Comcast Corp. v. Dep't of Revenue

Decision Date02 October 2014
Docket NumberTC 4909,SC S059764.
Citation356 Or. 282,337 P.3d 768
PartiesCOMCAST CORPORATION, Plaintiff–Respondent Cross–Appellant, v. DEPARTMENT OF REVENUE, State of Oregon, Defendant–Appellant Cross–Respondent.
CourtOregon Supreme Court

Marilyn J. Harbur, Senior Assistant Attorney General, Salem, argued the cause for appellant/cross-respondent. With her on the brief was John R. Kroger, Attorney General.

Eric S. Tresh, Sutherland Asbill & Brennan LLP, Atlanta, Georgia, argued the cause for respondent/cross-appellant. With him on the briefs were Joseph M. DePew, Zachary T. Atkins, David L. Canary and Cynthia M. Fraser, Garvey Schubert Barer, Portland.

Jed Tomkins, Portland, filed a brief on behalf of amicus curiae Association of Oregon Counties.

Sean E. O'Day and Maja K. Haium, Salem, filed a brief on behalf of amicus curiae League of Oregon Cities.

Scott G. Seidman and Mark F. LeRoux, Tonkon Torp LLP, Portland, and Jeremy N. Kudon, Orrick Herrington & Sutcliffe LLP, New York, New York, filed a brief on behalf of amici curiae DIRECT TV and DISH Network.

Mark Trinchero and Alan J. Galloway, Davis Wright Tremaine LLP, Portland, filed a brief on behalf of amicus curiae Associated Oregon Industries.

Ryan R. Nisle and John F. Neupert, Miller Nash LLP, Portland, filed a brief on behalf of amicus curiae Oregon Cable Telecommunications Association.

Julia E. Markley and Gregg Barton, Perkins Coie LLP, Portland, and Chérie R. Kiser, and Angela F. Collins, Cahill Gordon & Reindel LLP, Washington DC, filed a brief on behalf of amicus curiae Cable One, Inc.



This is a direct appeal from a decision of the Oregon Tax Court Regular Division (the Tax Court) setting aside an Opinion and Order issued by the Director of the Department of Revenue (the department). ORS 305.445. The chief issue on appeal is whether either Comcast's cable television service or internet access service qualifies as “communication” under ORS 308.515(1)(h) and is, therefore, subject to central assessment by the department pursuant to ORS 308.505 to ORS 308.665. Under ORS 308.505(2), [c]ommunication” includes “data transmission services.” In this case, whether Comcast's cable television service or internet access service qualifies as a “communication” service or business depends on whether either service is a data transmission service.

The Tax Court concluded that Comcast's internet access service, but not its cable television service, is a data transmission service. Comcast Corp. v. Dept. of Rev., 20 OTR 319, 333, 335 (2011). The Tax Court further concluded that Comcast's cable television service is the primary use of the property that Comcast uses for both. Id. at 337. Consequently, pursuant to ORS 308.510(5), the Tax Court determined that the property that Comcast uses for the two services was not subject to central assessment for the 20092010 tax year, contrary to the department's determination. Id. Both parties appeal. The department contends that both services are data transmission services, while Comcast urges that neither service is. For the reasons that follow, we hold that both the cable television and internet access services qualify as data transmission services and are, therefore, communication services subject to central assessment under ORS 308.515(1)(h). Accordingly, we reverse and remand the decision of the Tax Court.


The following facts and those that we discuss later are drawn from the Tax Court opinion, as supplemented with additional facts derived from our review of the record. Although the parties dispute the conclusions to be drawn from the facts, the facts themselves are not significantly contested.

Comcast uses real property, tangible personal property, and intangible personal property to provide three services. Those services are cable television, internet access, and “voice over internet protocol” (VOIP).1 The cable television and internet access services both involve, as the Tax Court found and Comcast does not dispute, “the communication of data.” Comcast Corp., 20 OTR at 320. Many of the major tangible, personal, and real properties owned by Comcast are used in some way to provide all the services that Comcast offers, including the cable television and internet access services at issue in this appeal.

