STATE OF MAINE SUPERIOR COURT KENNEBEC, SS. LOCATION: Augusta Docket No. AP-13-26
) BCN TELECOM, INC., ) ) Petitioner, ) ORDER ON THE PARTIES' MOTIONS ) FOR SUMMARY JUDl\'IENT v. ) ) MAINE STATE TAX ASSESSOR, ) ) Respondent. ) ) ) )
BCN Telecom, Inc. ("BCN') appeals the Decision ofthe Maine Board of Tax
Appeals ("BOTA") affirming the finding of the Maine State Tax Assessor (the
"Assessor") that BCN owes service provider tax, and interest, on account ofBCN's
failure to pay said tax with respect to presubscribed interexchange carrier charges
("PICCs"). Both parties have moved for summary judgment regarding the following two
issues: 1) are PICCS included in the sale price of telecommunications services and
subject to the service provider tax; and 2) if so, are PICCs exempt from the service
provider tax as constituting the sale of interstate telecommunications services. For the
reasons discussed below, the Court denies the Assessor's motion for summary judgment,
grants BCN's, and holds that PICCs are not taxable under the service provider tax.
I. Factual Background
A local exchange carrier ("LEC") provides telecommunications services to
customers in a defined geographic area, or local exchange area. (Stipulation of Facts ("Stipp.")~ 1.) The telecommunications service provided by aLEC is commonly known
as "local service" or "local exchange service," and is a telecommunications service
within the local exchange area. '(!d. at~ 2.) A competitive local exchange carrier
("CLEC") is aLEC providing local exchange service that competes with incumbent local
exchange carriers ("ILECS") and other CLECs. 1 (!d. at~ 5.) An interexchange carrier
("IXC") provides telecommunications services between exchange areas, and is
commonly known as long distance service. (Id. at~ 6.)
BCN is a privately held telecommunications service provider company with its
principal offices in New Jersey. (Id. at~ 12.) BCN is a reseller of telecommunications.
(!d. at~ 13.) It contracts with local and long distance carriers and resells those services to
customers in Maine and elsewhere. (!d.) On or about January 5, 2011, Maine Revenue
Services (":MR.S") sent BCN an Intent to Audit letter. (See id. at~ 17.) Thereafter, MRS
began an audit ofBCN that covered the period of March 1, 2008 to October 31, 2011 (the
"Audit Period"). (See id. at~~ 14-16.) During this period, BCN acted as both a CLEC
and an IXC in Maine. (!d. at~ 14.)
As the audit progressed, it became clear that the primary issue concerned the
taxation ofPICCs and whether they were subject to service provider tax pursuant to 36
M.R.S. §§ 2551-2560. (See id. at~ 18.) During the Audit Period, BCN paid PICCs to
long distance carriers from whom BCN purchased long distance services for resale. (!d.
at~ 15.) BCN did not charge PICCs to any other carriers. (See id. at~ 16.)
1 An ILEC is aLEC that was operating before February 8, 1996, i.e. the breakup of AT&T. (Id. at~ 3.) An ILEC owns and maintains the telephone lines and poles and other infrastructure within its local exchange area. (Id. at~ 4.) This infrastructure includes the "local loop," which is the line from the customer's premises to the office of the LEC. (!d.)
2 During the Audit Period, BCN had Maine customers with only local service,
Maine customers with long distance service, and Maine customers with both local and
long distance service. '(Id. at~ 30.) BCN charges a fixed monthly rate for local service.
(Id. at~ 31.) BCN charges for long distance usage, charging per call and per minute. (Id.
at~ 32.) BCN charges long distance rates in Maine for interstate calls (calls terminating
outside of Maine), as well as intrastate long distance calls (calls terminating within
Maine). (Id. at~ 33.) BCN only charges PICCs to its business customers with multiple
long distance lines? (Jd. at~ 35.) When a customer has long distance service through
BCN, BCN establishes and maintains network readiness so that the customer has access
to long distance service and can make a long distance call. (Resp.'s S.M.F. ~ 84.)
The PICCs are charged as a monthly per line charge, which is typically a monthly
rate of $2.95 per long distance line. (Stipp.~ 38.) BCN charges PICCs even if the
customer does not make any long distance calls on that line during the month. (Jd. at~
39.) The amount ofPICCs charged by BCN are discretionary, although there is a
statutory ceiling on the amount that can be charged. (Resp.'s S.M.F. ~ 25.) BCN
determines the amount it will charge for PICCs based on maintaining a certain level of
profit, evaluating and responding to price increases charged to BCN, and determining
how to best pass that along to the customer. (Id. at~ 26.) BCN's default position is to
charge PICCs unless it has been negotiated out of the agreement with the customer. (ld.
at~ 27.) PICCs are listed on BCN's bills under "Other Charges," which, along with
"Customer Level Charges" are competitive charges that can be negotiated out of a
customer's agreement with BCN. (Id. at~~ 29-30.) Only the amounts reflected in the
2 BCN did not charge PICCs to residential customers or customers that only had local service because it is not permitted by federal law. (Id. at~~ 36-37.) lines that say "local" and "long distance" on BCN' s bills represent charges for
telecommunications services. (Id. at~ 31.) All of the other charges and fees on a
customer's bills are not for electronic transmissions, i.e., telecommunications services.
