradition when it decided that the “freedom of speech”

guaranteed by the First Amendment applied to “commercial speech.” See United States v. Caputo, 517 F.3d 935, 938 (7th Cir. 2008). Four years later, Central Hudson announced a four-part test to

gauge the validity of commercial-speech regulations: (1) does the challenged law regulate speech,

does the proposed speech concern lawful activity and is it non-misleading? (2) is the governmental

interest substantial? (3) does the regulation directly advance the governmental interest? and (4) is

the regulation more extensive than necessary to serve that interest? See 447 U.S. at 566. Gauged

by this test, the law must fall. 

First, this provision regulates speech, not conduct, as it prohibits providers from “stat[ing]”

the tax on the bill. And as the positions of the parties illustrate, their debate concerns what the

providers may say, not what they may do. The Commonwealth has no objection to the providers’

conduct (raising prices to account for the new tax), just its speech (saying why it has raised prices).

In seeking to list the tax on consumer invoices, the providers’ proposed speech also does not

concern unlawful activity. If, as Kentucky has acknowledged, it does not oppose the providers’

efforts to raise prices to account for the new tax, speech about the reasons for these price increases

does not advance an illegal transaction. Nor does Kentucky law contain a general ban on line-item

tax descriptions that the providers’ invoices otherwise would violate. Indeed, the Commonwealth

in some instances requires line item tax descriptions, even when (as here) the tax is imposed on the

retailer. See, e.g., Ky. Rev. Stat. Ann. §§ 139.200, .210 (requiring a “gross receipts” tax “imposed

upon all retailers” to be “displayed separately from the sales price . . . on the sales receipt”). As for

Kentucky’s faint-hearted argument that the line item tax descriptions concern an unlawful activity

because the line items would violate the speech ban, that contention simply chases the

Commonwealth’s tail. The lawfulness of the activity does not turn on the existence of the speech

ban itself; otherwise, all commercial speech bans would all be constitutional. 

Nor is the speech “inherently misleading” such that it receives no First Amendment

protection. In re R.M.J., 455 U.S. 191, 203 (1982). The proposed speech is truthful and verifiable:
Nos. 07-5397/5424 BellSouth Telecomms. et al. v. Farris et al. Page 7

The Commonwealth in fact imposed a 1.3% tax on the gross revenues of providers; the providers

in fact increased prices to absorb the tax; and, so far as the record shows, the providers in fact intend

to send invoices that will accurately show the amount by which the new tax increases prices.

Kentucky nowhere argues that the providers’ speech is false. And truthfully telling

customers why a company has raised prices simply by listing a new tax on a bill, it seems to us, is

not the kind of false, inherently misleading speech that the First Amendment does not protect. Were

it otherwise, we doubt that the United States Congress, the Federal Communications Commission

or the Commonwealth would endorse line-item listings of taxes in one form or another. See 47

U.S.C. § 542(c)(3) (“Each cable operator may identify . . . as a separate line item on each regular

bill of each subscriber, . . . [t]he amount of any other fee, tax, assessment, or charge of any kind

imposed by any governmental authority on the transaction between the operator and the

subscriber.”); In re Truth-in-Billing & Billing Format (Truth-in-Billing I), 14 F.C.C.R. 7492, 7526

(1999) (“[W]e are concerned that precluding a breakdown of line item charges would facilitate

carriers’ ability to bury costs in lump figures.”), reconsideration granted in part on other grounds, 15 F.C.C.R. 6023 (2000); In re Truth-in-Billing and Billing Format (Truth-in-Billing II), 20

F.C.C.R. 6448, 6471 (2005) (Separate line-item listings of taxes “will discourage a carrier from

misleading consumers by recovering other operating costs as government mandated charges.”),

vacated on other grounds by Nat’l Ass’n of State Util. Consumer Advocates v. FCC, 457 F.3d 1238

(11th Cir. 2006), modified on denial of reh’g, 468 F.3d 1272 (11th Cir. 2006); Ky. Rev. Stat. Ann.

§§ 139.200–210. 

Second, while the Commonwealth has done little to justify this ban, we will accept solely

for the sake of argument that Kentucky’s interest in avoiding potential consumer confusion—here,

that consumers, rather than the providers, bear legal responsibility for the 1.3% tax—is substantial.

