Opinion ID: 1966700
Heading Depth: 1
Heading Rank: 6

Heading: capitol

Text: Capitol is a Nebraska corporation with its principal place of business in Nebraska. It purchases and services premanufactured telephone communications systems and equipment and resells the telephone systems to small and medium-sized businesses. It also installs and maintains computer cabling networks and paging and intercom sound systems. Its systems and services consist of a group of products that are sold as complete communications systems with a variety of features and functions. The systems vary in size and cost depending on the complexity of the features, functions, and telephones requested by the customer. The basic unit of the systems sold during the relevant time period was a key service unit (KSU) or a private branch exchange unit (PBX). When Capitol sells a telephone system or equipment to a customer in Nebraska, the customer has several options. The customer can do his or her own installation, engage another party to perform the installation, or have Capitol install the telephone system. The installation process involves unpacking the various components of the system and mounting the KSU or PBX to a floor or wall. Parts of the PBX have to be connected. Wire or cable would then be run from the PBX to various locations throughout the building where the telephone jacks are located. Individual systems are then connected to the system by running a wire from the jacks to a plug in the telephone. The telephones and the KSU or PBX are programmed to incorporate the features ordered by the customer. The system is physically linked with the local exchange telephone company's wire or cable via the D mark, thereby interconnecting the system with the local telephone facilities. This permits each telephone on the system the ability to access the local telephone exchange service. Capitol does not provide local exchange telephone service or intrastate message toll service in Nebraska. Capitol bills its customers for installing, connecting, and servicing telephone systems, and for moving, changing, and upgrading the related equipment and features at the customer's request. The Department conducted an audit for sales and consumer's use tax of the books and records of Capitol for the period December 1, 1993, through October 31, 1997. As a result of said audit, the Department issued a notice of deficiency determination to Capitol on April 1, 1998. Capitol timely filed a petition for redetermination of its sales and use tax liability for the portion of the sales tax deficiency relating to trip and labor charges, installation charges, programming charges, and charges associated with moving, changing, and upgrading telephone systems and related equipment. On October 22, 1999, the Commissioner issued an order sustaining the deficiency determination and dismissing Capitol's petition for redetermination. Capitol then appealed to the district court for Lancaster County. The district court held that Capitol's services are rendered in conjunction with the furnishing, installing, or connecting of local exchange and intrastate message toll service. Capitol has appealed to this court. The amount of tax being protested is $9,260, excluding interest and penalties.