Unwired Telecom v. Parish of Calcasieu

Decision Date19 January 2005
Docket NumberNo. 2003-CA-0732.,2003-CA-0732.
Citation903 So.2d 392
PartiesUNWIRED TELECOM 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 Parish Police Jury; The Calcasieu Parish School Board 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.
CourtLouisiana Supreme Court

Jones, Walker, Waechter, Poitevent, Carrere & Denegre, Edward Hart Bergin, William M. Backstrom, Jr., Coleman Douglas Ridley, Jr., New Orleans, counsel for Applicant.

Scofield, Gerard, Veron, Singletary & Pohorelsky, Russell Joseph Stutes, Jr., John Michael Veron, John Christopher Guillet, John B. Scofield, Toni Lewis Petrofes, Lake Charles, counsel for Respondents.

Hilton Sutton Bell, Mark James Jeansonne, New Orleans, counsel for amicus curiae AT&T Wireless Services d/b/a AT&T Wireless II.

John Bettes Dunlap, III, Baton Rouge, counsel for amicus curiae The Wireless Group.

Tina Vicari Grant, counsel for amicus curiae The State of Louisiana and Murphy J. "Mike" Foster, Jr.

Rachelle Deckert Dick, Baton Rouge, counsel for amicus curiae Louisiana Municipal Association.

Roland John Dartez, William J. Doran, Jr., Dannie P. Garrett, III, Baton Rouge, counsel for amicus curiae The Police Jury Association/Louisiana.


KNOLL, Justice.

This case poses the question of whether the court of appeal erred in declaring 2002 La. Acts No. 85, § 3 an unconstitutional violation of LA. CONST. art. VII, § 15 because the legislative act retroactively nullifies an appellate court decision and relieves the plaintiff of a use tax obligation owed to the Collector1 of the Calcasieu Parish sales and use taxes. An ancillary question raised and ruled upon in the trial court was whether the trial court erred in limiting the Collector's demand for penalties and attorney's fees to 15% of the total liability pursuant to LA.REV.STAT. ANN. § 33:2746 in accord with this Court's opinion in Elevating Boats, Inc. v. St. Bernard Parish, 00-3518 (La.9/5/01), 795 So.2d 1153. Finding no error in the appellate court's declaration of the unconstitutionality of Section 3 of Act No. 85 of the 2002 Legislative session, we affirm that decision. As to the ancillary question,2 we adopt the reasoning announced by this Court in Anthony Crane Rental, L.P. v. Rufus Fruge, Jr., et al., XXXX-XXXX (La.10/21/03), 859 So.2d 631, and remand for further proceedings in conformity with that holding.


Unwired Telecom Corp., formerly U.S. Unwired, Inc. and the successor by merger with Mercury Cellular Telephone Company (hereafter Unwired), is a wireless telecommunications services provider that operates a retail outlet in Calcasieu Parish, Louisiana. Prior to the time of merger, the Collector 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.3 That judgment was affirmed on appeal and this Court denied Mercury's application for a writ of certiorari. Mercury Cellular Telephone Co. v. Calcasieu Parish, 00-0318 (La.App. 3 Cir. 12/13/00), 773 So.2d 914, writ denied, 01-0126 (La.3/16/01), 787 So.2d 314.

Later, 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 use 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 appealed the trial court's judgment because of the court's reliance on Mercury. The Collector answered the appeal, seeking to review part of the trial court ruling that relied upon Elevating Boats. While the appeals were pending, 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 "overrule" the Mercury holding. In stating 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", XXXX-XXXX (La.App. 3 Cir. 12/13/00), 773 So.2d 914, writ denied, XXXX-XXXX (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.

Based upon Act 85, the Collector urged in brief before the court of appeal that the act was unconstitutional in three ways: (1) it impermissibly extinguished Unwired's existing tax obligations contrary to the provisions of LA. CONST. ANN. art. VII, § 15; (2) it creates a non-uniform exemption among otherwise equally situated tax jurisdiction in violation of LA. CONST. ANN. art. VI, § 29; and (3) the Act impermissibly shortened the prescriptive period for assessing taxes contrary to LA. CONST. ANN. art. VII, § 16.

Addressing the appeals 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 that Act 85 was unconstitutional.

In its resolution of this issue, the appellate court reasoned 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 (providing that "[t]he legislature shall have no power to release, extinguish, or authorize the releasing or extinguishing of an indebtedness, liability, or obligation of a corporation or individual to the state, a parish, or a municipality"). Accordingly, the court of appeal held Act 85 cannot be applied retroactively to extinguish any debts Unwired owed prior to the enactment of the new law. Unwired, 838 So.2d at 859. Therefore, the appellate court held the trial court properly granted summary judgment in...

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