BEFORE THE STATE BOARD OF EQUALIZATION
FOR THE STATE OF WYOMING
IN THE MATTER OF THE APPEAL OF )
QWEST CORPORATION, FROM AN AUDIT ) Docket No. 2003-92
ASSESSMENT DECISION OF THE EXCISE )
DIVISION OF THE DEPARTMENT OF )
REVENUE (7/1/97 - 12/31/01) )
FINDINGS OF FACT
CONCLUSIONS OF LAW
DECISION AND ORDER
APPEARANCES
John E. Masters and Ryan Schwartz, Hathaway & Kunz, P. C., Neil I. Pomerantz, Silverstein & Pomerantz LLP, and Mark Hamilton, Qwest Communication, Inc., for Qwest Corporation (Qwest or Petitioner).
Cathleen D. Parker and Ryan Schelhaas, Assistant Attorneys General, for the Department of Revenue (Department).
DIGEST
The matter came before the State Board of Equalization (Board) on a Case Notice filed August 13, 2003. Petitioner Qwest appealed a sales and use tax audit assessment which imposed sales tax on two charges collected from its customers: the 911 emergency service charge, and the End User Common Line charge. An order setting the matter for hearing was entered on December 8, 2003. The matter was heard on May 10-12, 2004, by Roberta A. Coates, Chairman, and Alan B. Minier, Vice-Chairman, a quorum of the Board. Thomas R. Satterfield, Board Member, participated in the decision by review of the record.
JURISDICTION
The Board is required to “[d]ecide all questions that may arise with reference to the construction of any statute affecting the assessment, levy and collection of taxes, in accordance with the rules, regulations, orders and instructions prescribed by the Department.” Wyo. Stat. Ann. §39-11-102.1(c)(iv). The rules of practice and procedure for appeals before the Board involving tax matters contemplate appeals from final administrative decisions of the Department. Rules, Wyoming State Board of Equalization, Chapter 2, §2. The rules require appeals to be filed with the Board within thirty (30) days of any administrative decision. Rules, Wyoming State Board of Equalization, Chapter 2, §5.
Petitioner Qwest timely filed its appeal. Upon application of any person adversely affected, the Board is mandated to review final Department actions concerning state excise taxes, and "[h]old hearings after due notice in the manner and form provided in the Wyoming Administrative Procedure Act and its own rules and regulations of practice and procedure." Wyo. Stat. Ann. §39-11-102.1(c)(viii), Wyo. Stat. Ann. §§16-3-101 through 16-3-115. The Board is required to decide all issues relating to this appeal and give a written decision, citing findings of fact and conclusions of law following a hearing. Rules, Wyoming State Board of Equalization, Chapter 2, §34.
DISCUSSION
This appeal of an assessment audit concerns three issues, which we pose and answer as follows:
Did the Department of Revenue properly assess a sales tax on 911 emergency services charges that Qwest collected from its customers?
No.
Did the Department of Revenue properly assess a sales tax on End User Common Line charges that Qwest collected from its customers?
Yes.
Did the pertinent statute of limitations bar a portion of the Department of Revenue’s audit assessment?
No.
FINDINGS OF FACT
A. General
1. The Wyoming Department of Revenue issued an assessment letter (Assessment) to Qwest on July 21, 2003. [Stipulated Facts, ¶1; Exhibit 101]. Qwest is the successor in interest to U S WEST. [Transcript Vol. I, p. 38]. The Department’s assessment followed an audit by the Wyoming Department of Audit for the period July 1, 1997 through December 31, 2001. [Exhibit 100].
2. The Assessment stated that Qwest owed $3,428,102.95 in additional tax, plus $1,553,797.16 in interest thereon, for a total of $4,981,900.11. [Stipulated Facts, ¶2; Exhibit 101].
3. Petitioner Qwest filed a Notice of Appeal of the Department’s assessment August 19, 2003. [Board Record]. The letter of appeal by Petitioner was timely filed and the Board has jurisdiction to determine this matter. [Stipulated Facts, ¶¶5, 6].
B. The 911 emergency services charge
4. The first issue involves the 911 emergency reporting system authorized by state and federal law. Infra, ¶42. During the period at issue, Wyoming law authorized local government entities to impose a 911 charge, and to require local exchange carriers such as Qwest to bill and collect the charge on their behalf. [Stipulated Facts, ¶¶8, 9]. The local government entities were obliged to use the 911 revenues for the construction, maintenance, and operation of infrastructure necessary to provide emergency 911 services. [Stipulated Facts, ¶7].