(Jd. at~ 32.) If a customer that is charged PICCs does not pay the charges, then BCN has
the option of terminating that customer's service. (Id. at~ 34.)
The Federal Communications Commission ("FCC") created the PICC, allowing
carriers to recover a portion of the interstate local loop cost either from the IXC or from
the end-user. (Stipp.~ 19.) During the audit, regulatory counsel for BCN sought and
received input concerning the jurisdictional nature ofPICCs from the FCC. (Id. at~ 20.)
The FCC explained that it would not get involved in disputes between carriers and state
regulatory bodies, but provided "some general advice as to universal service contribution
requirements related to certain fees or end user charges, like [PICCs]." (Exhibit 5 to
Stipp.) The general advice was: "[c]onsistent with [FCC] precedent, PICC charges are
considered interstate revenues. They allow a carrier to recover a portion of the interstate
local loop cost either from the interexchange carrier or from the end-user customer when
the customer is not presubscribed to an interexchange carrier." (Id.)
The Assessor concluded that PICCs were not exempt from service provider tax
and assessed BCN $41,296.96 in tax on the revenue received from PICCs and $7,778.60
in interest, for a total amount of $49,075.56. (Jd. at~~ 21-22.) Pursuant to 36 M.R.S. §
151, BCN sought reconsideration of the Assessment in a letter dated May 2, 2012. (Id. at
~ 23.) The Assessment was upheld and an additional $2,036.54 in additional interest
accrued for a total then due of$51,112.10. (Id. at~ 24.) ·BCN sought review ofthat
decision through a written statement of appeal to Maine Board of Tax Appeals ("BOTA")
4 dated October 22, 2012. (!d. at ,-r 25.) In a Decision dated April 24, 2013, BOTA
concluded that PICCs were not exempt from service provider tax and upheld the
Assessor's Assessment of service provider tax (the "BOTA Decision"). (!d. at ,-r 26.)
BCN appealed the BOTA Decision to the present Court. (!d. at ,-r 27.) The sole argument
raised by BCN is that PICCs are not due and/or exempt from the service provider tax.
(!d. at ,-r,-r 28-29.)
II. Discussion
a. Standard ofReview
The Court reviews the BOTA Decision de novo. 36 M.R.S. § 151-D(lO)(I). In
doing so, the Court makes its own determination as to all questions of fact and law,
regardless of whether the facts, arguments or issues were raised during the proceeding
being appealed so long as they are not barred by any other provision of law. !d. The
taxpayer, in this case BCN, bears the burden of proof !d. In other words, BCN bears the
burden to show that PICCs are not subject to, or exempted from the service provider tax.
Pursuant to M.R. Civ. P. 56( c), a party may obtain summary judgment if there is
no genuine issue as to any material fact and the party is entitled to judgment as a matter
oflaw. For purposes of summary judgment, a "material fact is one having the potential
to affect the outcome of the suit." Burdzel v. Sobus, 2000 l'v1E 84, ,-r 6, 750 A.2d 573.
b. Statutory Framework
As indicated above, the present dispute turns on questions of statutory
interpretation. Specifically, the parties argue about whether PICCs are: 1) included in the
sale price of telecommunications services and subject to the service provider tax; and 2)
5 if so, whether PICCs are exempt from the service provider tax as constituting the sale of
interstate telecommunications service.
The service provider tax statute, 36 M.R.S.'§§ 2551-2560, imposes a tax upon the
value of telecommunications services sold in Maine. 36 M.R.S. § 2552(1)(E). The
service provider tax statute currently defines "telecommunication services," in pertinent
part, 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) (2015). Prior to July 18,2008, the term "telecommunications services" was
defined, in pertinent part, as "[t]he provision of 2-way interactive communications
through the use of telecommunications equipment [but not] service originating or
terminating outside [Maine]." 36 M.R.S. § 2551(20) (2008).
The value of the telecommunications services sold is measured "by the sale
price." 36 M.R.S. § 2552(2). The sale price means:
[T]he total amount of consideration, including cash, credit, property and services, for which personal property or services are sold, leased or rented, valued in money, whether received in money or otherwise, without any deduction for the cost of materials used, labor or service cost, interest, losses and any other expense of the seller. "Sale price" includes any consideration for services that are a part of a sale ....
36 M.R.S. § 2551(15) (2015). "Sale price" does not include "[t]he amount of any tax
imposed by the United States or the State on or with respect to the sale of a service,
whether imposed upon the seller or the consumer[.]" 36 M.R.S. §2551(15)(D).
