Westside Cellular, Inc. v. U.S.

573 F.Supp.2d 1002

WESTSIDE CELLULAR, INC., Plaintiff v. UNITED STATES of America, Defendant.

No. 1:06 CV 2231.

United States District Court, N.D. Ohio, Eastern Division.

July 7, 2008.

Randy J. Hart, Hahn, Loeser & Parks, Cleveland, OH, Mark D. Griffin, Orange, OH, for Plaintiff.

Thomas P. Cole, U.S. Department of Justice-Tax Division, Washington, DC, for Defendant.

ORDER

SOLOMON OLIVER, JR., District Judge.

Now pending before the court is Plaintiff Westside Cellular, Inc.'s ("Plaintiff") Motion for Summary Judgment (ECF No. 16), wherein Plaintiff seeks a refund of $3,108,038.92, plus interest, for federal telecommunications excise taxes, allegedly imposed incorrectly under 26 U.S.C. § 4251, that Plaintiff billed and collected from its customers and eventually remitted to Defendant United States of America ("Defendant"). Also pending before the court is Defendant's Cross-Motion for Summary Judgment (ECF No. 17), wherein Defendant primarily asserts that Plaintiff lacks standing to seek an excise tax refund because it is merely a tax collector, not a taxpayer. For the following reasons, the court denies Plaintiffs Motion for Summary Judgment and grants Defendant's Cross-Motion for Summary Judgment.

I. FACTS AND PROCEDURAL HISTORY

A. Plaintiff Billed Its Customers for Excise Taxes, Collected the Tax, and Remitted the Taxes to Defendant

Plaintiff, an Ohio corporation that has been a reseller of cellular telephone service from Verizon Wireless and its corporate ancestors ("Verizon") since at least 1991, seeks to recover federal telecommunication excise taxes that it remitted to Defendant in the amount of $3,108,038.92 on or about August 4, 2003. (Pl.'s Summ. J. Mot. at 3, citing Affidavit of Michael Tricarichi ("Tricarichi Aff.") ¶ 6.) Plaintiff represented to Verizon in the Certificate of Exemption from Federal Excise Tax on Charges for Communication Services ("Certificate of Exemption") that Plaintiff "was exempt from taxes imposed by Section 4251 of the Internal Revenue Code" based on its status as a reseller. (Def.'s Cross-Mot. for Summ. J., Cole Decl., Ex. 11.) As a reseller, Plaintiff stated in the Certificate of Exemption that:

The communication services furnished by [Verizon] will be used exclusively in the rendering of a communication service upon which tax is imposed by Section 4251 of the Internal Revenue Code. It is understood that no tax will be collected by [Verizon] on charges for said services, and that it will be the responsibility of the undersigned [Westside Cellular] to collect such tax as may be due from its customers and to remit it to the Internal Revenue Service.

Id. In accordance with its representations in the Certificate of Exemption, Plaintiff Westside Cellular proceeded to bill and collect the tax from its customers. (Id., Cole Decl., Ex. 12.) After ten years, on or about August 4, 2003, Plaintiff eventually remitted the entirety of the excise taxes due from September 30, 1991, to March 31, 2003, together with the interest thereon, to the IRS. (Pl.'s Summ. J. Mot. at 3, citing Triarichi Aff. ¶ ¶ 13; 15.)

B. Plaintiff Filed its Request for a Refund of the Excise Tax Paid by Its Customers

On or around May, 2006, Defendant acknowledged in COMMUNICATIONS ECISE TAX, 2006 WL 1452787, IRS Notice 2006-50 (2006) that, in light of federal case holdings such as OfficeMax, Inc. v. United States of America, 428 F.3d 583 (6th Cir. 2005), Defendant incorrectly imposed excise tax pursuant to 26 U.S.C. § 4251 for telephonic communications based on time-only service, rather than services based on time and distance, as defined by the plain language of 26 U.S.C. § 4252(b)(1). As a result, Defendant stated in IRS Notice 2006-50 that taxpayers may be entitled to request credit or refund of the excise taxes it paid for communications based on timeonly service.

On July 31, 2006, Plaintiff filed copies of Forms 8849, in accordance with the administrative refund request requirements of Section 6532 and 7422 of the Code, to request the refund of the taxes that Defendant allegedly erroneously retained. (Pl.'s Summ. J. Mot. at 4, Tricarichi Aff. ¶ 20.) Defendant acknowledged receipt of Plaintiffs refund request at its regional office in Cincinnati on or around August 3, 2006. (Id., Triarchi Aff. ¶ 22.)

