Present: Kinser, C.J., Lemons, Goodwyn, Millette, and Mims, 

JJ., and Russell and Lacy, S.JJ.

LEVEL 3 COMMUNICATIONS, LLC

 OPINION BY

v. Record Nos. 102043, JUSTICE S. BERNARD GOODWYN

 102044, 102045, and 102046 June 9, 2011 

 

STATE CORPORATION COMMISSION, ET AL.

FROM THE STATE CORPORATION COMMISSION

In this appeal, we consider whether the State Corporation 

Commission (SCC) has the authority to deduct a 

telecommunications company’s Internet-related revenues when 

determining the gross receipts it certifies to the Virginia 

Department of Taxation (Department) pursuant to Code § 58.1-

400.1.

Background

Level 3 Communications, LLC (Level 3) filed several 

applications with the SCC for “review and correction of 

determination of gross receipts certified to the Department”

(applications) regarding calendar year 2002 and several years 

thereafter. The applications sought correction of the SCC’s 

certifications of Level 3’s gross receipts for those years

because the certified amounts included Internet-related 

revenues. The SCC concluded it did not have the authority to 

exclude such revenues from Level 3’s certified gross receipts,

and dismissed Level 3’s applications as they related to the 
2

inclusion of Internet-related revenues in Level 3’s gross 

receipts.1 Level 3 appeals.

Level 3 is a telecommunications company with a network in 

Virginia providing wholesale Internet services to major Internet 

service providers. This appeal consolidates four proceedings 

initiated by Level 3 in applications filed, pursuant to Code 

§ 58.1-2674.1, to correct the amount of its gross receipts 

certified by the SCC to the Department. In each of its

applications, Level 3 asserted that the federal Internet Tax 

Freedom Act (ITFA), Pub. L. No. 105-277, §§ 1100 et seq., 112 

Stat. 2681 (1998), reproduced at note to 47 U.S.C. § 151,2

 1 Level 3 and the SCC reached a settlement with respect to 

correcting the certifications for each year to reflect 

recalculation of the deductions from gross receipts provided by 

Code § 58.1-400.1(D)(2)(i)-(iii). The recalculated deductions 

reduced the amounts of gross receipts certified to the 

Department for all four years. The settlement did not extend to 

gross receipts related to Internet services.

2 Section 1101 of the ITFA states: 

(a) Moratorium.– No state or political subdivision thereof 

shall impose any of the following taxes during the period 

beginning October 1, 1998, and ending 3 years after the date of 

the enactment of this Act–

(1) taxes on Internet access, unless such tax was 

generally imposed and actually enforced prior to 

October 1, 1998; and 

(2) multiple or discriminatory taxes on electronic 

commerce.

Pub. L. No. 105-277, 112 Stat. 2681-719 (1998). Congress 

has extended the sunset provision on the ITFA to include all 

tax years relevant to this appeal. See Internet Tax 

Nondiscrimination Act, Pub. L. No. 107-75, 115 Stat. 703 

(2001) (extending ITFA to November 1, 2003), Internet Tax 

Nondiscrimination Act, Pub. L. No. 108-435, 118 Stat. 2615 

(2004) (extending ITFA to November 1, 2007), Internet Tax 
3

proscribes state taxation of its Internet-related revenues. As 

a result, Level 3 argued that the SCC must exclude Internetrelated revenues from its gross receipts certified to the 

Department for purposes of the Department computing the 

company’s potential minimum tax liability.

The SCC assigned Level 3’s applications to a hearing 

examiner. The SCC Staff (Staff) filed a motion to dismiss in 

part, contending that the SCC did not have jurisdiction to 

determine the issues raised in Level 3’s applications. 

The Department filed a motion to join the Staff’s motion to

dismiss Level 3’s applications. The Department asserted that 

the SCC is part of the “remedial scheme” envisioned by the 

applicable law and is an “indispensable party” with exclusive 

authority to calculate gross receipts. The Department also 

sought dismissal, with prejudice, claiming the ITFA does not 

require the exclusion of Internet-related revenues from gross 

receipts, and that the Department has no “independent authority 

to audit or modify the ‘gross receipts’ amount certified to it”

by the SCC.

After hearing oral argument, the hearing examiner agreed to 

suspend the proceeding to allow Level 3 to pursue a ruling by 

the Department regarding whether revenue generated by providing 

 

Freedom Act Amendments Act of 2007, Pub. L. No. 110-108, 121 

Stat. 1024 (2007) (extending ITFA to November 1, 2014).
4

Internet access should be included in gross receipts subject to 

a minimum tax. However, the Department declined to issue a 

ruling prior to “the conclusion of the case pending with the SCC

regarding calendar years 2002 [tax years 2003] and thereafter.”

