Court Opinion

ID: 4673889
Source: CourtListenerOpinion
Date Created: 2021-04-01 22:56:29.715065+00
Date Added: 2024-06-11T08:03:16.897325
License: Public Domain

MAINE SUPREME JUDICIAL COURT                                   Reporter of Decisions
Decision: 2021 ME 8
Docket:   BCD-20-112
Argued:   November 17, 2020
Decided:  February 18, 2021

Panel:       MEAD, GORMAN, JABAR, HORTON, and CONNORS, JJ.

                                     APPLE INC.

                                           v.

                               STATE TAX ASSESSOR

HORTON, J.

         [¶1] The State Tax Assessor appeals from a summary judgment entered

in the Business and Consumer Docket (Murphy, J.), concluding that the taxable

“sale price” of iPhones sold at discounted prices to customers who entered into

wireless service contracts at Apple Inc.’s retail stores did not include payments

made by the wireless service carriers to Apple in connection with the sales. The

court concluded that the carriers’ payments to Apple were not sufficiently

linked to the purchases of the phones to constitute reimbursement for the

discounts. The Assessor also appeals the court’s order sealing portions of the

parties’ filings.

         [¶2] We agree with the Assessor that amounts paid by the carriers to

Apple constitute part of the taxable sale prices for the phones because Apple
2

expected at the time of sale that it would be reimbursed by the carriers for the

price discounts granted to customers who entered into wireless service

contracts with the carriers.     We therefore vacate the grant of summary

judgment and remand for entry of judgment in favor of the Assessor. However,

we affirm the order sealing portions of the parties’ M.R. Civ. P. 56 filings.

                                I. BACKGROUND

      [¶3] The following recitation of facts is based on the parties’ stipulation

of facts and the additional undisputed facts in the summary judgment record.

See State Tax Assessor v. Kraft Foods Grp., Inc., 2020 ME 81, ¶¶ 2, 13,

235 A.3d 837.

      [¶4] The State Tax Assessor is the executive responsible for enforcing

the state tax laws through Maine Revenue Services (MRS).               Apple is a

manufacturer and retailer of electronic equipment, including handheld

wireless telephones marketed as iPhones. Apple operates online stores and

brick-and-mortar retail stores, collectively called Apple Direct Channels, where

iPhones are available for purchase by retail customers.

      [¶5] This case involves payments made to Apple pursuant to a series of

contracts between Apple and three wireless telecommunications carriers

during a roughly three-year period. The three carriers are AT&T Mobility, LLC
                                                                                3

(AT&T), Cellco Partnership d/b/a Verizon Wireless (Verizon), and

Sprint/United Management Company (Sprint). All of the contracts called for

the carriers to make payments to Apple. A payment was triggered by the

purchase of an iPhone at an Apple Direct Channel by a retail customer who also

entered into a wireless service contract with one of the three carriers. In nearly

every sale at issue, the wireless service contract was for a two-year period. For

example, a retail customer could buy for $199 an iPhone regularly priced at

$649 if the customer agreed to enter into a wireless service contract with AT&T,

Sprint, or Verizon. Apple collected and remitted to MRS sales tax on the

reduced price charged to the customer for the phone—$199 in that example—

rather than on the regular price of the iPhone. In contrast, a retail customer

who purchased the same phone without also entering into a wireless service

contract was charged the regular price of $649, and Apple collected and

remitted sales tax based on the regular price.

      [¶6] In May 2013, MRS commenced a “sales and use tax” and “service

provider tax” audit of Apple.     The audit period covered May 1, 2010, to

April 30, 2013.   As a result of the audit, the Assessor determined that,

throughout the audit period, Apple had not properly collected and remitted

sales tax due on sales of iPhones in Apple Direct Channels in Maine when Apple
4

sold iPhones at reduced prices to retail customers who agreed to enter into

wireless service contracts with the carriers. The Assessor concluded that the

tax on these transactions should have been collected and remitted based on the

regular price of the iPhones rather than the reduced price actually charged

because Apple expected full reimbursement by the carrier for the difference

between the regular price of the iPhones and the reduced price actually charged

to the customers.