5. Wyoming law required local exchange carriers such as Qwest to collect the 911 charge and remit all funds collected to the local government entities assessing the charge, with the exception of a 1% collection fee. [Stipulated Facts, ¶13]. Qwest remitted all 911 funds so collected, with the exception of the 1% collection fee, to the local government entities assessing the charge. [Stipulated Facts, ¶¶10, 14].
6. Wyoming law required local exchange carriers, such as Qwest, to separately state the 911 charge on their billings to service customers. [Stipulated Facts, ¶11]. Qwest separately stated the 911 charge on its monthly customer invoices. [Stipulated Facts, ¶12].
7. On a quarterly basis, Wyoming law required local exchange carriers, such as Qwest, to remit a report, together with 911 funds collected, to the respective local government entities imposing the charge. [Stipulated Facts, ¶15]. Qwest did so. [Stipulated Facts, 16].
8. State law also circumscribes a local exchange carrier’s rights and remedies with respect to the 911 charge. Any 911 charge billed by Qwest remained a debt of the customer until paid to Qwest, or to the local government entity imposing the charge. [Stipulated Facts, ¶17]. In the event a Qwest customer failed to pay the 911 charge, Qwest lacked legal authority to enforce payment of the charge. [Stipulated Facts, ¶18]. Only the local government entities had authority to initiate a collection action against a Qwest service customer that failed to pay the 911 charge. [Stipulated Facts, ¶19]. Qwest could not discontinue telephone services to a customer that failed to pay the 911 charge. [Stipulated
Facts, ¶20]. A Qwest customer that paid its entire Qwest bill, with the exception of the 50 cent 911 charge, would continue to receive telephone services from Qwest. [Stipulated Facts, ¶21]. A customer’s failure to pay the 911 charge would not allow Qwest to alter the level or quality of telephone services delivered to that customer. [Stipulated Facts, ¶22].
9. The Department takes the position that the 911 charge should be subject to sales tax because it is a charge that is incidental to the provision of intrastate telephone service. [Transcript, Vol. III, p. 459]. The 911 charge is therefore said to be part of the sales price to the service customer, or stated alternatively, part of the consideration paid by the customer. [Transcript, Vol. III, pp. 459-460, 462-463]. The Department also says that during the period at issue, there was nothing in the sales price statute that excluded the charge, and no exemption in the statute for the charge. [Transcript, Vol. III, pp. 459,463]. Specifically, during the period at issue, the 911 charge was not defined as a tax. [Transcript, Vol. III, p. 463].
10. In reaching its conclusion that the 911 charge should be subject to sales tax, the Department took into account the statutory definition of essential telecommunications services found under the authorities of the Wyoming Public Service Commission. [Transcript, Vol. III, p. 462]. One element of essential telecommunications services is “services necessary to connect 911 emergency services to the local network.” [Transcript, Vol. III, p. 462].
11. A statutory change in 2003 affected the Department’s view of whether the 911 charge was subject to taxation during the audit period. The Department contends that a 2003 statutory change denominating the 911 charge as a “tax” converted the charge from a taxable charge to a non-taxable charge. [Stipulated Facts, ¶¶23, 28]. The 2003 legislative amendments to the emergency 911 article became effective on July 1, 2003. [Stipulated Facts, ¶24].
12. The Legislature’s revised characterization of the 911 charge did not otherwise affect principal features of the statutory structure of 911 emergency service. The 2003 legislative amendments to the emergency 911 article did not alter the use of the 911 charge on behalf of local government entities. [Stipulated Facts, ¶25; Transcript, Vol. III, p. 567]. The 2003 legislative amendments did not alter Qwest’s responsibility to collect the 911 charge on behalf of local government entities. [Stipulated Facts, ¶26; Transcript, Vol. III, p. 566]. The 2003 legislative amendments did not alter Qwest’s responsibility to remit all 911 funds collected, with the exception of a 1% collection fee, to the local government entities assessing the charge. [Stipulated Facts, ¶27; Transcript, Vol. III, p. 567]. The 2003 legislative amendments to the emergency 911 article did not require local exchange carriers to make any changes to the forms used to report and remit 911 collections. [Stipulated Facts, ¶29].
C. The End User Common Line charge
13. The Federal Communications Commission (FCC) exercises regulatory jurisdiction over interstate telephone services. [Stipulated Facts, ¶30]. In contrast, the Wyoming Public Service Commission (PSC) exercises regulatory jurisdiction over intrastate telephone services. [Stipulated Facts, ¶33].
