State Tax Assessor v. MCI Communications Services, Inc.
2017 ME 119
| Me. | 2017Background
- MCI, a long-distance telecommunications provider, imposed two surcharges (Property Tax Recovery Charges (PTRCs) and Carrier Cost Recovery Charges (CCRCs)) on Maine customers in 2008–2010 to recover taxes and regulatory/third‑party fees.
- MCI calculated these surcharges as a percentage of customers’ interstate and international telecommunications charges and charged them only to customers who purchased interstate or international service.
- Maine Revenue Services audited MCI for March 1, 2008–December 31, 2010, and assessed $184,873.69, concluding the PTRCs and CCRCs were taxable sale price components.
- The Maine Board of Tax Appeals vacated the assessment, finding the surcharges were excluded or exempt because they related only to interstate and international sales.
- The State Tax Assessor appealed to Superior Court; the court granted summary judgment for MCI. The Assessor appealed to the Maine Supreme Judicial Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether PTRCs and CCRCs are part of the taxable “sale price” of telecommunications services | Assessor: They are part of sale price but not exempt because they are not themselves telecommunications services or interstate/international in nature | MCI: The surcharges are part of the total consideration for interstate/international services and thus part of the sale price — and eligible for exclusion/exemption | Held: PTRCs and CCRCs are part of the sale price of telecommunications services and thus subject to the statute’s exclusion/exemption analysis |
| Whether surcharges charged in connection with interstate/international services are excluded (pre‑July 18, 2008) | Assessor: The surcharges aren’t literal telecommunications services and so aren’t excluded | MCI: Pre‑amendment statutory language excluded services originating/terminating outside Maine, which covers these charges since they were applied only to interstate/international sales | Held: Pre‑July 18, 2008 surcharges were excluded from taxation under the statutory exclusion |
| Whether surcharges are exempt (post‑July 18, 2008) | Assessor: The exemption applies only to the underlying signal/transmission, not to ancillary surcharges; recovery of costs not exclusively incurred in Maine defeats the exemption | MCI: The statute exempts “sales of” interstate/international telecommunications service, and that phrase includes the sale price (all consideration) — so PTRCs/CCRCs are within the exemption | Held: Post‑July 18, 2008 surcharges were exempt because the exemptions for “sales of” interstate/international services encompass the sale price and these surcharges |
Key Cases Cited
- BCN Telecom, Inc. v. State Tax Assessor, 151 A.3d 497 (Me. 2016) (sale price analysis and construing tax statutes against the government)
- Blue Yonder, LLC v. State Tax Assessor, 17 A.3d 667 (Me. 2011) (statutory construction principles; do not treat words as superfluous)
- Apex Custom Lease Corp. v. State Tax Assessor, 677 A.2d 530 (Me. 1996) (use of dictionary definitions to determine plain meaning)
- Darling’s v. Ford Motor Co., 719 A.2d 111 (Me. 1998) (Legislature intended generally accepted meanings of terms absent contrary evidence)
- Linnehan Leasing v. State Tax Assessor, 898 A.2d 408 (Me. 2006) (standard for direct review of Superior Court tax determinations)