      [¶7] On October 17, 2014, MRS issued a notice of assessment for the

difference between what Apple actually collected and remitted in sales tax

during the audit period and what the Assessor determined should have been

collected and remitted. It asserted that Apple owed $437,896.32 in tax and

$101,342.05 in interest. The total amount owed was $539,238.37.

      [¶8] Apple requested reconsideration of the assessment pursuant to

36 M.R.S. § 151(1) (2020). On July 29, 2016, MRS issued its decision on

reconsideration, upholding the assessment in full. That September, Apple

appealed the assessment to the Board of Tax Appeals pursuant to 36 M.R.S.

§ 151-D(10) (2020). The Board issued a decision upholding the assessment.

Apple requested that the Board reconsider its decision and submitted

additional information in support of its position. After further review, the
                                                                              5

Board found no error in the decision and upheld it without alteration in an

order dated December 12, 2017, pursuant to 18-674 C.M.R. ch. 100

§ 305(B) (2020).

      [¶9] On February 8, 2018, Apple petitioned for judicial review of the

agency action in the Superior Court (Kennebec County), pursuant to 5 M.R.S.

§§ 11001(1) and 11002 (2020); 36 M.R.S. § 151; and M.R. Civ. P. 80C. The case

was transferred to the Business and Consumer Docket on March 22, 2018.

Apple filed its motion for summary judgment, see M.R. Civ. P. 56(a), on

September 16, 2019. The Assessor filed its own motion for summary judgment,

see M.R. Civ. P. 56(b), on October 29, 2019.

      [¶10] While the case was pending, the court entered a confidentiality

order at Apple’s request prescribing procedures for protecting confidential

material from disclosure in the public record. See M.R. Civ. P. 79(b)(1). Apple

asked the court to seal a considerable quantity of the material filed with the

Assessor and the Board and of the material filed in connection with the parties’

motions for summary judgment. The court requested that the parties confer on

Apple’s request, but the parties were unable to reach complete agreement.

Following the dispute resolution procedures contained in the confidentiality
6

order, the court issued an order broadly sealing references to the carrier

contract provisions from the public record.

        [¶11]      After holding a hearing on the pending motions, on

March 10, 2020, the court issued an order granting Apple’s motion for

summary judgment and denying the Assessor’s motion. The Assessor timely

appeals from the judgment and also appeals from the court’s order sealing the

parties’ filings, arguing that it is overbroad.1 See 14 M.R.S. § 1851 (2020);

5 M.R.S. § 11008 (2020); M.R. App. P. 2B(c)(1). The Assessor asks us to vacate

the judgment and the order sealing filings and to remand for the court to enter

judgment in the Assessor’s favor and to unseal at least some portions of the

filings. Apple asks us to affirm both the judgment and the order sealing filings.

                                       II. DISCUSSION

        [¶12] We begin with the Assessor’s appeal of the court’s entry of

summary judgment in favor of Apple.                       The issue involves statutory

interpretation, which we review de novo as a question of law, see Irving Pulp

& Paper, Ltd. v. State Tax Assessor, 2005 ME 96, ¶ 8, 879 A.2d 15, and the

application of law to undisputed facts.

    1 On August 24, 2020, the Council on State Taxation and the Maine State Chamber of Commerce
filed a joint amicus brief. Amici’s brief spoke only to Issue 2, proffering that taxpayers have an
expectation of privacy and that the court was correct to seal Apple’s confidential tax information.
                                                                                 7

      [¶13] The parties presented a stipulation to certain facts, and many other

assertions of fact are extensively set forth in the parties’ statements of material

fact. Although it would have been desirable for the parties to have presented

the case on a fully stipulated record, neither party asserts that there are any

disputed material facts nor additional material facts that are not set forth in the

record, although they disagree on how certain undisputed facts should be

interpreted. Neither party contends that the trial court should not have entered

summary judgment based on the record presented, although they disagree as

to which party was entitled to judgment. Given that the material facts are not

in dispute, “[t]he propriety of the court’s entry of summary judgment . . . turns

on whether, as a matter of law, [payments made to the retailer] fall within the

definition of ‘sale price’” pursuant to 36 M.R.S. § 1752(14). Flik Int’l Corp. v.

State Tax Assessor, 2002 ME 176, ¶ 9, 812 A.2d 974.

