Salt Lake City v. Tax Com'n of State of Utah ex rel. Mountain States Tel. & Tel. Corp., s. 880249

• Decision Date: 13 June 1991
• Docket Number: 880250,Nos. 880249,s. 880249
• Parties: SALT LAKE CITY, a legal and political subdivision, Petitioner, v. TAX COMMISSION OF the STATE OF UTAH ex rel. MOUNTAIN STATES TELEPHONE AND TELEGRAPH CORP., Respondent. SALT LAKE COUNTY, a legal and political subdivision, Petitioner, v. TAX COMMISSION OF the STATE OF UTAH ex rel. MOUNTAIN STATES TELEPHONE AND TELEGRAPH CORP., Respondent.
• Court: Utah Supreme Court

Page 1174

813 P.2d 1174

SALT LAKE CITY, a legal and political subdivision, Petitioner, v. TAX COMMISSION OF the STATE OF UTAH ex rel. MOUNTAIN STATES

TELEPHONE AND TELEGRAPH CORP., Respondent.

SALT LAKE COUNTY, a legal and political subdivision, Petitioner, v. TAX COMMISSION OF the STATE OF UTAH ex rel. MOUNTAIN STATES

TELEPHONE AND TELEGRAPH CORP., Respondent.

Nos. 880249, 880250.

Supreme Court of Utah.

June 13, 1991.

Steven W. Allred, Salt Lake City, for Salt Lake City.

R. Paul Van Dam, Leon A. Dever, Mark K. Buchi, Richie D. Haddock, Salt Lake City, for Utah State Tax Com'n.

David E. Yocom, Karl L. Hendrickson, Bill Thomas Peters, Salt Lake City, for Salt Lake County.

ZIMMERMAN, Justice:

Plaintiffs Salt Lake City and Salt Lake County ("the City and County") petitioned for, and we granted, writs of review to consider an order of the Utah State Tax Commission ("the Commission"). That order denied the City and County's motion to intervene in proceedings brought by Mountain States Telephone and Telegraph Company ("Mountain Bell") for a redetermination of a sales and use tax deficiency for 1983 through 1986 that had been fixed initially by Commission staff. After briefing was completed in the present case, the legislature effectively disposed of the underlying substantive taxation issue. Therefore, the taxation matter is moot. However, we address some of the other issues raised because of their importance and the likelihood that they may be raised again. See Burkett v. Schwendiman, 773 P.2d 42, 44 (Utah 1989); State v. Davis, 721 P.2d 894, 895 (Utah 1985); Wickham v. Fisher, 629 P.2d 896, 899-900 (Utah 1981).

Utah's Local Sales and Use Tax Act, Utah Code Ann. §§ 59-12-201 to 208 (1987), allows any county, city, or town to impose an additional sales and use tax up to 3/4 percent on transactions already taxed by the state if certain requirements are met. See Utah Code Ann. § 59-12-204 (1987). The tax may be imposed only upon transactions already taxed by the state. Utah Code Ann. § 59-12-103 (1987). Thus, the local tax is referred to as a "piggyback" tax, i.e., a tax imposed only where a base state tax applies.

While this piggyback tax may be imposed only under very specific circumstances strictly regulated by the state, the tax is a local tax imposed by local government, not a state tax shared with local government. See Utah Code Ann. § 59-12-202 (1987). The tax is so designed because the Utah Constitution prohibits the state from sharing revenue with local governments. Utah Const. art. XIII, § 5. Thus, it is critical to its constitutionality that the tax be that of the local government and that the money belong to the local government. The Act requires, however, that administration be turned over to the Commission under contractual terms mandated by the statute. See Utah Code Ann. § 59-12-204(5) (1987).

Pursuant to this Act, both Salt Lake City and Salt Lake County have enacted local sales and use tax ordinances. Both localities have entered into statutorily mandated agreements with the Commission. The agreements permit authorized personnel from both localities to examine records and procedures concerning local collections and the records of taxpayers subject to such collections, although the agreements do not specify when such examinations may be inappropriate. ¹

On December 30, 1987, Commission staff issued Mountain Bell a notice of deficiency for $17,865,309.04 consisting of $12,629,013.52 in sales and use taxes, penalties of $1,262,401.41, and interest of $3,987,894.11. The deficiency was for the period of January 1, 1983, through March 31, 1986, and included taxes for "carrier access charges." Carrier access charges are charges for telephone services which inter-exchange companies such as AT & T must purchase from local telephone network facilities in order to provide end-to-end telephone service. See generally United States v. American Tel. & Tel. Co., 552 F.Supp. 131 (D.D.C.1982), aff'd, Maryland v. United States, 460 U.S. 1001, 103 S.Ct. 1240, 75 L.Ed.2d 472 (1983) (ordering AT & T divestiture of Bell operating companies and resulting in local intra-exchange companies and larger inter-exchange companies). Such charges had been determined by Commission staff to be subject to sales and use tax pursuant to section 59-12-103 of the Utah Code. See Utah Code Ann. § 59-12-103 (1987). The amount of the proposed deficiency included an amount representing Salt Lake's local option sales and use tax.