The service provider tax does not apply, however, "in connection with ... [s]ales of
interstate telecommunications service." 36 M.R.S. § 2557(34). Interstate
telecommunications service is defined as a subset of telecommunications services, i.e. a
"telecommunications service that originates in one state ... and terminates in a different
6 state." 36 M.R.S. § 2551(5-B). Therefore, in order to be taxable PICCs must: 1)
constitute part of the value of telecommunications services, which is measured by the sale
price of the services; and 2) not constitute the sale of interstate telecommunications
services.
c. Whether PICCs are Included in the Sale Price of Telecommunications Services and Subject to the Service Provider Tax
The Assessor explains that the service provider tax is imposed on the value of
each telecommunications service sold in Maine and that the amount of tax imposed upon
each sale is measured by the sale price of the service. (Resp.' s Mot. Summ. J. 9.) The
Assessor contends that PICCs are included in the sale price of telecommunications
services because the PICCs are part of the total amount charged to customers on a
monthly basis. (See id. at 10.) Furthermore, the Assessor argues that PICCs are charges
BCN imposes to recover costs it incurs in providing telecommunications services and, as
such, are an expense ofthe seller. (Id.) The definition of sales price, however, does not
permit any deduction for expenses of the seller. (Id.) The Assessor argues that the same
analysis and result are applicable under the earlier statutory definition of
"telecommunications services." (See id. at 15-17.)
BCN argues that PICCs are not subject to the service provider tax because they
are not telecommunications services and, as a result, cannot constitute part of the sale
price of telecommunications services. (Pet's Mot. Summ. J. 4.) In particular, BCN
argues that PICCs are not telecommunications services because there is no actual
"transmission, conveyance or routing" as required by the definition of
telecommunications services. (Id.) In support, BCN points out that the FCC categorized
PICC charges as interstate revenue, not telecommunications services. (Id. at 4-5.)
7 Instead, BCN contends that PICCs constitute access charges to
telecommunications services. (Id. at 5.) BCN explains that PICCs are charged at the
same flat rate regardless of the number or duration oflong distance calls made. (Jd.)
Indeed, BCN explains that PICCs are charged even if the customer makes no calls, i.e.
utilizes no telecommunications services, in a given month. (Id.)
Similarly, BCN argues that PICCs cannot be characterized as part of the "sale
price" of "telecommunications services" because PICCs are charged at the same rate
every month, regardless ofthe customer's usage oftelecommunications series. (Id. at 6.)
An alternate construction could result in BCN being taxed for PICCs to customers in
months when those customers made no calls or, in other words, utilized no
telecommunications services. (Id. at 6.) To illustrate this argument, BCN offers the
allegedly analogous situation of a members-only retail chain such as Sam's Club. (Id. at
7.) At Sam's Club, members pay a fee for the right to shop at the store. (Id.) The fee is
payable regardless of whether the member ultimately purchases any products during the
membership period and is independent of the amount of purchases they make, similar to
PICCs. (Id.) In addition, if a member makes a tax-exempt purchase, such as milk, Sam's
Club does not charge tax, similar to interstate calls which are tax exempt pursuant to 36
M.R.S. § 2557(34). (Id.) But if a member makes a taxable purchase, Sam's Club charges
tax, similar to instate calls. (Id.) Under no circumstances, BCN contends, is the
membership fee to Sam's Club a taxable item, nor is it taxed as part of the "sale price" of
a taxable item. (Id.)
In its opposition, the Assessor contends that the narrow definition of
telecommunications BCN advocates for is not supported by the language of the statute,
8 the legislative history or the factual record and would lead to absurd or illogical results.
(Resp.'s Opp'n to Pet's Mot. Summ. J. 3.) First, the Assessor argues BCN ignores the
term "services" in the definition of telecommunications services. (Id. at 5.) The
Assessor argues that BCN is selling a service to its customers, not individual outgoing
telephone calls, and that BCN' s interpretation is tantamount to treating each sale of
telecommunication services as the sale of tangible personal property. (Id.) In addition,
the Assessor argues that the factual record confirms BCN is providing a service broader
than just outgoing calls as evidenced by BCN's description of its long distance service as
establishing and maintaining network readiness so that the customer has access to the
long distance network and can make a call. (Jd.) The Assessor argues this is consistent
with Law Court precedent, which described the sale of telecommunications services as
the sale of"access to" telecommunications services. (Id. at 5-6 (citing Community
Telecommunications Corp. v. State Tax Assessor, 684 A.2d 424, 426 (Me. 1996)).) The
Assessor also argues that BCN did not compute or remit its service provider tax liability
for the Audit Period based on the definition of telecommunications services it now
supports. (Id.)
The Assessor further argues that BCN disregards the term "routing" in its
definition of telecommunications. It argues that in the context of the telecommunications
definition, routing means setting the line of passage for information between or among
points and that this is the exact description used by BCN to describe its long distance
service. (Id. at 6.) The Assessor also contends that BCN fails to give meaning to the
portion ofthe definition that says "between or among points," which includes outgoing as
well as incoming calls as telecommunication services. (Id. at 7.)
9 Second, the Assessor argues that BCN' s interpretation of telecommunications
services is contrary to the legislative history of the service provider tax statute. (Id. at 7.)
