State Tax Assessor v. Tracfone Wireless, Inc.

MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2022 ME 36
Docket: BCD-21-135
Argued: December 8, 2021
Decided: June 23, 2022

Panel: STANFILL, C.J., and MEAD, JABAR, HORTON, and CONNORS, JJ.*

STATE TAX ASSESSOR

v.

TRACFONE WIRELESS, INC.

JABAR, J.

[¶1] TracFone Wireless, Inc., appeals from a summary judgment granted

in favor of the Maine Tax Assessor entered in the Business and Consumer

Docket (Murphy, J.) concluding that TracFone’s Lifeline service was subject to

the state’s prepaid wireless fee and service provider tax. TracFone also appeals

from the trial court’s denial of a motion to compel the production of documents

related to taxpayers similarly situated to TracFone.

[¶2] Because we disagree that the Lifeline service was “paid for in

advance,” 25 M.R.S. § 2921(13) (2022), 35-A M.R.S. § 7102(4) (2022), we vacate

the court’s summary judgment as to the prepaid wireless fee. However,

*
Although Justice Gorman and Justice Humphrey participated in the appeal, both retired before
this opinion was certified.
2

because TracFone sold its Lifeline service under 36 M.R.S. § 2552 (2022), we

affirm the court’s grant of summary judgment as to the service provider tax.

Finally, we affirm the order denying TracFone’s motion to compel the

production of documents.

I. BACKGROUND

[¶3] The following is based on the parties’ stipulation of the facts and the

additional undisputed facts in the summary judgment record. See Apple Inc. v.

State Tax Assessor, 2021 ME 8, ¶ 3, 254 A.3d 405.

[¶4] TracFone sells telecommunications services and has operated in

Maine since 1998. At all relevant times, TracFone did not own or operate its

own telecommunications facilities but instead purchased the services from

other licensed wireless network operators. It provided prepaid minutes for use

by its customers on a “declining-balance basis,” where TracFone would supply

a set number of minutes that declined as the consumer used the service for

calls, voicemail, texts, and directory and operator assistance.

[¶5] In 2005, the Federal Communications Commission granted

TracFone a forbearance that allowed it to become an eligible

telecommunications provider (ETC) for the Lifeline program. Lifeline is a

program designed to provide universal access to telecommunications services,
3

specifically to qualifying low-income consumers. The FCC created the Universal

Service Fund to pay for Lifeline, and the Universal Service Administrative

Company (USAC) administers the program and the Universal Service Fund. To

be eligible, ETCs must certify that they would pass through the full amount of

the subsidy—$9.25 a month per consumer for the relevant time period—to

“qualifying low-income consumer[s] and that [the ETC] has received any

non-federal regulatory approvals necessary to implement the rate reduction.”

47 C.F.R. § 54.403(a)(1) (2020).

[¶6] In February 2010, the Public Utilities Commission granted

TracFone’s application to operate as a Lifeline-only ETC in Maine, and TracFone

began offering the service, known as SafeLink Wireless, in March 2010. The

program supplied to consumers each month a set number of minutes that

subscribers could use on a declining-balance basis. Unused minutes were

rolled over to the next month’s balance. TracFone never charged Lifeline

subscribers more than the subsidy it received from USAC. By the end of 2015,

TracFone had 17,000 Lifeline subscribers in Maine.

[¶7] In April 2014, the Maine Revenue Service initiated an audit of

TracFone covering the period from December 1, 2012, to January 31, 2016.

During the audit period, TracFone did not pay any taxes or fees to the Maine
4

Revenue Service or the PUC on the subsidy it received from USAC. On July 28,

2016, the Assessor issued a notice of assessment and determined that TracFone

should have been paying a service provider tax and a prepaid wireless fee.1

Based on the $9.25 subsidy per subscriber per month, the Assessor assessed a

prepaid wireless fee of $1,208,459.42 and service provider tax of $439,333.25

for the audit period.

[¶8] On September 26, 2016, TracFone requested reconsideration of the

assessments of the service provider tax and prepaid wireless fee. The Assessor

upheld its original assessment. On May 22, 2017, TracFone filed a statement of

appeal with the Board of Tax Appeals, which, on April 21, 2018, upheld the

assessment of the prepaid wireless fee but determined that Lifeline was a

“prepaid calling service” subject to the sales tax and not the service provider

tax. The Board of Tax Appeals denied TracFone’s subsequent request for

reconsideration.

[¶9] Both the State Tax Assessor and TracFone then petitioned for

review in the Superior Court (Kennebec County, Stokes, J.), which

recommended transfer to the Business and Consumer Docket. The Business

1In 2018, after the audit period, the legislature passed a bill exempting USAC-subsidized services
from certain fees, including the service provider tax. See P.L. 2017, ch. 422. The law’s stated effective
date was January 1, 2019. Id. § 12.
5

and Consumer Docket (Murphy, J.) accepted the transfer. During discovery, on

February 3, 2020, the court denied TracFone’s motion to compel the release of

information about taxpayers that TracFone asserted were similarly situated to

it. Following the close of discovery, both parties moved for summary judgment.