After the Department declined to issue a ruling, on 

September 3, 2008 the hearing examiner filed a report 

determining that the SCC has no authority to exclude Internetrelated revenues from gross receipts it is statutorily obligated 

to report to the Department.

The SCC issued an opinion after considering the hearing 

examiner’s recommendation, noting that its relevant role, as 

defined by statute, is limited to certifying the 

telecommunications company’s gross receipts to the Department. 

The SCC concluded that because the relevant statutes define 

gross receipts and do not empower the SCC to establish 

deductions from gross receipts not enumerated in the statutes, 

the ITFA does not reach the SCC’s function under Virginia law,

and the ITFA does not impact the SCC’s duties because the SCC

makes no determination of tax liability and imposes no tax. 

The SCC entered a final order dismissing Level 3’s 

applications to the extent it sought exclusion of Internetrelated revenues from the SCC gross receipts certifications sent 

to the Department. The SCC specifically stated that it did not 

reach any issue regarding the Department’s exercise of its power 
5

to collect taxes or remedies available to a taxpayer that seeks 

to challenge the levy of such taxes. 

Analysis

Level 3 argues that the SCC incorrectly determined that it 

does not have authority to determine whether its Internetrelated revenues should be excluded from the gross receipts 

certified to the Department. Specifically, Level 3 argues that 

the SCC misconstrued the scope of its duty under Virginia law 

and, as a result, incorrectly determined that the ITFA does not 

reach the SCC’s function. 

The SCC responds that its “duty under Virginia law [is] to 

collect information on gross receipts; to determine that the 

deductions provided by Virginia law have been properly taken; 

and to provide that information to the Department of Taxation.” 

Therefore, because the ITFA limits state and local taxation, and 

taxation is outside the scope of the SCC’s duty, the SCC argues 

that the ITFA does not address the SCC’s duty. We agree.

Because the issues in this appeal involve strictly 

questions of law, this Court reviews de novo whether the SCC 

properly construed the applicable statutes. Piedmont Envtl. 

Council v. Virginia Elec. & Power Co., 278 Va. 553, 563, 684 

S.E.2d 805, 810 (2009). Under Virginia tax law, 

telecommunications companies are subject to either a corporate 

income tax on income from Virginia sources or to a minimum tax 
6

on gross receipts. Code §§ 58.1-400, -400.1. A 

telecommunications company pays the minimum tax only when its 

regular corporate income tax liability is less than the minimum 

tax. Code § 58.1-400.1(A). The minimum tax is imposed at a 

rate of 0.5% of the telecommunications company’s gross receipts. 

Id. The Department determines whether a telecommunications 

company is subject to the minimum tax. See Virginia Cellular 

LLC v. Virginia Dep’t of Taxation, 276 Va. 486, 489, 666 S.E.2d 

374, 375 (2008).

Code § 58.1-400.1 assigns the SCC the limited function of 

certifying telecommunications companies’ gross receipts to the 

Department for the purpose of determining the minimum tax. 

Pursuant to Code § 58.1-2628(A), telecommunications companies 

file a statement of their gross receipts with the SCC. The SCC 

then certifies to the Department the names, addresses and gross 

receipts for each telecommunications company. Code § 58.1-

400.1(C). 

The General Assembly has defined “gross receipts” as “all 

revenue from business done within the Commonwealth, including 

the proportionate part of interstate revenue attributable to the 

Commonwealth if such inclusion will result in annual gross 

receipts exceeding $5 million.” Code § 58.1-400.1(D). Code 

§ 58.1-400.1 specifies what the SCC must include in, and what 

the SCC may exclude from, the certified gross receipts. Code 
7

§ 58.1-400.1 enumerates two specific deductions, but it does not 

authorize the SCC to deduct Internet-related revenues from gross 

receipts. After allowing the two specified deductions, if 

applicable, the SCC is required by statute to certify the 

remaining revenue amount as the company’s gross receipts. The 

SCC has no other relevant function aside from providing copies 

of the certifications to the telecommunications companies.

If a telecommunications company disagrees with the SCC’s 

certification of gross receipts, the company may apply to the 

SCC for review and correction of the certification within 18

months of the date of the certification to the Department. Code 

§ 58.1-2674.1. If the SCC finds that the certification is 

incorrect, it shall correct the certification sent to the 

Department. Id. Level 3 timely filed its applications with the 

SCC to contest certifications for the relevant tax years. 