In support, the Assessor points to legislative history indicating that the enactment of the
service provider tax statute in 2004 was not intended to make any substantive change
from the former sales tax that was imposed on telecommunications services. (Id at 7-8.)
The Assessor similarly argues that the amendment to the definition of
telecommunications services in 2008 to the present definition was intended to capture
additional services, not to narrow the definition. (Id. at 8.) In particular, the amendment
was made to capture voice over internet protocol ("VOIP") services. (Id. at 8.)
Third, the Assessor argues that BCN's interpretation could result in a customer
receiving 10,000 calls in a month, paying BCN for the ability to receive those calls, but
resulting in no taxable service because the customer did not make an outgoing call. (!d.
at 9.) In other words, the Assessor argues that BCN is attempting to alter the event
triggering the imposition ofta'{ from the sale of the service, to an actual call. (Id.)
Fourth, the Assessor argues that even if the Court adopted BCN's definition, BCN has
not provided any factual evidence to support its theory. (Id. at 10.) Accordingly, the
Assessor argues BCN cannot prevail under its definition of telecommunications service
because it has not shown that its customers have not made any calls during any given
month in the audit period. (Id. at 10-11.) Fifth, the Assessor argues that PICCs are not
telecommunications services, but are included in the sale price of telecommunications
services because they are charges to recover BCN's own expenses, and the definition of
sale price does not permit any deduction for expenses ofthe seller. (Id. at 12.)
10 In its opposition, BCN contends that the parties agree PICCs are not charges for
telecommunications services and-while the Assessor does not agree with the
conclusion-they are accordingly not subject to the service provider tax. (Pet. 's Opp'n to
Resp. 's Mot. Summ. J. 3.) BCN explains that since the parties agree PICCs are not
telecommunications services, or calls, they must be considered charges for access to
interstate telecommunications services. (Id. at 4.) Since PICCs are not charges for
telecommunications services, the definition of sale price, which states in relevant part that
the sale price is the total amount of consideration for which telecommunications services
are sold, does not include PICCs. (Id. at 4-5.)
BCN also argues that just because a charge appears on a bill from a
telecommunications provider does not, ipso facto, render it part of the statutory sale price
of a telecommunications service. (Id. at 5.) Instead, the tax can only be collected if it is
shown that the PICCs represent part of the sale price of telecommunications services.
(Id.)
In its reply, the Assessor frames the question before the Court as whether the
Legislature intended to tax amounts charged for the ability to make and receive calls, or
whether the Legislature intended to tax only amounts charged for outgoing calls, should
the customer make a call, and regardless of the number of calls a customer may receive.
(Resp.'s Reply Supp. Mot. Summ. J. 2.) The Assessor contends the Legislature intended
to tax the ability to make and receive calls when it imposed a tax on telecommunications
services. (Id. at 2-3.) This is because a tax on the sale oftelecommunications is a tax on
the sale of"access to" telecommunications services. (Id. at 3 (citing Cmty. Telecomms.
Corp., 684 A.2d at 426).) The Assessor further contends that a sale is simply a transfer
11 or exchange for consideration and that a tax imposed on the sale of telecommunications
services accrues whenever a customer purchases the ability to both make and receive
calls. (Jd.at3.)
The Assessor further argues that BCN' s position puts forward a narrow definition
under which the Legislature only intended to tax a narrow subset of the actual services
BCN sells; namely, the outgoing calls a customer may make in a month. (Id.) In
addition, BCN's interpretation requires the Court to find that the Assessor cannot assess
whether the sale of a taxable service has occurred, i.e. the exchange for consideration,
until the customer subsequently makes an outgoing call-even if the customer receives
numerous calls. (Jd.) Finally, the Assessor reiterates its argument that the sale price of
telecommunications services includes "any consideration" for services that are a part of a
sale" and hence includes PICC charges. (Id. at 4.)
BCN replies that the definition of"telecommunications services" and "sale price"
are not particularly complex and do not, by their plain terms, encompass the ability to
make and receive calls. (Pet.' s Reply Supp. Mot. Summ. J. 1.) BCN argues that the
Assessor's argument that "telecommunications services" is a broad definition, is not
supported by the statutory language and, that if the Legislature intended, it could have-
and would have-included in the definition of telecommunications services the ability to
make and receive calls. (Id. at 2.) BCN also argues that the Assessor's focus on the term
"routing" is unavailing as the PICCs are not charges for "routing" calls, but charges for
access to the routing, transmission or conveyance of calls. (Id.)
BCN further argues that the Assessor misconstrues BCN' s emphasis on outgoing
calls. (Id. at 3 .) This misunderstanding allegedly stems from the Assessor's focus on
12 outgoing, as opposed to incoming calls. (Id. at 3-4.) BCN explains that it focused on
outgoing calls because it does not charge for incoming long-distance calls and thus, there
is no taxable "sale price" for those calls. (Id. at 4.) IfBCN did charge for incoming
calls, they would be taxable telecommunications services subject to the service provider
tax, absent any other exemptions. (Id.) Finally, BCN argues that whether or not any of
BCN' s customers did or did not make outgoing calls in a given month is irrelevant, as the
question was brought up to illustrate a consequence of a statutory interpretation, not as
the factual scenario before the Court and BOT A. (Id.)
