Opinion ID: 2622745
Heading Depth: 1
Heading Rank: 6

Heading: Wyoming's Imposition Statute

Text: [¶ 15] The question before us is whether an access charge for connection to the local network for the ability to make or receive an interstate call is subject to Wyoming sales and use tax. The imposition statute levies an excise tax on [t]he sales price paid for intrastate telephone and telegraph services including the consideration paid for the rental or leasing of any equipment or services incidental thereto[.] Wyo. Stat. Ann. § 39-15-103(a)(i)(C) (LexisNexis 2001). While this statutory language clearly indicates that intrastate telephone services are to be taxed, it is not clear what constitutes an intrastate telephone service. Intrastate telephone services is not further defined in the statute. [¶ 16] The Department argues that Qwest is providing a telephone serviceaccess to its customers in Wyoming. It reasons that because Qwest provides all of the switching within Wyoming and because all of the equipment used is located completely within Wyoming, that the EUCL charge should be subject to Wyoming sales and use tax. Furthermore, the Department claims that access to other networks is incidental to intrastate telephone service because Qwest's Wyoming telephone customers automatically receive interstate access along with their local or intrastate service. On the other hand, Qwest claims that the EUCL charge is associated with interstate long distance and, therefore, cannot be compensation for an intrastate telephone service. While both interpretations of the statute appear plausible, we must construe the statute favorably to Qwest. See, e.g., Amoco Production Co., ¶ 18 (where statute is susceptible to more than one reasonable interpretation, it must be construed against government, and in taxpayer's favor). [¶ 17] By including the word intrastate to modify telephone services, the legislature expressed intent to limit the scope of the imposition statute. Use of the specific term intrastate signals that a distinction is to be made between intrastate telephone services and other services, i.e., interstate telephone services. Intrastate is defined as [s]ervices, traffic or facilities that originate and terminate within the same state. Therefore, if related to telephone, falling under the jurisdiction of that state's telephone regulatory procedures. Newton's Telecom Dictionary 448 (21st ed.2005). It is significant that the EUCL charge is not regulated within Wyoming. The FCC retains jurisdiction over the EUCL charge and sets a cap on the EUCL rate. [8] Since the charges are ordered by the FCC as a means of making all customers share in the costs of interstate service, we conclude that the income is generated from interstate commerce. [9] South Cent. Bell Telephone v. Celauro, 735 S.W.2d 228, 231 (Tenn.1987). [¶ 18] The Department does not dispute that the EUCL charge is federal for regulatory purposes, but claims that Qwest's role in switching interstate calls occurs within Wyoming, thus meeting the definition of an intrastate service for tax purposes. The Department's rules define intrastate telephone service as the intrastate two-way transmission of sound, data, or other forms of information by any means from one point to another within this state. Rules, Wyoming Department of Revenue (2000), ch. 2, § 3(k). The Department argues that the switching of interstate calls involves a two-way transmission within Wyoming, i.e., the switch from the customer's home to the central office or vice versa. [¶ 19] Qwest argues that the Department's definition does not support its position because an interstate call does not occur entirely within the state of Wyoming. Qwest urges us to look beyond the switching that takes place at its central office and to consider the call as being the transmission. The call should be viewed from its starting point and ending point, not solely on how it might be routed within Wyoming's borders. Qwest reasons that if the purpose of interstate access service is to allow one end of a call to originate within one state and to terminate in a different state, then the service should not be considered an intrastate service. [¶ 20] The Department's definition of intrastate telephone service supports Qwest's view. Two-way traffic is defined as [a] type of circuit operation that provides for both originating and terminating traffic. Newton's Telecom Dictionary 876 (21st ed.2005). The access service at issue fails this definition because, standing alone, it is not a two-way transmission. The access service provides a two-way transmission only when it is connected to the interstate network at which point the connection is not from one point to another within Wyoming. [¶ 21] We agree with Qwest that we should look at the origination and termination point of the call to determine whether it comprises an intrastate telephone service. The common understanding of intrastate telephone service would not include interstate long distance calls. A customer placing a call to Montana or receiving a call from Florida probably believes she is a party to an interstate long distance call. At that point, she probably does not believe that she is receiving intrastate telephone service. The distinction between an intrastate and interstate long distance call was recognized in Union Tel. Co. v. Qwest Corp., No. 02-CV-209-D, 2004 U.S. Dist. LEXIS 28417, at  (D.Wyo. May 11, 2004). In that case, the court identified an intrastate long distance call as one that originates and terminates in different local service areas, but within the borders of a single state. Intrastate long distance service provided by wireline service is subject to the jurisdiction of and regulations by state public utility commissions, and is generally offered to subscribers pursuant to tariffs filed with and approved by the state commissions. Id. In contrast, [a]n interstate long distance call is one that originates and terminates in different states. Interstate long distance service is subject to the jurisdiction of and regulation by the FCC under the Communications Act of 1934. See 47 U.S.C. § 151 et seq. Id. Under a reasonable and common sense interpretation of the statute and the Department's definitions, the EUCL charge does not represent an intrastate telephone service. Giving effect to the legislature's choice to tax only intrastate