Several state tax offices and wireless carriers responded to the tax predicament faced by Western Wireless Corp. in Oregon.
The Oregon Department of Revenue sent Western a proposed assessment that included in the valuation the $34 million Western paid for the Portland personal communications service license. The addition of the license could hike Western’s tax bill an additional $500,000 a year.
Western has petitioned the Federal Communications Commission to intervene in what it sees as a barrier to market entry. The FCC put the matter out for comment, some of which are listed below. Comments are due Sept. 16.
The Taxation and Revenue Department of New Mexico expressed concern that the FCC had an “apparent willingness to assume the authority to regulate state taxes.” According to New Mexico, neither the Telecommunications Act of 1996 nor the 1993 Omnibus Budget Reconciliation Act authorizes the FCC to settle this issue.
“The commencement by the FCC has potentially serious impacts on states’ taxing jurisdiction and the federal system, particularly in this context where Congress so very clearly secured the states’ taxing authority,” said John J. Chavez, secretary of the New Mexico Taxation and Revenue Department.
AT&T Wireless Inc. has taken the position that “Oregon’s tax is impermissible because spectrum licenses are not `property’ and hence are not subject to property taxes. Moreover, because spectrum is inherently interstate in nature and not located within the boundaries of a particular state, it is beyond the reach of Oregon’s taxing power.” AT&T holds PCS licenses throughout the nation.
Sprint Spectrum and its Washington, D.C., affiliate, American Personal Communications, support Western’s position. Sprint also holds PCS licenses in numerous states and estimated that, “If every state adopted the Oregon tax, Sprint Spectrum would have to pay a $300 million fee over the 10-year term, in addition to the value paid for its PCS license.
“If the commission grants the petition and invalidates the Oregon tax, it will not be giving Western and other PCS providers a free pass on taxes. PCS providers still will face income taxes and tangible property taxes in virtually every state in which they operate. These are the same taxes that cellular companies and other communications companies pay,” Sprint said.
Nextel Communications Inc. supports Western’s position, saying, “The wireless telecommunications provider who has just invested significant resources in purchasing a license at a federal spectrum auction has already made a notable contribution to the federal Treasury, thereby benefiting all taxpayers (including those in Oregon).
“That wireless provider cannot then be subject to an ultra vires state licensee fee disguised as a property tax,” said Robert Foosaner, senior vice president of government affairs for Nextel.
United States Cellular Corp., which operates five systems in Oregon, said Western is directly on point.
“Whether or not such taxes violate the supremacy clause of the intergovernmental tax immunity doctrine, as we have maintained that they do, they are certainly in direct opposition to Congress’ direction to the FCC in 1993 and 1996,” U.S. Cellular states.
The State of Arkansas said the FCC lacks jurisdiction, and further commented to the FCC that “Arkansas cannot understand why the FCC would permit a proceeding in a matter that is so lacking in merit.”
