The opinion
MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2017 ME 119
Docket: Ken-16-358
Argued: May 12, 2017
Decided: June 15, 2017
Panel: SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ.
STATE TAX ASSESSOR
v.
MCI COMMUNICATIONS SERVICES, INC.
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
2
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.
1 These fees included interstate service provider regulatory fees, international bearer circuit
fees, submarine cable fees, earth station fees, North American Numbering Plan fees, federal
telecommunications relay service fees, and federal local number portability fees. CCRCs also
allowed MCI to recover part of its own overhead expenses related to international and interstate
settlement recoveries, and collecting and administering CCRCs and the federal universal service
fund.
3
[¶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.
§§ 151(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.
2 This statute has since been amended but not in any way that affects this appeal. P.L. 2013,
ch. 45, § 4 (effective Apr. 22, 2013) (codified at 36 M.R.S. § 151 (2016)).
3 This statute has since been amended but not in any way that affects this appeal. P.L. 2013,
ch. 331, §§ B-1, B-2 (effective Oct. 9, 2013) (codified at 36 M.R.S. § 151-D (2016)).
4
§ 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).
4 Although the Superior Court designated this case as an appeal brought pursuant to M.R. Civ. P.
80C, the Superior Court considers de novo those petitions seeking review of a decision of the
Assessor pursuant to 36 M.R.S. § 151(2)(F)(2), as well as those seeking review of a decision of the
Maine Board of Tax Appeals pursuant to 36 M.R.S. § 151-D(10)(I). We therefore review directly the
decision of the Superior Court. See Linnehan Leasing v. State Tax Assessor, 2006 ME 33, ¶ 16,
898 A.2d 408; Apex Custom Lease Corp. v. State Tax Assessor, 677 A.2d 530, 532 (Me. 1996).
5
[¶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 “extend[] [an exemption] . . . to situations
not clearly coming within the scope of the exemption provisions.” Id. ¶ 13
(quotation marks omitted).
A. The “Sale Price” of Telecommunications Services
[¶8] We must first determine whether the charges at issue were part of
the “sale price” of telecommunications services and were thus subject to the
service provider tax before turning to whether the charges were excluded or
exempt from that tax. The tax applied to “the value of . . .
[t]elecommunications services,” and that value was “measured by the sale
6
price.” 36 M.R.S. §§ 2552(1)(E), (2) (2016).5 “Sale price” was defined, in
relevant part, as “the total amount of consideration . . . for which . . . services
are sold.” 36 M.R.S. § 2551(15) (2016).6 A charge falls within the “sale price”
if it is “part of the total compensation paid for telecommunications services.”
BCN Telecom, 2016 ME 165, ¶ 12, 151 A.3d 497.
[¶9] Like the charges at issue in BCN Telecom, PTRCs and CCRCs are
part of “the total amount of consideration . . . for which . . . services are sold.”
36 M.R.S. § 2551(15); see generally 2016 ME 165, 151 A.3d 497. Nothing in
the stipulated facts or exhibits—which describe these charges as
“surcharge[s] . . . calculated as a percentage of charges for . . .
telecommunications services” that “appear[ed] on a customer’s bill if the
customer purchase[d] interstate or international telecommunications
service”—distinguishes PTRCs and CCRCs “as anything other than [charges]
for telecommunications services.” BCN Telecom, 2016 ME 165, ¶ 12, 151 A.3d
497. Based on the plain language of the statute and “the clear import” of that
5
Title 36 M.R.S. § 2552 has been amended multiple times since the beginning of the audit
period, but none of these amendments affects the statutory language at issue in this appeal.
See, e.g., P.L. 2015, ch. 300, § A-32 (effective Oct. 15, 2015) (codified at 36 M.R.S. § 2552 (2016)).
6 Although this statute was amended partway through the audit period, see infra Part B, the
amendment did not affect the relevant portions of this definition for purposes of this appeal. This
statute has also been amended multiple times since the audit period, but none of these amendments
affects this appeal. See, e.g., P.L. 2015, ch. 300, §§ A-30, A-31 (effective Oct. 15, 2015).