telephone services means that a charge for connecting customers to interstate long distance calls is not subject to the tax. [¶ 22] Our focus upon the two-way transmission of sound is similar to the analysis used by the court in GTE Sprint. The issue before the Michigan Appellate Court was whether per-minute access fees charged by local exchange carriers (LEC's) to interexchange carriers were subject to a use tax imposed on intrastate telephone, telegraph, leased wire and other similar communications, including local telephone exchange and long distance telephone service which both originates and terminates in Michigan.... GTE Sprint Com., 445 N.W.2d at 477. The Michigan Appellate Court upheld the Tax Tribunal's conclusion that access services are not in and of themselves communications, but merely a part of the communication. Id. at 478. The court concluded that the Michigan use tax required a complete, end-to-end communication to constitute a taxable communication. Id. at 480. See also In the Matter of Petition for Emergency Relief and Declaratory Ruling Filed by the BellSouth Corporation, No. FCC 92-18, 7 FCC Rcd. 1619, 1992 FCC LEXIS 2915 (Jan. 16, 1992) (rejecting state's contention that the local access portion of interstate voicemail service could be severed from interexchange company's service, finding instead that the end-to-end call produced the two-way transmission path). [¶ 23] The Michigan court's focus on the scope of intrastate telephone ... communications closely resembles our inquiry into the scope of the term intrastate two-way transmission under the Department's regulation. See 47 U.S.C. § 153(22) (equating the terms interstate communication and interstate transmission). Like the Michigan court, we find that the tax imposition statute requires a complete, end-to-end communication. Thus, the access service for which the EUCL charge compensates does not constitute an intrastate two-way transmission of sound. [¶ 24] We recognize that other cases have decided similar issues differently. The Department points to AT & T to support its position that Qwest's location and switching within Wyoming subjects it to state tax. The Colorado Supreme Court held that the sale of local telephone network access services used in connection with interstate telephone calls was subject to state sales tax under 16B Colo.Rev.Stat. § 39-26-104(1)(c) (Bradford 1982). [10] However, we are not inclined to follow the reasoning of AT & T for several reasons. [¶ 25] First, in reaching its decision, the Colorado Supreme Court relied on MCI Telecommunications v. Dept. of Treasury, 136 Mich.App. 28, 355 N.W.2d 627 (1984). The Michigan Court of Appeals subsequently determined that Michigan's imposition statute did not encompass charges for access service in GTE Sprint Communications Corp. v. Michigan Dept. of Treasury, 179 Mich.App. 276, 445 N.W.2d 476 (1989). The court in GTE specifically discussed its prior holding in MCI and concluded that: [A]lthough we reach a different result than the MCI opinion, our decision does not necessarily contradict the MCI holding inasmuch as the MCI case considered a different attack on the applicability of the use tax to access services. Specifically, MCI considered whether access services are intrastate or interstate in nature, as well as certain constitutional challenges. The MCI decision did not, we believe, directly address the question whether access service fees come within the provisions of § 3a of the Use Tax Act; rather, the MCI Court assumed that they do.... Id. at 480-81 n.7. While the GTE court found that its holding was not necessarily in conflict with the prior holding in MCI, it indicated that to the extent there was contradiction, MCI reached the wrong result. [11] Id. [¶ 26] Next, the Colorado Supreme Court found the district court erred in focusing on the end-to-end user interstate nature of the call instead of on the specific activity being taxed. Although our imposition statute is similar to Colorado's, the Department's definition of intrastate telephone services narrows the scope of these services to the  intrastate two-way transmission of sound, data, or other forms of information by any means from one point to another within this state.  In the absence of such a regulation, we might be more inclined to follow the rationale of the Colorado Supreme Court. [¶ 27] Finally, AT & T was decided in the context of specific and long-standing administrative treatment of the tax issue. In 1983, the Colorado Department of Revenue issued a bulletin advising of the taxable nature of the access charge in anticipation of the 1984 breakup of the American Telephone & Telegraph Company. The bulletin stated, It is the Department's position that the services being provided for which `carrier access charges' and `customer access line charges' are assessed constitute `intrastate telephone service' and are therefore taxable. AT & T Com., 778 P.2d at 680. The Wyoming Department of Revenue has not issued a similar bulletin or any other public form of written guidance such as a rule, regulation, or guideline that directly addresses the taxable nature of the access charge. [¶ 28] The Department claims that even if the EUCL charge is deemed to compensate for interstate telephone services, there is still a taxable retail event. The Department's regulations provide that [a]ll rentals of equipment or services incidental to intrastate telephone services including but not limited to ... access to a telephone transmission system shall be considered retail in nature and shall be subject to the sales tax. Rules, Wyoming Department of Revenue (2000), ch. 2, § 14(gg). According to the Department, the access service provided by Qwest is incidental to intrastate telephone services because local telephone service cannot be obtained without being assessed the EUCL charge for the ability to receive interstate telephone calls. We disagree and conclude that the EUCL charge is incidental to inter state telephone service. Incidental is defined as [s]ubordinate to something of greater importance; having a minor role. Black's Law Dictionary 777 (8th ed.2004). If not for the interstate call, the charge would not exist. [12] Given the legislature's clear intent to exclude interstate telephone services from Wyoming sales tax, we cannot extend the imposition statute to encompass the EUCL charge. [13]