911 Emergency Surcharge and Right-of-Way Charge
| Decision Date | 08 April 2002 |
| Docket Number | B-288161 |
| Parties | 911 Emergency Surcharge and Right-of-Way Charge |
| Court | Comptroller General of the United States |
Dear Mr. Eagen:
By letter dated June 18, 2001, you asked whether the United States House of Representatives and its respective offices are responsible for paying the 911 emergency surcharge and the right-of-way charge to local carriers within the District of Columbia. Both charges are itemized on the monthly statement from the local carrier, Verizon. As set forth more fully below, we find that the District of Columbia's 911 emergency surcharge is a tax, the legal incidence of which falls directly on the federal government as a user of telephone services in the District of Columbia. Consequently the United States is constitutionally immune and the tax is not payable by the federal government. However, the right-of-way charge is a rental fee imposed upon the telecommunications companies and other utilities that use public property. Since it is not a tax that falls on the federal government as a vendee, the federal government may pay the right-of-way charge.
The House of Representatives receives a monthly statement from Verizon, its local carrier for telephone services. Among the itemized charges are two specific fees which are the subject of your letter: a 911 emergency surcharge and a right-of-way charge. You note that the federal government is constitutionally immune from taxation by the states and where a state tax is imposed directly on the purchaser, and the purchaser is the United States, the United States is not required to pay the tax pursuant to principles of sovereign immunity. McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819). You asked us whether the House of Representatives and its respective offices are responsible for paying the 911 emergency surcharge and right-of-way charge.
The two relevant statutes to the inquiry are the Emergency and Non-Emergency Number Telephone Calling Systems Act of 2000 for the 911 emergency surcharge (D.C. Code Ann. Sec. 34-1801 (2001)) and the Fiscal Year 1997 Budget Support Act of 1996 (D.C. Law 11-198, April 9, 1997), which authorized the Mayor to issue permits and charge rent for use of public rights of way. D.C. Code Ann. Sec. 7-1076 (2001). We will describe each in turn below.
In 2000, the District of Columbia enacted the Emergency and Non-Emergency Number Telephone Calling Systems Fund Act of 2000 (fund) (D.C. Law 13-172, Oct. 19, 2000) which is to be used to defray the 911 emergency system costs incurred by the District of Columbia. Under this law, "[a]ll subscribers shall contribute to the Fund through a user fee to be collected by each local exchange carrier." D.C. Code Ann. Sec. 34-1803(a) (2001). User fees collected under the statute are not "considered revenue of a local exchange carrier for any purpose." D.C. Code Ann. Sec. 34-1803(c) (2001). These fees must be deposited in the fund and used solely to defray the costs incurred by the District of Columbia in providing a 911 emergency system. D.C. Code Ann Sec. 34-1802 (2001). The law explains that the 911 charges are "user fees imposed on [telephone] subscribers" and that the law "remove[s] the 911 system costs currently embedded in the base rates charged by the [telephone companies] for local telephone services." Emergency and Non-Emergency Number Telephone Calling Systems Fund Act of 2000, D.C. Law 13-172, Oct. 19, 2000.
The Fiscal Year 1997 Budget Support Act of 1996 (D.C. Law 11-198, April 9, 1997) authorizes the Mayor to issue permits and charge rent for the occupation and use of public space, public rights of way and public structures. Part of the law deals with the area below the surface of any public street or sidewalk. D.C. Code Ann. Sec. 10-1141.01 (2001). The Mayor is empowered to issue permits for use of the public rights of way, to issue regulations, and to provide for the payment of a nondiscriminatory, fair and equitable fee for use of the space. D.C. Code Ann. Sec. 10-1141.03-.04 (2001).
By regulation, no person may use the below ground right of way without an occupancy permit and paying the rental fee. D.C. Mun. Regs. Tit. 24, Sec. 3302.1 (2001). The rental fee for pipes below the surface is $.14 per linear foot of public right-of-way occupied. D.C. Mun. Regs. Tit. 24, Sec. 3302.8 (2001). The law also requires each public utility company regulated by the Public Service Commission to recover from its utility customers all lease payments through a surcharge mechanism applied to each unit of sale, and separately state the surcharge amount on each customer's monthly billing statement. D.C. Code Ann. Sec. 10-1141.06 (2001).
