Mountain Cable Co. v. Department of Taxes

Mountain Cable Co. v. Department of Taxes (97-290); 168 Vt. 454; 721 A.2d 507

[Filed 13-Nov-1998]


       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                 No. 97-290


       Mountain Cable Co. and	                   Supreme Court
       Better TV. Inc., of Bennington
                                                   On Appeal from
       v.		                           Washington Superior Court

       State Department of Taxes	           February Term, 1998



       Alan W. Cheever, J.

       Wm. Roger Prescott and Christopher D. Roy of Downs Rachlin & Martin,
  PC, Burlington, for Appellants.

       William H. Sorrell, Attorney General, and John M. Bagwell, Special
  Assistant Attorney General, Montpelier, for Appellee.
       

  PRESENT:  Morse, Johnson and Skoglund, JJ., and Allen, C.J.
            (Ret.) and Wesley, Supr. J., Specially Assigned


       WESLEY, Supr. J., Specially Assigned.   At issue in this appeal is
  whether installation and connection fees charged by cable television
  companies are subject to sales tax under Vermont law.  We affirm the
  superior court's order upholding the Commissioner of Taxes' determination
  that such fees are taxable amusement charges.

       The facts are not in dispute.  From 1989 to 1992, Mountain Cable
  Company and Better TV, Inc. of Bennington ("taxpayers"), two commonly owned
  cable television providers, charged customers a flat one-time installation
  or initiation fee for connecting them to the cable network.  In the typical
  case involving a new customer without a cable-ready home, taxpayers'
  technicians would run aerial or underground coaxial wire from a telephone
  pole outside the customer's residence to one or more outlets installed in
  the customer's home.  Although the $20 to $25 installation fee recovered
  only about fifty percent of the actual cost of a first-time installation,
  taxpayers recouped the rest of the costs by charging the same amount for
  initiating service in 

   

  previously-wired homes, which would involve merely engaging a switch on a
  telephone pole.

       During the relevant period, taxpayers took the position that the fees
  they charged for installation or initiation of cable television service
  were not "amusement charges," and thus not subject to sales tax.  See 32
  V.S.A. § 9771(4) (sales tax shall be paid upon receipts from amusement
  charges).  In November 1992, the Department of Taxes notified taxpayers
  that they were required to collect and turn over sales taxes imposed on
  their installation and initiation fees.  Taxpayers filed an administrative
  appeal, and the Commissioner issued a determination upholding the
  Department's position, ordering taxpayers to pay uncollected sales taxes on
  installation or service initiation charges required of their customers for
  the commencement, or reconnection, of cable television signals.  Noting
  that customers could not choose to forgo the installation fees and still
  obtain cable programming, the Commissioner reasoned that the fees were
  merely one component of the transaction for the provision of cable
  television services, and thus should be considered "service charges" under
  32 V.S.A. § 9701(10) ("amusement charges" include "service charges of cable
  television systems").  The superior court upheld the Commissioner's
  determination, in turn, concluding that § 9701(10) does not limit "service
  charges" to just the monthly programming fee.

       On appeal, taxpayers argue that the superior court erred (1) by
  according the Commissioner an undue degree of deference on a purely legal
  question of statutory interpretation, (2) by improperly imposing upon them
  the burden of proving that the installation fees were not subject to sales
  tax, and (3) in concluding that the installation fees were "amusement
  charges" subject to sales tax.

       It is undisputed that "amusement charges," as defined by § 9701(10),
  are subject to sales tax.  Under that statutory provision, the term
  "amusement charges" means:

       the admission charge (including any subsidiary, service or cover 
       charge) to, and any charge for the use of any place of recreation or 
       amusement . . . including specifically service charges of cable 
       television systems or other audio or video programming systems that
       operate by wire, coaxial cable, lightwave, microwave, satellite


  

        transmission or by other similar means.
   
  32 V.S.A. § 9701(10) (emphasis added).  The key issue, then, is whether
  "service charges" include installation and initiation fees.

       Without question, the common, ordinary meaning of the term "service
  charges" would include any fee charged for installing a product or system. 
  See Cable Television Ass'n v. Finneran, 954 F.2d 91, 99 (2d Cir. 1992)
  (term "cable services" is not limited to cable programming, but includes
  both provision of equipment necessary to receive service and charge for
  installation to obtain service).  Indeed, in the context of the sale of
  tangible personal property, fees designated as "service charges" most often
  denote charges associated with the installation or delivery of the product. 
  Because the term "service charges" is not defined in the statute, we must
  presume that the Legislature intended the everyday commonly understood
  meaning that would certainly encompass installation and initiation fees. 
  See Shetland Properties, Inc. v. Town of Poultney, 145 Vt. 189, 194, 484 A.2d 929, 932 (1984) (words undefined in statute are given their plain and
  commonly accepted usage).

