Court Opinion

ID: 4096442
Source: CourtListenerOpinion
Date Created: 2016-11-08 17:08:06.17674+00
Date Added: 2024-06-11T14:49:16.441367
License: Public Domain

MAINE	SUPREME	JUDICIAL	COURT	 	          	     	    	      	      Reporter	of	Decisions	
Decision:	 2016 ME 165 
Docket:	   Ken-15-541	
Argued:	   September	13,	2016	
Decided:	  November	8,	2016	
	
Panel:	    SAUFLEY,	C.J.,	and	ALEXANDER,	MEAD,	GORMAN,	JABAR,	HJELM,	and	HUMPHREY,	JJ.	
	
	
                                      BCN	TELECOM,	INC.	
                                              	
                                             v.	
                                              	
                                     STATE	TAX	ASSESSOR	
	
	
SAUFLEY,	C.J.	

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

by	the	Superior	Court	(Kennebec	County,	Murphy,	J.)	in	favor	of	BCN	Telecom,	

Inc.,	 on	 BCN’s	 appeal	 from	 the	 assessment	 of	 a	 state	 service	 provider	 tax,	

36	M.R.S.	 §	 2552(1)(E)	 (2011),1	 on	 certain	 flat	 charges	 that	 BCN	 imposed	 on	

some	 business	 customers’	 lines	 from	 March	 2008	 to	 October	 2011.	 	 The	

charges	 were	 designed	 in	 part	 to	 reimburse	 BCN	 for	 presubscribed	

interexchange	 carrier	 charges	 (PICCs)2	 that	 it	 paid	 to	 access	 local	 telephone	

infrastructure,	 and	 in	 part	 to	 generate	 profits.	 	 We	 agree	 with	 the	 Assessor	

    1		Although	the	parties	agree	that	the	procedure	in	this	matter	was	governed	by	the	provisions	of	

Title	36	that	are	currently	in	effect,	see	36	M.R.S.	§§	151,	151-D	(2015),	the	substantive	statutes	that	
we	have	been	asked	to	construe	are	those	that	were	in	effect	during	the	audit	period.	

    2	
    For	 the	 reader’s	 ease	 in	 this	 matter,	 which	 involves	 multiple	 abbreviations,	 “PICC”	 is	
pronounced	“pixie”	in	the	telecommunications	industry.	
2	

that	 (A)	 the	 amounts	 received	 by	 BCN	 were	 subject	 to	 the	 tax	 as	 part	 of	 the	

sale	 price	 for	 telecommunications	 services,	 and	 (B)	 BCN	 failed	 to	 provide	

prima	 facie	 proof	 that	 the	 tax	 exemption	 for	 interstate	 telecommunications	

services,	36	M.R.S.	§	2557(34)	(2011),	applied	to	these	charges.		Accordingly,	

we	vacate	the	judgment	entered	by	the	Superior	Court.	

                                        I.		STANDARD	OF	REVIEW	

	         [¶2]	 	 This	 matter	was	decided	by	the	Superior	Court	on	 cross-motions	

for	 summary	 judgment.	 	 The	 court	 considered	 the	 matter	 de	 novo,	 see	

36	M.R.S.	§	151-D(10)(I)	(2015),3	and	we	review	the	decision	of	the	court	on	

appeal.	 	 In	 considering	 an	 appeal	 from	 a	 summary	 judgment,	 we	 review	 de	

novo	whether	there	was	no	genuine	issue	of	material	fact	and	either	party	was	

entitled	to	judgment	as	a	matter	of	law.		See	M.R.	Civ.	P.	56(c);	Blue	Yonder,	LLC	

v.	State	Tax	Assessor,	2011 ME 49,	¶	7,	17 A.3d 667.		In	interpreting	statutes,	

we	 give	 effect	 to	 the	 Legislature’s	 intent	 as	 expressed	 in	 the	 statutes’	 plain	

meaning.		Scott	Paper	Co.	v.	State	Tax	Assessor,	610 A.2d 275,	277	(Me.	1992).		