On April 7, 2021, the court granted the Assessor’s motion for summary

judgment and held that the Lifeline service was subject to the service provider

tax and the prepaid wireless fee. TracFone timely appealed. See 14 M.R.S.

§ 1851 (2022); M.R. App. P. 2A, 2B(c)(1).

II. DISCUSSION

[¶10] On appeal, TracFone contends that the court erred in granting a

summary judgment in favor of the Assessor and determining that TracFone was

subject to both the prepaid wireless fee and the service provider tax.

Additionally, TracFone argues that the court erred in denying its discovery

motion to compel the Assessor to release records to establish the Assessor’s

policy, practice, or interpretation prior to the audit period.

A. Motion for Summary Judgment

1. Standard of Review

[¶11] In reviewing a motion for summary judgment “[w]e review de

novo whether there was no genuine issue of material fact and whether either
6

party was entitled to judgment as a matter of law.” Warnquist v. State Tax

Assessor, 2019 ME 19, ¶ 12, 201 A.3d 602. We also review de novo issues of

statutory interpretation. Apple Inc., 2021 ME 8, ¶ 12, 254 A.3d 405. Because

the trial court’s review of the Board of Tax Appeals’ decision was de novo, see

36 M.R.S. § 151-D(10)(I) (2022), we review the trial court’s interpretation

without deference to the Board’s legal determinations. See Warnquist, 2019 ME

19, ¶ 12, 201 A.3d 602. On appeal to the Superior Court, “[t]he burden of proof

is on the taxpayer.” 36 M.R.S. § 151-D(10)(I).

[¶12] In interpreting a statute, we first look to the “plain meaning of the

statutory language to give effect to the Legislature’s intent,” and only if the

statute is ambiguous will we “look beyond that language to examine other

indicia of legislative intent, such as legislative history.” Wuori v. Otis, 2020 ME

27, ¶¶ 6-7, 226 A.3d 771 (quotation marks omitted). However, we construe

taxation statutes “most strongly against the government and in the [taxpayer’s]

favor, and we will not extend [a taxation statute’s] reach beyond the clear

import of the language used.” Goggin v. State Tax Assessor, 2018 ME 111, ¶ 13,

191 A.3d 341 (first alteration in original) (quotation marks omitted).
7

2. Prepaid Wireless Fee

[¶13] The Legislature enacted the prepaid wireless fee as an alternative

method of taxing any prepaid wireless provider who lacks a regular monthly

billing cycle and whose telecommunications service is provided without a

periodic bill.2 35-A M.R.S. § 7101(6) (2022). The prepaid wireless fee requires

that “seller[s] of prepaid wireless telecommunications services . . . collect the

prepaid wireless fee from the prepaid wireless consumer for each retail

transaction occurring in this State.”3 35-A M.R.S. § 7104-C(2)(A) (2022). Maine

law defines “[p]repaid wireless telecommunications service” as “a cellular or

wireless telecommunications service that allows a caller to dial 9-1-1 to access

the E-9-1-1 system, which service must be paid for in advance and is sold in

2 Effective January 1, 2019, the Legislature rescinded the applicability of the prepaid wireless fee
to “prepaid wireless telecommunications service supported by federal universal service support
funds.” P.L. 2017, ch. 422, § 1.
3 Although a fee is not a tax, see Bd. of Overseers of the Bar v. Lee, 422 A.2d 998, 1004 (Me. 1980),
because 36 M.R.S. § 111(5) (2022) defines a tax as including a “fee . . . subject to collection by the
[A]ssessor pursuant to statute,” and because 35-A M.R.S. § 7104-C (2022) provides for remittance of
the prepaid wireless fee to the Assessor, the Assessor’s authority to collect the fee is implicit, and we
apply the same rules of statutory construction and standard of review for the Assessor’s fee
determination as its determination regarding the service provider tax.
8

predetermined units or dollars that declines with use in a known amount.”

25 M.R.S. § 2921(13); 35-A M.R.S. § 7102(4).

[¶14] For TracFone’s SafeLink service to be a prepaid wireless

telecommunications service and therefore subject to the prepaid wireless fee

assessed, it must be “paid for in advance” and “sold in predetermined units or

dollars that decline[] with use in known amounts.” 25 M.R.S. § 2921(13);

35-A M.R.S. § 7102(4).