The question of whether the United States and its instrumentalities must pay these charges turns on whether the 911 emergency surcharge and right-of-way charge are taxes imposed on the federal government. It is well established that the United States and its instrumentalities are immune from direct taxation by state and local governments. Direct taxation occurs where the legal incidence of a tax falls directly on the United States as the buyer of goods, Kern-Limerick, Inc. v. Scurlock, 347 U.S. 110 (1954), as the consumer of services, 53 Comp. Gen. 410 (1973), or as the owner of property, United States v. Allegheny County, 322 U.S. 174 (1944). These direct taxes, known as "vendee" taxes, are not payable by the federal government unless expressly authorized by Congress. 64 Comp. Gen. 655, 656-57 (1985).
Generally, when a statute states that the tax must be passed on to the purchaser, the legal incidence of the tax falls on the purchaser. See, e.g., 57 Comp. Gen. 59 (1977) (). In these instances, the business enterprise (the "vendor") passing the tax on to vendees is really the collection agent for the state. On the other hand, if the legal incidence of the tax falls directly on a vendor, which is supplying the federal government as a customer with goods or services, immunity does not apply. 61 Comp. Gen. 257 (1982) (requirement that a utility tax be passed on to the user must be part of the taxing statute for the government to invoke the principles of sovereign immunity). Whether the federal government reimburses the vendor when it pays for the goods or services supplied by the vendor is determined by the government's contract or other agreement with the vendor. 61 Comp. Gen. 257, 258 (1982); B-211093, May 10, 1983.
A fee charged by a state or political subdivision for a service rendered or convenience provided, however, is not a tax. See Packet Co. v. Keokuk, 95 U.S. 80, 84 (1877) (); 49 Comp. Gen. 72 (1969) (). Distinguishing a tax from a fee requires careful analysis because the line between "tax" and "fee" can be a blurry one. Collins Holding Corp. v. Jasper County, South Carolina, 123 F.3d 797, 800 (4th Cir. 1997). Taxation is a legislative function while a fee "is incident to a voluntary act, e.g., a request that a public agency permit an applicant to practice law or medicine or construct a house or run a broadcast station." National Cable Television Ass'n v. United States, 415 U.S. 336, 340 (1974).
In determining whether a charge is a "tax" or "fee, " the nomenclature is not determinative and the inquiry must focus on explicit factual circumstances. Valero Terrestrial Corp. v. Caffrey, 205 F.3d 130, 134 (4th Cir. 2000). One court described a "classic" tax as one imposed by a legislature upon many, or all, citizens, raises money, and is spent for the benefit of the entire community. San Juan Cellular Tel. Co. v. Public Service Comm'n of Puerto Rico, 967 F.2d 683, 685 (1st Cir. 1992). On the other hand, a classic "regulatory fee" is imposed by an agency upon those subject to its regulation, may serve regulatory purposes, and may raise money to be placed in a special fund to help defray the agency's regulation related expenses.[1] Id.
The 911 emergency surcharge has attributes of a "classic" tax described in San Juan: it is levied by the D.C. Council on all citizens with telephone service, it raises money, and the money is spent to provide emergency service for the benefit of the entire community. Although the District of Columbia statute terms it a "user fee, " it is clear that the service provider is not the telephone company but rather the District of Columbia government. The amount of the surcharge, $.56 per access line, $.07 per centrex line and $.56 per wireless telephone service for each telephone number, is set by statute for all persons with local exchanges. D.C. Code Ann. Sec. 34-1803(a) (2)(2001). The revenue raised is placed in a special fund to be used to defray the costs of the 911 emergency system. D.C. Code Ann. (2)(2001). The revenue raised is placed in a special fund to be used to defray the costs of the 911 emergency system. D.C. Code Ann. Sec. 34-1802(a)(2001).
We have examined telephone charges in several states, including Utah B-283464, February 28, 2000; Illinois, B-265776, November 29, 1995; and Alaska, B-259029, May 30, 1995. In each of these cases, we held...
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