Court Opinion

ID: 4557492
Source: CourtListenerOpinion
Date Created: 2020-08-21 05:07:34.029947+00
Date Added: 2024-06-11T09:46:37.254354
License: Public Domain

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
08/21/2020 12:07 AM CDT

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                               Nebraska Supreme Court Advance Sheets
                                        306 Nebraska Reports
                                        DIVERSIFIED TELECOM SERVS. v. STATE
                                                  Cite as 306 Neb. 834

                       Diversified Telecom Services, Inc., a corporation
                          organized under the laws of the State of
                          Nebraska, appellant, v. State of Nebraska,
                            Nebraska Department of Revenue, and
                            Tony Fulton, Tax Commissioner of the
                                 State of Nebraska, appellees.
                                                      ___ N.W.2d ___

                                           Filed August 14, 2020.   No. S-19-883.

                 1. Administrative Law: Judgments: Appeal and Error. When reviewing
                    an order of the district court under the Administrative Procedure Act
                    for errors appearing on the record, the inquiry is whether the decision
                    conforms to the law, is supported by competent evidence, and is neither
                    arbitrary, capricious, nor unreasonable.
                 2. Administrative Law: Statutes: Appeal and Error. The interpretation
                    of statutes and regulations presents questions of law, in connection with
                    which an appellate court has an obligation to reach an independent con-
                    clusion irrespective of the decision made by the court below.
                 3. Statutes: Appeal and Error. An appellate court will not resort to
                    interpretation to ascertain the meaning of statutory words that are plain,
                    direct, and unambiguous.
                 4. Statutes: Legislature: Intent. A collection of statutes pertaining to a
                    single subject matter are in pari materia and should be conjunctively
                    considered and construed to determine the intent of the Legislature, so
                    that different provisions are consistent, harmonious, and sensible.
                 5. Taxation. There is no double taxation unless both taxes are of the same
                    kind and have been imposed by the same taxing entity, for the same tax-
                    ing period, for the same taxing purpose, and upon the same property or
                    the same activity, incident, or subject matter.
                 6. ____. Unless it is unreasonable, confiscatory, or discriminatory, double
                    taxation is not unconstitutional or prohibited, although it is the court’s
                    policy to guard against it.
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            Nebraska Supreme Court Advance Sheets
                     306 Nebraska Reports
                 DIVERSIFIED TELECOM SERVS. v. STATE
                           Cite as 306 Neb. 834

 7. Taxes: Words and Phrases. A tax is confiscatory if it is established
    that it is so high as to effectively prohibit a taxpayer from engaging in a
    particular business.
 8. Taxation: Statutes: Legislature: Intent. The Legislature may enact
    laws that result in double taxation, and if it does, it is a valid exercise of
    the taxing power, and if the plain meaning of a statute results in double
    taxation, courts will enforce the Legislature’s intent.
 9. Taxes: Sales: Property. The legal incidence of a sales tax falls upon
    the purchaser, because it is a tax upon the privilege of buying tangible
    personal property.
10. Equal Protection. In an equal protection challenge, when a fundamental
    right or suspect classification is not involved, the act is a valid exercise
    of police power if the act is rationally related to a legitimate governmen-
    tal purpose.
11. Equal Protection: Statutes: Proof. The party attacking a statute as vio-
    lative of equal protection has the burden to prove that the classification
    violates the Equal Protection Clause.

  Appeal from the District Court for Lancaster County: Kevin
R. McManaman, Judge. Affirmed.
  Andrew C. Pease and Thomas E. Jeffers, of Crosby Guenzel,
L.L.P., for appellant.
  Douglas J. Peterson, Attorney General, and L. Jay Bartel for
appellees.
  Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
   Heavican, C.J.
                      INTRODUCTION
   The Nebraska Department of Revenue (Department) issued
a sales tax deficiency assessment to Diversified Telecom
Services, Inc. (Diversifed). Diversified filed a petition for
redetermination, which was denied by the Tax Commissioner
(Commissioner). Diversified appealed to the district court,
which affirmed the decision of the Commissioner.
   On appeal, Diversified’s primary argument is that the district
court erred in agreeing with the Department that Diversified
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         Nebraska Supreme Court Advance Sheets
                  306 Nebraska Reports
              DIVERSIFIED TELECOM SERVS. v. STATE
                        Cite as 306 Neb. 834