       Taxpayers argue, however, that in the cable television industry the
  term "service charge," as demonstrated by the exhibits in this case, is
  often used when referring to fees for providing monthly programming
  service.  We do not find this argument persuasive.  The fact that the term
  "service charge" might be used on cable bills to refer to monthly fees for
  programming services does not suggest that it is limited to that meaning or
  that it is not generally understood to include fees for installing or
  initiating service.  The cable industry cannot infect the tax code with an
  ambiguity simply by giving different names to the various fees it imposes
  for providing cable signals.  If that were the case, the industry's ability
  to evade sales tax on its services would be limited only by the creativity
  of its marketing staff.  Further, the Legislature would be sorely tested to
  fashion statutory provisions to immunize itself against the "ambiguity
  virus" arising from the very commercial entities it seeks to tax.

       In any event, the Legislature has already provided the antidote for
  this potential epidemic 

  

  by broadly defining "amusement charges" and by placing the burden on
  taxpayers to show that charges are outside that broad definition.  Whether
  termed an "admission charge," "cover charge," "subsidiary  charge," or
  "service charge," the costs associated with enjoying the specified taxable
  activities come within the definition of an "amusement charge."  32 V.S.A.
  §9701(10).  The denomination of alternative common names for amusement
  charges should have forestalled the name game relied upon by taxpayers.

       To further discourage precisely the sort of challenge taxpayers have
  mounted here, the Legislature expressly limited the arguments which cable
  companies, and all other operators of amusements, might raise to escape
  taxation based on creative nomenclature.  Section 9813(a) of Title 32 of
  the Vermont Annotated Statutes establishes a special presumption applicable
  to the collection of sales taxes:

       For the purpose of the proper administration of this chapter and to 
       prevent evasion of the tax hereby imposed, it shall be presumed that all 
       receipts for property and services of any type mentioned in subdivision 
       (1), (2) and (3) of section 9771 of this title, and all amusement 
       charges of any type mentioned in subdivision (4) of section 9771,
       are subject to tax until the contrary is established, and the burden of
       proving that any receipt of amusement charge is not taxable hereunder 
       shall be upon the person required to collect tax.


  32 V.S.A. § 9813(a) (emphasis added).  The provision unmistakably
  delineates the legislative desire to broadly sweep amusement charges, by
  whatever name they may be called, within the ambit of the sales tax.

       Taxpayers challenge the superior court's reliance on § 9813(a),
  arguing that applying the provision in this instance would require us, in
  effect, to assume an affirmative answer to the very question raised and
  abandon the common-law presumption favoring taxpayers.  But § 9813(a) was
  plainly enacted precisely to abrogate the common-law presumption in
  circumstances that include this case.  The narrowly focused provision
  explicitly addresses the presumptions and the burden of proof in cases
  involving the sales tax, whose explicitly stated purpose is preventing
  evasion of that tax, and which most explicitly covers "all amusement
  charges of any type 

   

  mentioned in subdivision (4) of section 9771."  Id. (emphasis added).  We
  will not presume that the Legislature enacted meaningless legislation.  See
  State v. Baldwin, 140 Vt. 501, 511, 438 A.2d 1135, 1140 (1981); see also
  Trombley  v. Bellows Falls Union High School, 160 Vt. 101, 104, 624 A.2d 857, 860 (1993) (statutes may not be construed so as to render significant
  part pure surplusage).  Accordingly, we conclude that the superior court
  properly applied the presumption contained in § 9813(a) to the instant
  matter.

       Further, we find no basis for taxpayers' assertion that the superior
  court accorded the Commissioner's decision an undue degree of deference in
  construing the relevant statute.  We have repeatedly stated that the
  interpretation of a statute by the administrative body responsible for its
  execution will be sustained on appeal absent compelling indication of
  error.  See In re Burlington Elec. Dep't v. Department of Taxes, 154 Vt.
  332, 337, 576 A.2d 450, 453 (1990).  The superior court expressly
  acknowledged this accepted standard, and then went on to undertake an
  independent analysis of the language and purpose of the relevant statutory
  provisions to determine the intent of the Legislature.  In arriving at its
  conclusion that "amusement charges" include installation and initiation
  fees for providing cable television, the superior court emphasized (1) the
  mandatory nature of such initial fees as a condition of receiving cable
  services, even if a customer's home is cable-ready; (2) the absence of any
  relationship between those fees and the actual costs of installation; and
  (3) the discounts on such fees for those who subscribe to a more expensive
  package of programming.  Given the nature and purpose of the initial fees,
  the court found them indistinguishable from subsequent monthly service
  charges in considering the applicability of the sales tax on amusement
  charges associated with cable television systems.  As the court observed,
  nothing in the statutory scheme suggests that the Legislature's intent to
  tax cable service charges as amusements is limited to a consideration of
  monthly fees only.

       In view of the encompassing scope of the statutory scheme, and the
  obvious correlation between the payment of installation or initiation
  charges and the receipt of cable services, the 

  

  superior court correctly concluded that such charges were taxable amusement
  charges.  See State v. Ben-Mont Corp., 163 Vt. 53, 57, 652 A.2d 1004, 1007
  (1994) (court's task is to give effect to legislative intent and to further
  fair and rational results); Bisson v. Ward, 160 Vt. 343, 348, 628 A.2d 1256, 1260  (1993) (Legislature is presumed to intend plain meaning of
  statutory language).

       Affirmed.
  	

                               FOR THE COURT:

                                                           
                               _________________________________________
                               Superior Judge, Specially Assigned