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State Tax Assessor v. MCI Communications Services, Inc.

Supreme Court of Maine

June 15, 2017

STATE TAX ASSESSOR
v.
MCI COMMUNICATIONS SERVICES, INC.

          Argued: May 12, 2017

          Janet T. Mills, Attorney General, and Kimberly L. Patwardhan, Asst. Atty. Gen. (orally), Office of the Attorney General, Augusta, for appellant State Tax Assessor

          Jonathan M. Dunitz, Esq., Verrill Dana LLP, Portland, and Cindy B. Gonzales, Esq. (orally), Verizon Corp. Resources Group, LLC, Irving, Texas, for appellee MCI Communications Services, Inc.

          Panel: SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ.

          REPORTER OF DECISIONS

          GORMAN, J.

         [¶1] The State Tax Assessor appeals from the entry of a summary judgment in the Superior Court (Kennebec County, Marden, J.) in favor of MCI Communications Services, Inc. (MCI) on an appeal by the Assessor of a decision vacating the imposition of the state service provider tax on certain charges collected by MCI. The court concluded that those charges were part of the sale of interstate or international telecommunications services and were therefore excluded or exempt from taxation. We affirm the judgment.

         I. BACKGROUND

         [¶2] This appeal concerns two types of surcharges-property tax recovery charges (PTRCs) and carrier cost recovery charges (CCRCs)-that MCI, a telecommunications service provider of long distance telephone service in Maine, imposed upon its Maine customers in 2008, 2009, and 2010. The case was presented to the Superior Court through joint stipulations of facts and stipulated exhibits. As stipulated, the following facts are not in dispute. MCI imposed PTRCs on its customers to recover a percentage of the local and state taxes that it paid on real and tangible personal property used to provide international, interstate, and intrastate telecommunications services. MCI imposed CCRCs on its customers to recover a percentage of the expenses that it paid to the Federal Communications Commission (FCC) and third party administrators for regulatory fees.[1] MCI determined the rate of the PTRC and CCRC surcharges by comparing the total expenses to be recovered to the total eligible revenue (i.e., revenue from interstate and international telecommunications services) against which the surcharges were to be recovered, with the intention of recovering only a portion of the total expenses paid. MCI collected these charges only from its customers with international and interstate services.

         [¶3] In January of 2011, Maine Revenue Services (MRS) notified MCI of its intent to audit MCI for the period of March 1, 2008, to December 31, 2010. As a result of the audit, MRS determined that PTRCs and CCRCs were subject to taxation. MRS assessed MCI $184, 873.69, including interest, for those charges collected during the audit period.

         [¶4] MCI sought reconsideration of the assessment, see 36 M.R.S. § 151 (2012), [2] which the MRS Audit Division denied. MCI next sought review of the assessment with the Maine Board of Tax Appeals. See 36 M.R.S. §§ l5l(2)(E)-(G); 36 M.R.S. § 151-D (2012).[3] By decision dated September 12, 2013, the Board vacated the imposition of the tax based on its determination that PTRCs and CCRCs were excluded or exempt from taxation because they were charged only in connection with sales of international and interstate services.

         [¶5] On November 6, 2013, the Assessor filed a timely petition for review and de novo determination in the Superior Court. See 36 M.R.S. § 151-D(10)(I) (2016).[4] As mentioned above, after they conducted discovery, the parties entered a joint stipulation of facts and exhibits and filed cross-motions for summary judgment. In a judgment dated June 30, 2016, the court denied the Assessor's motion and granted MCI's motion for a summary judgment. The Assessor timely appealed.

         II. DISCUSSION

         [¶6] The Assessor contends that the PTRCs and CCRCs collected by MCI were subject to taxation because they were part of the taxable "sale price" of telecommunications services and were not excluded or exempt from taxation because they were not themselves "telecommunications services" nor were they international or interstate in nature. Because the Assessor appeals from the court's decision on cross-motions for 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." BCN Telecom, Inc. v. State Tax Assessor, 2016 ME 165, ¶ 2, 151 A.3d 497; see M.R. Civ. P. 56(c).

          [¶7] In interpreting a tax statute, we look first to its plain meaning to give effect to the Legislature's intent. BCN Telecom,2016 ME 165, ¶ 2, 151 A.3d 497. We "seek to avoid absurd, illogical or inconsistent results" and "will not read additional language into a statute" or treat words in a statute as "meaningless and superfluous." Blue Yonder, LLC v. State Tax Assessor,2011 ME 49, ¶ 10, 17 A.3d 667 (quotation marks omitted). Further, we construe a tax statute "most strongly against the government and in the [taxpayer's] favor" and will not extend its reach "beyond the clear import of the language used." BCN Telecom,2016 ME 165, ¶ 10, 151 A.3d 497 (quotations marks omitted). Statutory exemptions to taxes are construed narrowly, however, and we will not ...


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