must pay sales or use tax on building materials purchased by
Diversified and also must remit sales tax when it bills its cus-
tomers for the same building materials once those materials are
annexed to real property in the course of Diversified’s “fur-
nishing, installing, or connecting” of mobile telecommunica-
tions services under Neb. Rev. Stat. § 77-2701.16(2)(e) (Supp.
2019). This appeal requires the interpretation of Neb. Rev.
Stat. § 77-2701.10(2) (Reissue 2018) and § 77-2701.16(2)(e).
We affirm.
                         BACKGROUND
   The facts are largely undisputed. Diversified builds, main-
tains, repairs, and removes mobile telecommunication towers
and equipment. Specifically, Diversified erects towers, builds
lines and antennas, and installs roads and fences for wire-
less 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 con-
sumer 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 tax-
paid 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 inter-
est and $11,797 in penalties. Diversified sought a redetermina-
tion of that deficiency.
   A hearing was held on the petition for redetermination in
May 2018. The Department offered no evidence at that hear-
ing; Diversified offered the testimony of both Diversified’s
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          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 account-
ing 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 telecommunica-
tions 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 lan-
guage of § 77-2701.16 applied to Option 2 contractors under
§ 77-2701.10 and that such a taxing structure did not consti-
tute 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.
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            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 build-
ing 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 telecommu-
nications 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 treat-
ment 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.

                   STANDARD OF REVIEW
   Under Neb. Rev. Stat. § 84-918(3) (Reissue 2014), an order
of the district court “may be reversed, vacated, or modified for
errors appearing on the record.”
   [1] When reviewing an order of the district court under
the Administrative Procedure Act for errors appearing on the
record, the inquiry is whether the decision conforms to the law,
is supported by competent evidence, and is neither arbitrary,
capricious, nor unreasonable. 1
   [2] The interpretation of statutes and regulations presents
questions of law, in connection with which an appellate court
1
    Tyson Fresh Meats v. State, 270 Neb. 535, 704 N.W.2d 788 (2005).
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            Nebraska Supreme Court Advance Sheets
                     306 Nebraska Reports
                 DIVERSIFIED TELECOM SERVS. v. STATE
                           Cite as 306 Neb. 834

has an obligation to reach an independent conclusion irrespec-
tive of the decision made by the court below. 2
                          ANALYSIS
   On appeal, Diversified argues that the district court erred in
agreeing with the Department that Diversified must both pay
sales or use tax on building materials purchased by Diversified
and also remit sales tax on gross receipts earned in the “fur-
nishing, installing, or connecting” of mobile telecommunica-
tions services, even though Diversified used the previously
taxed building materials to perform work for its customers.
Diversified argues that this appeal presents a conflict between
§ 77-2701.10(2) and § 77-2701.16(2)(e).
Relevant Law.
   Section 77-2701.10 defines
         [c]ontractor or repairperson [to] mean[] any person
      who performs any repair services upon property annexed
      to, or who annexes building materials to, real estate,
      including leased property, and who, as a necessary and
      incidental part of performing such services, annexes
      building materials to the real estate being so repaired or
      annexed or arranges for such annexation.
Under § 77-2701.10, a contractor may opt to be taxed as the
retailer or as the consumer of building materials. Option 1
contractors are taxed as retailers 3; Option 2 and “Option 3”
contractors are taxed as consumers. 4 The Department is not
permitted to “prescribe any requirements . . . restricting any
person’s election.” 5 A contractor can change its status with per-
mission of the Commissioner. 6
2
    Bridgeport Ethanol v. Nebraska Dept. of Rev., 284 Neb. 291, 818 N.W.2d
600 (2012).
3
    § 77-2701.10(1).
4
    § 77-2701.10(2) and (3).
5
    § 77-2701.10.
6
Id.
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         Nebraska Supreme Court Advance Sheets
                  306 Nebraska Reports
              DIVERSIFIED TELECOM SERVS. v. STATE
                        Cite as 306 Neb. 834

