City of Springfield v. SPECTRUM
| Decision Date | 08 August 2006 |
| Docket Number | No. SC 87238,SC 87238 |
| Citation | 203 S.W.3d 177 |
| Parties | City of Springfield, Appellant v. Sprint Spectrum, L.P., Respondent. |
| Court | Missouri Supreme Court |
John W. Housley, Angela K. Drake, Nicole D. Lindsey and Nancy K. Yendes, Counsel for Appellant.
Stephen R. Clark, Kristin E. Weinberg, Randy R. Cowherd and David R. Adairs, Counsel for Respondent.
The City of Springfield ("City") appeals the trial court's dismissal of its suit alleging that the "Municipal Telecommunications Business License Tax Simplification Act" ("Act"), codified at 92.074 to 92.095, RSMo Supp. 2005,1 is unconstitutional in the manner in which it regulates and prohibits collection by municipalities of business license taxes on telecommunication companies for wireless service already provided by those companies before the law was enacted.
This Court agrees that section 92.086.10 violates the Missouri Constitution's prohibition on special laws. It creates a fixed category of cities that are exempt from specified taxation restrictions placed on all other cities. It bases the exemption on an immutable, historical fact — whether a city had adopted and enforced its tax prior to January 15, 2005 — and substantial justification for failure to enact a general law in lieu of a special law has not been shown. Because section 92.092 expresses the legislature's intent that if "any provision or part of sections 92.074 to 92.089" is invalid, all of those sections of the Act must fall, sections 92.074 to 92.089 are invalid in their entirety.
For decades the City has imposed a gross receipts business license tax on providers of "telephone and telephonic service" in the City. Originally enacted in 1968,2 the tax, sometimes referred to as a "Telephone Company Alternative Tax," is imposed pursuant to the City ordinance that states:
Every person engaged in the business of supplying telephones, and telecommunications and telephonic service, and telecommunications services, within the city shall pay as a license tax a sum equal to six percent of the gross receipts from such business.
City of Springfield, Code 1981, sec. 20-146.
The City claims Sprint Spectrum, L.P. ("Sprint"), has not paid most of the gross receipt taxes, interest and penalties required under the ordinance. Seeking to enforce the application of its tax to the wireless telephone service Sprint had already supplied to its customers, the City filed suit against Sprint in late 2004. Sprint defended that the tax did not apply to its wireless service because wireless service is not telephone service.
The City's claims and Sprint's defenses are not unique. Similar suits were filed by other Missouri cities against Sprint and other wireless service providers during that same period. Three such suits are the subject of companion cases decided this day involving nearly identical claims and defenses.3
During the course of and perhaps in response to this litigation, the legislature passed H.B. 209, which went into effect August 28, 2005.4 Of primary importance here, the bill enacted sections 92.074 to 92.095, relating to imposition of business license taxes levied by Missouri municipalities.5 Sprint moved to dismiss, arguing that the Act prohibited suits for collection of unpaid business license taxes on wireless telephone service unless a city sought to enforce such a tax and met certain other requirements prior to January 15, 2005, a requirement the City did not meet.
On its face, the Act prohibits all but a few municipalities from enforcing their business license taxes for wireless service provided by telecommunications companies prior to July 1, 2006, requires them to dismiss suits that have been filed to collect such taxes, and prohibits them from suing for such taxes prior to July 1, 2006, while giving immunity from suit for such taxes to any telecommunications company that acted in subjective good faith in failing to pay these taxes prior to July 1, 2006. Sec. 92.089.
Specifically, section 92.080 limits the right of a municipality to impose a business license tax after August 28, 2005, except as permitted by the Act itself. Beginning July 1, 2006, the director of revenue shall promulgate regulations for municipalities' collection of business license taxes on telecommunications companies and shall collect such taxes for those municipalities that comply with these regulatory procedures. Sec. 92.086. "Pass through" of the business license tax to the consumer is authorized. Sec. 92.086.13.