"The State's power to tax is strictly construed in favor of the taxpayer."
Community Telecommunications Corp., 684 A.2d at 426 (internal quotation omitted).
"The interpretation of statutes levying taxes should not extend their provisions by
implication beyond the clear import of the language used." !d. (citations omitted). As
with the interpretation of any statute, the court looks "first to the plain meaning of the
statutory language to give effect to the legislative intent." !d. The words of a tax statute
must be given their "plain and natural meaning" and construed in accordance with their
"natural import in common and approved usage." Great N. Nekoosa Corp. v. State Tax
Assessor, 540 A.2d 770, 772 (Nie. 1998) (quotation marks omitted). All words are to be
given meaning, and none are to be treated as surplusage. Preti Flaherty Beliveau &
Pachios LLP v. State Tax Assessor, 2014 ME 6, ~ 17, 86 A.3d 30.
Here, the Court finds that PICCs are not subject to the service provider tax
because they are not part of the "sale price" of"telecommunications services" within the
clear import of the service provider tax statutes. At its core, the issue presented is
whether the Legislature intended preliminary charges for access to telecommunications
13 services (i.e. PICCs) to constitute part of the sale price of telecommunications services or
whether those charges are an independent charge that has not been taxed by the
Legislature. In resolving this question, the first step is to assess whether PICCs constitute
telecommunications services in themselves. Based on the plain language of the current
service provider statute, it is clear that PICCs do not constitute telecommunications
services because they do not transmit, convey, or route any information. 36 M.R.S. §
2551(20-A). Similarly, under the version ofthe service provider statute in effect prior to
July 18, 2008, it is clear that PICCs do not constitute telecommunications services
because they do not involve the provision of 2-way interactive communications. 26
M.R.S. § 2551(20) (2008). Instead, PICCs are a monthly charge imposed on BCN
customers with multiple long distance lines. (Stipp. ,-r,-r 35, 38.) PICCs are designed to
allow carriers, such as BCN, to recover a portion of their costs for the local loop, i.e. the
line from the customer's premises to the office of the LEC. (Stipp. ,-r,-r 4, 19-20.) Stated
differently, PICCs are a charge that carriers may impose to recover some of their
expenses incurred in maintaining the local loop. If a customer does not pay the PICCs,
the provider may terminate the customer's service.
While PICCs do not constitute telecommunications services in themselves, the
service provider tax statute is not imposed simply on telecommunications services.
Instead, it is imposed on the "value" oft~lecommunications services. The value of
telecommunications services, in turn, is defined as the "sale price" of the
telecommunications service. Sale price is defined, in pertinent part, as "the total amount
of consideration ... for which ... services are sold ... without any deduction for' the cost
of.. .any other expense of the seller." 36 M.R.S. § 2551(15). The key question before the
14 Court then, is whether the clear import of the definition of"sale price" encompasses a
broader scope of services and charges than those defined as telecommunications services
by 36 M.R.S. § 2551(20-A) (2015) and former 36 M.R.S. § 2551(20) (2008). '
While there are reasonable arguments on both sides, in light of the requirement to
strictly construe the State's power to tax in favor of the taxpayer and the prohibition from
extending statutes imposing taxes beyond the clear import of their language, the Court
determines that the definition of "sale price," in the present circumstances, does not
encompass PICCs. This is because the definition of"sale price" is directly linked to the
total amount of consideration paid for telecommunications services. There is no "clear
import" that "sale price" is designed to include additional charges, such as PICCs, that
are related to-and serve as access charges to-telecommunications services.
Accordingly, the Court finds that PICCs are not subject to the service provider tax
because they are not part of the "sale price" of "telecommunications services" within the
clear import of the service provider tax statute.
Although the parties raise additional arguments that support different results, the
Court will rely upon the plain language of the statute. While the parties pose dueling
hypotheticals, the Court will rely upon the plain language of the statute. On the one
hand, the Assessor argues that the consideration for PICCs and telecommunications
services would essentially disappear ifBCN chose to charge a flat fee for its long
distance telecommunications services. On the other hand, BCN argues that taxing it for
PICCs in a month when a client does not make any long distance telephone calls would
result in BCN being taxed when no actual telecommunications ser\rices were provided.
While recognizing the merit to these concerns, the plain language of the statute must be
15 the primary focus of the analysis. This approach is supported by the lack of information
the legislative history of the service provider tax statute brings to the present question. In
particular, while the Assessor is correct that the scope of the statute expanded in 2004 to
encompass VOIP services, it offers no insight into the question of whether PICCs
constitute part ofthe "sale price" of telecommunications services.
Finally, the Court's determination that PICCs are not part of the "sale price" of
"telecommunications services" within the clear import of the service provider tax statute
is not controlled by the Law Court's opinion in Community Telecommunications Corp. v.