   In addition to sales tax on building goods, gross income
from installing or connecting mobile telecommunications serv­
ices is also taxable under Neb. Rev. Stat. § 77-2703 (Reissue
2018) and § 77-2701.16(2)(e). Section 77-2703(1) imposes
a sales or use tax on gross receipts of “any person involved
in the connecting and installing of the services” defined in
§ 77-2701.16(2).
   As relevant to this appeal, § 77-2701.16(2)(e) defines gross
receipts as
      [t]he gross income received from the provision, installa-
      tion, construction, servicing, or removal of property used
      in conjunction with the furnishing, installing, or connect-
      ing of any public utility services specified in subdivision
      (2)(a) or (b) of this section . . . except when acting as a
      subcontractor for a public utility, this subdivision does
      not apply to the gross income received by a contractor
      electing to be treated as a consumer of building materi-
      als under subdivision (2) or (3) of section 77-2701.10 for
      any such services performed on the customer’s side of the
      utility demarcation point.
   The Nebraska Administrative Code specifically deals with
Option 2 contractors in the area of telephone, cable satellite
services, and other utilities, including mobile telecommunica-
tions services. It provides:
         017.06E(1) Option 2 contractors who install, construct,
      service, repair, replace, upgrade, or remove outlets, wire,
      cable, satellite dishes or receivers, or any other property
      for telephone, telegraph, cable, satellite services, and
      mobile telecommunications services must collect sales tax
      as follows:
         017.06E(1)(a) Option 2 contractors must collect sales
      tax on the total amount charged when working on the
      service provider’s side of the demarcation point (i.e.,
      the general distribution system) whether the property is
      annexed or remains tangible personal property.
         017.02E(1)(b) Option 2 contractors must collect
      sales tax on the total amount charged when acting as a
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           Nebraska Supreme Court Advance Sheets
                    306 Nebraska Reports
                DIVERSIFIED TELECOM SERVS. v. STATE
                          Cite as 306 Neb. 834

       subcontractor for a telephone, telegraph, or mobile tele-
       communications service provider on the customer’s side
       of the demarcation point.
          017.02E(1)(c) Except as provided in subsection
       017.06E(1)(b), Option 2 contractors will not collect sales
       tax when working on the customer’s side of the demarca-
       tion point.
          017.02E(1)(d) Option 2 contractors will not collect
       sales tax on labor charges for installing or connecting gas,
       electricity, sewer, and water services.
          017.06E(2) Option 2 contractors must pay sales tax
       or remit use tax on all of their purchases of wire, cable,
       outlets, and other property used to install or construct
       telephone, telegraph, cable, satellite services, and mobile
       telecommunications services. 7
Option 2 Contractor Taxed
Under § 77-2701.16.
   In its first assignment of error, Diversified argues that it is
entitled to a credit or deduction for the sales tax it has already
paid on the building materials used in its work for customers
and that the district court erred in finding otherwise.
   Diversified argues that there is a conflict between
§ 77-2701.10(2), allowing it to pay sales tax as a consumer,
and § 77-2701.16(2)(e), requiring it to pay tax on the gross
receipts it earned in the “furnishing, installing, or connecting”
of mobile telecommunications services using those previously
taxed goods. We find no conflict.
   [3,4] The principles of law regarding the interpretation of
statutory language are familiar. An appellate court will not
resort to interpretation to ascertain the meaning of statutory
words that are plain, direct, and unambiguous. 8 A collection of
statutes pertaining to a single subject matter are in pari
7
    316 Neb. Admin. Code, ch. 1. § 017.06E (2017).
8
    Shelter Mut. Ins. Co. v. Freudenburg, 304 Neb. 1015, 938 N.W.2d 92
    (2020).
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             Nebraska Supreme Court Advance Sheets
                      306 Nebraska Reports
                  DIVERSIFIED TELECOM SERVS. v. STATE
                            Cite as 306 Neb. 834