A.    Sales Tax

      [¶14] Because the trial court’s review of the Tax Board’s decision was

de novo, see 36 M.R.S. § 151-D(10), we review the trial court’s interpretation of

the applicable statutes directly, without deference to the Board’s legal

determinations.    See Warnquist v. State Tax Assessor, 2019 ME 19, ¶ 12,

201 A.3d 602.
8

        1.     Statutory and Precedential Framework

        [¶15] By statute, sales tax “is imposed on the value of all tangible

personal property . . . sold at retail in this State.” 36 M.R.S. § 1811 (2013). 2

“Value is measured by the sale price” of the property sold. Id. “Sale price” is

defined as “the total amount of a retail sale valued in money, whether received

in money or otherwise.” 36 M.R.S. § 1752(14) (2020).3 “Sale price” includes

        (1) Any consideration for services that are a part of a retail sale;
        [and]

        (2) All receipts, cash, credits and property of any kind or nature
        and any amount for which credit is allowed by the seller to the
        purchaser, without any deduction on account of the cost of the
        property sold, the cost of the materials used, labor or service cost,
        interest paid, losses or any other expenses.

36 M.R.S. § 1752(14)(A)(1)-(2).

        [¶16] The definition of “sale price” “sweeps broadly so that any value

received for a retail sale is included.” Flippo v. L.L. Bean, Inc., 2006 ME 62, ¶ 10,

898 A.2d 942. Payments made to a retailer in connection with a particular sale

count toward the sale price even “if they come from two different sources, if

    2Since 2013, 36 M.R.S. § 1811 has been amended multiple times but not in ways that affect this
analysis. See P.L. 2017, ch. 409, § D-2 (effective Aug. 1, 2017).
    3The statutory definition of “sale price” was amended in 2019 but not in any respect material to
the analysis. See P.L. 2019, ch. 401, § B-5 (effective Sept. 19, 2019). The citation is to the current
version of the definition.
                                                                                 9

they are paid at two different times, or if they are not itemized to correspond to

a particular item sold.” Flik, 2002 ME 176, ¶ 19, 812 A.2d 974.

      [¶17] The definition of “sale price” does not include “discounts allowed

and taken on sales.” 36 M.R.S. § 1752(14)(B)(1). However, if at the time of sale

the retailer expects to be reimbursed for what may appear to be a price

discount, the amount of the expected reimbursement becomes part of the

taxable sale price. See Flippo, 2006 ME 62, ¶ 17, 898 A.2d 942.

      [¶18] “[I]n a case where the facts are not in dispute, the burden is on the

taxpayer, at all stages of the proceeding, to establish that the transaction is not

taxable.” Flik, 2002 ME 176, ¶ 13, 812 A.2d 974 (citing 36 M.R.S. § 151).

Accordingly, Apple has the burden to demonstrate that the price reductions

that it granted on iPhones purchased by customers who also bought wireless

plans were true nontaxable discounts. See id. Apple must also show that the

payments that it received from carriers in connection with such sales should

not be treated as “value” to be counted in determining the sale price of the

iPhones. See id. Our decisions in Flik and Flippo offer useful guidance in our

determination of whether Apple has met its burden.

      [¶19] In Flik, the issue was whether payments made by MBNA America

Bank, N.A., to Flik International Corp., which operated employee cafeterias at
10

three of MBNA’s corporate facilities, should be counted toward the sale price of

the cafeteria food. 2002 ME 176, ¶¶ 1-3, 812 A.2d 974. MBNA required Flik to

sell the cafeteria food at below-market prices and to operate the cafeteria for

longer hours at a higher staffing level than would be the case at a “typical

restaurant,” resulting in Flik’s operating costs for the cafeterias exceeding its

proceeds from cafeteria sales. Id. ¶¶ 3-4. However, MBNA also made “contract

payments” to Flik, covering the “costs of acquiring, preparing and selling food

in MBNA’s cafeterias, plus a guaranteed profit, plus an overhead charge, less the

gross proceeds from Flik’s sales to cafeteria patrons.” Id. ¶ 5. “MBNA never

directly reimbursed Flik for any portion of the stated sale price of any food item

sold to cafeteria patrons.” Id.

