Officemax, Inc. v. U.S., No. 04-4009.

CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)
Writing for the CourtSutton
Citation428 F.3d 583
PartiesOFFICEMAX, INC., Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.
Docket NumberNo. 04-4009.
Decision Date02 November 2005

Page 583

428 F.3d 583
OFFICEMAX, INC., Plaintiff-Appellee,
v.
UNITED STATES of America, Defendant-Appellant.
No. 04-4009.
United States Court of Appeals, Sixth Circuit.
Argued: July 29, 2005.
Decided and Filed: November 2, 2005.

Page 584

ARGUED: Teresa E. McLaughlin, United States Department of Justice, Washington, D.C., for Appellant. Henry D. Levine, Levine, Blaszak, Block & Boothby, LLP, Washington, D.C., for Appellee. ON BRIEF: Teresa E. McLaughlin, Robert W. Metzler, United States Department of Justice, Washington, D.C., for Appellant. Henry D. Levine, Stephen J. Rosen, Levine, Blaszak, Block & Boothby, LLP, Washington, D.C., Stephan J. Schlegelmilch, Baker & Hostetler, Cleveland, Ohio, for Appellee. David Isaacson, New York, New York, for Amicus Curiae.

Before: ROGERS and SUTTON, Circuit Judges; ROSEN, District Judge.*

SUTTON, J., delivered the opinion of the court, in which ROSEN, D. J., joined.

ROGERS, J. (pp. 600-05), delivered a separate dissenting opinion.

OPINION

SUTTON, Circuit Judge.


When a party presents the question whether "and" means "or," it is tempting to be dismissive of the claim or, worse, to make a crack about the demise of the rule of law. But in this instance the disputed "and" appears in the context of several uses of the term that are alternately conjunctive and disjunctive and as much as nine billion dollars in potential tax refund claims (according to the government) rest on the resolution of the issue in this case and others, both of which prompt us to be anything but dismissive of the question.

At issue is the meaning of "toll telephone service," which Congress has subjected to a three-percent federal excise tax. The relevant legislation defines the phrase as "a telephonic quality communication for which [ ] there is a toll charge which varies in amount with the distance and elapsed transmission time of each individual communication." 26 U.S.C. § 4252(b)(1) (emphasis added). According to the IRS, the definition means that the tax applies when the telephone company assesses a toll charge that varies in amount by either the distance or elapsed transmission time of each individual communication, or both. According to OfficeMax, the definition means that the tax applies when the telephone company assesses a toll charge that varies in amount by both the distance and elapsed transmission time of each individual communication. Given the traditional presumption that Congress uses "and" conjunctively, given other contextual clues supporting a conjunctive reading, given the awkwardness of construing the provision as the government does and given the historical fact that the one provider of long-distance telephone service in 1965, when the definition was adopted, charged for phone calls

Page 585

both by distance and time, we conclude that a toll charge must vary by both distance and elapsed transmission time in order to be taxed. We thus hold for the taxpayer and affirm.

I.
A.

In 1898, 22 years after Alexander Graham Bell's work led to the invention of the telephone, Congress imposed the first tax on telephone service. Designed to curb the federal deficit caused by the Spanish-American War, the temporary tax applied to "every person, firm or corporation owning or operating any telephone line or lines" and charged one cent for "messages or conversations transmitted over their respective lines ... for which a charge of fifteen cents or more was imposed." 30 Stat. at 460, Pub.L. No. 55-133 (1898). Congress repealed the tax as scheduled in 1902. See Louis Alan Talley, The Federal Excise Tax on Telephone Service: A History 1 (Congressional Research Service 2001), available at http://www. law.umaryland.edu /marshall/cr sreports/ crsdocuments/RL30553_01042001.pdf (hereinafter "Talley"). Beginning in 1914 and continuing through 1916, in response to falling revenues caused by the start of World War I, Congress reenacted the tax—this time applying it to owners or operators of "any telegraph or telephone line or lines" and charging the same one cent for "dispatches, messages, or conversations originated at each of their respective exchanges, toll stations, or offices, and transmitted thence over their lines ... for which a charge of 15 cents or more was imposed." 30 Stat. at 761, Pub.L. No. 217; see Talley at 1-2. Between 1917 and 1924, in response to the United States' entry into the war, Congress imposed a higher tax—"5 cents upon each telegraph, telephone, or radio, dispatch, message, or conversation, which originates within the United States, and for the transmission of which a charge of 15 cents or more is imposed." 40 Stat. 300, Pub.L. No. 50. Congress increased the tax to 10 cents for calls costing more than 50 cents in 1919. See Talley at 3.