14. As an exercise of its interstate regulatory jurisdiction, the FCC authorizes the End User Common Line (EUCL) charge. [Stipulated Facts, ¶¶31, 34]. In contrast, the PSC exercises no regulatory jurisdiction over the EUCL charge. [Stipulated Facts, ¶35].
15. The EUCL charge is a flat charge, and does not vary with the customer’s use of telecommunications services. [Stipulated Facts, ¶32]. The EUCL charge is not a tax or fee charged by the government. Instead, the money received from this charge goes directly to Qwest. [Stipulated Facts, ¶38]. It is part of the access charge contained in Petitioner’s basic service rate. [Transcript Vol. I, p. 42].
16. The parties generally agree on the following explanation of the EUCL charge provided by the Office of the Consumer Advocate of the PSC, which relates to residential telephone customers:
Federal Access Charge $6.00 per month. The $6.00 charge reflects a charge in a month prior to July 1, 2003. The charge as of July 1, 2003 has increased to $6.50 per month. This interstate charge, which is imposed by the Federal Communications Commission, is meant to recover a portion of the customer’s local loop (i.e., connection from the customers’ premise [sic] to the telephone company’s central office and switching equipment) that is used for providing interstate services. In recent years, the recovery of these interstate assigned costs has been moving from a per minute charged, paid by interstate, long distance providers, to a flat charge paid by customers, regardless of the amount of long distance service used.
[Exhibit 105, p. 000267; see also Transcript Vol. I, p. 89]. The EUCL charge for customers with other types of service, such as a multi-line business subscriber, may be higher than $6.50 per month. [Exhibit 126, pp. 773-777]. The charge helps assure the financial integrity of the local telecommunications carrier that provides the local portion of interstate service. [Transcript Vol. I, p. 58].
17. Generally speaking, a tariff is a “fee that a .... telecommunications company may assess for its services; the tariffs that a provider may charge are limited by statute.” Black’s Law Dictionary (7th Ed.)(1999), at 1468. The parties have stipulated that Qwest includes the EUCL charge in tariffs it files with the FCC, but does not include the EUCL charge in tariffs it files with the PSC. [Stipulated Facts, ¶¶36, 37]. Despite the stipulation of the parties, the word “tariff” has been an anachronism in the context of Wyoming intrastate telecommunications since the passage of the Wyoming Telecommunications Act of 1995. Wyo. Stat. Ann. §37-15-101 et seq.
18. Qwest established its Wyoming intrastate prices pursuant to price schedules. [Exhibit 125; compare excerpted FCC tariff, Exhibit 126, §4.1]. The table of contents of the current Price Schedule for Wyoming, together with Section 5 related to Exchange Services, was admitted into the record. [Exhibit 125]. There is no EUCL charge on the Price Schedule because the EUCL charge is not within the jurisdiction of the PSC. [Transcript Vol. I, p. 63].
19. At the hearing of this matter, neither party called an official of the PSC or the FCC. Our record therefore does not include the testimony of authorized officials to explain the EUCL charge, or generally to the current structure of rate regulation for telecommunications services.
20. To provide context for the EUCL charge, Qwest employee Jerrold Thompson testified to a simplified schematic of the Wyoming telecommunications network. [Exhibit 150]. Thompson explained that a typical Qwest customer in Cheyenne is connected to Qwest’s wire center in Cheyenne by a local loop which provides the customer with access to Qwest’s switching facilities at the wire center. [Transcript Vol. I, pp. 43-44]. From the wire center, the customer’s calls can be directed to one of three places: (1) a wire center in another state for further switching and eventual termination, in which case the call is an interstate long distance call; (2) a different wire center in Wyoming for further switching and eventual termination, in which case the call is an intrastate long distance call; (3) another local customer in Cheyenne, in which case the call is an intrastate local call. [Transcript Vol. I, pp. 43-45, 83, 107].
21. For historical reasons, all long distance calls that cross state lines are made over the lines of interstate carriers who are independent of Qwest. [Transcript Vol. I, pp. 47-48, 84, 99]. Conversely, services associated with the local intrastate loop are provided exclusively by Qwest. [Transcript Vol. I, p. 48]. The structure of rate regulation generally follows these divisions. Rates for interstate calls were and are regulated by the FCC. [Transcript Vol. I, p. 55]. Rates for intrastate calls are regulated, if at all, by the PSC. [Transcript Vol. I, p. 55]. For rate regulation purposes, twenty-five percent of the costs of the local loop are associated with the provision of interstate service, even though all of the local loop is physically located in Wyoming. [Transcript Vol. I, pp. 41, 46, 51].