Third, the regulation does not directly advance the government’s interest in avoiding

consumer confusion over responsibility for paying the tax. By considering whether the

government’s goals and the regulation’s scope align or whether the regulation is riddled with

“exemptions and inconsistencies,” the directly advance prong seeks to ferret out whether a law

ostensibly premised on legitimate public policy objectives in truth serves those objectives. See

Rubin v. Coors Brewing Co., 514 U.S. 476, 488–89 (1995); see also Edenfield v. Fane, 507 U.S.

761, 771 (1993) (noting that, without this requirement, the government “could with ease restrict

commercial speech in the service of other objectives that could not themselves justify a burden on

commercial expression”). One problem with the government’s attempt to address consumer

confusion is that the Commonwealth allows providers to tell their customers anything about the tax,

no matter how confusing, in all settings save one: an invoice. A concern about consumer confusion,

however, presumably would apply to all communications between the providers and consumers

about the relationship between the tax and price increases—whether on the invoice, in

advertisements or on billing inserts.

In Coors, the Court held that a regulation banning beer labels from displaying alcohol

content violated the First Amendment for similar reasons, namely because the regulation banned

information about alcohol content on beer labels but not in advertisements. 514 U.S. at 488. Just

as “[t]he failure to prohibit the disclosure of alcohol content in advertising, which would seem to

constitute a more influential weapon in any strength war than labels, ma[de] no rational sense if the

Government’s true aim [wa]s to suppress strength wars,” id., the failure to ban providers from

distributing confusing information about the tax through flyers, separate mailings or advertisements,

which would seem to be more confusing than a single separate line item, makes little sense if the

Commonwealth truly aims to curb the distribution of confusing information to consumers, see also

Linmark Assocs., Inc. v. Twp. of Willingboro, 431 U.S. 85, 94–96 (1977). 
Nos. 07-5397/5424 BellSouth Telecomms. et al. v. Farris et al. Page 8

A similar problem flows from the Commonwealth’s decision to prohibit just one type of lineitem statement—those about this tax and no other. Coors again points the way. “While [the

regulation] bans the disclosure of alcohol content on beer labels, it allows the exact opposite in the

case of wines and spirits. . . . If combating strength wars were the goal, we would assume that

Congress would regulate disclosure of alcohol content for the strongest beverages as well as for the

weakest ones.” Coors, 514 U.S. at 488. So it is the case here: while the statute bans providers from

separately stating the tax on telecommunications bills, it allows those same separate statements on

other industries’ bills. See, e.g., Ky. Rev. Stat. Ann. § 139.210 (requiring sales tax to be separately

listed as a line item); id. § 139.380 (same for use tax); cf. id. § 143A.020 (natural gas); id. § 143.020

(coal processing). And some of these taxes, like the telecommunications tax, are likewise imposed

on the retailer, not the purchaser. See id. §§ 139.210, 143A.020, 143.020. The Commonwealth

offers no reason why telecommunications customers are any more likely to be confused by tax line

items on bills than are consumers of, say, natural gas, and we cannot think of a good reason on our

own. If the government’s goal is to avoid consumer confusion, this law does not directly advance

that interest. 

Fourth, the Commonwealth fares no better under the “reasonable fit” prong. Just as the

directly advance requirement generally guards against underinclusive laws (those that do too little),

the reasonable-fit requirement generally guards against overinclusive laws (those that do too much).

If that sounds like the government is playing on an uneven field, that is because it is: Before a

government may resort to suppressing speech to address a policy problem, it must show that

regulating conduct has not done the trick or that as a matter of common sense it could not do the

trick. “If the First Amendment means anything, it means that regulating speech must be a last—not

first—resort.” Thompson, 535 U.S. at 373; see also Pagan v. Frunchey, 492 F.3d 766, 770–71 (6th

Cir. 2007); Jobe v. City of Catlettsburg, 409 F.3d 261, 264 (6th Cir. 2005).