      [¶20] Flik remitted sales tax on the amounts paid by cafeteria patrons

for food but did not remit sales tax on any of the “contract payments” it received

from MBNA. Id. ¶¶ 3, 5. After an audit, the Assessor made an assessment of

sales tax against the payments Flik had received from MBNA based on the

Assessor’s determination that the payments counted toward the sale price of

the cafeteria food. Id. ¶ 6.

      [¶21] On appeal, Flik contended that MBNA’s payments were not tied to

sales of food and instead were made under a service contract intended to
                                                                                11

compensate Flik for managing and operating the cafeterias. Id. ¶ 17. The

Superior Court agreed with Flik and vacated the assessment. Id. ¶ 7. On the

Assessor’s appeal, we vacated the Superior Court’s grant of summary judgment

and remanded for entry of judgment in the Assessor’s favor, noting that “Flik

would not have agreed to charge the low prices but for MBNA’s agreement to

reimburse Flik for costs that Flik did not recover from the revenues derived

from sales to cafeteria patrons.” Id. ¶ 3.

      [¶22]    Even though MBNA’s payments were not characterized as

subsidies or reimbursements, came from a different source than the retail

purchasers of the food, were not made at the time of the retail purchases, and

did not correlate to specific retail food purchases, we decided that the payments

still constituted a portion of the sale price of the food and were therefore

subject to sales tax. Id. ¶¶ 19-21.

      [¶23] In Flippo v. L.L. Bean, Inc., we addressed a sale price issue involving

L.L. Bean merchandise and MBNA credit card accounts. 2006 ME 62, ¶ 2,

898 A.2d 942. MBNA and L.L. Bean entered into an agreement under which

MBNA issued “affinity” L.L. Bean VISA credit cards to L.L. Bean retail customers.

Id. MBNA agreed to pay L.L. Bean royalties based on the number of such

accounts opened and the amounts charged on those accounts. Id.
12

      [¶24] To induce L.L. Bean customers to apply for the affinity VISA

accounts with MBNA, the agreement called for L.L. Bean to give “inducement

coupons” to retail customers who applied for L.L. Bean VISA accounts. Id. ¶ 3.

The customers could use the coupons to purchase L.L. Bean merchandise for

less than the regular price charged for the same merchandise. Id. ¶ 2. When a

customer used a coupon in making a purchase, L.L. Bean collected sales tax

based on the regular price for the merchandise rather than the reduced price.

Id. MBNA paid L.L. Bean royalties as reimbursement for the value of the

coupons and additional royalties for new VISA accounts opened through this

marketing effort. Id.

      [¶25] The Flippo plaintiffs were members of a class consisting of persons

who had purchased L.L. Bean merchandise using MBNA’s inducement coupons.

Id. ¶¶ 4, 6. Their claim was that L.L. Bean should have collected sales tax based

on the reduced prices for its merchandise rather than on the regular prices, and

they sought recovery for the class measured by the difference. Id. ¶ 6. Thus,

the fundamental issue was whether the reduction in sale price associated with

the coupon was a nontaxable discount, as the plaintiff class contended, or was

taxable because MBNA’s royalty payments counted toward the sale price of the

merchandise. Id. ¶ 10. We pointed out that “[t]he MBNA contract payments at
                                                                              13

issue in Flik were more closely tied to sales than the MBNA royalty payments

[to L.L. Bean] because the contract payments were calculated by a formula that

considered Flik’s monthly cafeteria sales, while the royalty formula does not

consider the amount of coupons redeemed in any particular period.” Id. ¶ 13

(citations omitted).

      [¶26] Still, we concluded that, based on the undisputed facts, “the value

of the coupons is not an unreimbursed discount, but is part of the sale price.”

Id. ¶ 14. Key to our conclusion was the undisputed fact that L.L. Bean reduced

its retail prices by the value of the inducement coupons expecting to be

reimbursed by MBNA for the reduction. Id. ¶ 15. It was the expectation of

reimbursement at the time of sale that conclusively established that the price

reduction granted was not a nontaxable discount. See id. ¶ 17. It is that

consideration that guides our analysis of the Apple service contracts.

      2.    The Carriers’ Payments to Apple

      [¶27] The Assessor contends that payments made by the carriers to

Apple for sales made at Apple Direct Channels were meant to reimburse Apple

for the price reductions on iPhones granted to customers who agreed to enter

into wireless service contracts with the carriers at the point of purchase. Thus,
14

the Assessor argues, the payments were a part of the taxable sale price on which

sales tax should have been collected and remitted.