22. The Department views the EUCL charge as part of the sales price a person pays in order to obtain basic phone service. [Transcript Vol. III, p. 451]. Although authorized by the FCC, the Department views the charge as supporting the maintenance of the local exchange. [Transcript Vol. III, p. 458]. Further, the Department notes that the Petitioner has no facilities that cross state lines, and that the service provided by the Petitioner, even with respect to interstate calls, falls within the definition in the Department’s regulations. [Transcript Vol. III, pp. 483-484].
D. The statute of limitations
23. William McInerney is a principal auditor employed by the Wyoming Department of Audit. [Transcript Vol. II, p. 327]. On March 6, 2000, McInerney sent a letter to Paul Fortney, Director of State and Local Taxes for U S WEST Communications, confirming that an audit had been scheduled. [Exhibit 500; Transcript Vol. II, p. 332]. The audit was initiated by the Department of Audit independent of any contact from the Department of Revenue. [Transcript Vol. II, p. 344]. The Department of Audit, Chapter 11, General Auditing Rules and Procedures provides that all types of audit candidates shall be selected by the Department of Audit, in its discretion, based upon the statute of limitations for tax audits provided by law. [Stipulated Facts, ¶48].
24. The stated period of the sales and use tax audit was July 1, 1997, through June 30, 2000. [Exhibit 500]. As initially engaged, the audit contemplated a review of no more than three years of the taxpayer’s records.
25. On March 24, 2000, Fortney called McInerney to reschedule the audit to accommodate a pending merger between U S WEST Communications and Qwest. [Exhibit 502, explained in Transcript Vol. II, pp. 333-334; Transcript Vol. II, p. 335]. Consistent with the practice of the Department of Audit, McInerney agreed to push the start date to March 5, 2001, on the condition that the audit would be brought current. [Exhibit 502; Transcript Vol. II, pp. 335, 340]. Fortney accepted the condition. [Transcript Vol. II, p. 335]. McInerney immediately sent a letter to Fortney confirming the revised start date, and a revised audit period of July 1, 1997 through January 2001. [Exhibit 501].
26. On January 22, 2001, Fortney and Galina Moyzes of Qwest called McInerney to request a further delay in the commencement of the audit. [Exhibit 502; Transcript Vol. II, p. 336]. McInerney once again agreed to push the start date back, but again on the condition that the audit would be brought current. [Exhibit 502; Transcript Vol. II, p. 336]. Fortney and Moyzes agreed to an audit period of July 1, 1997 through December 31, 2001, with the audit to begin on January 21, 2002. [Exhibit 502; Transcript Vol. II, p. 336].
27. The audit commenced on January 21, 2002, as rescheduled. [Transcript Vol. II, p. 341]. The Department of Audit made its last on-site visit to Petitioner on April 29, 2002. [Transcript Vol. II, p. 363]. However, at the close of field work, the Department of Audit did not have information from the Petitioner regarding the EUCL charges or the 911 charges; this information was not supplied totally until October, 2002. [Transcript Vol. II, pp. 363-364].
28. Petitioner filed monthly Sales and Use Tax Returns on a timely basis. [Exhibit 103]. However, these returns only oblige the Petitioner to report total sales and use tax collections by county. [Exhibit 103]. The returns do not require the Petitioner to report the components of its calculations of sales and use taxes. [Exhibit 103]. The Department of Revenue relies on audits to discover instances in which the taxpayer’s returns under-report sales and use taxes. [Transcript Vol. III, pp. 529-530, 596-597].
29. McInerney’s notes indicate that questions concerning the taxability of EUCL and 911 charges arose on or about May 24, 2002. [Exhibit 502, p. 22; Transcript Vol. II, p. 365]. These questions were directed to the Department of Revenue, which over several months undertook an internal analysis before reaching a policy decision. [Transcript Vol. II, pp. 365-367; Transcript Vol. III, pp. 578-583; Exhibit 502, pp. 20-23].
30. On or about August 30, 2002, Moyzes asked McInerney whether a waiver had been signed to extend the period of the audit. [Exhibit 503, p. 24; Transcript Vol II, p. 383]. McInerney replied that there had been no waiver because Wyoming did not have a statute of limitations, and recounted the history of the Petitioner’s agreement to extensions of the audit period. [Exhibit 503, p. 24; Transcript Vol II., p. 383].