State Tax Assessor, 684 A.2d 424. In that case, the Law Court found that a separate
contract for the repair, labor, and maintenance of telecommunications services was
taxable under a different statutory provision, 36 M.R.S. § 1752. Id. at 426. At the time,
section 1752 defined "telephone or telegraph service" as a "taxable service" and defined
telephone or telegraph service as "all telecommunications or telegraph service, including
installation or use of telecommunication or telegraphic equipment." !d. at 425.
"Telecommunication and telegraphic equipment" was defined as "any 2-way interactive
communications device, system or process for transmitting or receiving electromagnetic
signals and capable of exchanging audio, data base or textual information." Id.
Interpreting that language, the Law Court pointed out that telephone or telegraph service
means "all telecommunications or telegraph service," including installation or use of
telecommunications equipment. Id. at 426 (emphasis in original). "All" means the "total
entirety or extent of' the noun that it modifies and, when used in statutes, is a "wide-
ranging word" that "does not admit of exception, addition or exclusion." !d. (citations
omitted). Accordingly, the Law Court determined that the phrase "all
16 telecommunications ... service includes not only the sale of access to a telecommunication
or telegraph service but also the repair and maintenance contracts sold by [the
company.]" Id. While Community Telecommunications Coip. arguably favors a broad
interpretation of what constitutes a taxable service, it is of limited application to the
present case because it turned on its own, distinct statutory language. Most importantly,
the pertinent definition of telecommunications services in this case does not contain the
key phrase "all" that was central to the Law Court's analysis in Community
Telecommunications Corp. Accordingly, the Court finds that the PICCs charged by BCN
are not subject to the service provider tax.
d. Even ifPICCs Were Included in the Sale Price of Telecommunications Services, Which They are not, They Would Fit within the Exemption from the Service Provider Tax for the Sale of Interstate Telecommunications Service
As discussed above, the Court finds that PICCs are not included in the sale price
of telecommunications services and are not subject to the service provider tax. However,
assuming for the sake of argument that the Court agreed with the Assessor that PICCs
were included in the sale price of telecommunications services, they would still notbe
taxable because PICCs fit within the exemption for the sale of interstate
telecommunications services. Specifically, 36 M.R.S. § 2557(34) provides that the
service provider tax "does not apply in connection with the "sales of interstate
telecommunications service." (emphasis added). Interstate telecommunications service is
defined as a subset of telecommunications services, i.e. a "telecommunications service
that originates in one state ... and terminates in a different state." 36 M.R.S. § 2551(5-B).
"[T]ax exemptions are construed narrowly," Brent Leasing Co., 2001l\1E 90, ~
15, 773 A.2d 457, and "not to be extended ... to situations not clearly coming within the
17 scope ofthe exemption provisions," HaroldMacQuinn, Inc. v. Halperin, 415 A.2d 818,
820 (Me. 1980). However, the service provider tax statutes, must be construed in a
holistic approach so that "a harmonious result, presumably the intent of the Legislature,
may be achieved." McPhee v. Nie. State Ret. Sys., 2009l\IIE 100, ,-r 23, 980 A.2d 1257
(quotation omitted). As a result, the term "sales" in 36 M.R.S. § 2557(34) should be
construed in a harmonious way with the term "sale price" in 36 M.R.S. § 2551(15).
Here, it is clear that PICCs are charged in conjunction with interstate
telecommunications services and, indeed, are not permitted by federal law to be charged
to residential customers or customers that only have local service. (Stipp. ,-r,-r 36-39.) It
therefore stands to reason that ifPICCs are included within the sale price of
telecommunications services-such that they are initially subject to the service provider
tax-PICCs are also exempt as a portion ofthe "[s]ales of interstate telecommunications
services."
Indeed, this is the same reasoning employed by BOTA in MCI Comms. Servs. Inc.
v. Me. Revenue Servs., BTA-2013-7 (Me. Bd. Tax App. Sept. 13, 2013) (attached as
Exhibit A to Pet.' s Mot. Summ. J.)_3 In that case, MCI explained, and l\1RS did not
dispute, that MCI's "carrier cost recovery charges" ("CCRCs") and "property tax
recovery charges" ("PTRCs") were charged only on interstate and international
telecommunications services. Id. at 2, 4. These charges were calculated based upon the
cost of those services, which the parties agreed were exempt from the service provider
tax. !d. at 2. Against this backdrop, BOTA determined that MCI's CCRCs and PTRCs
3 This decision is currently on appeal in the Kennebec County Superior Court.
18 were exempt from the service provider tax because both charges were part of the sale
price of exempt interstate services 4 Id at 8. Specifically, BOTA explained that:
Since subsections 33 and 34 [of'36 M.R.S. § 2557] exempt the sale of international and interstate telecommunications services, we conclude that those subsections must logically exempt the sale price of both services. As both the CCRC and PTRC are charges that constitute part of the sale price of the exempt services, subsections 33 and 34 exempt both charges from [the service provider ta.-x.)