materia and should be conjunctively considered and construed
to ­determine the intent of the Legislature, so that different pro-
visions are consistent, harmonious, and sensible. 9
   Together, § 77-2703(1) and § 77-2701.16(2) apply to “any
person involved in [the] connecting and installing” of mobile
telecommunications services. There is an exemption for the
gross income of certain Option 2 and Option 3 contractors
in § 77-2701.16(2)(e); that exemption is applicable to “serv­
ices performed on the customer’s side of the utility demarca-
tion point.”
   We observe that Diversified does not assert on appeal that
any of its services were performed on the customer’s side of
the demarcation point, and thus this exception is not applicable
to Diversified. We further note that the very existence of this
exception shows that Option 2 contractors were intended to be
taxed under both §§ 77-2701.10 and 77-2701.16.
   First, the enactment of this exception shows that the
Legislature considered the interplay between Option 2 con-
tractors and the tax on gross receipts and, at least implicitly,
rejected an exemption as to the utility’s side of the demarca-
tion point. Moreover, if, as claimed by Diversified, all Option
2 contractors were entitled to a credit or deduction, the excep-
tion provided would be meaningless. A court must attempt to
give effect to all parts of a statute, and if it can be avoided,
no word, clause, or sentence will be rejected as superfluous
or meaningless. 10
   Our conclusion is reinforced by the Department’s regula-
tions, which provide that an Option 2 contractor pay a sales
tax on its purchase of “wire, cable, outlets, and other ­property
used to install or construct . . . mobile telecommunications
services.” 11 Agency regulations properly adopted and filed
 9
Id.
10
 Id.
11
     316 Neb. Admin. Code, ch. 1, § 017.06E(2).
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             Nebraska Supreme Court Advance Sheets
                      306 Nebraska Reports
                   DIVERSIFIED TELECOM SERVS. v. STATE
                             Cite as 306 Neb. 834

with the Nebraska Secretary of State have the effect of statu-
tory law. 12
   We find that the plain meaning of these statutes is clear
and that Diversified is not entitled to the credit it seeks.
Diversified’s first assignment of error is without merit.
Double Taxation.
   Diversified next contends that the taxation under
§§ 77-2701.10 and 77-2701.16 constitutes impermissible dou-
ble taxation. We reject this contention.
   [5] We begin with a brief examination of the concept of
double taxation in Nebraska. We have held that “[t]here is no
‘double taxation’ unless both taxes are of the same kind and
have been imposed by the same taxing entity, for the same
taxing period, for the same taxing purpose, and upon the same
property or the same activity, incident, or subject matter.” 13
   [6-8] Still, “unless it is unreasonable, confiscatory, or dis-
criminatory, double taxation is not unconstitutional or prohib-
ited, although it is [the court’s] policy to guard against it.” 14
We have held that a tax is confiscatory if it is established that
it is so high as to effectively prohibit a taxpayer from engag-
ing in a particular business. 15 Otherwise, “the Legislature may
enact laws that result in double taxation and if it does it is a
valid exercise of the taxing power,” 16 and if the plain meaning
of a statute results in double taxation, courts will enforce the
Legislature’s intent. 17
12
     In re Application No. OP-0003, 303 Neb. 872, 923 N.W.2d 653 (2019).
13
     Anthony, Inc. v. City of Omaha, 283 Neb. 868, 884, 813 N.W.2d 467, 480
     (2012).
14
Id.
15
     See, e.g., Waste Connections of Neb. v. City of Lincoln, 269 Neb. 855, 697
N.W.2d 256 (2005).
16
     Stephenson School Supply Co. v. County of Lancaster, 172 Neb. 453, 463,
     110 N.W.2d 41, 47 (1961).
17
     See Kappa Ethanol v. Board of Supervisors, 285 Neb. 112, 825 N.W.2d
761 (2013).
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             Nebraska Supreme Court Advance Sheets
                      306 Nebraska Reports
                  DIVERSIFIED TELECOM SERVS. v. STATE
                            Cite as 306 Neb. 834

