Qualcomm, Inc. v. State, Dept. of Revenue

Decision Date25 August 2009
Docket NumberNo. 37718-7-II.,37718-7-II.
Citation151 Wn. App. 892,213 P.3d 948
PartiesQUALCOMM, INCORPORATED, Appellant, v. STATE of Washington, DEPARTMENT OF REVENUE, Respondent.
CourtWashington Court of Appeals

Brett S. Durbin, Cameron Gordon Comfort, Atty. General's Office, Revenue Division, Olympia, WA, for Respondent.

HOUGHTON, P.J.

¶ 1 Qualcomm, Incorporated, appeals the trial court's summary judgment order dismissing its tax refund claim. It argues that the Department of Revenue (DOR) improperly taxes its truck tracking service as a "network telephone service" rather than at the business and occupations (B & O) tax service rate. We disagree and affirm.

FACTS

¶ 2 Qualcomm sells the OmniTRACS Mobile Communications System (OmniTRACS system or system) to trucking companies to assist them with tracking and managing vehicles. To use Qualcomm's OmniTRACS system, a customer needs three components: (1) mobile communication terminals in its trucks and other truck hardware; (2) system software, installed at the trucking dispatch center; and (3) the OmniTRACS service (tracking service), which allows the customer's dispatch center to locate and communicate with individual trucks.

¶ 3 The customer purchases from Qualcomm the hardware, such as sensors and mobile communication terminals, and the software and licenses to use the software, such as the programs used in a trucking company's dispatch center. The taxation of these items is not the subject of this appeal.

¶ 4 A customer may purchase one of two system tracking service plans. The Base Plan costs $35 per month. This plan includes one automatic position poll per hour, which informs trucking company's dispatch centers of the truck's location. It creates an automatic position poll when the truck's mobile communication terminal sends a signal via two satellites to Qualcomm's network management center.

¶ 5 Qualcomm's network management center converts the raw information sent by the truck's mobile communication terminals to Qualcomm's satellites into location, time, and date information, readable by the system software at the customer's dispatch center. Qualcomm's system can also use a global positioning system (GPS) to calculate a truck's location, but fewer than 10 percent of "all units on air" use GPS. Clerk's Papers (CP) at 112.

¶ 6 The position poll data resides in Qualcomm's network management center computers. To receive automatic position polls, the customer must log into Qualcomm's network management center. The customer must do so via landline or Internet from its own computer in its own dispatch center.

¶ 7 Qualcomm's Enhanced Plan costs $50 per month and includes the Base Plan plus 180 messages and 18,000 characters per month. The Enhanced Plan groups messages into three categories: macro messages, freeform messages, and SensorTRACS.

¶ 8 Macro messages comprise the bulk of messages sent. These messages consist of a template stored at both the customer's dispatch center and in a customer's mobile communication terminal in the customer's truck. The customer determines the information contained in its template.

¶ 9 To send a macro message to a truck, the customer's dispatch center uses a "fill in the blank" template and transmits the information to a truck's mobile communication terminal via Qualcomm's network management center. CP at 30. Information from the truck can also be filled in on the template to transmit information to the customer's dispatch center via Qualcomm's network management center. A customer can integrate the macro data into its own computer system to create, for example, invoices for delivered goods.

¶ 10 Either the customer's truck driver or the customer's dispatch center employee drafts freeform messages, like the macro messages, transmissible via Qualcomm's network management center. These messages most resemble email messages, but like all other data, Qualcomm's network management center stores the customer's messages accessible by the customer's dispatch center. For example, Qualcomm's system assigns a tracking number to messages sent from a customer's truck. The customer's dispatch center then references this number to access the truck's freeform message.

¶ 11 The customer's dispatch center sends an automatic confirmation to Qualcomm's network management center. Freeform messages include additional data that Qualcomm's network management center can use to calculate the position of a truck's mobile communication terminal sending the message and "provide information on the signal strength of the satellite communications link between the mobile unit and the satellite." Appellant's Br. at 7.

¶ 12 The SensorTRACS messages consist of information collected by a customer's mobile communication terminal from sensors on a truck and transmitted via Qualcomm's network management center to the customer's dispatch center. The Qualcomm software at the customer's dispatch center receives the information from Qualcomm's network management center and allows a customer to use the raw information to monitor truck driver performance, engine information, and location.

