Opinion ID: 1966700
Heading Depth: 1
Heading Rank: 7

Heading: aliant and systems

Text: Aliant is a Delaware corporation domesticated under the laws of Nebraska with its principal offices and place of business in Lincoln, Nebraska. During the relevant time period (February 1, 1995, through March 31, 1998), Aliant operated as a diversified communications company. Aliant also purchased telephones and resold them to its residential and business customers. It provided and installed voice mail and custom calling features such as call waiting and caller identification remotely from its central office. If requested by a customer, Aliant also installed materials such as inside wiring. Systems is a Nebraska corporation with its principal offices and place of business also in Lincoln. During the relevant time period (July 1, 1995, through June 30, 1998), Systems provided intrastate message toll service through its division known as Lincoln Telephone Long Distance and later as Aliant Long Distance, provided sales and leases of telephone systems and other equipment, provided installation and training for the operation of telephone systems and other equipment, provided service agreements related to telephone systems and other equipment, and provided telephone answering service. Systems also purchased premanufactured telephone systems and resold them to customers. Among the systems it sold were KSU, PBX, voice mail, call monitoring, facsimile machines, and intercoms. The Department conducted an audit of Aliant for compliance with the sales and use tax laws of Nebraska for the period of February 1, 1995, through March 31, 1998. The Department issued a notice of deficiency determination to Aliant on or about February 16, 1999. On March 11, Aliant timely filed a petition for redetermination of such sales and use tax liability with the Department. Aliant requested a redetermination of the audit findings, including, but not limited to, the application of sales tax to gross receipts that Aliant derived from installations, moves, equipment changes, and additions. The Department also conducted an audit of Systems for compliance with the sales and use tax laws of Nebraska for the period July 1, 1995, through June 30, 1998. The Department issued a notice of deficiency determination on or about November 30, 1999. Systems made payment of amounts set forth in the notice. On or about January 26, 2000, Systems filed with the Department a claim for overpayment of sales and use tax, requesting a refund of amounts taxed, interest, and penalties paid as a result of the audit of Systems, and the subsequent deficiency assessment. The request for refund included sales tax on gross receipts that Systems derived from labor involved in the installation of telephone systems, equipment, and wiring. The Department assessed sales tax on installation labor services provided by Aliant and Systems that were performed with regard to customer-owned facilities on the customer side of the D mark. As a result of a regulatory directive, these facilities were not a part of the public utility operations of either Aliant or Systems during the audit period. After consolidation of Aliant's petition for redetermination and Systems' claim for overpayment, on May 16 and 17, 2000, the Department conducted a hearing. On July 20, the Commissioner issued her order sustaining the deficiency determination against Aliant and denying Systems' claim for overpayment of sales and use tax. Aliant and Systems then appealed to the district court for Lancaster County. The district court held that the weight of the evidence supports Aliant and Systems' argument that gross receipts from the labor services at issue do not relate to public utility functions, nor do such receipts relate to the connecting or installing of services. Thus, the trial court set aside the order of the Department and the Commissioner and stated that Aliant and Systems were not subject to sales tax, interest, or penalties relating to the gross receipts from the installation charges on the customer side of the D mark. The Department has now appealed to this court. Again, the disputed items relate only to the various installation services performed by Aliant and Systems on the customer side of the D mark, and the sales tax on those charges are $136,095 and $98,307, respectively.