!d. at 8 (emphasis in original). 5
Accordingly, even assuming for the sake of argument that PICCs were part of the
"sale price" of telecommunications services, they would be exempt from the tax as
connected to the "sales of telecommunications services."
ill. Conclusion
The Court denies the Assessor's motion for summary judgment and grants
BCN' s because it finds that PICCs are not subject to the service provider tax since they
are not part of the" sale price" of telecommunications services" within the clear import of
the tax. Furthermore, even ifPICCs constituted part ofthe "sale price" of
"telecommunications services," they would be exempt from the service provider tax as
connected to the "sales of telecommunications services." Accordingly, the Court
4 MCI similarly found that under the service provider statutes before their amendment on July 18, 2008, the CCRCs and PTRCs were exempt because they were not part of the consideration paid for the purchase of intrastate telecommunications services and hence not part of the ta.-xable sales price of the services. !d. at 6. 5 As indicated, MCI concluded that the CCRC and PTRC are charges that constitute part of the "sale price" of both services. !d. at 8. While that finding supports a determination that PICCs are also part of the sale price of telecommunications services, it bears noting that this does not appear to have been a contested issue in MCI. In other words, the parties agreed, i.e. did not dispute, that CCRCs and PTRCs constitute part of the sale price oftelecommunications services. As discussed supra section II( c), the Court determines that PICCs are not part of the sale price of telecommunications services.
19 reverses the underlying decision from the Board of Tax Appeals and remands with
instructions to abate the assessment.
Pursuant to M.R. Civ. P. 79(a), the Clerk is hereby directed to incorporate this
Order by reference in the docket.
Dated: October 5, 2015 SUPERIOR COURT JUSTIC
20 Date Filed 06/28/13 Kennebec Docket No. AP-13-26 F County Petition for Review J. Murphy 80C
BCN Telecom, Inc. vs. Maine Revenue Services
Plaintiff's Attorney Defendant's Attorney
-Michael Smith, Esq. Kimberly Patwardhan, AAG -Michael L. Sheehan, Esq. Seett 'N. Beak, MG (Withdrawn) PO Box 9546 6 State House Station Portland, ME 04112 Augusta, ME 04333
-John Sullivan, Ill, Esq. (Pro hac vice) Paul BeuFget, Es€1. 80 Maiden Lane, Suite 1502 134 State He use Stetien New York, NY 10038 Auguste, ME 04333
Date of Entry
7/1/13 Petition For Review, filed 6/28/13. s/Sheehan, Esq.
7/18/13 Entry of Appearance for State Tax Assessor, filed. s/Boak, AAG
7/18/13 Letter stating that the Respondent will not file a responsive pleading unless ordered to do so by the court, as there is no record to file, filed. s/Boak
7/23/13 Standard Scheduling Order issued and mailed to Petitioner and AAG Beak. Discovery deadline 10/23/13 Justice Assigned, Michaela Murphy
9/18/13 Amended Scheduling Order issued. Discovery deadline 3/23/14. Copy to Atty Sheehan and AAG Beak
12/3/13 Letter requesting conference regarding discovery dispute, filed 11/27/13. s/Boak, AAG
12/11/13 Phone conference scheduled for 12/11/13 at 3:30.
12/17/13 Phone conference not held.
12/17/13 ORDER, Murphy, J. (12/11/13) Court informed parties will submit agreed-upon Protective Order. Copy to Atty Sheehan and AAG Beak.
1/8/14 Consented-to Motion for Protective Order, filed 1/7/14. s/Boak AAG
1/10/14 PROTECTIVE ORDER, Murphy, J. Copy to Atty Sheehan and AAG Beak 1/28/14 Letter requesting order to resolve discovery dispute, filed 1/21/14. s/Boak, AAG 1/28/14 Letter as follow-up to discovery issues in previous letter, indicating the parties conferred and agree to and request order, filed 1/21/14. s/Boak, AAG
1/31/14 ORDER, Murphy, J. (1/29/14) (re: Letters filed 1/21/14) Approved. AAG Beak to prepare order for Court's signature. Copy to Atty Sheehan and AAG Beak
2/4/14 Draft Discovery Order filed by AAG Beak.
2/12/14 DISCOVERY ORDER, Murphy, J. (2/9/14) 1) Petitioner shall produce all outstanding documents requested by Respondent no later than 2/14/14. 2) The discovery deadline is 8/25/14. Copy to Atty Sheehan and AAG Beak
5/7/14 Letter entering appearance for Respondent, filed. s/Patwardhan, AAG
7/1/14 Letter withdrawing appearance as co-counsel for Respondent, filed. s/Boak, AAG
9/10/14 Consented-to Motion to Stay Deadlines, filed 9/5/14. s/Patwardhan, AAG
9/12/14 ORDER, Murphy, J. The Court stays the deadlines in the scheduling order dated 9/18/13. The clerk shall schedule a conference of counsel to discuss and set new deadlines for the future course of proceedings. Copy to Atty Sheehan and AAG Patwardhan
9/12/14 Phone conference scheduled 9/26/14 at 3:30. Notice sent to Atty Sheehan and AAG Patwardhan
9/30/14 ORDER, Murphy, J. (9/26/14) (Hearing/Conference Record) By 10/31/14, the parties shall file a Stipulated Record. If they are not able to do so, they shall advise the Court by that date and confer with the Court telephonically on that same date at 12:30 p.m. Copy to Atty Sheehan and AAG Patwardhan
10/31/14 ORDER, Murphy, J. (Hearing/Conference Record) Parties shall each file Motion for Summary Judgment by 12/12/14, any opposition by 1/9/15, replies by 1/16/15. Oral argument to be provided. This Order shall supplant prior Scheduling Order. Copy to Atty Sheehan and AAG Patwardhan
11/4/14 Entry of Appearance, filed. s/Smith, Esq.