Because	the	Superior	Court	was	authorized	to	rule	on	legal	matters	de	novo,	

see	36	M.R.S.	§	151-D(10)(I),	we	review	the	court’s	interpretation	directly	and	

     3	 	 “The	 court	 shall	 make	 its	 own	 determination	 as	 to	 all	 questions	 of	 fact	 or	 law,	 regardless	 of	

whether	the	questions	of	fact	or	law	were	raised	before	the	division	within	the	bureau	making	the	
original	determination	or	before	the	board.”		36	M.R.S.	§	151-D(10)(I)	(2015).	
                                                                                                        3	

do	not	defer	to	the	Tax	Assessor’s	interpretive	rulings.4		See	Blue	Yonder,	LLC,	

2011 ME 49,	¶¶	6-7,	17 A.3d 667.	

                                         II.		BACKGROUND	

        [¶3]	 	 The	 following	 facts	 are	 drawn	 from	 the	 parties’	 statements	 of	

material	 facts	 and	 their	 stipulated	 facts	 and	 exhibits.	 	 During	 the	 relevant	

audit	period	of	March	1,	2008,	to	October	31,	2011,	BCN	functioned	in	Maine	

both	as	a	competitive	local	exchange	carrier	(CLEC),	supplying	local	telephone	

service,	 and	 an	 interexchange	 carrier	 (IXC),	 providing	 long-distance	 service	

between	 exchange	 areas.	 	 BCN	 charged	 a	 monthly	 rate	 for	 local	 calls	 and	 a	

per-minute	rate	for	interstate	and	intrastate	long-distance	calls.		BCN	had	no	

employees	 stationed	 in	 Maine	 but	 resold	 telecommunications	 services	 to	

business	and	residential	customers	in	Maine	for	both	local	and	long-distance	

services.			

        [¶4]	 	 In	 its	 role	 as	 an	 IXC,	 BCN	 was,	 in	 some	 instances,	 charged	 PICCs,	

which	are	fees	or	end-user	charges	that	a	local	exchange	carrier	may	impose	

to	recover	a	portion	of	the	interstate	local	loop	cost	from	an	IXC.		See	47	C.F.R.	

   4		Cf.	SST	&	S,	Inc.	v.	State	Tax	Assessor,	675 A.2d 518,	521	(Me.	1996)	(stating,	before	36	M.R.S.	

§	151-D(10)(I)	(2015)	was	enacted,	that	“absent	language	in	the	statute	making	the	interpretative	
ruling	 of	 the	 Assessor	 contrary	 to	 the	 expressed	 legislative	 purpose,”	 we	 would	 defer	 to	 the	
Assessor’s	interpretive	ruling).	
4	

§	 69.153	 (2014).5	 	 Thus,	 IXCs	 like	 BCN	 pay	 PICCs	 to	 local	 exchange	 carriers,	

whether	 they	 are	 incumbent	 local	 exchange	 carriers	 (ILECs),	 which	 own	 the	

actual	 infrastructure	 of	 local	 loops,	 or	 CLECs,	 which	 compete	 with	 ILECs	 in	

providing	local	services.		See	id.		PICCs	are	capped	by	federal	regulations,	but	

the	 amount	 charged	 by	 a	 local	 exchange	 carrier	 up	 to	 that	 cap	 is	 in	 the	

carrier’s	discretion.		See	47	C.F.R.	69.153(a),	(e).	

          [¶5]	 	 BCN’s	 bills	 to	 its	 customers	 included	 a	 line	 item	 that	 it	 labeled,	

“PICC:	 Primary	 InterExchange	 Carrier	 Charge.”	 	 The	 charges	 that	 it	 thereby	

imposed	on	customers	were	not,	themselves,	PICCs,	which	are,	by	definition,	

paid	by	IXCs	as	long	as	customers,	like	those	of	BCN,	have	selected	an	IXC.		See	

47	C.F.R.	 §	 69.153(a),	 (b).	 	 Thus,	 the	 charge	 listed	 on	 the	 customers’	 bills	 by	

BCN	was	more	in	the	nature	of	a	pass-through	charge,	although,	as	described	

below,	 the	 charge	 significantly	 exceeded	 the	 costs	 incurred	 by	 BCN.	 	 BCN	

imposed	 its	 “PICC”	 charges	 on	 those	 business	 customers	 with	 multiple	

long-distance	 lines	 that	 did	 not	 negotiate	 with	 BCN	 to	 avoid	 paying	 the	

charges.		BCN	did	so	in	part	to	recover	PICCs	that	it	had	paid	to	local	exchange	

carriers	and	in	part	to	realize	a	profit.			

     5	 	 A	 local	 exchange	 carrier	 may	 recover	 a	 PICC	 from	 the	 end	 user	 only	 if	 the	 customer	 is	 not	

presubscribed	to	an	IXC.		See	47	C.F.R.	§	69.153(b)	(2014).	
                                                                                      5	

      [¶6]	 	 BCN	 limited	 the	 charges	 that	 it	 imposed	 to	 an	 amount	 not	

exceeding	 the	 maximum	 PICC	 authorized	 for	 a	 local	 exchange	 carrier	 to	

charge	an	IXC	by	federal	regulation.		See	47	C.F.R.	69.153(a),	(e).		BCN’s	“PICC”	

charges	 were	 imposed	 on	 a	 per-line,	 not	 a	 per-call,	 basis,	 and	 were	 charged	

whether	or	not	any	long-distance	calls	were	made.		Even	if	all	of	a	customer’s	

long-distance	calls	were	in-state	calls,	BCN	imposed	the	charge.			