“Yet here it seems” that banning statements about the tax on the invoice was “the first

strategy the Government thought to try.” Thompson, 535 U.S. at 373. The government’s interest

in avoiding consumer confusion, as we have explained, arises from its fear that, if consumers see

a line item on their invoices reflecting the new tax, they will jump to the conclusion that the

Commonwealth has imposed the 1.3% tax directly on them, not on the providers. Even granting the

Commonwealth’s assumption that this was a potential problem, it retained a full arsenal of options

short of restricting speech to address the issue.

For one, why not first enforce existing state law on the point? The Kentucky Consumer

Protection Act already prohibits “[u]nfair, false, misleading, [and] deceptive acts or practices in the

conduct of any trade or commerce.” Ky. Rev. Stat. Ann. § 367.170. If Kentucky is right that the

providers’ invoices will mislead consumers, it has every right to use this law to stop the problem.

For another, why not rely on enforcement of federal regulations already on the books? One

regulation focuses on the Commonwealth’s precise interest: the risk of consumer confusion. It says

that “[t]elephone bills shall be clearly organized,” 47 C.F.R. § 64.2401(a), and that “[c]harges

contained on telephone bills must be accompanied by a brief, clear, non-misleading, plain language”

statement, id. § 64.2401(b). To the extent the Commonwealth worries that line items will confuse

consumers, it remains unclear why the Commonwealth is unwilling to rely on the FCC’s

enforcement of the requirement that the line items be “clear,” “non-misleading” and “plain.” The

FCC, indeed, has addressed this issue, concluding that “it is a misleading practice” for a

communications provider to imply that a charge is imposed by the government, when, in fact, the

company made a business decision “to recover [the cost] directly from consumers through a separate

line item charge.” See Truth-in-Billing II, 20 F.C.C.R. at 6461. At the same time, however, the FCC

has not banned line items altogether, noting that (1) they convey “useful information to the

consumer in better understanding the charges associated with their service,” (2) they permit

providers to let their customers know which costs originate with the carrier and which costs
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originate with elected officials and (3) they prevent providers from lumping all costs (and price

increases) together rather than identifying their constituent parts. See id. at 6459, 6471; see Truthin-Billing I, 14 F.C.C.R. at 7526.

For still another, why not require a disclaimer about the gross revenues tax any time a

provider chooses to mention the tax on a bill? In some settings where there is a meaningful risk of

confusion, we have held that “[a] disclaimer . . . would adequately address a state’s concern.”

Parker v. Ky. Bd. of Dentistry, 818 F.2d 504, 510 (6th Cir. 1987). 

If the Commonwealth wants something stronger than its own state law, the existing federal

regulations and the requirement of a disclaimer, why not add an award of costs and fees to litigants

who successfully challenge a misleading line item? “The difficulty with [Kentucky’s] argument is

that the State can serve [its] interest through means that would not violate [the providers’] First

Amendment rights, such as awarding costs and fees . . . [and] imposing on appellant the reasonable

expenses of responsible groups that represent the public interest . . . .” Pac. Gas & Elec. Co. v. Pub.

Utils. Comm’n, 475 U.S. 1, 19 (1986). After all, “if there are numerous and obvious lessburdensome alternatives to the restriction on commercial speech, that is certainly a relevant

consideration in determining whether the ‘fit’ between ends and means is reasonable.” City of

Cincinnati v. Discovery Network, Inc., 507 U.S. 410, 417 n.13 (1993).

And if all of this still leaves the Commonwealth cold, why not ensure that its fear of

consumer confusion is real before suppressing this type of speech? Keep in mind that the new law

does not prohibit the providers from raising prices to account for the new tax, and no one claims that

the providers wish to switch the legal incidence of taxation to consumers. While some consumers

may still worry whether Kentucky has placed the incidence of taxation on them, despite the statute’s

clear indication to the contrary, the Commonwealth offers no evidence or studies to suggest that is

so, and it is “hardly . . . obvious” as a matter of common sense. Pagan, 498 F.3d at 775; cf. Jobe, 409 F.3d at 264. In view of “the complete absence of any evidence of deception,” Ibanez v. Fla.

Dept. of Bus. & Prof’l Regulation, 512 U.S. 136, 145 (1994), and in view of the absence of any

obvious source for the problem, the Commonwealth’s “concern about the possibility of deception

in hypothetical cases is not sufficient to rebut the constitutional presumption favoring disclosure

over concealment,” id. (internal quotation marks omitted).