7
language, id. ¶ 10, the PTRCs and CCRCs collected by MCI were therefore part
of the “sale price” of telecommunications services and were subject to taxation
unless they were otherwise excluded or exempted by the statute.
B. The Nature of PTRCs and CCRCs
[¶10] The Legislature amended the tax statute at issue in the instant
case partway through the audit period. P.L. 2007, ch. 627, §§ 62-64, 74-75
(effective July 18, 2008) (codified at 36 M.R.S. §§ 2551, 2557 (2016)). Before
July 18, 2008, the statute excluded the “sale price” of international and
interstate telecommunications services from taxation, see infra Part C, and,
from that date forward, the statute exempted the “sales of” international and
interstate telecommunications services from taxation, see infra Part D.
Regardless of which version of the statute was in force, whether the PTRCs
and CCRCs were subject to taxation depends upon whether they related only
to the sale of international and interstate services or whether they were also
charged in connection with intrastate services.
[¶11] There is no dispute that MCI imposed PTRCs and CCRCs only on
customers who received international and interstate services and calculated
them as a percentage of the international and interstate charges incurred by
8
those customers.7 Despite those uncontroverted facts, however, the Assessor
presents two arguments to support its position on appeal. First, the Assessor
asserts that, because the surcharges themselves were not “services” and were
not “interstate or international in nature,” they are neither excluded nor
exempt from the service provider tax. Second, the Assessor asserts that,
because PTRCs and CCRCs were intended to recover costs that were not
exclusively incurred in Maine, they did not arise solely from the sale of
interstate or international telecommunications services in Maine, and
therefore they are not excluded or exempt. We do not find either argument
persuasive.
C. Exclusion of International and Interstate Services
[¶12] Before July 18, 2008, the statute excluded “service originating or
terminating outside of this State” from the definition of “[t]elecommunications
services,” thereby excluding the “sale price” of international and interstate
services from taxation. 36 M.R.S. §§ 2551(15), (20)(B)(1) (2007); 36 M.R.S.
§§ 2552(1)(E), (2) (2007). Construing the statute strongly in favor of MCI and
against the State, see BCN Telecom, 2016 ME 165, ¶ 10, 151 A.3d 497, we
7 As the Assessor has conceded, MCI imposed the charges at issue only on the international and
interstate portion of the customer’s plan even where a customer purchased bundled intrastate,
interstate, and international services.
9
conclude that the PTRCs and CCRCs collected by MCI before July 18, 2008,
were not subject to taxation. The plain language of the statute applied the tax
to the “sale price” of “[t]he provision of 2-way interactive communications . . .
originating and terminating” within Maine. 36 M.R.S. §§ 2551(15), (20);
36 M.R.S. §§ 2552(1)(E), (2). Because PTRCs and CCRCs were only included in
the “sale price” of telecommunications services originating or terminating
outside of Maine during the audit period, see supra Part B, they were excluded
from taxation.
D. Exemption of International and Interstate Services
[¶13] From July 18, 2008, to the end of the audit period, the statute
defined “[t]elecommunications services” more generally as “the electronic
transmission, conveyance or routing of . . . information or signals to a point or
between or among points.” 36 M.R.S. § 2551(20-A) (2016). It expressly
exempted, however, “[s]ales of international telecommunications service” and
“[s]ales of interstate telecommunications service” from taxation.8 36 M.R.S.
8 The statute defined an “[i]nternational telecommunications service” as one “that originates or
terminates in the United States and terminates or originates outside the United States” and an
“[i]nterstate telecommunications service” as one “that originates in one state, territory or
possession of the United States and terminates in a different state, territory or possession of the
United States.” 36 M.R.S. §§ 2551(5-A), (5-B) (2016).
10
§§ 2557(33), (34) (2015).9 The phrase “sales of” is undefined in the statute,
and we must determine whether the exemptions for “sales of” international
and interstate services includes the statutorily-defined “sale price,” which
would result in exempting PTRCS and CCRCs from taxation, or whether the
exemptions are more limited than the “sale price,” which would mean that
PTRCs and CCRCs remain within the ambit of the tax statute.