12/11/14 Petitioner's Consented-To Motion for Enlargement of Time to Move for Summary Judgment, filed 12/5/14. s/Smith, Esq.
12/18/14 ORDER, Murphy, J. (12/16/14) Motion is GRANTED. The parties' deadline to move for summary judgment shall be 12/19/14. Copy to Atty Sheehan and AAG Patwardhan 12/18/14 Respondent's Consented-to Motion for Enlargement of Time to Move for Summary Judgment, filed. s/Patwardhan, AAG
12/24/14 ORDER, Murphy, J. (12/19/14) (re: Motion for Enlargement filed 12/18/14) GRANTED. Parties' deadline to move for summary judgment shall be 1/9/15, Oppositions 1/23/15, Replies 1/30/15. Copy to Atty Sheehan and AAG Patwardhan
1/7/15 Unopposed Motion for Admission Pro Hac Vice of John W. Sullivan, Ill, Esq., with Affidavit, filed 1/2/15. s/Smith, Esq.
1/13/15 ORDER, Murphy, J. (1/10/15) Attorney Sullivan is admitted to practice and shall at all times be associated with Michael Sheehan, Esq., Michael Smith, Esq., and the law firm of Preti Flaherty Beliveau & Pachios. Copy to Atty Sheehan, Atty Sullivan, and AAG Patwardhan
1/14/15 -Joint Stipulation of Facts and Stipulated Exhibits, filed 1/9/15. s/Patwardhan, AAG s/Smith, Esq. -Respondent's Motion for Summary Judgment, Supporting Statement of Material Facts, filed 1/9/15. s/Patwardhan, AAG
1/14/15 Petitioner's Motion for Summary Judgment, filed 1/9/15. s/Smith, Esq.
1/23/15 Petitioner's Opposition to Respondent's Motion for Summary Judgment, Response to Respondent's Statement of Material Facts, filed. s/Smith, Esq.
1/23/15 Respondent's Opposition to Petitioner's Motion for Summary Judgment, Additional Statement of Material facts, filed. s/Patwardhan, AAG
2/3/15 Petitioner's Reply to Respondent's Opposition to Motion for Summary Judgment, Petitioner's Response to Respondent's Additional Statement of Material Facts, filed 1/30/15. s/Smith, Esq.
2/3/15 Respondent's Reply Memorandum in Support of its Motion for Summary Judgment, Respondent's M.R. Vic.P. 56(i) Statement, filed 1/30/15. s/Patwardhan, AAG
2/12/15 Petitioner's Reply to Respondent's Opposition to motion for Summary Judgment, Petitioner's Response to Respondent's Additional Statement of Material Facts, filed 2/3/15. sf Smith, Esq.
4/14/15 Hearing on Motions for Summary Judgment scheduled for 6/2/15 at 9:00 a.m. Notice of Hearing sent to Atty Smith, Atty Sullivan, AAG Patwardhan, and Atty Bourget.
5/26/15 Petitioner's Consented-To Motion for Continuance of Summary Judgment Hearing, filed 5/20/15. s/Smith, Esq.
5/28/15 Letter advising that Maine Board of Tax Appeals is not a party and will not appear on June 2, filed. s/Bourget, Esq. 6/10/15 ORDER, Murphy, J. (5/27/15) Petitioner's Consented-to Motion for Continuance of Summary Judgment hearing is GRANTED. Copy to Atty Smith, Atty Sullivan, AAG Patwardhan
7/2/15 Hearing on Motions for Summary Judgment scheduled for 8/16/15 at 9:30. Notice of Hearing sent to Atty Smith, Atty Sullivan, AAG Patwardhan
8/14/15 Hearing scheduled for 8/18/15 at 9:30. (Notice sent 7/2/15)
8/18/15 Hearing held 8/18/15, J. Murphy presiding. Michael Smith, Esq.; John Sullivan, Ill, Esq.; Kimberly Patwardhan, AAG Courtroom 4, 9:33:24 to 10:10:08 Under advisement
10/6/15 ORDER ON THE PARTIES' MOTIONS FOR SUMMARY JUDGMENT, Murphy, J. (1 0/5/15) The Petitioner's motion for summary judgment is granted. The Respondent's motion for summary judgment is denied. The Court reverses the underlying decision from the Board of Tax Appeals and remands with instructions to abate the assessment. Copy to Atty Smith, Atty Sullivan, AAG Patwardhan Copy to Repositories