      [¶7]	 	 Nationwide,	 BCN,	 in	 its	 capacity	 as	 an	 IXC,	 paid	 a	 total	 of	

$386,802.46	in	PICCs	to	local	exchange	carriers	during	the	period	established	

for	the	audit.		It	then	charged	its	customers	$6,736,257.78,	nationwide,	in	fees	

that	it	designated	“PICC”	in	its	bills.		In	Maine	alone,	BCN	charged	$825,940.30	

to	customers	under	this	“PICC”	designation,	more	than	double	the	amount	of	

the	costs	it	incurred	on	a	nationwide	basis.			

      [¶8]	 	 Maine	 Revenue	 Services	 determined	 that	 BCN’s	 “PICC”	 revenues	

were	subject	to	a	service	provider	tax	as	part	of	BCN’s	sale	price	for	in-state	

“[t]elecommunications	 services.”	 	 36	M.R.S.	 §§	 2551(15),	2552(1)(E),	

2557(34)	 (2011).	 	 BCN	 was	 assessed	 $41,296.96	 in	 taxes	 and	 $7,778.60	 in	

interest.		BCN	sought	reconsideration,	see	36	M.R.S.	§	151(2)	(2015),	and	the	

Sales	 and	 Use	 Tax	 Division	 of	 Maine	 Revenue	 Services	 affirmed	 the	

assessment.	 	 BCN	 sought	 review	 of	 the	 reconsidered	 decision	 by	 filing	 a	
6	

written	statement	of	appeal	with	the	Maine	Board	of	Tax	Appeals	in	October	

2012.	 	 See	 36	 M.R.S.	 §	 151(2)(E),	 (F)(1)	 (2015).	 	 The	 Board	 affirmed	 the	

imposition	of	the	tax.		See	36	M.R.S.	§	151-D(10)(I).			

       [¶9]		BCN	filed	a	timely	petition	for	review	of	final	agency	action	in	the	

Superior	Court.		See	id.;	M.R.	Civ.	P.	80C.		The	parties	conducted	discovery	and,	

at	 the	 direction	 of	 the	 court,	 entered	 a	 joint	 stipulation	 of	 facts	 and	 exhibits.		

The	 parties	 filed	 cross-motions	 for	 summary	 judgment	 with	 statements	 of	

material	 facts	 and	 supporting	 materials.	 	 After	 considering	 the	 parties’	

submissions,	 the	 court	 granted	 BCN’s	 motion	 for	 summary	 judgment,	

concluding	 that	 BCN’s	 charges	 were	 not	 part	 of	 the	 “sale	 price”	 of	

telecommunications	 services,	 36	 M.R.S.	 §§	 2551(15),	 2552(2)	 (2011),	 and	

that,	 even	 if	 they	 were,	 they	 were	 exempt	 from	 taxation	 because	 they	 were	

charges	 for	 interstate	 telecommunications	 services.	 	 The	 Assessor	 appeals	 to	

us.		See	14	M.R.S.	§	1851	(2015);	M.R.	App.	P.	2.			

                                     III.		DISCUSSION	

A.	    Applicability	of	Service	Provider	Tax	

       [¶10]		“Statutes	imposing	taxes	are	construed	most	strongly	against	the	

government	and	in	the	citizen’s	favor	and	may	not	be	extended	by	implication	

beyond	the	clear	import	of	the	language	used.”		Camp	Walden	v.	Johnson,	156	
                                                                                                                    7
Me. 160,	 165,	 163 A.2d 356  (1960);	 see	 also	 Capitol	 Bank	 &	 Tr.	 Co.	 v.	 City	 of	

Waterville,	343 A.2d 213,	218	(Me.	1975)	(“[T]ax	statutes	are	to	be	construed	

strictly	against	the	taxing	authority.”).		During	the	audit	period,	the	statute	at	

issue	 here	 provided,	 “A	 tax	 at	 the	 rate	 of	 5%	 is	 imposed	 on	 the	 value	 of	 .	 .	 .	

[t]elecommunications	 services”	 sold	 in	 Maine.	 	 36	 M.R.S.	 §	2552(1)(E).6		

“Value	is	measured	by	the	sale	price.”		36	M.R.S.	§	2552(2).	

