Unwired Telcom Corp. v. Parish of Calcasieu, No. 03-CA-0732 (La. 12/12/2003)
| Decision Date | 12 December 2003 |
| Docket Number | No. 03-CA-0732.,03-CA-0732. |
| Parties | UNWIRED TELCOM CORP., FORMERLY KNOWN AS UNWIRED, INC. AND SUCCESSOR IN INTEREST BY MERGER TO MERCURY CELLULAR TELEPHONE COMPANY v. PARISH OF CALCASIEU, LOUISIANA; THE CALCASIEU PARISH SCHOOL BOARD; THE CALCASIEU PARISH POLICE JURY; THE CALCASIEU PARISH SCHOOL SYSTEM; THE TREASURER OF THE CALCASIEU PARISH SCHOOL BOARD; AND THE TREASURER'S DESIGNATED AGENTS, INCLUDING RUFUS R. FRUGE, JR., IN HIS CAPACITY AS DIRECTOR OF THE CALCASIEU PARISH SCHOOL SYSTEM, SALES AND USE TAX DEPARTMENT. |
| Court | Louisiana Supreme Court |
ON APPEAL FROM THE COURT OF APPEAL, THIRD CIRCUIT, PARISH OF CALCASIEU.
Unwired Telecom Corp., formerly US Unwired, Inc. and the successor by merger with Mercury Cellular Telephone Company (hereafter Unwired), is a wireless telecommunications services provider that operates a retail business in Calcasieu Parish, Louisiana. Unwired invokes the appellate jurisdiction of this Court pursuant to LA. CONST. ANN. art. V, § 5(D), on the ground that the appellate court declared 2002 La. Acts No. 85, § 3 unconstitutional. For reasons that follow, we find the parties failed to raise the constitutionality of 2002 La. Acts No. 85, § 3 in a pleading. Accordingly, we find the appellate court improperly reached the constitutional issue. Therefore, we vacate and set aside that judgment and remand the case to the trial court to properly raise the issue of the constitutionality of 2002 La. Acts No. 85, § 3 and to conduct further proceedings consistent with this opinion.
Prior to Mercury and Unwired's merger, the Collector of the Calcasieu Parish sales and use taxes (the Collector)1 successfully collected a use tax from Mercury Cellular for the period of January 1, 1993 through December 31, 1995, on cellular telephones Mercury regularly furnished its customers when they also contracted cellular telecommunications services with Mercury. That collection was affirmed in the trial court after Mercury paid the use tax assessment under protest.2
In Mercury, the appellate court affirmed the trial court's grant of summary judgment in favor of the Collector on the ground that Mercury was properly assessed a use tax for the cellular telephones it furnished its customers at a price less than Mercury's wholesale cost.3 Mercury Cellular Telephone Co. v. Calcasieu Parish, 00-0318 (La. App. 3 Cir. 12/13/00). The basis of the appellate court's reasoning was that Mercury's transfer of the cellular telephones was "an incentive invariably . . . as a conduit for marketing its cellular service." Mercury, 773 So. 2d at 919. Simply stated, the appellate court held that Mercury was liable for a use tax because it used the cellular telephones as marketing tools rather than reselling them. On March 15, 2001, this Court denied Mercury's writ application. Mercury Cellular Telephone Co. v. Calcasieu Parish, 01-0126 (La. 3/16/01), 787 So. 2d 314.
Between January 1, 1996 and December 31, 1999, Unwired, like its predecessor Mercury, continued to regularly sell cellular telephones below its actual wholesale cost to those customers who contracted cellular telecommunications services from Unwired for a specified period of time. Unwired, as did Mercury before it, collected applicable sales tax only on the price it charged its customers and remitted these sums to the Collector.4 At no time did Unwired collect and remit a use tax to the Collector on its use of cellular telephones in the marketing of its telecommunication services.
The Collector audited Unwired's financial records for the above-referenced time frame. It determined that, based on its tax ordinances, Unwired's transfer of discounted cellular phones as part of a sale of a cellular telecommunications package is not a "sale at retail" in the regular course of business. Rather, the Collector asserted that Unwired "uses" the cellular phones in its business and thus it should have paid use tax, not sales tax, based on the wholesale prices of the cellular phones. Accordingly, the Collector assessed Unwired a use tax of $650,786.94, related interest of $295,310.59, and penalties in the sum of $162,696.94. On March 21, 2001, Unwired paid the use tax assessment under protest and timely filed suit for a refund on April 20, 2001.