C. The IRS Denied Plaintiff's Refund Request

On or around August 22, 2006, Defendant formally denied Plaintiffs refund request. (Pl.'s Summ. J. Mot. at 4, citing Ex. C ("IRS Letter")). In the IRS letter, Defendant stated that Plaintiffs refund request was not timely because it purportedly "was not filed within three years from the date we received a late return." (Id.) The IRS letter did not state any other reason for denying Plaintiffs request. (Id.) Yet, as Defendant now concedes in its Opposition to Plaintiffs Motion for Summary Judgment and Cross-Motion for Summary Judgment, Plaintiffs relevant returns were filed on or after August 4, 2003, and its excise tax refund request was accepted by the IRS on or before August 3, 2006. As a result, since it was filed within the three-year statutory period, Defendant does not now argue that Plaintiffs refund request is untimely. (Id.)

II. SUMMARY JUDGMENT STANDARD

Federal Rule of Civil Procedure 56(c) governs summary judgment motions and provides:

The judgment sought shall be rendered forthwith if 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 a judgment as a matter of law. . . .

In reviewing summary judgment motions, this court must view the evidence in a light most favorable to the non-moving party to determine whether a genuine issue of material fact exists. Adickes v. S.H. Kress & Co., 398 U.S. 144, 153, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); White v. Turfway Park Racing Ass'n, Inc., 909 F.2d 941, 943-44 (6th Cir.1990). A fact is "material" only if its resolution will affect the outcome of the lawsuit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Determination of whether a factual issue is "genuine" requires consideration of the applicable evidentiary standards. Thus, in most civil cases the Court must decide "whether reasonable jurors could find by a preponderance of the evidence that the [non-moving party] is entitled to a verdict." Id. at 252, 106 S.Ct. 2505. However, "[c]redibility judgments and weighing of the evidence are prohibited during the consideration of a motion for summary judgment." Ahlers v. Schebil, 188 F.3d 365, 369 (6th Cir.1999).

Summary judgment is appropriate whenever the non-moving party fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Moreover, "the trial court no longer has a duty to search the entire record to establish that it is bereft of a genuine issue of material fact." Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479-80 (6th Cir.1989) (citing Frito-Lay, Inc. v. Willoughby, 863 F.2d 1029, 1034 (D.C.Cir.1988)). The nonmoving party is under an affirmative duty to point out specific facts in the record as it has been established that create a genuine issue of material fact. Fulson v. City of Columbus, 801 F.Supp. 1, 4 (S.D.Ohio 1992). The non-movant must show "more than a scintilla of evidence to overcome summary judgment"; it is not enough to show that there is slight doubt as to material facts. Id. As Rule 56(e) makes clear:

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial.

III. LAW AND ANALYSIS

In its Motion for Summary Judgment, Plaintiff argues, in light of IRS Notice 2006-50, that it is entitled to an excise tax refund based upon the fact that the telephonic communication services were timeonly, rather than services based on time and distance. In its Opposition to Plaintiffs Motion for Summary Judgment and Cross-Motion for Summary Judgment, Defendant argues, as a threshold issue, that Plaintiff lacks standing to seek a refund for taxes imposed under § 4251, even if the tax was incorrectly imposed, because Plaintiff is a tax collector, not a taxpayer. As a tax collector, Plaintiff itself was exempt from the excise tax and merely billed and collected the tax from its customers and then remitted the tax to the government. Defendant maintains that only the taxpayers who paid the tax—Plaintiffs customers—have standing to seek a refund against Defendant in the absence of Plaintiffs compliance with IRS Notice 2006-50, Section 5(d)(4), which provides that a tax collector can only seek an excise tax refund if it certifies that it has repaid the tax to its customers or obtained its customers' written consent to seek a tax refund.

In response to Defendant's standing argument, Plaintiff relies on several provisions relating to the regulation of prepaid telephone calling cards and prepaid cellular telephones to argue that it has standing to seek a refund of the excise tax. Since the court finds that Defendant's argument is well-taken that these regulations are inapposite to the facts in the instant case and that Plaintiff has provided no evidence that its meets the requirements of IRS Notice 2006-50, Section 5(d)(4), the court holds that Plaintiff lacks standing to seek an excise tax refund. Accordingly, the court need not address Plaintiff's argument that the excise tax was improperly imposed or Defendant's alternative argument that at least a portion of the telephone calls at issue are subject to the excise tax....