As we later describe in additional detail, Comcast's cable television service essentially provides video content (television, movies, and other video programming) to customers. The transmitted content or data flows between Comcast and its customers predominantly in one direction—from Comcast to the customer. Certain interactive features cause signals to flow in the opposite direction—from the customer to Comcast—as well. Those features mainly facilitate communication back from Comcast to the customer, such as transmitting a particular movie to the customer in response to the customer's request for it through Comcast's on-demand video product. For the most part, the content transmitted to the customers is either owned by Comcast or licensed to Comcast by third parties so that Comcast may transmit it to customers. A significant exception is advertisements, which third parties pay Comcast to transmit to Comcast's customers. The revenue generated from local and national advertisers is a “significant part” of Comcast's business, accounting for $1.5 billion of revenue in 2008, for instance.

Comcast's internet access service, just as the name suggests, provides access to the internet. In so doing, the internet access service facilitates the flow of content principally between the customer and third parties. In contrast to its cable television service, Comcast does not own, generate, or license that content. Instead, the content, which takes the form of e-mail, documents, video and audio files, and similar information, is either generated by Comcast's customers and sent via Comcast's internet access service to others, or is generated by others and accessed by the customer through Comcast's service.

For both the cable television and the internet access services, the content transmitted from Comcast to the customer travels through Comcast's cable plant. The cable plant consists of tangible property in the form of

“signal receiving, encoding and decoding devices; headends and distribution systems; and equipment at or near * * * customer's homes. The signal receiving apparatus typically includes a tower, antenna, ancillary electronic equipment and earth stations for reception of satellite signals.
Headends consist of electronic equipment necessary for the reception, amplification and modulation of signals and are located near the receiving devices. [The] distribution system consists primarily of coaxial and fiber-optic cables, lasers, routers, switches, and related electronic equipment. [The] cable plants and related equipment generally are connected to utility poles under pole rental agreements with local public utilities, although in some areas the distribution cable is buried in underground ducts or trenches. Customer premises equipment (“CPE”) consists primarily of set-top boxes and cable modems.”

Comcast Corp., 2008 Annual SEC Report 16 (2009).

Until recent years, the department did not consider Comcast's internet and cable services to be subject to central assessment. As a result, the property used for the internet and cable services was subject to local assessment. When those services were locally assessed in 2008, the maximum assessed value (MAV) of all Comcast's tangible property, real and personal, owned and used in Oregon, was calculated at $434,084,202. Beginning with the 20092010 tax year, the department treated cable television and internet access services as “communication” services or businesses and added Comcast, along with 125 other companies, to the central assessment roll. As of January 1, 2009, the department calculated the real market value (RMV) and MAV of all Comcast's property, real and personal, owned and used in Oregon, at $1,135,868,000. That 2009 calculation included the value of Comcast's intangible property, while the previous tax year values, which had been calculated through local assessment, had not. The addition of the value of Comcast's intangible property as a result of central assessment was, in large part, why the assessed value of Comcast's property increased so remarkably in 2009.

Comcast initiated this action, contesting the Opinion and Order issued by the department that centrally assessed the property that Comcast uses for its internet access and cable television services. The case went to trial before the Tax Court. The parties' arguments to the Tax Court presented widely divergent views of the meaning of “data transmission services” for purposes of ORS 308.505(2). Suffice it to say, Comcast argued that “data transmission services” meant the kind of private line intracompany data transmission services provided in 1973 by point-to-point microwave transmissions, which did not include cable television or internet access. The department, conversely, urged that the legislature used terminology broad enough to include businesses and services of all kinds, as long as the service provides the means to transmit data to and between the customer and others, which cable television and internet access providers (and perhaps many other businesses) do.

The Tax Court was not satisfied with either party's interpretation. The Tax Court considered the department's interpretation so expansive as to give the department an ability to set legislative policy in the guise of interpretation. Comcast Corp., 20 OTR at 326–27. To avoid what it thought might be the potential unconstitutionality of the statute, the Tax Court concluded that the statute should be interpreted more narrowly than the department proposed. Id. at 327. But the Tax Court also rejected Comcast's position—which restricted the statute to “a particular technological form of data...

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