The Great Depression prompted the next iteration of the tax, and it has existed in one form or another ever since. Id. In 1932, Congress enacted a tax on "each telegraph, telephone, cable, or radio dispatch, message, or conversation, which originates ... within the United States," applying different rates to each service. 47 Stat. at 270, Pub.L. No. 154. In 1958, Congress changed the organization and labeling of the "communication services" tax, 72 Stat. at 1289, Pub.L. No. 85-859, dividing it into six categories, two of which concern us here: (1) "general telephone service," i.e., local telephone services; and (2) "toll telephone service," i.e., long-distance service involving a toll charge. 72 Stat. at 1290, Pub.L. No. 85-859. The local ("general") and long-distance ("toll") telephone service taxes continued at varying rates through 1959, when Congress passed legislation repealing the tax on July 1, 1960. But by that date new legislation had enacted a one-year extension, and subsequent one-year extensions maintained the tax through 1965. Talley at 4-5.

In 1965, Congress enacted the Excise Tax Reduction Act, which called for the repeal of most excise taxes, including an immediate reduction of the telephone tax from ten percent to three percent followed by an annual one-percent reduction thereafter until the tax was completely repealed on January 1, 1969. 79 Stat. at 145, Pub.L. No. 89-44. The 1965 legislation retained three categories of taxable services: "local telephone service," "toll telephone service" and "teletypewriter exchange service." As to toll telephone service, originally defined in the 1958 legislation

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as "a telephone or radio telephone message or conversation for which (1) there is a toll charge, and (2) the charge is paid within the United States," Congress enacted the following definition, unchanged to this day:

(1) a telephonic quality communication for which (A) there is a toll charge which varies in amount with the distance and elapsed transmission time of each individual communication and (B) the charge is paid within the United States, and

(2) a service which entitles the subscriber, upon payment of a periodic charge (determined as a flat amount or upon the basis of total elapsed transmission time), to the privilege of an unlimited number of telephonic communications to or from all or a substantial portion of the persons having telephone or radio telephone stations in a specified area which is outside the local telephone system area in which the station provided with this service is located.

79 Stat. at 146, Pub.L. No. 89-44; 26 U.S.C. § 4252(b). When Congress enacted this legislation (and for many years before and after its passage), the country had just one provider of long-distance service—AT & T. See, e.g., Am. Bankers Ins. Group v. United States, 408 F.3d 1328, 1333 (11th Cir.2005). And when Congress passed this version of the tax, AT & T already imposed a toll charge based on variations in both the time and distance of each call. Id.

In 1966, in response to spending pressures brought on by the Vietnam War, Congress began another series of extensions of the tax. The extensions continued through the 1970s and 1980s, with legislation maintaining the tax at varying rates through 1991. During these years, long-distance telecommunications transformed from a service offered by only one commercial provider to a service offered by several companies in a competitive market. The Federal Communications Commission issued a 1971 Specialized Common Carrier decision opening the long distance market to competition. See Michael R. Ward, Bureau of Economics Staff Report: Measurements of Market Power in Long Distance Telecommunications (Federal Trade Commission 1995), available at http://www.ftc.gov/ reports/telecomm.pdf. An antitrust suit filed by the Department of Justice and the eventual settlement of that litigation in 1982 spurred further competition in the long-distance market. "While AT & T's share of the long distance market's revenues in 1982 was 95%, by 1987 its market share had fallen to 80%, and [in 1993 was] about 60%. By 1991, MCI's and Sprint's revenue market shares had climbed to 17% and 10% respectively." Id. at 4 (citation omitted).

In 1990, Congress made the excise tax permanent at a three-percent rate, and, aside from a 1997 amendment clarifying that calling cards were taxable, it did not revisit the issue again during that decade. The 1990s, however, did see a change in the way companies billed for long-distance telephone services, with long-distance companies beginning to offer for the first time nationwide long-distance plans for flat per-minute rates. AT & T abandoned its distance-and-time formula in favor of a time-only formula in 1997.

Congress most recently considered the tax in 2000, when it enacted a package of spending and tax bills that proposed repealing the tax. A presidential veto, however, prevented the bill from becoming a law.

B.

From the first quarter of 1999 through the last quarter of 2002, OfficeMax purchased long distance telephone service from MCI. During this time, MCI charged

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OfficeMax one flat per-minute rate for every long distance call it made...