    The Department contends that two different activities
are subject to tax here: the first is the sales or use tax on
Diversified’s purchase of building materials, and the second is
the sales tax on the gross receipts from the “furnishing, install-
ing, or connecting” of mobile telecommunications serv­ices.
The Department also points out that Diversified failed to col-
lect a sales tax from its customers as it was permitted to do.
    [9] We agree that Diversified is not subject to double taxa-
tion in this case. In reaching this decision, we find our prior
decision in Anthony, Inc. v. City of Omaha 18 instructive. There,
we discussed the legal incidence of a sales tax and of an occu-
pation tax. We explained that the legal incidence of a sales tax
falls upon the purchaser, because it is a tax upon the privilege
of buying tangible personal property. 19
    That concept is helpful here. In the first instance, Diversified
purchased building goods and voluntarily, and for business rea-
sons, elected to pay a sales tax as a consumer of those building
goods. 20 Thus, that sales tax is part of Diversified’s purchase
price and it is the obligation of the retailer of those goods to
remit the tax to the State. 21 As to the second instance, the sales
tax on Diversified’s gross receipts, the position of the par-
ties is different. Diversified is no longer the consumer; rather,
Diversified’s customers are the consumers. The sales tax is part
of the purchase price, and it is Diversified’s obligation to remit
the tax to the State.
    Given these distinct scenarios, this situation presents no
­double taxation. While on a superficial level Diversified appears
 to pay sales tax in each instance, a closer examination shows
 that is not the case. As to the first transaction, Diversified is the
 entity being taxed. But in the second, Diversified’s customer
 is the entity being taxed. Double taxation exists when “both
18
     Anthony, Inc. v. City of Omaha, supra note 13.
19
Id.
20
     See § 77-2701.10(2) and (3).
21
     See § 77-2701.10(1).
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             Nebraska Supreme Court Advance Sheets
                      306 Nebraska Reports
                 DIVERSIFIED TELECOM SERVS. v. STATE
                           Cite as 306 Neb. 834

taxes are . . . for the same taxing period, for the same taxing
purpose, and upon the same property or the same activity, inci-
dent, or subject matter.” 22 That is not the case here, and thus
there is no double taxation presented.
   Given the results of the audit in this case, it seems apparent
that Diversified did not charge its customers the full amount
of the tax owed. This failure does not change the fact that the
incidence of the unpaid tax was on the customer, while the
obligation to remit the tax belonged to Diversified.
   There is no merit to Diversified’s second assignment of error.

Connecting of Mobile
Telecommunications
Services.
   Diversified next assigns that the district court erred in find-
ing that certain portions of the deficiency determination—
specifically electrical services, gaslines, concrete pads, and
backup generators—were not used in conjunction with the
“furnishing, installing, or connecting” of mobile telecommuni-
cations serv­ices. Diversified primarily argues that it relied on
2008 correspondence from the Department when it did not col-
lect sales tax on the now-challenged items, with the exception
of the backup generators. And the Department suggests that the
audit was conducted in keeping with that advice, citing a 2015
letter indicating as much.
   We turn first to the generators and the gaslines that power
them. Diversified argues that cellular towers are fully func-
tional without the generators and that the generators only
provide backup power in the event of the failure of com-
mercial power. As such, Diversified contends generators
were not used in conjunction with the “furnishing, installing
or connecting” of mobile telecommunications services. The
Department disagrees.
22
     Anthony, Inc. v. City of Omaha, supra note 13, 283 Neb. at 884, 813
     N.W.2d at 480.
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             Nebraska Supreme Court Advance Sheets
                      306 Nebraska Reports
                  DIVERSIFIED TELECOM SERVS. v. STATE
                            Cite as 306 Neb. 834