        [¶11]	 	 As	 it	 applies	 here,	 “‘[s]ale	 price’	 means	 the	 total	 amount	 of	

consideration,	 including	 cash,	 credit,	 property	 and	 services,	 for	 which	 .	 .	 .	

services	 are	 sold	 .	 .	 .	 without	 any	 deduction	 for	 the	 cost	 of	 materials	 used,	

labor	 or	 service	 cost,	 interest,	 losses	 and	 any	 other	 expense	 of	 the	 seller.”		

36	M.R.S.	§	2551(15)	(emphasis	added).		“Sale	price”	is	specifically	defined	to	

include	 “any	 consideration	 for	 services	 that	 are	 a	 part	 of	 a	 sale.”	 	 Id.		

Telecommunications	 services,	 at	 issue	 here,	 were	 defined	 as	 “the	 electronic	

transmission,	conveyance	or	routing	of	voice,	data,	audio,	video	or	any	other	

information	 or	 signals	 to	 a	 point	 or	 between	 or	 among	 points.”	 	 36	 M.R.S.	

§	2551(20-A)	(2011).7	

   6	 	 The	 tax	 rate	 has	 since	 increased	 to	 six	 percent.	 	 See	 P.L.	 2015,	 ch.	 267,	 §	 TTTT-3	 (effective	

January	1,	2016)	(codified	at	36	M.R.S.	§	2552(1)	(2015)).	

   7	 	 The	 statute	 differed	 slightly	 at	 the	 start	 of	 the	 audit	 period,	 defining	 “[t]elecommunications	

services”	to	include,	in	relevant	part,	“[t]he	provision	of	2-way	interactive	communications	through	
the	 use	 of	 telecommunications	 equipment,	 exclusive	 of	 mobile	 telecommunications	 services.”		
36	M.R.S.	§	2551(20)(A)(1)	(2007).	
8	

        [¶12]	 	 We	 conclude,	 based	 on	 the	 plain	 language	 of	 the	 statute,	 that	

BCN’s	 “PICC”	 charges	 to	 its	 Maine	 customers	 were	 included	 in	 the	 “total	

amount	 of	 consideration,”	 36	 M.R.S.	 §	2551(15),	 that	 the	 multiple-line	

business	 customers	 paid	 to	 BCN	 for	 telecommunications	 services.	 	 See	 Camp	

Walden, 156 Me.	at	165,	163 A.2d 356.		Although	BCN	argues	that	the	“PICC”	

charges	        were	       access	        charges—not	            consideration	           for	     actual	

telecommunications	 services—BCN	 did	 not	 require	 all	 multi-line	 business	

customers	to	pay	these	charges	to	access	services,	and	the	charges	were	part	

of	the	total	compensation	paid	for	telecommunication	services.		See	36	M.R.S.	

§	 2551(15).	 	 BCN	 could	 have	 taken	 into	 account	 its	 need	 to	 cover	 costs	 and	

earn	a	profit	through	its	ordinary	rate-setting	process,	and	there	was	nothing	

about	the	“PICC”	charge	that	distinguished	it	as	anything	other	than	a	charge	

for	 telecommunications	 services.8	 	 Thus,	 whether	 or	 not	 federal	 regulators	

precluded	 or	 allowed	 BCN’s	 billing	 practice,	 Maine’s	 statutes	 brought	 the	

“PICC”	charge	imposed	on	Maine	customers	during	the	audit	period	within	the	

sale	price	of	telecommunications	services.		See	id.		Based	on	the	language	used	

   8		Cf.	Indoor	Billboard/Wash.,	Inc.	v.	Integra	Telecom	of	Wash.,	Inc.,	170 P.3d 10,	19	(Wash.	2007)	

(concluding	 that	 a	 carrier	 that	 “labeled	 the	 surcharge	 it	 imposed	 on	 local	 business	 service	
customers	a	PICC”	had	committed	an	unfair	or	deceptive	act	or	practice	because	“the	term	PICC	had	
the	 capacity	 to	 deceive	 a	 substantial	 portion	 of	 the	 public	 into	 thinking	 the	 surcharge	 was	 FCC	
regulated	and	required”).	
                                                                                      9	

by	the	Legislature,	the	charges	were	subject	to	the	service	provider	tax,	see	36	

M.R.S.	§	2552(1)(E),	unless	an	exemption	applied.	

