Qualcomm Incorporated v. Chumley, No. M2006-01398-COA-R3-CV (Tenn. App. 9/26/2007)
| Decision Date | 26 September 2007 |
| Docket Number | No. M2006-01398-COA-R3-CV.,M2006-01398-COA-R3-CV. |
| Parties | QUALCOMM INCORPORATED v. LOREN L. CHUMLEY, COMMISSIONER OF REVENUE, STATE OF TENNESSEE. |
| Court | Tennessee Court of Appeals |
Appeal from the Chancery Court for Davidson County; No. 04-1127-IV; Richard Dinkins, Chancellor.
Judgment of the Chancery Court Affirmed.
Robert E. Cooper, Jr., Attorney General and Reporter, Michael E. Moore, Solicitor General, Richard H. Sforzini, Jr., Assistant Attorney General, and Jonathan N. Wike, Assistant Attorney General, for the appellant, Loren L. Chumley, Commissioner of Revenue.
Michael D. Sontag and Stephen J. Jasper, Nashville, Tennessee, for the appellee, Qualcomm Incorporated.
OPINION
In this appeal we consider application of Tennessee's sales and use tax on telecommunications as "telecommunications" was formerly defined. See T.C.A. § 67-6-102(a)(32) (2003). The taxpayer plaintiff-appellee provides a service which allows its customers (commercial trucking companies) to locate and determine the status of individual vehicles as well as communicate with its drivers. The defendant-appellant Commissioner of Revenue determined that this service constituted taxable "telecommunications" during the audit period in question. The taxpayer filed this suit in the Chancery Court for Davidson County seeking a refund. The chancellor below granted the taxpayer's motion for summary judgment and denied the Commissioner's cross-motion. The Commissioner appeals this decision. Applying the "true object" test as it has been developed by prior decisions of this Court rendered in the context of telecommunications taxation, we agree with the court below that telecommunication was not the true object or primary purpose of the service at issue. Accordingly, we affirm.
This case arises from a dispute concerning sales and use taxes paid by the plaintiff-appellee, Qualcomm Incorporated (Qualcomm), to the defendant-appellant, the Commissioner of the Tennessee Department of Revenue (Commissioner), for a specified audit period — the calendar months ending May 31, 2002 and June 30, 2002. Qualcomm seeks a refund of sales taxes attributable during these months to its OminiTRACS information management service.
On March 11, 2004, the Commissioner, acting pursuant to T.C.A. § 67-1-1802(c)(2), granted a written waiver that allowed Qualcomm to file suit in chancery court without first requesting from the Commissioner a refund of the taxes that had been paid. Qualcomm timely filed this action on April 15, 2004 in the Chancery Court for Davidson County, see T.C.A. § 67-1-1801 et seq., and the case came before the trial court on the parties' cross-motions for summary judgment.
The issue for the court below was the same as that presented on appeal: whether Qualcomm's OmniTRACS is a taxable telecommunications service within the meaning of T.C.A. § 67-6-102(a)(32) (2003). That court concluded that OmniTRACS did not fit within the scope of the statute. Thus, it denied the Commissioner's motion for summary judgment and granted Qualcomm's. The Commissioner appeals, arguing that the trial court's decision was erroneous as a matter of law. We affirm.
Qualcomm is a Delaware corporation which has its principal place of business in San Diego, California. It is authorized to do business in Tennessee and has several Tennessee customers engaged in commercial trucking.
Both Qualcomm and the Commissioner agree that Qualcomm's OmniTRACS service "is a means by which customers gather information about the vehicles within their fleets[.]" Customers contract for this service to enable their fleet management centers or fleet dispatchers to track and manage their vehicles more efficiently. Use of OmniTRACS requires that a Mobile Communications Device (MCD) be installed in the vehicles of a customer's fleet. At the time relevant to this appeal, Qualcomm leased transponder space on two satellites which served as the link between individual trucks and Qualcomm's Network Operations Center (NOC). One of these satellites sent and received data while the other triangulated the vehicle's location. The information collected from each truck includes its "position or location, the vehicle[] identification number, the date and time stamp[,] and [its] latitude and longitude."