Level 3 maintains that the gross receipts the SCC certified 

to the Department are incorrect because the SCC erroneously 

included Level 3’s Internet-related revenues in its gross 

receipts. Level 3 argues that although the calculation and 

imposition of tax is the Department’s responsibility, the amount 

of minimum tax liability depends entirely on the amount of gross 

receipts certified by the SCC. Level 3 contends that the ITFA 

reaches the SCC’s function and the SCC must consider its impact 

because the SCC’s actions in performing the certification have a 
8

proximate, direct and substantive impact on the taxability of 

reported gross receipts.

“The Constitution of Virginia and statutes enacted by the 

General Assembly thereunder give the [SCC] broad, general and 

extensive powers in the control and regulation of a public 

service corporation.” Northern Virginia Elec. Coop. v. Virginia 

Elec. & Power Co., 265 Va. 363, 368, 576 S.E.2d 741, 743 (2003). 

However, “[t]he SCC’s regulatory jurisdiction is not plenary.” 

Potomac Elec. Power Co. v. State Corp. Comm’n, 221 Va. 632, 636, 

272 S.E.2d 214, 216 (1980). “The [SCC] is the creation of the 

Constitution and has no inherent power. All of its jurisdiction 

is [either] conferred . . . by the Constitution or is derived 

from statutes which do not contravene the Constitution.” City 

of Richmond v. Chesapeake & Potomac Telephone Co., 127 Va. 612, 

619, 105 S.E. 127, 129 (1920). The SCC must adhere to statutory 

language and cannot allow a deduction not recognized in the 

Code. Commonwealth v. Washington Gas Light Co., 221 Va. 315, 

323, 269 S.E.2d 820, 825 (1980) (“Had the General Assembly 

intended to grant such authority, it could have done so 

expressly.”).

The SCC is bound by the plain meaning of Code § 58.1-400.1. 

See VYVX of Va., Inc. v. Cassell, 258 Va. 276, 292, 519 S.E.2d 

124, 132 (1999). “ ‘Where the legislature has used words of a 

plain and definite import the courts cannot put upon them a 
9

construction which amounts to holding the legislature did not 

mean what it has actually expressed.’ ” Halifax Corp. v. First 

Union Nat’l Bank, 262 Va. 91, 100, 546 S.E.2d 696, 702 (2001)

(quoting Watkins v. Hall, 161 Va. 924, 930, 172 S.E. 445, 447 

(1934)); see also Arogas, Inc. v. Frederick Cnty. Bd. of Zoning 

Appeals, 280 Va. 221, 228, 698 S.E.2d 908, 912 (2010).

The General Assembly has expressly indicated what is to be 

included in a telecommunications company’s gross receipts 

certified to the Department, and the SCC’s function in this 

regard is limited to providing certifications to the Department 

and to the telecommunications companies. The SCC cannot rewrite 

tax statutes; the SCC must administer the tax statutes as 

enacted. See Washington Gas Light Co., 221 Va. at 323, 269 

S.E.2d at 825 (finding SCC not authorized to exempt particular 

receipts from gross receipts taxes). The SCC does not have the 

authority to create additional categories of deductions for 

Internet-related revenues. 

The ITFA prevents states from imposing a tax on Internet 

access revenues or applying multiple or discriminatory taxes on 

electronic commerce. The General Assembly has assigned the 

responsibility for imposing the relevant taxes to the 

Department, not the SCC. The SCC does not impose or apply any 

tax liability under the income tax or minimum tax structures for 

telecommunications companies. Because the SCC does not impose 
10

any tax, the ITFA does not reach the SCC’s function under 

Virginia law. 

As a result, the SCC properly declined to allow a deduction 

for Internet-related revenues that the General Assembly did not 

provide in the gross receipts statute. To allow for such a 

deduction would have required the SCC to exceed its statutory 

authority.3

Accordingly, for the reasons stated, we will affirm the 

SCC’s order.

Affirmed.

 3 Level 3 also assigns error to the fact that the SCC’s 

rulings inappropriately deny Level 3 any remedy with respect to 

its applications to exclude Internet-related revenues. Level 3 

argues that if this Court accepts the SCC’s rulings then Level 3 

will have no state agency forum from which to obtain a 

determination of its liability for a tax imposed by Virginia 

law. Level 3’s argument ignores the statutory remedies provided 

by Code § 58.1-1821 (permitting a taxpayer assessed with tax 

administered by the Department to apply for relief to the 

Commissioner within 90 days of the assessment) and Code § 58.1-

1825 (allowing any taxpayer aggrieved with a tax administered by 

the Department to apply to a circuit court for relief). Second, 

assuming arguendo that Level 3 is correct and the statutory 

scheme does not provide Level 3 a remedy, this Court cannot 

rewrite the Code to provide a remedy. See Virginia Cellular, 

276 Va. at 490, 666 S.E.2d at 376 (“It is the Court’s duty to 

construe the law as written in the Virginia Code.”).