31. The Department of Audit sent preliminary audit findings to Galina Moyzes in mid-November 2002, by letter dated October 31, 2002. [Exhibit 100].
32. The Department of Audit issued a final letter confirming its audit findings on July 11, 2003. [Exhibit 100]. On July 21, 2003, the Department of Revenue issued its Assessment, which recites that it is “based on that audit.” [Exhibit 100].
33. The reasons for the delay between issuance of the preliminary audit findings and the issuance of the final assessment are not clear. [Transcript Vol. III, pp. 584-586]. However, McInerney testified that the overall eighteen months from commencement of the audit to issuance of an assessment by the Department of Revenue is a not an unusual period of time for a company such as Qwest. [Transcript Vol. II, pp. 362-363].
34. The Petitioner did not object to the start date or the duration of the audit period until it filed its Notice of Appeal on August 19, 2003. [Board Files].
35. At the hearing of this matter, Petitioner called Professor Walter Hellerstein as an expert on state taxes and state tax policy. [Transcript Vol. II, pp. 237 et seq.]. Professor Hellerstein testified that most states that levy a sales tax employ a limitations period for delinquency assessment actions, and that the limitations period generally runs from the date the return is filed. [Transcript Vol. II, pp. 244-250]. In such states, an extension of the limitations period is customarily accomplished by execution of a waiver. [Transcript Vol. II, pp. 245-246]. Professor Hellerstein would have this Board focus on two different universes of taxpayers: those who comply by filing returns, and those who do not. [Transcript Vol. II, p. 319]. He argues for a limitations period which runs from the date a return is filed. In his view, this interpretation provides important incentives for the taxpayer to file a return, even when the taxpayer disputes the assessment, thereby bringing both the potential tax liability and the dispute to the attention of the state. [Transcript Vol. II, pp. 252, 255, 303-304].
36. Professor Hellerstein was less conversant with the specific powers of the Wyoming Departments of Revenue and Audit, and conceded that he did not know “what powers the Department of Revenue has vis-a-vis the Department of Audit.” [Transcript Vol. II, pp. 313-315, 319]. Professor Hellerstein likewise conceded that the language of the pertinent limitations statute could be read to distinguish between actions initiated by the Department of Revenue and actions initiated by the Department of Audit. [Transcript Vol. II, pp. 322-323].
37. Any Discussion above or Conclusion of Law below which includes a finding of fact may also be considered a Finding of Fact and, therefore, is incorporated herein by this reference.
CONCLUSIONS OF LAW
A. General
38. The letter of appeal by Petitioner Qwest was timely filed and the Board has jurisdiction to determine this matter.
39. The Rules of the Board state in pertinent part that:
Except as specifically provided by law or in this section, the Petitioner shall have the burden of going forward and the ultimate burden of persuasion, which burden shall be met by a preponderance of the evidence. If Petitioner provides sufficient evidence to suggest the Department determination is incorrect, the burden shifts to the Department to defend its action. For all cases involving a claim for exemption, the Petitioner shall clearly establish the facts supporting an exemption.
Rules, Wyoming State Board of Equalization, Chap. 2, §20.
B. The 911 emergency services charge
40. The parties agree that the only pertinent imposition statute levies an excise tax on “[t]he sales price paid for intrastate telephone and telegraph services including the consideration paid for the rental or leasing of any equipment or services incidental thereto...” Wyo. Stat. Ann. §39-15-103(a)(i)(C); Wyo. Stat. Ann. §39-16-404(a)(iii) [1997]. Prior to July 1, 2002, “sales price” meant “the consideration paid by the purchaser of .... services which are the subject of taxation as provided by this article...” Wyo. Stat. Ann. §39-15-101(a)(viii) [1999-2001]; Wyo. Stat. Ann. §39-15-101(a)(v) [1998]; Wyo. Stat. Ann. §39-6-402(a)(iv) [1997]. The Department’s regulations defined “Intrastate telephone services” as “the intrastate two-way transmission of sound, data, or other forms of information by any means from one point to another within this state.” Rules, Wyoming Department of Revenue, Ch. 2, §3(k). [Exhibit 107].