      [¶28] Apple counters that those payments were “bounties” that the

carriers paid to Apple for finding them new customers rather than

reimbursements for iPhone price reductions. It claims that the contracts with

the carriers unambiguously establish that Apple and the carriers intended the

payments to constitute rewards given to Apple for the economic benefit to the

carriers in gaining new wireless contracts. Apple contends that, because the

payments made were bounties, the price reductions constituted true discounts

that would not count toward the taxable sale price.             See 36 M.R.S.

§ 1752(14)(B)(1).    Apple also submitted affidavits and other evidence

indicating that its intent and that of the carriers was that the payments be

bounties rather than reimbursements to Apple for the iPhone discounts

granted to retail customers.

      [¶29] The ultimate question presented is whether, at the time of sale,

Apple expected to receive reimbursement for the price reduction on an iPhone

that it granted to a customer who also agreed to enter into one of the wireless

service contracts covered by Apple’s contracts with the carriers. See Flippo,

2006 ME 62, ¶ 11, 898 A.2d 942 (“[I]f the retailer expects reimbursement, and
                                                                              15

thus does not foresee a reduction in profits, there is no discount regardless of

the particular form that the reimbursement will take.”).         This analytical

framework is consistent with how other jurisdictions characterize similar

transactions in the sales tax context. See, e.g., Home & Garden Party, Inc. v.

Comm’r of Revenue, No. 7924-R, 2008 Minn. Tax LEXIS, at *7-*9 (Minn. Tax Ct.

Nov. 24, 2008) (concluding that “sales tax is based upon the retail selling price

of [the] products because the [benefits paid as reimbursements for the

discounted sale price] were part of the gross receipts paid for [the retailer’s]

products”); Grogan v. N.M. Tax’n & Revenue Dep’t, 62 P.3d 1236, 1241

(N.M. 2003) (“A retailer who is reimbursed the discounted amount does not

absorb the cash loss.    Such a retailer is in no position to claim a[ tax]

exclusion.”); cf. Saxon-Western Corp. v. Mahin, 411 N.E.2d 242, 245 (Ill. 1980)

(concluding that discount coupons distributed by the retailer-taxpayer were

not taxable as part of the taxpayer’s gross receipts because the taxpayer never

received reimbursement from any source for the discount granted when

honoring the coupon).

      [¶30] The fundamental issue before us distills to whether Apple reduced

iPhone prices with the expectation of recouping its profit through payments

from the carriers. Therefore, whether Apple’s contracts with the carriers are
16

ambiguous or not, what Apple and the carriers may have thought or intended

the payments to be, and what labels the contracts placed on the carriers’

payments to Apple are relevant but not determinative. See Flippo, 2006 ME 62,

¶ 11, 898 A.2d 942. The parol evidence rule regarding contract interpretation

“cannot prevent a court from inquiring into the facts in order to determine the

actual sale price for tax purposes.” Id. ¶ 14 n.2. For the same reason, the

purpose of the carriers’ payments to Apple may be gleaned from the parties’

course of performance as well as from the contract terminology, see

A. E. Robinson Oil Co. v. Cty. Forest Prod., 2012 ME 29, ¶ 9, 40 A.3d 20.

      [¶31] In fact, the terminology in most of Apple’s contracts with the

carriers describing certain payments to Apple supports the Assessor’s position.

These contracts provide for the carriers to “reimburse” Apple with “subsidies”

keyed to the amount of the price reduction on iPhones granted to customers

who also entered into the carriers’ wireless contracts at Apple Direct Channels.

Apple’s contracts with all three carriers during most of the audit period

required the carriers to pay Apple what the contracts call the “iPhone Handset

Subsidy.” The contracts set the amount of each “Subsidy” payment at the

difference between the regular price of the iPhone and the reduced price

charged to a customer who purchased one of the wireless service plans covered
                                                                              17

by the carriers’ contracts with Apple. Moreover, the contracts stated that the

carriers were to “promptly reimburse” Apple with the “Subsidy” payments.

