WA Legal Roundup: Division II
Qualcomm appeals the trial court’s order for summary judgment in favor of the DOR dismissing Qualcomm’s tax refund claim. Qualcomm argues that the DOR erroneously found that its truck tracking service was a “network telephone service” rather than being taxed at the buisness and operations tax service rate.
Qualcomm sells a truck tracking service that requires each truck have mobile communication terminals, system software, and the service that allows the dispatch center to locate and communicate with the individual trucks. A customer can sign up for one of two services, their standard or deluxe package. Between 1998 and 2001 Qualcomm paid B&O taxes at a lower service rate than taxes assessed under a “network telephone service.” After an audit, DOR determined that Qualcomm should have been paying at a higher tax rate because they ruled that the tracking portion of the service fits the definition of “network telephone service,” under a former RCW. Qualcomm exhausted their venues with the Department and its appeals division, paid the taxes, and filed suit in superior court seeking a refund.
The appeals court disagreed with Qualcomm’s tax argument and affirmed the trial court’s summary judgment order in favor of the DOR. The statute states that ““network telephone service”means the providing by any person of access to a local telephone network… or the providing of telephonic, video, data, or similar communication or transmission for hire, via a local telephone network.. microwave, or similar communication or transmission system.”
The court began by a analyzing the plain meaning of the statute, where they determined it was necessary to conduct a primary purpose test to determine whether the primary purpose of the tracking service is data transmission or data processing. The court acknowledges that the tracking system provides a range of options from finding the trucks location to freeform messages. The court finds that if the basic truck location system qualifies as the “network telephone service,” the primary purpose of the system will be taxable data transmission. The court found that because the tracking service provides a communication link between the truck and the mobile terminal and the dispatch center’s computer and tracking software all the data sent qualifies as “network telephone service.”