41. The initial step in arriving at a correct interpretation of a statute is to examine the ordinary and obvious meaning of the words employed according to their arrangement and connection. Parker Land and Cattle Co. v. Wyoming Game and Fish Commission, 845 P.2d 1040, 1042 (Wyo. 1993). This rule of statutory construction also applies to the interpretation of administrative rules and regulations. State ex rel Department of Revenue v. Buggy Bath Unlimited, Inc., 18 P.3d 1182, 1885, 2001 WY 27, ¶6 (Wyo. 2001). We defer to an agency’s construction of its rules unless that construction is clearly erroneous or inconsistent with the plain meaning of those rules. Pinther v. State, Department of Administration and Information, 866 P. 2d 1300, 1302 (Wyo. 1994). We do not defer to the Department’s construction with respect to the 911 emergency services charge, because we conclude that the plain meaning of the statute differs from the Department’s construction.
42. By statute, the FCC must “designate 9-1-1 as the universal emergency telephone number within the United States for reporting an emergency to appropriate authorities and requesting assistance.” 47 U.S.C.A. §251(e)(3). During the period at issue, a Wyoming statute defined 911 services in Wyoming as follows:
“911 emergency reporting system” or “911 system” means a telephone system consisting of network, database and on-premises equipment, including operating and personnel costs, using the single three-digit number 911 for reporting police, fire, medical or other emergency situations and enabling the users of a public telephone system to reach a public safety answering point to report emergencies by dialing 911. The level of technology for provision of the 911 emergency system is to be determined by the governing body....(emphasis supplied)
Wyo. Stat. Ann. §16-9-102(a)(iv); Session Laws of Wyoming, 1990, Ch. 73, Section 2.
43. The Wyoming Telecommunications Act of 1995 defines “essential telecommunications services” as:
...a customer’s access to service that is necessary for the origination or termination, or both, of two-way, switched telecommunications for both residential and business service within a local exchange area. Essential telecommunications services are limited to:
***
(D) Services necessary to connect 911 emergency services to the local network... (emphasis supplied)
Wyo. Stat. Ann. § 37-15-103(a)(iv). We note that the Administrator of the Department’s Excise Tax Division quoted this statute to the Board at the hearing of this matter. Supra, ¶10. The local exchange area referenced in the definition means the geographical unit established by the PSC for providing telecommunications services. Wyo. Stat. Ann. § 37-15-103(a)(vii).
44. The threshold issue is whether 911 emergency service is an intrastate telephone and telegraph service. We conclude that it is not. The 911 system is an emergency reporting system operated by a local government entity, not by the local exchange carrier. Supra, ¶¶4, 5, 42. The statutory definition of essential telecommunications service further states that the services provided by a local exchange carrier include only the provision of access necessary to connect to 911 emergency services, not the provision of 911 emergency services. Supra, ¶42. In terms of the Department’s definition of intrastate telephone services, 911 emergency services are one of the points to which sound or information is transmitted, rather than the means of transmission. Supra, ¶40.
45. The Department contends that 911 emergency service is incidental to the services provided by Qwest, and therefore falls under the within the plain language of the imposition statute. The plain and ordinary meaning of incidental is “secondary or minor, but usually associated.” Webster’s New World College Dictionary, 4th Edition (2001), p. 721. However, the difficulty with the Department’s reading is that it strains the language of the statute, which imposes the tax on “[t]he sales price paid for intrastate telephone and telegraph services including the consideration paid for the rental or leasing of any equipment or services incidental thereto...” Wyo. Stat. Ann. §39-15-103(a)(i)(C); Wyo. Stat. Ann. §39-16-404(a)(iii) [1997]. To rely on the word “incidental,” the Department seems to skip over some portion of the words between “intrastate telephone and telegraph services” and “incidental” to reach a sense something like, “consideration paid for...services incidental [to intrastate telephone and telegraph services].” Even if we were to accept this elision, the Department’s definition of intrastate telephone services, supra, ¶40, would still oblige us to focus on the transmission of sound, data, or other forms of information from one point to another. Since 911 emergency service is provided at a point, by an entity other than the local exchange carrier, we conclude that the Department stretches the sense of “incidental” too far.
46. Because we dispose of the 911 charge without the need to resort to an exemption, we have no reason to address the Department’s concern for whether such an exemption existed prior to the 2003 amendments.
C. The End User Common Line charge
47. As with 911 service, we first turn to the statute and applicable rules. Wyoming levies an excise tax on “[t]he sales price paid for intrastate telephone and telegraph services...” Wyo. Stat. Ann. §39-15-103(a)(i)(C); Wyo. Stat. Ann. §39-16-404(a)(iii) [1997]. Prior to July 1, 2002, “sales price” meant “the consideration paid by the purchaser of .... services which are the subject of taxation as provided by this article...” Wyo. Stat. Ann. §39-15-101(a)(viii) [1999-2001]; Wyo. Stat. Ann. §39-15-101(a)(v) [1998]; Wyo. Stat. Ann. §39-6-402(a)(iv) [1997]. The Department’s regulations defined “Intrastate telephone services” as “the intrastate two-way transmission of sound, data, or other forms of information by any means from one point to another within this state.” (Emphasis supplied) Rules , Wyoming Department of Revenue, Ch. 2, §3(k). [Exhibit 107]. We then apply familiar principles to reach our conclusion. Supra, ¶41.
