Opinion ID: 4561041
Heading Depth: 1
Heading Rank: 2

Heading: facts

Text: The facts are largely undisputed. Diversified builds, maintains, repairs, and removes mobile telecommunication towers and equipment. Specifically, Diversified erects towers, builds lines and antennas, and installs roads and fences for wireless tower sites. At some sites, Diversified’s work includes installing backup generators attached to concrete foundations, the purpose of which is to allow the telecommunications tower to operate during a power outage. At all relevant times, Diversified has been an “Option 2” contractor. This means that under § 77-2701.10(2), it pays sales tax or use tax as a consumer when it purchases building materials. Counsel explained at the hearing before the district court the advantage of being an Option 2 contractor, in that “it allows them to keep a taxpaid inventory. . . . [A]nd so this reduces the management cost and accounting cost and record-keeping that’s required of keeping a tax-free inventory and then determining where all the building materials went and the local tax and regulations that apply there.” Following an audit, a sales tax deficiency assessment in the amount of $138,237.49 was issued to Diversified on March 11, 2016, finding tax owed of $117,969.15, plus $8,471.34 in interest and $11,797 in penalties. Diversified sought a redetermination of that deficiency. A hearing was held on the petition for redetermination in May 2018. The Department offered no evidence at that hearing; Diversified offered the testimony of both Diversified’s - 837 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports DIVERSIFIED TELECOM SERVS. v. STATE Cite as 306 Neb. 834 director of operations and an individual who worked for the management company tasked with Diversified’s accounting and bookkeeping. The parties stipulated to the admission of certain documents, primarily consisting of Diversified’s invoices and photographs that corresponded to transactions for which, following its audit, the Department found additional taxation was owed. The record also includes correspondence between the Department and Capital Tower & Communications, Inc. (Capital), a sister corporation to Diversified. Correspondence from 2008 shows that the Department and Capital discussed whether Capital was subject to the tax set forth in § 77-2701.16. The Department concluded that it was, and further noted that Capital’s status as an Option 2 contractor did not entitle it to a credit or deduction for sales tax paid for materials. In an order issued in January 2019, the Commissioner denied the petition for redetermination, except with respect to certain items stipulated to by the parties and not at issue in this appeal. Specifically, under § 77-2701.16(2), the Commissioner found that Diversified owed taxes on gross income from providing, installing, constructing, servicing, or removing property used in conjunction with mobile telecommunications services. The Commissioner disagreed with Diversified and found that certain things (notably, backup generators) were used in conjunction with providing mobile telecommunications services. Diversified appealed to the district court. Following a hearing, the district court affirmed the decision of the Commissioner. The district court reasoned that the plain language of § 77-2701.16 applied to Option 2 contractors under § 77-2701.10 and that such a taxing structure did not constitute double taxation. In addition, the district court found that Diversified failed to show that the Department assessed tax for property not used in conjunction with “telecommunications services” and failed to show that the Department incorrectly calculated Diversified’s tax liability. - 838 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports DIVERSIFIED TELECOM SERVS. v. STATE Cite as 306 Neb. 834 ASSIGNMENTS OF ERROR On appeal, Diversified assigns that the district court erred in (1) affirming the Commissioner’s order finding that Diversified must pay sales or use tax on building materials purchased by Diversified and must also remit sales tax on gross receipts earned from the “furnishing, installing, or connecting” of mobile telecommunications services; (2) finding that the Department’s assessment of sales or use tax on Diversified, both when it purchased building materials and when it billed its customers for the construction using said materials, was not double taxation; (3) finding that the challenged building materials used by Diversified to which the Department assessed sales or use tax were used in conjunction with the “furnishing, installing, or connecting” of mobile telecommunications services; (4) finding that Diversified did not show that the Department incorrectly calculated Diversified’s tax liability; and (5) finding that the Department’s disparate treatment of Option 2 contractors like Diversified versus “Option 1” contractors under §§ 77-2701.10(1) and 77-2701.16 did not violate the Equal Protection Clause of the Nebraska or U.S. Constitution.