Griffith v. Frontier West Virginia, Inc.

Citation719 S.E.2d 747,228 W.Va. 277
Decision Date10 November 2011
Docket NumberNo. 11–0166.,11–0166.
PartiesCraig A. GRIFFITH, State Tax Commissioner of West Virginia, Respondent Below, Petitioner, v. FRONTIER WEST VIRGINIA, INC., Petitioner Below, Respondent.
CourtSupreme Court of West Virginia

OPINION TEXT STARTS HERE

Syllabus by the Court

1. “Interpreting a statute or an administrative rule or regulation presents a purely legal question subject to de novo review.” Syllabus point 1, Appalachian Power Company v. State Tax Department of West Virginia, 195 W.Va. 573, 466 S.E.2d 424 (1995).

2. “Where the language of a statute is clear and without ambiguity the plain meaning is to be accepted without resorting to the rules of interpretation.” Syllabus point 2, State v. Elder, 152 W.Va. 571, 165 S.E.2d 108 (1968).

3. ‘It is well established that the word “shall,” in the absence of language in the statute showing a contrary intent on the part of the Legislature, should be afforded a mandatory connotation.’ Syllabus Point 1, Nelson v. West Virginia Public Employees Insurance Board, 171 W.Va. 445, 300 S.E.2d 86 (1982).” Syllabus point 1, E.H. v. Matin, 201 W.Va. 463, 498 S.E.2d 35 (1997).

4. Effective July 1, 1988, the plain language of W. Va.Code § 11–13B–2(b)(5) (1987) (Repl.Vol.2008) excludes from the Telecommunication Tax's definition of “gross income” those commodities or services which the Public Service Commission of West Virginia (“PSC”) determines to be subject to competition. The PSC is required to submit its exempt services list to the State Tax Commissioner of West Virginia on or before December 31st of each calendar year, and the PSC's “listing shall constitute a conclusive determination” of the definition of “gross income” for purposes of the Telecommunications Tax.

5. ‘It is fundamental law that the Legislature may delegate to an administrative agency the power to make rules and regulations to implement the statute under which the agency functions. In exercising that power, however, an administrative agency may not issue a regulation which is inconsistent with, or which alters or limits its statutory authority.’ Syllabus point 3, Rowe v. West Virginia Department of Corrections, 170 W.Va. 230, 292 S.E.2d 650 (1982).” Syllabus point 6, Simpson v. West Virginia Office of Insurance Commissioner, 223 W.Va. 495, 678 S.E.2d 1 (2009).

6. ‘Procedures and rules properly promulgated by an administrative agency with authority to enforce a law will be upheld so long as they are reasonable and do not enlarge, amend or repeal substantive rights created by statute.’ Syllabus point 4, State ex rel. Callaghan v. West Virginia Civil Service Commission, 166 W.Va. 117, 273 S.E.2d 72 (1980).” Syllabus point 11, Simpson v. West Virginia Office of Insurance Commissioner, 223 W.Va. 495, 678 S.E.2d 1 (2009).

7. Pursuant to W. Va.C.S.R. § 110–13B–2.6 (1988), the list of exempt competitive services generated by the Public Service Commission of West Virginia under W. Va.Code § 11–13B–2(b)(5) (1987) (Repl.Vol.2008) applies to define “gross income” “for the next succeeding calendar year” following the year in which the PSC issues its exempt services list.

Darrell V. McGraw, Jr., Attorney General, L. Wayne Williams, Assistant Attorney General, Charleston, WV, for the Petitioner.

Thomas R. Goodwin, Carte P. Goodwin, J. David Fenwick, Goodwin & Goodwin, LLP, Charleston, WV and Joseph J. Starsick, Jr., Associate General Counsel–Southeast Region, Frontier Communications, Charleston, WV, for the Respondent.

DAVIS, Justice:

The petitioner herein and respondent below, Craig Griffith, State Tax Commissioner of West Virginia (hereinafter Tax Commissioner),1 appeals from an order entered September 14, 2010, by the Circuit Court of Berkeley County. By that order, the circuit court reversed an earlier order of the Office of Tax Appeals; 2 found that W. Va.Code § 11–13B–2(b)(5) (1987) (Repl.Vol.2008) is plain and unambiguous; and concluded that W. Va.C.S.R. § 110–13B–2.6 (1988) is an invalid legislative rule. The circuit court further determined that the West Virginia Public Service Commission's (hereinafter PSC) December 23, 2004, list of competitive services that are exempt from the Telecommunications Tax defines exempt competitive services for the 2004 tax year. Under the circuit court's order, then, the respondent taxpayer herein and petitioner below, Frontier West Virginia, Inc. (hereinafter Frontier),3 is entitled to a refund of its Telecommunications Tax for the 2004 tax year in the amount of $9,359,083.60. On appeal to this Court, the Tax Commissioner argues that the circuit court incorrectly interpreted and applied the governing statute and the corresponding legislative rule. In this regard, the Commissioner contends that, pursuant to W. Va.C.S.R. § 110–13B–2.6, the PSC's exempt competitive services list of December 23, 2004, applies to the calendar year following the PSC's issuance of its list and not to the calendar year in which the list is issued. Upon a review of the parties' arguments, the designated record, and the pertinent authorities, we affirm, in part, and reverse, in part, the September 14, 2010, order of the Berkeley County Circuit Court and reinstate the April 23, 2007, order of the Office of Tax Appeals. In summary, we affirm the circuit court's ruling finding the subject statute, W. Va.Code § 11–13B–2(b)(5), plain and unambiguous, and we reverse the circuit court's ruling finding the governing rule, W. Va.C.S.R. § 110–13B–2.6, invalid. Furthermore, we find that the PSC's list of exempt competitive services does not apply to define a taxpayer's gross income for the calendar year in which the PSC issues its list; rather, the PSC's list operates to define a taxpayer's gross income for the calendar year following the issuance of the list.

I.FACTUAL AND PROCEDURAL HISTORY

The facts underlying the case sub judice have been stipulated to by the parties and are not disputed. By way of background, the State of West Virginia imposes a Telecommunications Tax upon “every telecommunications 4 business selling or furnishing telegraph, telephone or other telecommunications service ... within this State[.] W. Va.Code § 11–13B–3(a) (1985) (Repl.Vol.2008) (footnote added). Such tax is levied upon the gross income of telecommunications service providers. See W. Va.Code § 11–13B–3(b). Telecommunications gross income does not include, however, those services that the PSC determines to be subject to competition. In this regard, the PSC is required to issue, every calendar year, a list of those services it deems to be exempt competitive services:

[O]n and after the first day of July, one thousand nine hundred eighty-eight, the term “gross income” of a telephone company or communications carrier shall not include gross income from the provision of commodities or services which shall be determined by the Public Service Commission of West Virginia to be subject to competition. On or before the thirty-first day of December of each calendar year, the Public Service Commission of West Virginia shall submit to the Tax Commissioner a listing of those commodities or services which it has determined to be subject to competition. Such listing shall constitute a conclusive determination for the purposes of defining “gross income” within the meaning of this subsection.W. Va.Code § 11–13B–2(b)(5) (1987) (Repl.Vol.2008). This statute is silent, however, as to the year to which the PSC's exempt services list applies to determine a telecommunication business's gross income.

To “explain and clarify” various provisions of the Telecommunications Tax Act, the Tax Commissioner adopted legislative rule W. Va.C.S.R. § 110–13B–1 et seq. See W. Va.C.S.R. § 110–13B–1.1 (1988). With respect to the definition of “gross income,” W. Va.C.S.R. § 110–13B–2.6 (1988) provides, in pertinent part, that

[o]n or after July 1, 1988, the term “gross income” of a telephone company or communications carrier shall not include gross income from the provision of commodities or services which shall be determined by the Public Service Commission of West Virginia to be subject to competition. The Public Service Commission of West Virginia will submit to the Tax Commissioner, on or before December 31 of each calendar year, a listing of those commodities or services the trading in which it has determined to be subject to competition. Such listing shall constitute a conclusive determination for the purpose of defining “gross income” of a telephone company or communications carrier for the next succeeding calendar year.

(Emphasis added). Thus, pursuant to the legislative rule clarifying the statutory definition of “gross income,” the PSC's exempt services list applies to define a telecommunication business's gross income for the calendar year following the year in which the PSC issues such list. See id.

Frontier, the taxpayer herein, is a telecommunications business providing telecommunications services upon which it is required to pay the Telecommunications Tax. As a calendar year taxpayer, Frontier's tax year corresponds with the calendar year. Thus, Frontier's 2004 tax year was the period from January 1, 2004, to December 31, 2004, and its 2005 tax year was from January 1, 2005, to December 31, 2005. Throughout the 2004 calendar year, Frontier reported and paid estimated Telecommunications Tax as required by statute. See W. Va.Code § 11–13B–6 (1988) (Repl.Vol.2008). Failure to pay sufficient estimated taxes could subject a telecommunications business to penalties. See W. Va.Code § 11–10–18b (1993) (Repl.Vol.2008).

On December 23, 2004, the PSC issued an order enumerating sixty-six different services and commodities it deemed to be subject to competition and thus exempt from the Telecommunications Tax; in its order, the PSC stated that the identified services “are certified as competitive telecommunications services for the 2004 tax year. (Emphasis added). Thereafter, Frontier, on May 31, 2005,...

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