It seems just as likely, moreover, that consumer curiosity will run in another direction: Why

have prices been raised, and do the providers have authority to raise them? The providers’ invoices

of course seek to answer both questions. On this record, there is considerable reason to doubt

whether the Commonwealth’s speech ban corrects a problem of its own making or indeed was meant

to respond to another problem—political accountability for the tax. Because the Commonwealth

has not demonstrated that it “carefully calculated the costs and benefits associated with the burden

on speech imposed by its prohibition,” Discovery Network, 507 U.S. at 417 (internal quotation

marks omitted), the provision amounts to precisely the kind of blunderbuss legislation that cannot

satisfy the First Amendment’s preference for resolving policy problems by regulating conduct rather

than speech. 

The Commonwealth responds that, because the statute “does nothing more than establish the

legal incidence of the tax . . . and specify how and by whom it is to be collected and remitted,” the

Central Hudson framework should not apply in the first place. Br. at 21. If that were all the statute

did, we would not be here. But the provision does more than that. It prevents providers from

describing the tax in the one setting where the consumer is guaranteed to look: the invoice. Indeed,

the breadth of the provision would seem to prevent a provider even from stating the tax on an

invoice when the listing is designed to demonstrate not that it is raising prices but that it is keeping

them constant, even as its competitors raise prices to account for the new tax. Even the

Commonwealth’s position in this case shows the communicative nature of the bill: A line item
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cannot simultaneously be non-communicative, as Kentucky argues, and yet pose the risk of

communicating a misleading message. See JA 124; Lorillard Tobacco Co. v. Reilly, 533 U.S. 525,

567 (2001).

Nor does it make a difference that other channels of communication remain open to the

providers. Because this is a content-based regulation of speech, the Court’s softened restrictions for

time, place and manner regulations do not apply. See Discovery Network, 507 U.S. at 428–30;

Consol. Edison Co. of N.Y., Inc. v. Pub. Serv. Comm’n, 447 U.S. 530, 541 n.10 (1980). 

B. 

That leaves the question whether the direct-collection clause, see Ky. Rev. Stat. Ann.

§ 136.616(3), violates the First Amendment and, if not, whether we may sever it from the no-statingthe-tax clause. It remains unclear, as an initial matter, precisely what the direct-collection clause

does. The Commonwealth acknowledges that the clause does not prevent providers from raising

prices to recover the costs of the new tax, and no one suggests that the providers intend to avoid

paying the tax, whether this clause remains on the books or not. What purpose the clause still serves

under these circumstances remains to be seen. 

What does seem to be clear, however, is that the terms of the clause refer to non-expressive

conduct, not speech, and as a result lie beyond the protection of the First Amendment. Because

Kentucky encourages courts to sever invalid provisions from valid legislation “unless the remaining

parts are so essentially and inseparably connected with and dependent upon the unconstitutional part

that it is apparent that the General Assembly would not have enacted the remaining parts without

the unconstitutional part, or unless the remaining parts, standing alone, are incomplete and incapable

of being executed in accordance with the intent of the General Assembly,” Ky. Rev. Stat. Ann.

§ 446.090, we sever the offending speech restriction from the rest of the statute, cf. Ayotte v.

Planned Parenthood of N. New Eng., 546 U.S. 320, 330 (2006). Accordingly, to the extent the

district court meant to strike all, rather than just part, of the provision, that was error.

Not so, say the providers. Because “[a]ny attempt to ‘state’ the tax on a customer’s bill

constitutes ‘collect[ing] the tax directly’ from the customer,” we must throw out the conduct-related

clause with the speech-related clause. Br. at 27. We grant that one way a provider could collect the

tax directly from a customer is through a separate statement on the bill. But that does not mean that

the separate-statement clause covers the same conduct as the direct-collection clause. Indeed, that

the legislature elected to use both weighs against the providers’ interpretation. See Duncan v.

Walker, 533 U.S. 167, 174 (2001). Just as one could directly collect the tax without separately

stating it (to use the providers’ example, “through direct, in-person communication,” Br. at 27

(internal quotation marks omitted)), one could separately state the tax without collecting it directly

(for example by listing the tax separately as an expense but rolling that expense into the overall rate).