B.	   Exemption	for	Interstate	Telecommunications	Services	

      [¶13]		When	a	tax	exemption	is	being	interpreted,	it	must	be	“construed	

narrowly.”		Brent	Leasing	Co.	v.	State	Tax	Assessor,	2001 ME 90,	¶	15,	773 A.2d
457.	 	 “[A]n	 exemption	 from	 taxation,	 while	 entitled	 to	 reasonable	

interpretation	 in	 accordance	 with	 its	 purpose,	 is	 not	 to	 be	 extended	 by	

application	to	situations	not	clearly	coming	within	the	scope	of	the	exemption	

provisions.”	 	 Robbins	 v.	 State	 Tax	 Assessor,	 536 A.2d 1127,	 1128	 (Me.	 1988)	

(quotation	 marks	 omitted).	 	 To	 the	 extent	 that	 the	 applicability	 of	 the	

exemption	 cannot	 be	 determined	 on	 the	 facts	 provided	 on	 summary	

judgment,	the	matter	must	be	resolved	in	favor	of	the	Assessor	because	“[t]he	

burden	 of	 proof	 is	 on	 the	 taxpayer,”	 36	 M.R.S.	 §	 151-D(10)(I),	 which	 must	

make	a	prima	facie	showing	of	the	applicability	of	the	exemption	for	its	claim	

to	 survive	 the	 cross-motions	 for	 summary	 judgment.	 	 Estate	 of	 Cabatit	 v.	

Canders,	 2014 ME 133,	 ¶	 8,	 105 A.3d 439;	 Kondaur	 Capital	 Corp.	 v.	 Hankins,	

2011 ME 82,	¶	17,	25 A.3d 960.	

      [¶14]	 	 The	 exemption	 at	 issue	 here	 applied	 to	 “[s]ales	 of	 interstate	

telecommunications	 service.”	 	 36	 M.R.S.	 §	 2557(34).	 	 Although	 the	 PICC	 is	 a	
10	

creature	of	federal	law	that	is	chargeable	to	an	IXC,	see	47	C.F.R.	§	69.153,	BCN	

has	 offered	 no	 evidence	 to	 demonstrate	 that	 the	 charges	 that	 it	 imposed	 in	

fact	 related	 only	 to	 interstate	 telecommunications	 services.	 	 Given	 that	 the	

charges	 paid	 by	 multi-line	 business	 customers	 in	 Maine	 far	 exceeded	 what	

BCN	paid	in	PICCs	nationwide,	however,	we	can	be	certain	that	not	all	of	the	

revenues	 it	 received	 from	 Maine	 customers	 arose	 from	 PICCs	 related	 to	

interstate	 service.	 	 BCN	 has	 not,	 on	 the	 record	 supplied,	 met	 its	 burden	 to	

make	a	prima	facie	showing	that	all—or	any	identified	portion—of	the	“PICC”	

charges	that	it	imposed	on	Maine	customers	arose	from	the	sale	of	interstate	

telecommunications	 services	 in	 Maine.	 	 Accordingly,	 the	 stipulated	 facts	 and	

summary	 judgment	 record,	 although	 undisputed,	 do	 not	 establish	 the	

applicability	 of	 the	 tax	 exemption	 as	 a	 matter	 of	 law.	 	 See	 36	M.R.S.	

§	151-D(10)(I).	

      The	entry	is:	

                    Judgment	vacated.		Remanded	for	the	entry	of	a	
                    judgment	affirming	the	decision	of	the	State	Tax	
                    Assessor.	
	
	     	      	      	      	      	
                                                                              11	

	
On	the	briefs:	
	
      Janet	 T.	 Mills,	 Attorney	 General,	 and	 Kimberly	 L.	
      Patwardhan,	Asst.	Atty.	Gen.,	Office	of	the	Attorney	General,	
      Augusta,	for	appellant	State	Tax	Assessor	
      	
      Michael	 L.	 Sheehan,	 Esq.,	 and	 Michael	 S.	 Smith,	 Esq.,	 Preti	
      Flaherty	 Beliveau	 &	 Pachios,	 LLP,	 Portland,	 and	 John	 W.	
      Sullivan	III,	Esq.,	Sullivan	&	Associates,	P.C.,	New	York,	New	
      York,	for	appellee	BCN	Telecom,	Inc.	
	
	
At	oral	argument:	
	
      Kimberly	L.	Patwardhan,	Asst.	Atty.	Gen.,	for	appellant	State	
      Tax	Assessor	
      	
      John	W.	Sullivan	III,	Esq.,	for	appellee	BCN	Telecom,	Inc.	
	
	
	
Kennebec	County	Superior	Court	docket	number	AP-2013-26	
FOR	CLERK	REFERENCE	ONLY