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73 practice notes
  • Cohen v. United States, No. 08-5088
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • July 1, 2011
    ...Fortis, Inc. v. United States, 447 F.3d 190, 191 (2d Cir. 2006); Nat'l R.R. Passenger, 431 F.3d at 374; OfficeMax, Inc. v. United States, 428 F.3d 583, 585 (6th Cir. 2005); Am. Bankers Ins. Group, 408 F.3d at 1338. On May 26, 2006, after the last of these rulings came down, the IRS issued N......
  • Long-Distance Tel. Serv. Fed. Excise Tax Refund Litigation-Mdl 1798 v. United States, Nos. MDL 1798
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • July 2, 2014
    ...408 F.3d 1328 (11th Cir.2005); Nat'l R.R. Passenger Corp. v. United States, 431 F.3d 374 (D.C.Cir.2005); OfficeMax, Inc. v. United States, 428 F.3d 583 (6th Cir.2005). 2. Cohen (but not Gurrola or Sloan) also appealed the dismissal of his refund claims. We affirmed that part of the district......
  • Sixta Gladys Peña Martínez v. Azar, CIVIL ACTION NO. 3:18-01206-WGY
    • United States
    • United States District Courts. 1st Circuit. District of Puerto Rico
    • April 15, 2019
    ...independently sufficed to justify the exclusion of Puerto Rico residents from eligibility for SSI. See OfficeMax, Inc. v. United States, 428 F.3d 583, 589 (6th Cir. 2005) (Sutton, J.) (noting that "the Supreme Court has said that 'and' presumptively should be read in its 'ordinary' conjunct......
  • United States v. Vaello-Madero, No. 19-1390
    • United States
    • United States Courts of Appeals. United States Court of Appeals (1st Circuit)
    • April 10, 2020
    ...from eligibility for SSI." Peña Martínez v. Azar, 376 F. Supp. 3d 191, 207-08 (D.P.R. 2019) (citing OfficeMax, Inc. v. United States, 428 F.3d 583, 589 (6th Cir. 2005) ).9 Appellant cites United States v. Ríos-Rivera, 913 F.3d 38, 44 (1st Cir. 2019), as evidence that our Court has recently ......
  • Request a trial to view additional results
73 cases
  • Cohen v. United States, No. 08-5088
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • July 1, 2011
    ...Fortis, Inc. v. United States, 447 F.3d 190, 191 (2d Cir. 2006); Nat'l R.R. Passenger, 431 F.3d at 374; OfficeMax, Inc. v. United States, 428 F.3d 583, 585 (6th Cir. 2005); Am. Bankers Ins. Group, 408 F.3d at 1338. On May 26, 2006, after the last of these rulings came down, the IRS issued N......
  • Long-Distance Tel. Serv. Fed. Excise Tax Refund Litigation-Mdl 1798 v. United States, Nos. MDL 1798
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • July 2, 2014
    ...408 F.3d 1328 (11th Cir.2005); Nat'l R.R. Passenger Corp. v. United States, 431 F.3d 374 (D.C.Cir.2005); OfficeMax, Inc. v. United States, 428 F.3d 583 (6th Cir.2005). 2. Cohen (but not Gurrola or Sloan) also appealed the dismissal of his refund claims. We affirmed that part of the district......
  • Sixta Gladys Peña Martínez v. Azar, CIVIL ACTION NO. 3:18-01206-WGY
    • United States
    • United States District Courts. 1st Circuit. District of Puerto Rico
    • April 15, 2019
    ...independently sufficed to justify the exclusion of Puerto Rico residents from eligibility for SSI. See OfficeMax, Inc. v. United States, 428 F.3d 583, 589 (6th Cir. 2005) (Sutton, J.) (noting that "the Supreme Court has said that 'and' presumptively should be read in its 'ordinary' conjunct......
  • United States v. Vaello-Madero, No. 19-1390
    • United States
    • United States Courts of Appeals. United States Court of Appeals (1st Circuit)
    • April 10, 2020
    ...from eligibility for SSI." Peña Martínez v. Azar, 376 F. Supp. 3d 191, 207-08 (D.P.R. 2019) (citing OfficeMax, Inc. v. United States, 428 F.3d 583, 589 (6th Cir. 2005) ).9 Appellant cites United States v. Ríos-Rivera, 913 F.3d 38, 44 (1st Cir. 2019), as evidence that our Court has recently ......
  • Request a trial to view additional results

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