The two clauses, on this reading, may still bar two separate things: The first bars direct collection

of the tax (regardless of how it is stated), and the second bars separately stating the tax (regardless

of how it is collected). Regulating only conduct, the direct-collection prong is not unconstitutional

on its face, which is to say in all or virtually all of its applications. See Wash. State Grange v. Wash.

State Republican Party, 128 S. Ct. 1184, 1190 (2008).

That leaves one loose end—the validity of the penalty provision. See Ky. Rev. Stat. Ann.

§ 136.990(11). So long as the direct-collection prong may stay on the books, so may the penalty

provision, to which it applies. Yet the penalty provision of course may not be applied to enforce the

invalidated no-stating-the-tax provision.
Nos. 07-5397/5424 BellSouth Telecomms. et al. v. Farris et al. Page 11

IV.

For these reasons, we affirm in part and reverse in part and remand the case to the lower

court for further proceedings.
Nos. 07-5397/5424 BellSouth Telecomms. et al. v. Farris et al. Page 12

_______________________________________________

CONCURRING IN PART, DISSENTING IN PART

_______________________________________________

MARTHA CRAIG DAUGHTREY, Circuit Judge, concurring in part and dissenting in part.

Section 136.616 of the Kentucky Revised Statutes imposes a 1.3% tax on the gross revenues of

providers of communications services within the Commonwealth. See K.R.S. §§ 136.616(1) and

(2). The validity of that tax is not at issue in this litigation. Subsection (3) of the legislation

mandates, however, that “[t]he provider shall not collect the tax directly from the purchaser or

separately state the tax on the bill to the purchaser.” It is this prohibition on the communication of

certain information that has engendered this legal dispute between BellSouth and the Kentucky

officials charged with the administration of the statute.

The majority adroitly resolves many of the thorny subissues involved in this appeal, and I

concur in much of that exposition. Specifically, I agree that this litigation is not circumscribed by

the Tax Injunction Act, 28 U.S.C. § 1341. Furthermore, I concur in the conclusion of the majority

that the provision of the Kentucky statute that bars the actual collection of the tax at issue from

consumers regulates conduct, not speech, and thus withstands constitutional scrutiny. Because,

however, I would conclude that the speech that is restricted by the statute is both commercial in

nature and inherently misleading, I respectfully dissent from the majority’s invalidation of the

legislative directive that a regulated industry not include the gross receipts tax as a line item on

customers’ bills.

Commercial Nature of the Speech

Although the United States Supreme Court has recognized a “commonsense” distinction

between commercial speech “and other varieties of speech,” see Cent. Hudson Gas & Elec. Corp.

v. Pub. Serv. Comm’n of NY, 447 U.S. 557, 562 (1980) (quoting Ohralik v. OH State Bar Ass’n, 436

U.S. 447, 455-56 (1978)), this case exemplifies the lack of clarity in such a distinction. Even in

Central Hudson, the Court first equated commercial speech with “expression related solely to the

economic interests of the speaker and its audience.” Id. at 561. Immediately after that seemingly

straightforward description, however, the Court continued by explaining that “[c]ommercial

expression not only serves the economic interest of the speaker, but also assists consumers and

furthers the societal interest in the fullest possible dissemination of information.” Id. at 561-62.

Thus, according to the Court’s own words, commercial speech does not involve solely the economic

interests of the speaker; certain societal benefits also spring from the sharing of ideas and

information that necessarily accompanies any such communication.

Prior to its decision in Central Hudson, the Supreme Court embraced an even more

restrictive view of commercial speech, equating it simply with “speech proposing a commercial

transaction.” Ohralik, 436 U.S. at 455-56; see also Bolger v. Youngs Drug Prods. Corp., 463 U.S.

60, 64 (1983). It is this line of cases upon which BellSouth now appears to rely, arguing that

placement of the tax line-item on a consumer’s bill cannot be considered commercial speech because

the communication also serves the additional purpose of informing the consumer exactly who is

responsible for the increase in costs passed on to the end-user.