48. Based on the record before us, we conclude that the Petitioner provides intrastate telephone services within the meaning of the statute and the regulation. For all services, the Petitioner provides intrastate two-way transmission between the customer and the local wire center. Supra, ¶¶20-22. We apply a standard definition of “two-way” to mean “used for both transmission and reception; moving, operating, or allowing movement in either of two directions.” Webster’s New Collegiate International Dictionary (4th Ed.)(2001), at 1548. We conclude that transmissions are two-way in the ordinary sense that the portion of the transmission that is related to the EUCL charge occurs between the customer and the local wire center, even when the transmission is subsequently directed from the local wire center to an interstate carrier, or has previously been received from an interstate carrier by the local wire center. Supra, ¶¶20, 22.
49. We further conclude that the EUCL charge is associated exclusively with the local loop provided by the Petitioner, and is part of the consideration paid by the customer for the intrastate telephone services provided through the local loop, even though that intrastate service is the local leg of a transmission which is ultimately carried across state lines by an interstate carrier, and other local carriers which may eventually include Qwest in other states. Supra, ¶¶-. It follows that the EUCL charge is part of the sales price paid for intrastate telephone services within the meaning of the statute and regulation, and is therefore subject to Wyoming sales and use taxes.
50. No provision of the statute or regulations pertaining to the PSC conflicts with the Department’s definition of intrastate telephone services. See generally Wyo. Stat. Ann. §39-15-101 et seq.; Rules, Wyoming Public Service Commission, Ch. 5. Further, contrary to Petitioner’s argument, we conclude that Wyoming’s levy of an excise tax does not affect either the rate base used by the FCC for interstate purposes, or total service long run incremental costs and other statutory matters which the PSC must take into account in authorizing price schedules for noncompetitive intrastate services. Contrary to Petitioner’s argument, we do not find GTE Sprint Communications Corporation v. Michigan Department of Treasury, 445 N.W.2d 476 (Mich. Ct. App. 1989), to be pertinent authority.
51. The Petitioner has directed our attention to South Central Bell Telephone Company v. Commissioner of Revenue, 735 S.W.2d 228 (Tenn. 1987) for the proposition that Tennessee has ruled that the EUCL charge applies to the calculation of gross receipts from interstate business, for purposes of its gross receipts tax. The Petitioner neglected to mention that the same authority held that “the state can and does properly collect the sales tax on the [EUCL] charges.” 735 S.W.2d at 232. We conclude that the sales tax analysis of the Supreme Court of Tennessee, including its conclusion that the collection of sales tax on the EUCL tax passes constitutional muster, applies to this case. A similar analysis and conclusion appear in AT&T Communications of the Mountain States v. Department of Revenue, 778 P.2d 677 (Colo. 1999), a case which also supports the decision we reach today. The analysis and holding of South Central Bell Telephone Company related to the gross receipts tax do not apply to Wyoming’s sales and use taxes. We likewise conclude that another reported case concerned with a gross receipts tax, GTE Southwest Incorporated v. Taxation Revenue Department, 830 P.2d 162 (Ct. App. N.M. 1992), does not apply to Wyoming’s sales and use taxes.
52. We conclude that Petitioner has failed to carry its burdens of proof and persuasion on the End User Common Line charge issue.
D. The statute of limitations
53. The statute of limitations for sales and use taxes are stated in precisely the same words:
The department [of revenue] may bring an action to recover any delinquent taxes, penalty or interest in any appropriate court within three (3) years following the delinquency. In the case of an assessment created by an audit, the delinquency period is deemed to start thirty (30) days after the date the assessment letter is sent. Any tax penalty and interest related to the audit assessment shall be calculated from the filing period during which the deficiency occurred. In such action a certificate by the department is prima facie evidence of the amount due.
Wyo. Stat. Ann. §39-15-110(b); Wyo. Stat. Ann. §39-16-108(b)(vii).