Business license taxes for periods after July 1, 2006, are permitted by the Act if certain conditions are met, but are subject to a 5 percent cap on gross receipt taxation. Sec. 92.086.9. The legislature also attempted to address compliance with the Hancock Amendment, Mo. Const., art. X, sec. 22 ("Hancock"),6 mandating certain anticipated necessary adjustments, responding in particular to expected issues with basing the Act's new approved taxation on gross receipts. Sec. 92.086.6.
Most importantly here, this 5 percent cap on municipal business license taxes specifically is not made applicable to all Missouri cities and towns. To the contrary, section 92.086.10 creates a special rule for any municipality that "specifically included the words 'wireless,' 'cell phones,' or ' mobile phones' in its business license tax ordinance" prior to November 4, 1980, the date Hancock took effect, as well as for any municipality that included such language after that date if its ordinance was authorized or amended by a public vote. Such a municipality could continue to impose the tax previously approved without being limited by the provisions of either section 92.086.6 or 92.086.9 if it also took "affirmative action to collect such tax from wireless telecommunications providers prior to January 15, 2005. . . ." Sec. 92.086.10(1), (2). Otherwise, except in rare circumstances, municipalities are all required to limit their future business license taxes to 5 percent of gross receipts as defined in the Act, even if their ordinances also comply with Hancock.7
The reason for these enactments is set out in section 92.089, which states that the legislature "finds and declares" that litigation filed by municipalities to collect taxes due under pre-existing municipal ordinances "is detrimental to the economic well being of the state"; that the legislature believes such debts to be unliquidated; that the legislature adopts the Act as a means of compromising uncertain litigation for the municipalities; and that the promise of permission to impose up to a 5 percent tax in the future is legislatively determined to be "full and adequate consideration" as the term "consideration" is used in article III, section 39(5) of the Missouri Constitution. Sec. 92.089.1.
At the time these provisions went into effect, this lawsuit was pending. Sprint filed a motion to dismiss in light of the new Act. The trial court agreed and dismissed the suit with prejudice. In so doing, it declared that H.B. 209 was constitutional, that as a result of its passage the City's suit was required to be dismissed "without further showing" and that Sprint was immune from past tax liability. The City appeals, claiming H.B. 209, as codified, is unconstitutional for multiple reasons.8 Jurisdiction is in this Court, which has "exclusive appellate jurisdiction in all cases involving the validity . . . of a statute or provision of the constitution of this state. . . ." Mo. Const. art. V, sec. 3.
"Construction of a statute is a question of law." Delta Air Lines v. Dir. of Revenue, 908 S.W.2d 353, 355 (Mo. banc 1995). This Court reviews issues of law de novo. Barker v. Barker, 98 S.W.3d 532, 534 (Mo. banc 2003). "A statute is presumed to be constitutional," Blaske v. Smith & Entzeroth, Inc., 821 S.W.2d 822, 828 (Mo. banc 1991), and "should be enforced by the courts unless it plainly and palpably affronts fundamental law embodied in the constitution." Id. "Regardless of legislative intent, it should be obvious that a statute cannot supercede a constitutional provision." Doe v. Roman Catholic Diocese, 862 S.W.2d 338, 341 (Mo. banc 1993). Further, if a law constitutes a "special law" under article III, section 40(30) of the Missouri Constitution because it applies to a fixed subclass, then it will be invalidated unless substantial justification is shown for utilization of a special rather than a general law. Harris v. Missouri Gaming Comm'n, 869 S.W.2d 58, 65 (Mo. banc 1994).
Although the City notes numerous constitutional deficiencies in the Act, this Court focuses on its allegation that section 92.086.10 is an invalid "special law" that, by creating an impermissible fixed class, exempts certain cities from its provisions in violation of article III, section 40(30) of the Missouri Constitution. Because this Court agrees that sec. 92.086.10 is an invalid special law for this reason and because section 92.092 provides that if any one of sections 92.074 to 92.089 of the Act is declared invalid all of those sections fail, this Court need not address the other grounds on which the City alleges that the Act is a special law9 or its arguments as to the unconstitutionality of other provisions of the Act.10
Missouri's Constitution specifically provides:
Mo. Const. art. III, sec. 40(30). Section 92.086.10 states in relevant part:
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