      [¶32] Apple contends that the use of the term “reimburse” should be

disregarded because the payments were due only when customers activated

wireless service contracts and therefore were “bounties” to reward Apple for

finding new customers for the carriers. But the reimbursement label that the

contracts use to describe the payments cannot be ignored, and the record does

not show that Apple incurred any expense or cost for which it could be

“reimbursed” except the price reductions on its iPhones.

      [¶33] Although not all of the contracts used “reimburse” or other

terminology so favorable to the Assessor’s position, they all called for payments

from the carriers triggered by Apple’s retail sales of iPhones at reduced prices.

Apple clearly expected to be reimbursed for the iPhone price reductions it

granted to customers who entered into wireless service contracts that qualified

for reimbursement by the carriers.        The price reductions, the carriers’

payments, and the length of the wireless contracts were all directly related. The

longer the term of the wireless service plan a customer agreed to purchase, the

greater the price reduction on the phone and the larger the carrier’s payment

to Apple. Thus, there was direct linkage between the subsidies that Apple
18

granted to its customers on iPhone prices and all three carriers’ payments to

Apple. See Flik, 2002 ME 176, ¶¶ 19, 21, 812 A.2d 974.

      [¶34] On the other hand, not all of the carriers’ payments to Apple were

reimbursement for the price reductions. Some payments were tied to the

duration of the wireless service contracts rather than to price reductions on

iPhones, and the Assessor does not contend that these commissions should be

included in the calculation of the iPhones’ taxable sale prices.

      [¶35] Perhaps the most compelling evidence that Apple always intended

and expected to realize its regular price for the iPhones sold at reduced prices

to customers who also purchased wireless service plans is the fact that it did

not grant the same price reductions to customers who purchased iPhones but

did not enter into wireless service contracts. A retailer who grants a price

reduction to customers who also purchase a product from a third party but

does not grant a similar price reduction to other customers who purchase the

same product at the same time without purchasing the third party’s product

may have difficulty proving that payments it receives from the third party are

not reimbursements for the price reduction. See Flik, 2002 ME 176, ¶ 17,

812 A.2d 974.
                                                                                 19

      [¶36] In arguing that the payments were “bounties,” Apple points out

that the carriers’ payments were subject to delay and were conditioned on the

customers’ activation of wireless service contracts with the carriers. We

rejected a similar argument in Flippo. In Flippo, MBNA paid L.L. Bean for

accepting an inducement coupon if the customer who redeemed the coupon

opened a credit card account with MBNA. 2006 ME 62, ¶¶ 2-3, 898 A.2d 942.

The plaintiff class argued that L.L. Bean was entitled to collect sales tax in the

amount of the inducement coupons only if MBNA actually reimbursed L.L. Bean

for accepting the coupons. Id. ¶ 15. We noted that “there is no requirement in

the statutes for examining actual reimbursement” because it is the retailer’s

expectation at the time of sale that controls. Id. ¶ 16.

      Because the tax is due, and must be calculated at the time of sale,
      the expectation of the retailer that there will be third-party
      reimbursement for part of the sale price must also be judged at the
      time of the sale. The failure to receive expected reimbursement
      within a certain period does not retroactively decrease the sales tax
      liability and entitle the purchaser to a refund of the difference.

Id. This principle is directly translatable to the transactions at issue here.

      [¶37] Apple also points to the Maine Revenue Services Instructional

Bulletin’s provision noting that a customer who enters into a wireless service

contract and purchases an iPhone at a retail outlet operated by a wireless

carrier typically pays no sales tax on the iPhone because its price is considered
20

part of the purchase price of the wireless service, which is subject to service

provider tax, see 36 M.R.S. §§ 2551-2560 (2020), rather than sales tax. Apple

argues that it is illogical for its own retail customers who purchase iPhones and

enter into wireless service contracts to be required to pay sales tax on the

regular prices of the iPhones when they would pay no sales tax on the iPhones

if they made the purchase at the carriers’ retail outlets. But, as the Assessor

points out, the two types of transactions are fundamentally different. Apple’s

retail customers make two purchases from two different sellers—they

purchase tangible personal property from Apple and purchase a service from a

wireless carrier—whereas the carriers’ retail customers make a single

“bundled” purchase of a service with the phone included at no extra cost in the

transaction. Also, as the Assessor points out, when the carrier provides a free

phone to a customer entering into a wireless contract, the carrier is extending

a true, nontaxable discount because it does not expect payment for the phone

from either the customer or any third party. See Flippo, 2006 ME 62, ¶ 11,

898 A.2d 942.

      [¶38] The undisputed facts make it clear that the carriers’ payments to

Apple functioned, in part, as reimbursement to Apple for the iPhone price

reductions granted to customers who entered into wireless service contracts
                                                                                                  21