54. We begin by applying the plain language of the statute to the facts in this case. We conclude that the assessment in this case was created by an audit. In its ordinary sense, “create” means “to bring about; give rise to; cause.” Webster’s New World Collegiate Dictionary (4th Ed.)(2001), at 340. Since the assessment was created by an audit, supra, ¶¶23-32, the delinquency period in this case was deemed to start thirty days after the date of the assessment.
55. In light of our application of the statute to the facts of this case, the three year limitation found in the first sentence of Wyo. Stat. Ann. §39-15-110(b) and Wyo. Stat. Ann. §39-16-108(b)(vii) does not apply to this appeal at all. The Department did not bring an action to recover delinquent taxes after issuing the assessment; instead, the taxpayer has appealed the Department’s final action of issuing the assessment. Supra, ¶¶32, 34.
56. Based on the testimony of Professor Hellerstein, we infer that Petitioner’s theory arose in part from the mistaken assumption that the Department of Revenue initiates audits. Supra, ¶36. If this assumption were correct, the statute of limitations would have the peculiar quality of enabling the Department of Revenue to circumvent its statute of limitations by initiating an audit. However, in Wyoming the Department of Audit and the Department of Revenue are separate statutory departments, with different powers and responsibilities. Wyo. Stat. Ann. §9-2-2003; §9-2-2007; §39-11-102(b), (c). Petitioner’s implicit premise is mistaken.
57. As a fallback, Petitioner attempts to persuade us that the Department of Revenue has retained practical control over the initiation of audits (e.g, the manner in which the two Departments share information, Transcript. Vol. III, pp. 561-562, and open lines of communication between the two Departments, Transcript Vol. II, p. 386). We do not find these arguments persuasive as a matter of fact. More important, we do not find these arguments persuasive in light of the allocation of authorities and responsibilities found in the statutes creating the two Departments, which we must read in pari materia with the statute of limitations. Parker Land & Cattle Company, 845 P.2d at 1042.
58. Moreover, we have found nothing in the record to suggest that the Petitioner has been the object of unfair audit practices. The sales and use tax statutes require a taxpayer to preserve for three years “suitable records and books as may be necessary to determine the amount of tax” for which it is liable. Wyo. Stat. Ann. §39-15-108(c)(xi) and predecessor statutes; Wyo. Stat. Ann. §39-16-110(a) and predecessor statutes. When the Department of Audit initially scheduled the audit, it defined the audit period in a way that honored these limitations. Supra, ¶24. All subsequent extensions of the audit period were initiated by employees of the Petitioner, and granted on condition that the audit period be extended. Supra, ¶¶25-26. Based on various bits of evidence unrelated to the actual conduct of its employees (e.g., Exhibits 517, 518, 519; Stipulated Facts, ¶¶44-46), Petitioner asks for relief from its own commitments regarding the audit period and schedule. We conclude there is no reason to grant such relief.
59. Our conclusion of law is consistent with the result of In the Matter of Samuel, Docket No. 2001-84, 2002 WL 1269647 (Wyo. St. Bd. Eq.)(2002), but ostensibly inconsistent with a finding in that case that Wyo. Stat. Ann. §39-16-108(c)(vii) is ambiguous. In the Matter of Samuel, ¶15. Unfortunately, this Board did not expressly analyze the manner in which Wyo. Stat. Ann. §39-16-108(c)(vii) was ambiguous, but relied instead on the fact that “both parties argue the statute is clear and unambiguous but with opposite results.” In the Matter of Samuel, ¶15. To the extent that In the Matter of Samuel is inconsistent with this decision, we now overrule In the Matter of Samuel.
60. We conclude that Petitioner has failed to carry its burdens of proof and persuasion on the statute of limitations issue.
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ORDER
IT IS THEREFORE HEREBY ORDERED: The Department of Revenue’s decision to assess an excise tax on the 911 emergency services charge, together with any associated interest, is hereby reversed and remanded; and
The Department of Revenue’s decision to assess an excise tax on the End User Common Line charge, together with any associated interest, is hereby affirmed.
Pursuant to Wyoming Statute Section 16-3-114, and Rule 12, Wyoming Rules of Appellate Procedure, any person aggrieved or adversely affected in fact by this decision may seek judicial review in the appropriate district court by filing a petition for review within 30 days of the date of this decision.
Dated this 8th day of September, 2004.
STATE BOARD OF EQUALIZATION
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Roberta A. Coates, Chairman
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Alan B. Minier, Vice Chairman
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Thomas J. Satterfield, Board Member
ATTEST:
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Wendy J. Soto, Executive Secretary