[¶14] “In construing a statutory term that is undefined in the statute
itself, our primary obligation is to determine its plain meaning. We often rely
on the definitions provided in dictionaries in making this determination.”
Apex Custom Lease Corp. v. State Tax Assessor, 677 A.2d 530, 533 (Me. 1996)
(citation omitted). The noun “sale” is commonly defined to mean “[t]he
transfer of property or title for a price.”10 Black’s Law Dictionary 1337
(7th ed. 1999). Similarly, the Legislature has defined “sale” elsewhere to
mean “any transfer, exchange or barter, in any manner or by any means
whatsoever, for a consideration,” 36 M.R.S. § 1752(13) (2016), and “the
9 The Legislature recently amended these sections, limiting the exemption of sales of
international and interstate telecommunications services to those services sold “to a business for
use directly in that business.” P.L. 2015, ch. 267, §§ TTTT-4, TTTT-5, TTTT-9 (effective Jan. 1, 2016)
(codified at 36 M.R.S. §§ 2557(33), (34) (2016)). These changes do not affect this appeal.
10 “Price” is commonly defined as “[t]he amount of money or other consideration asked for or
given in exchange for something else; the cost at which something is bought or sold.” Black’s Law
Dictionary 1207 (7th ed. 1999).
11
passing of title from the seller to the buyer for a price,” 11 M.R.S. § 2-106(1)
(2016). Considering these definitions together, a “sale” is fundamentally an
exchange of goods or services for a price or consideration and is therefore
broader than and inclusive of the price. See Darling’s v. Ford Motor Co.,
1998 ME 232, ¶ 14, 719 A.2d 111 (“In the absence of evidence to the contrary,
we conclude that the Legislature intended the generally accepted meanings of
the terms to apply.”).
[¶15] Based on the plain language of the statute, anything that is part of
the “sale price” of international or interstate services is also part of the “sales
of” those services, which the Legislature exempted from taxation.11 PTRCs
and CCRCs, as part of the consideration paid for international and interstate
telecommunications services, were also part of the “sales of” those services
and “clearly [came] within the scope of the exemption provisions.”12 BCN
Telecom, 2016 ME 165, ¶ 13, 151 A.3d 497 (quotation marks omitted).
11 Assigning the undefined term “sale” its common, broad meaning is also consistent with the
Legislature’s definition of “sale price” as “the total amount of consideration . . . for which . . . services
are sold [and] any consideration for services that are a part of a sale.” 36 M.R.S. § 2551(15) (2016)
(emphasis added). That definition narrows what might otherwise be considered the “sale price” by
deducting certain listed amounts from the total consideration paid, further suggesting that the
“sale[] of” services is broader than the “sale price” of those services. See 36 M.R.S. § 2551(15).
12
Although, as the Assessor points out, PTRCs and CCRCs do not meet the definition of
international or interstate telecommunications services because they are not literally signals that
originate or terminate outside of this State, the statutory exemptions apply to the “sales of” those
services, which includes the “sale price.” To read the exemptions as applying only to
“telecommunications services” while ignoring the phrase “sales of” would violate our rules of
12
[¶16] Accordingly, we conclude that the PTRCs and CCRCs collected by
MCI before July 18, 2008, were excluded from taxation and that those charges
collected by MCI from July 18, 2008, forward were exempt from taxation. MCI
was entitled to judgment as a matter of law. See M.R. Civ. P. 56(c); BCN
Telecom, Inc., 2016 ME 165, ¶ 2, 151 A.3d 497.
The entry is:
Judgment affirmed.
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.
Kennebec County Superior Court docket number AP-2013-42
FOR CLERK REFERENCE ONLY
statutory construction. See Blue Yonder, LLC v. State Tax Assessor, 2011 ME 49, ¶ 10, 17 A.3d 667
(explaining that we must not treat words in a statute as meaningless or superfluous).