¶ 13 Between 1998 and 2001, the period at issue here, Qualcomm paid B & O taxes at a lower service rate. After an audit, DOR assessed Qualcomm $900,573 for uncollected retail sales tax, retailing B & O tax, and interest, based on its assumption that the tracking portion of Qualcomm's system is a "network telephone service," as defined by former RCW 82.04.065(2) (2002) (amended in 2002, 2007, 2009).

¶ 14 Qualcomm appealed to DOR's appeals division, which rejected the appeal and sustained the tax. Qualcomm paid the taxes and filed a superior court action seeking a refund. RCW 82.32.180. On cross motions for summary judgment, the trial court granted DOR's motion and denied Qualcomm's. Qualcomm appeals.

ANALYSIS

¶ 15 Qualcomm first contends that the trial court erred in granting summary judgment to DOR. It argues that DOR incorrectly determined that Qualcomm's tracking service is taxable as a "network telephone service" as defined in former RCW 82.04.065.

Standard of Review

¶ 16 We review summary judgment orders de novo. Qwest Corp. v. City of Bellevue, 161 Wash.2d 353, 358, 166 P.3d 667 (2007). A trial court properly grants a motion for summary judgment when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c).

¶ 17 We resolve this matter by interpreting the statute DOR used to tax the OmniTRACS system. We review the meaning of a statute de novo as a question of law. Delyria v. State, 165 Wash.2d 559, 562, 199 P.3d 980 (2009). We must ascertain and carry out the legislature's intent. Delyria, 165 Wash.2d at 563, 199 P.3d 980. Where plain on its face, we give effect to a statute's language as an expression of legislative intent. Delyria, 165 Wash.2d at 563, 199 P.3d 980. We determine the plain meaning of a statutory provision based on the statutory language but, where necessary, we may look to the context of related statutes that disclose legislative intent. Delyria, 165 Wash.2d at 563, 199 P.3d 980. Where the statutory language is clear, we end our inquiry. Delyria, 165 Wash.2d at 563, 199 P.3d 980. If after this inquiry the statute remains susceptible to more than one reasonable meaning, the statute is ambiguous and we may resort to statutory construction aids, including legislative history. Delyria, 165 Wash.2d at 563, 199 P.3d 980. We construe taxation statute ambiguities against the state and in favor of the taxpayer. Qwest, 161 Wash.2d at 364, 166 P.3d 667.

¶ 18 According to DOR, Qualcomm provided "network telephone service" as defined by former RCW 82.04.065, requiring it to be taxed at that rate. The relevant portion of this statute provides:

"Network telephone service" means the providing by any person of access to a local telephone network, local telephone network switching service, toll service, or coin telephone services, or the providing of telephonic, video, data, or similar communication or transmission for hire, via a local telephone network, toll line or channel cable, microwave,[1] or similar communication or transmission system.

Former RCW 82.04.065(2) (emphases added).

¶ 19 In 2007, the legislature amended RCW 82.04.065 to replace the phrase "network telephone service" with "telecommunications service." Laws of 2007, ch. 6, § 1002(8). The legislature enacted the changes to update terminology, not to change current taxability law. S.B. Rep. 5089, at 3 (Final Bill Report, effective July 22, 2007).

¶ 20 In the new law, "telecommunications service" expressly excludes

[d]ata processing and information services that allow data to be generated, acquired, stored, processed, or retrieved and delivered by an electronic transmission to a purchaser where such purchaser's primary purpose for the underlying transaction is the processed data or information.

Laws of 2007, ch. 6, § 1002(8)(a) (emphasis added) (codified as RCW 82.04.065(8)(a)).2

¶ 21 The parties dispute the proper method of analysis. We must first decide the correct method for analyzing the statutory language.

Plain Language and Proper Method of Analysis

¶ 22 Qualcomm contends that the plain language of the "network telephone service" definition covers only "pure transmission— transporting voice and data messages from one point to another—not on generating or processing the content of those messages." Appellant's Br. at 12. Hence, it argues that because its system involves data processing, DOR cannot tax the system as a telephone service even if it also transmits the processed data.

¶ 23 Qualcomm cites two cases to support its argument, but neither applies here. In Western Telepage, Inc. v. City of Tacoma, 140 Wash.2d 599, 998 P.2d 884 (2000), our Supreme Court addressed taxation of a pager service. Qualcomm argues that Western...

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