Qualcomm collects this data regarding customer vehicles and processes it at its NOC. Another feature of the OmniTRACS service allows text messages to be sent to and from vehicles by way of the NOC. Information as to a vehicle's location is automatically ascertained at regular intervals established by the customer — typically each hour on the hour — and also anytime a driver sends a text message. (Furthermore, it is possible for a customer to specifically request the location of an individual vehicle at any given time through a procedure referred to as initiating a "ping.") After being processed at the NOC, this data is sent to a "queue" where it is accessible to each customer through its own internet connection. Special software purchased for a one-time fee from Qualcomm and a password are required to log onto its system. As the individual customer must initiate the query to the NOC, it is the customer who determines how frequently this stored information is accessed.
Qualcomm does not, except in a few special instances,1 provide the landline or internet service between the customer and the NOC. Rather, the customer is left to access the NOC computer in much the same manner as any website would be visited. The data provided by OmniTRACS allows customers to in turn generate their own reports and evaluations for use in improving operational efficiency.
In conjunction with this vehicle location service, Qualcomm's customers are secondarily provided a messaging component. Like its vehicle positioning feature, the OmniTRACS service's text messaging capability operates through the same "store-and-forward" technology that is used with most of the internet, including e-mail systems. According to the record, between six and ten million messages are processed by Qualcomm's NOC each day. Text messages in OmniTRACS may be either "macro" messages, which are templated or formulaic communications sent with little to no addition of information by the sender, or they may be "free form" text messages, which are messages actually composed by the sender. The Commissioner admitted in the court below that the "vast majority of the messages . . . processed by the NOC" are "macro" messages. She further admitted that OmniTRACS is "seldomly . . . used as a means of `communication' through back-and-forth free form messages." These "macro" messages are sent by the pressing of numbers (1 through 99) which correspond to commonly and routinely used shipping phrases. Whenever any message is sent from a vehicle, the NOC processes the data and, before forwarding it to the customer's queue, adds such pertinent information as the vehicle's location and the time of the message. Messages may also be sent to vehicles from the customer's fleet management center, and, once received by the destination vehicle or vehicles, a confirmation receipt is sent back to the NOC and then to the customer's queue.
In the court below, the Commissioner agreed with Qualcomm that its "OmniTRACS service is principally used to provide information regarding the location and status of each vehicle in the customer's fleet." Similarly, the parties agreed that the "majority of information which flows through the OmniTRACS service relates to the vehicle's status and position." The Commissioner even admitted that "[f]rom Qualcomm's customer's perspective, the primary purpose or use of the OmniTRACS service is to determine the location of the vehicles" and that "the location/positioning feature and the macro messaging features of the OmniTRACS system are the primary reasons why Qualcomm's customers contracted for this service." Finally, both sides agreed below that the "OmniTRACS service does not replace the driver's personal cell phone, in that the service is seldomly, if ever, used to carry on a conversation between the truck driver and the customer's fleet management center." Conversations are instead still typically conducted by means of a driver's cellular phone.
"The standard for reviewing a grant of summary judgment by a trial court is de novo without a presumption that the trial court's conclusions are correct." Butterworth v. Butterworth, 154 S.W.3d 79, 81 (Tenn. 2005) (citing Mooney v. Sneed, 30 S.W.3d 304, 306 (Tenn. 2000)). The inquiry is itself entirely a question of law. Messer Griesheim Indus., Inc. v. Cryotech of Kingsport, Inc., 131 S.W.3d 457, 462 (Tenn. Ct. App. 2003).
"Summary Judgment is appropriate where `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Godfrey v. Ruiz, 90 S.W.3d 692, 695 (Tenn. 2002) (quoting Tenn. R. Civ. P. 56.04); see Byrd v. Hall, 847 S.W.2d 208, 211 (Tenn. 1993). The party seeking summary judgment bears the burden of persuading the Court that it has met these requirements. Godfrey, 90 S.W.3d at 695 (citations omitted). "Summary judgment is appropriate only when the facts and inferences permit a reasonable person to reach only one conclusion." Doe v. HCA Health Svs. of Tennessee, Inc., 46 S.W.3d 191, 196 (Tenn. 2001) (citations omitted).
"If a factual dispute exists, we must then determine whether the fact is material to the claim or defense upon which the summary judgment is predicated and whether the disputed fact creates a genuine issue for trial." Pendleton v. Mills, 73 S.W.3d 115, 122 (Tenn. Ct. App. 2001) (citations omitted); see ...
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