   Section 77-2701.16(2)(e) provides that taxable gross receipts
include “gross income received from the provision, installa-
tion, construction, servicing, or removal of property used in
conjunction with the furnishing, installing, or connecting” of
mobile telecommunications services. The term “in conjunction
with” is not defined by statute, but the dictionary defines it to
mean “in combination with” or “together with.” 23
   Using this general definition, we agree with the State’s posi-
tion that the generators were installed “in conjunction with”
the “furnishing, installing, or connecting” of mobile telecom-
munications services. While a generator and its fuel may not
be critical to the usual operation of mobile telecommunica-
tions services, those items are necessary to the uninterrupted
operation of such a service. We therefore find that generators
and fuel are used to furnish mobile telecommunications serv­
ices within the meaning of § 77-2701.16 and that taxation
was appropriate.
   Diversified also argues that the Department wrongly assessed
tax on electrical services and concrete pads. Diversified argues
that these items were not “in conjunction with” the “fur-
nishing, installing, or connecting” of mobile telecommuni-
cations services, and also that it had not collected any tax,
because the Department indicated in 2008 that these items
were not taxable.
   We reject both contentions. We have compared the
Department’s audit, the 2008 and 2015 letters, Diversified’s
invoices, and the testimony offered at the hearing. We conclude
that the Department did conduct the audit in accordance with
the parameters of the 2008 and 2015 correspondence.
   Moreover, we agree with the Department and the district
court that the items identified by the Department as being
subject to taxation—specifically, the installation and removal
of electrical equipment and the installation of concrete pads
23
     “In conjunction with,” Merriam-Webster.com, https://www.merriam-webster.
     com/dictionary/in%20conjunction%20with (last visited Aug. 5, 2020).
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                      306 Nebraska Reports
                   DIVERSIFIED TELECOM SERVS. v. STATE
                             Cite as 306 Neb. 834

for equipment mounting—following the audit were all used
“in conjunction with” the “furnishing, installing, or connect-
ing” of mobile telecommunications services.
   This assignment of error is without merit.
Calculation of Tax Liability.
   Diversified argues the district court erred in concluding
that it did not show the Department incorrectly calculated
its tax liability. Diversified claims the evidence showed that
all of its records for the audit period were available to the
Department and that the Department therefore erred in esti-
mating its deficiency based on the 2014 tax year. Diversified
asserts that the district court “twisted the language [of the
Nebraska Administrative Code] into placing an affirmative
duty and evidentiary burden on the taxpayer to prove that there
were not any missing records.” 24
   But as we view the record, the issue is not that Diversified
did not provide access to the Department at the time of the
audit, but that Diversified now challenges that deficiency
without offering documentation to prove its assertion that
the Department’s determination was wrong. It is a problem
with the record as provided to the district court and to this
court, not a problem with the documentation provided to the
Department. In other words, Diversified would like us to con-
clude that it gave proper access to the Department and that the
Department erred in its determination, without providing the
court the documentation necessary to prove the determination
was wrong.
   There is no merit to this assignment of error.
Equal Protection.
   Finally, Diversified assigns that the Department’s misap-
plication of this tax scheme violates its right to equal protec-
tion. Diversified argues that the Department’s position effec-
tively requires it to operate as an Option 1 contractor, in
24
     Replacement brief for appellant at 31.
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                      306 Nebraska Reports
                  DIVERSIFIED TELECOM SERVS. v. STATE
                            Cite as 306 Neb. 834

violation of the portion of § 77-2701.10 that prohibits the
Department from restricting a taxpayer’s election under that
section. Diversified further argues that its rights were infringed
upon, because it is not permitted to retroactively elect Option 1
status. We reject these claims.
   [10,11] In an equal protection challenge, when a fundamen-
tal right or suspect classification is not involved, the act is a
valid exercise of police power if the act is rationally related
to a legitimate governmental purpose. 25 The party attacking a
statute as violative of equal protection has the burden to prove
that the classification violates the Equal Protection Clause. 26
   As an initial matter, we find that Diversified has not met
its burden to show that the classification in question was not
rationally related to a legitimate governmental purpose.
   Moreover, as we have found above, the Department was cor-
rect in its application of these statutes. And we find no State
action with respect to the tax consequences of an Option 1
versus Option 2 election. While the taxing scheme enacted by
the Legislature might make operating as an Option 2 contrac-
tor less advantageous, there is nothing that forces a change in
election by Diversified. Nor does Diversified direct us to any
authority which might suggest that a less advantageous busi-
ness outcome due to a taxation structure is equivalent to the
Department or the State action requiring a taxpayer to adopt a
particular election under our tax laws.
   Finally, we observe that Diversified was notified in 2008
that acting as an Option 2 contractor would result in the tax
consequences it now challenges.
   There is no merit to this assignment of error.
                       CONCLUSION
  The decision of the district court affirming the Department’s
deficiency determination is affirmed.
                                                    Affirmed.
25
     Waste Connections of Neb. v. City of Lincoln, supra note 15.
26
     Id.