I find BellSouth’s argument in this regard unhelpful in light of Central Hudson’s refinement

of the Court’s earlier commercial speech analyses. Indeed, even in instances involving what is

typically considered classic commercial speech, a potentially broader underlying concern could be

uncovered such that the speech might otherwise merit the stricter protections now reserved for noncommercial communication. For example, a newspaper advertisement of a sale on gas-guzzling

Hummers could be construed not as a strategy to sell motor vehicles, but as a political statement that

the country need not concern itself with the two-headed monster of environmental degradation and
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destructive self-aggrandizement. Likewise, a circular announcing drastic pre-fall price cuts on

camouflage outerwear might not be seen as simply an effort to boost lagging clothing sales in a

crippled economy, but rather as the outward expression of support for the sport of hunting or even

a subtle method of demonstrating contempt for the role of government in the regulation of firearms.

Despite the political accouterments that might thus be attached to the plaintiff’s proposed

communications, at its core BellSouth’s desire to include a line-item on its invoices indicating the

existence of a required 1.3% tax on the corporation’s gross receipts is simply a commercially-savvy

gambit to deflect from itself ultimate responsibility for a price increase that could encourage

consumers to seek telecommunications service from another company. The speech thus has a

predominant commercial value, with any political or other protected aspect being not only

speculative but tangential and de minimis. I thus conclude that the speech at issue in this case is

commercial in nature and that any restrictions on it must satisfy only the less-stringent analytical test

of Central Hudson set forth in the majority opinion. 

Misleading Nature of the Speech

As explained by the majority, the threshold inquiry under the Central Hudson analysis seeks

simply to ensure that “the communication is neither misleading nor related to unlawful activity.”

Cent. Hudson, 447 U.S. at 564. Indeed, “there can be no constitutional objection to the suppression

of commercial messages that do not accurately inform the public about lawful activity.” Id. at 563.

Consequently, “[t]he government may ban forms of communication more likely to deceive the

public than to inform it.” Id. (citing Friedman v. Rogers, 440 U.S. 1, 13, 15-16 (1979), and Ohralik, 436 U.S. at 464-65).

By including a line-item tax on a consumer’s invoice, BellSouth clearly gives the impression

that the consumer is responsible for the additional tax imposed by the government through

legislation. In fact, however, K.R.S. § 136.616(3) explicitly provides that the gross revenue tax

imposed by the legislation is not the responsibility of the consumer but, rather, must be handled by

the telecommunications company as an additional cost of doing business within the Commonwealth.

I find it difficult to imagine more misleading “speech” than a list of charges referencing a monthly

fee and various taxes, when one of the listed taxes is not to be assessed against the customer at all

but is more akin to the fixed costs of a corporate entity, like building rental charges, satellite

purchases, or other business overhead costs.

Clearly, line-item charges on a customers bill are not inherently misleading; to the contrary,

such itemizations most often serve to explain the various components of a consumer’s cost or,

traditionally, are assessed “on the transaction between the operator and the subscriber.” See, e.g., 47 U.S.C. § 542(c)(3). Nevertheless, to insinuate that a certain charge is somehow dependent upon

the consumer’s usage of a particular telecommunication service when it is, in fact, an assessment

only upon the gross revenues of the company providing the service is nothing if not misleading.

Were BellSouth willing to place line items on customers’ invoices listing the consumers’ shares of

payments for executive salaries, golden parachutes, lobbying expenses, business travel, corporate

parties, advertising, and every other component of the corporation’s costs of doing business, the line

item defining the portion of the bill necessary to recoup payment of a gross receipts tax would not

appear as deceptive. Its failure to do so, however, merely highlights the misleading nature of

emphasizing that single fixed business-operations expense. 

By banning the inclusion of a line item on consumers’ invoices listing that portion of each

individual bill that represents a portion of a gross-receipts tax imposed upon BellSouth, the

Kentucky legislature has acted to protect Commonwealth citizens from misleading, deceptive

information. Because cherished First Amendment principles do not protect false or misleading
Nos. 07-5397/5424 BellSouth Telecomms. et al. v. Farris et al. Page 14

commercial speech, I dissent from the majority’s analysis of this issue and would reverse the district

court’s invalidation of the challenged ban that seeks to prevent just such deception.