After receiving notice of the alleged deficiency, Mountain Bell petitioned the Commission for a redetermination of the deficiency on December 31, 1987, and subsequently initiated settlement negotiations with the Commission. On April 8, 1988, before any settlement was concluded, both Salt Lake City and Salt Lake County filed separate motions to intervene in the redetermination proceedings. ² Both parties filed motions for oral argument. Acting under the terms of its agreement with the Commission respecting the administration of the local option sales tax, Salt Lake County filed a request to review documents and records relevant to the assessment.

After hearing oral argument, the Commission entered an order on May 26, 1988, denying the motions to intervene. It stated that neither the City nor the County is legally entitled to participate in the proceeding and that the Commission would adequately protect their interests since the largest portion of any deficiency would go to the state. The Commission also denied Salt Lake County's request to review documents and records, reasoning that local governments enacting piggyback sales and use taxes were not entitled to access to confidential taxpayer information except as necessary to determine proper allocation of collected tax revenues to the local entities.

In June of 1988, the City and the County petitioned this court for writs of review which we issued to the Commission.

We first address Salt Lake County's argument that the Commission improperly denied it access to records dealing with the tax assessment. The contract entered into between Salt Lake County and the Commission, a statutorily mandated adhesion contract the terms of which are prescribed by section 59-12-204 of the Code, provides in part:

The Commission agrees to permit authorized personnel of the County to examine the records and precedures [sic] of the Commission concerning the County tax collections and the records of taxpayers subject thereto.

The Commission argues that, despite the contract's apparent plain language granting the County access to the sought-after records, it is precluded by section 59-1-403(1) of the Code from revealing this information.

Section 59-1-403(1) states that the Commission may not divulge information gained from any return filed with the Commission. Utah Code Ann. § 59-1-403(1) (1987). Subsection 3(b) of the same section, however, provides:

Notwithstanding Subsection (1) ... the commission may, by rule, share information gathered from returns and other written statements with the federal government, any other state, any of their political subdivisions, or any political subdivision of this state, if these political subdivisions or the federal government grant substantially similar privileges to this state.

Utah Code Ann. § 59-1-403(3)(b) (1987). Thus, it is readily apparent that subsection (1) is not intended to be an all-encompassing bar to disclosure of any information gathered from returns. The exemption in subsection (3) permits this information to be made available to virtually all federal and state political entities and makes it clear that there is no overriding legislative mandate to keep such information from local government. Under these circumstances, the bar to disclosure in section 59-1-403(1) cannot reasonably be read to bar the express authorization for disclosure contained in subsection (3) and incorporated into the adhesion contract that the Commission requires all local entities to sign if they want to enact a local option sales tax. The Commission expresses concern that if it complies with the County's request for disclosure, it will be unable to protect the confidentiality of the information given it by taxpayers, as contemplated by section 59-1-403(1). See Utah Code Ann. § 59-1-403(1) (1987). There are adequate means available to secure the confidentiality of the information while still making it available to local government. See Utah Code Ann. § 59-2-206 (1987). Under the plain terms of the contract, Salt Lake County should have been granted access to relevant records. The Commission erred in its flat denial of this request.

We next address the City and County's argument that they were wrongfully denied intervention in the proceedings between the Commission and Mountain Bell. Both localities presented compelling arguments to support the contention that they have an interest in how their local tax is administered and how any liability for such tax is compromised and that their interest should give them a basis for intervening in such proceedings. However, Mountain Bell argues that the merits of the issue upon which the City and the County sought intervention have been mooted both by Commission Rule 865-19-90S (retroactive to July 1, 1988) and Senate Joint Resolution No. 12. ³ See Utah Admin.R. 865-19-90S (1990); S.J.Res. 12, 48 Leg., Gen.Sess., 1989 Utah Laws 1010.

Generally, the resolution of substantive issues renders an appeal moot. See 13A C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 3533.2 (1984). As we have previously stated, "when the requested relief cannot affect the rights of the litigants," we deem the case moot. Burkett v. Schwendiman, 773 P.2d 42, 44 (Utah 1989). We recognize an exception to this doctrine when the issue presented is likely to recur yet evade review. Id.; State v. Davis, 721 P.2d 894, 895 (Utah 1986); Wickham v. Fisher, 629 P.2d 896, 899-900 (Utah 1981). Legislation can often moot a...