Relying on Mercury, 773 So. 2d 914, the Collector moved for summary judgment, contending Unwired is required to pay use tax on the total price it pays for each cellular telephone. Unwired opposed the motion for summary judgment, arguing its transfer of cellular telephones at discounted prices as part of its sales of cellular telecommunication packages is not subject to use tax. To the contrary, Unwired argued its transfers of these discounted phones constitute "sales at retail" under the applicable ordinances and are excluded from the use tax. Assuming arguendo that the tax assessment was correct, Unwired further argued under the provisions of LA. REV. STAT. ANN. § 33:2746 and this Court's holding in Elevating Boats, Inc. v. St. Bernard Parish, 00-3518 (La. 9/5/01), 795 So. 2d 1153, that the Collector could only hold it liable for no more than the 15% interest penalty.
The trial court granted the Collector's motion for summary judgment and ordered Unwired to pay all taxes and interest assessed for the taxable period beginning January 1, 1996 and ending December 31, 1999. In reaching that conclusion, the trial court found the present case factually indistinguishable from Mercury. However, based upon this Court's holding in Elevating Boats, the trial court dismissed the Collector's assessment of penalties, denied its request for attorney's fees, and ordered a refund to Unwired of $152,696.94, the amount of the delinquency penalties Unwired previously paid under protest.
Unwired and the Collector appealed the trial court's judgment on May 1 and May 7, 2002 respectively. After the appeal was perfected, but before oral argument, the Legislature enacted 2002 La. Acts No. 85, to provide new definitions of "retail sale" or "sale at retail," "sales price," and "use" in LA. REV. STAT. ANN. § 47:301(10)(v), (13)(g) and (h), and (18)(i). This legislation purported to legislatively change the law as to the Mercury holding. In stating that 2002 La. Acts No. 85 was interpretative and applicable retroactively, § 3 of the act specified:
The provisions of Section 1 of this Act are interpretative of R. S. 47:301(10), (13), and (18) for all taxable periods that ended prior to January 1, 2001, and are intended to explain and clarify their original intent, notwithstanding the contrary interpretation given in "Calcasieu Parish School Board v. Mercury Cellular Telephone Company", 2000-0318 (La. App. 3 Cir. 12/13/00), 773 So. 2d 914, writ denied, 2001-0126 (La. 3/16/01), 787 So. 2d 314, and all cases consistent therewith. Therefore, the provisions of Section 1 of this Act shall be applicable to all claims existing or actions pending for any taxable period prior to January 1, 2001, and to all claims arising or actions filed on and after its effective date.
At this stage in the appellate process, the Collector attacked the constitutionality of 2002 La. Acts No. 85, § 3 in its brief to the court of appeal.5 In its reply brief, Unwired addressed the three assertions brought by the Collector and in a footnote urged that the appellate court notify the Attorney General of the Collector's objection to the constitutionality of Act 85.6 The appellate record reflects that the Attorney General filed an amicus brief with the appellate court, urging the constitutionality of Act 85.7
Addressing the briefs of Unwired and the Collector, the Court of Appeal, Third Circuit, noted "but for the passage of Act 85, this court would find that summary judgment in favor of the School Board was appropriate based on Mercury." Unwired Telecom Corp. v. Parish of Calcasieu, 02-0839 (La. App. 3 Cir. 2/5/03), 838 So. 2d 854, 857. Nevertheless, questioning whether the Legislature acted properly in declaring Act 85 interpretive and applicable retroactively, the appellate court addressed the Collector's argument presented in brief that Act 85 was unconstitutional.
In its resolution of this issue, the appellate court reasoned that the interpretation of the law is a judicial function, not legislative. The court further stated the Legislature cannot create a new substantive law in the guise of interpretive legislation to give retroactive effect "because it does not like the result of its legislation as it stands." Unwired, 838 So. 2d at 858. On this basis, the appellate court determined Act 85 was clearly substantive law because the Legislature altered existing tax obligations when it redefined "sales" and "use," a violation of La. Const. Ann. art. VII, § 15 (). Accordingly, the court of appeal held Act 85 cannot be applied retroactively to extinguish any debts that Unwired owed prior to the enactment of the new law. Unwired, 838 So. 2d at 859. The appellate court held that the trial court properly granted summary judgment in favor of the Collector on the authority of its earlier decision in Mercury. Id.
In addition, the court of appeal, relying on Elevating Boats, concluded that the trial court properly determined the combined interest, penalties, and attorney's fees cannot exceed the 15% penalty provided in LA. REV. STAT. ANN. § 33:2746. Accordingly, the appellate court agreed that the trial court correctly dismissed the Collector's assessment of penalties against Unwired, denied its request for attorney's fees, and ordered a refund of the penalties. Unwired, 838 So. 2d at 859-60.8
This matter was docketed in this Court as a direct appeal from the Third Circuit because the court of appeal's ruling...
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