with carriers.        Accordingly, the price reductions that Apple granted to

customers who purchased iPhones and entered into wireless service contracts

were not true, nontaxable discounts within the meaning of the statute, see

36 M.R.S. § 1752(14)(B)(1), and the assessment of sales tax based on the

regular retail prices of the iPhones was valid.

B.     Record Sealing and Public Access to Court Files

       [¶39] The Assessor contends that the court’s order granting Apple’s

request to seal portions of the parties’ court filings was overbroad. The

Assessor objects specifically because the effect of the order was to seal

verbatim quotes from Apple’s contracts with carriers and to redact from the

public record references to the amounts of payments made under the contracts,

despite the fact that all of the contracts have long since expired. Apple cites to

the continued need for confidentiality because it maintains contractual

relationships with the same carriers, and current contracts are built upon

previous ones.4

    4 The tax statute that extends confidentiality protection to information and documentary material

provided by a taxpayer to the Assessor in connection with an audit does not compel the sealing of
such information and material if filed in court. See 36 M.R.S. § 191 (2020) (“Except as otherwise
provided by law, it is unlawful for any person who, pursuant to this Title, has been permitted to
receive or view any portion of the original or a copy of any report, return or other information
provided pursuant to this Title to divulge or make known in any manner any information set forth in
any of those documents or obtained from examination or inspection under this Title of the premises
or property of any taxpayer.”). The statute acknowledges the presumptively public nature of court
filings by specifically permitting such material to be filed in court if “pertinent to the action or
22

       [¶40] A trial court’s decision to seal records is reviewed for an abuse of

discretion. See Bailey v. Sears, Roebuck & Co., 651 A.2d 840, 844 (Me. 1994). “An

abuse of discretion may be found where an appellant demonstrates that the

decisionmaker exceeded the bounds of the reasonable choices available to it,

considering the facts and circumstances of the particular case and the

governing law.” Sager v. Town of Bowdoinham, 2004 ME 40, ¶ 11, 845 A.2d 567.

       [¶41] Here, the court’s confidentiality order was entered by agreement

of the parties.       The order permitted Apple to designate documents and

information as confidential and established a procedure for resolving disputes

about the confidentiality of particular documents and information. The court

followed the procedure in determining what information and documents

should be sealed. The court’s sealing order indicates that it was satisfied that

the material deserved the protection afforded by the order. Although the

court’s sealing order is indeed very broad, we cannot say that it reflected an

abuse of discretion. See Bailey, 651 A.2d at 844.

       [¶42] Accordingly, as to this issue, the court’s order is affirmed.

proceeding,” 36 M.R.S. § 191(2)(C). As with any other material filed with the court, the proponent of
sealing such material has the burden to justify the request through a showing of need for
confidentiality, typically through affidavits if the sealing request is opposed by another party or
questioned by the court.
                                                                             23

        The entry is:

                           Judgment in favor of Apple vacated. Remanded
                           for entry of summary judgment affirming the
                           decision of the Maine Board of Tax Appeals in
                           favor of the Assessor. Order sealing records is
                           affirmed.

Aaron M. Frey, Attorney General, Thomas A. Knowlton, Asst. Atty. Gen. (orally),
and Kimberly L. Patwardhan, Asst. Atty. Gen., Office of the Attorney General,
Augusta, for appellant State Tax Assessor

George S. Isaacson, Esq. (orally), Nathaniel A. Bessey, Esq., and David W.
Bertoni, Esq., Brann & Isaacson, Lewiston, for appellee Apple Inc.

Bernard J. Kubetz, Esq., Eaton Peabody, Bangor, for amici curiae Council on
State Taxation and Maine State Chamber of Commerce

Business and Consumer Docket docket number AP-2018-1
FOR COURT REFERENCE ONLY