[¶15] We turn first to the “paid for in advance” requirement. The Federal

Lifeline program pays ETCs for services after the services are provided. Under

the Lifeline program,

(c) [a]n eligible telecommunications carrier offering a Lifeline
service that does not require the eligible telecommunications
carrier to assess and collect a monthly fee from its subscribers:

(1) Shall not receive universal service support for a
subscriber to such Lifeline service until the subscriber
activates the service by whatever means specified by the
carrier, such as completing an outbound call; and

(2) After service activation, an eligible telecommunications
carrier shall only continue to receive universal service
support reimbursement for such Lifeline service provided to
subscribers who have used the service within the last
30 days, or who have cured their non-usage . . . .

47 C.F.R. § 54.407(c) (2020) (emphasis added); see also In re Lifeline & Link Up

Reform Modernization, 27 FCC Rcd. 6787, ¶ 303 (2012) (“ETCs seeking support
9

for low-income service provided in the preceding month shall submit to USAC

no later than the eighth day of each month [a report supporting their claims] in

order to receive a low-income disbursement at the end of that same month.”).

[¶16] Given that TracFone did not charge any SafeLink users for the

service during the audit period,4 TracFone received all Lifeline payments for a

customer following the consumer’s use of the service.5 By the Lifeline

program’s plain terms, there is no indication that, under federal law or

regulation, TracFone would have received payment from USAC prior to

providing the service. In that strict sense, the service was not prepaid.

[¶17] It is true that TracFone’s SafeLink bears some hallmarks of a

prepaid plan, such as having no monthly billing relationship with the consumer.

4 The Assessor argues that “TracFone’s customers also provided certain consideration for
[SafeLink] . . . before a customer’s service was activated,” and, therefore, the service was paid for in
advance because of the consideration provided by consumers. However, for consideration to be
“valid,” it must be valuable; that is, it must “confer[] a pecuniarily measurable benefit on one party or
impose[] a pecuniarily measurable detriment on the other.” Valuable Consideration, Black’s Law
Dictionary (11th ed. 2019). The taxes and fees were assessed solely against the $9.25 subsidy
provided to TracFone, so any consideration the consumer provided was valueless and therefore not
valid under the law. See id.
5 The Assessor argues that the record demonstrates instances in which TracFone was paid prior
to the Lifeline service being activated, and that this renders the entire SafeLink program prepaid.
Even if we view the record evidence in the light most favorable to the State, see Stewart Title Guar.
Co. v. State Tax Assessor, 2009 ME 8, ¶ 11, 963 A.2d 169, the regulations still clearly state that USAC
would reimburse TracFone only after the consumer had activated the SafeLink service. See 47 C.F.R.
§ 54.407(c)(1) (2020). We do not find compelling the argument that the minor corrections TracFone
made to its filings with USAC, which occasionally led to TracFone collecting, during the audit period,
payment before the user had activated the program, invalidated the entire structure of the Lifeline
program.
10

In addition, TracFone had previously described its SafeLink program as

following a prepaid model. However, the record contains no evidence of any

consistent practice of payment by USAC to TracFone in advance of TracFone’s

rendering the service being paid for. See 47 C.F.R. § 54.407(c). The SafeLink

program, therefore, falls somewhere between a prepaid and postpaid

telecommunications plan.6 Given that we strictly construe tax statutes against

the taxing entity, see Goggin, 2018 ME 111, ¶ 13, 191 A.3d 341, the SafeLink

plan cannot be considered “paid for in advance.” Because the SafeLink plan is

not “paid for in advance,” the prepaid wireless fee does not apply, and,

therefore, we need not address whether there was a retail transaction or

whether the Assessor had the authority to audit, assess, and sue TracFone for

the prepaid wireless fees. We therefore vacate the court’s grant of a summary

judgment in favor of the Assessor with respect to the prepaid wireless fee and

remand for entry of summary judgment in favor of TracFone.

6Despite the Assessor’s claim to the contrary, TracFone is not judicially estopped from claiming
that its Lifeline service is not prepaid. Judicial estoppel “prohibits parties from deliberately changing
positions according to the exigencies of the moment” and applies when a party takes positions that
are “clearly inconsistent” with each other, the party in the previous action “successfully convinced
the court to accept the inconsistent position” in the previous action, and the party gained an unfair
advantage due to the change in position. In re Child of Nicholas P., 2019 ME 152, ¶ 16, 218 A.3d 247
(alteration and quotation marks omitted). There is no indication that the PUC’s order granting
TracFone’s ETC status was predicated on it being a prepaid service, meaning, at the very least, that
TracFone gained no unfair advantage due to any change in its position.
11

3. Service Provider Tax

[¶18] The service provider tax is applied to the value of certain services,

including “telecommunications” and “ancillary services,” that are sold in

Maine.7 36 M.R.S. § 2552(1)(E), (L). The statute provides that “[v]alue is

measured by the sale price.” Id. § 2552(2). The definitions section of the statute

defines “sale price” as follows:

“Sale price” means the total amount of consideration, including
cash, credit, property and services, for which personal property or
services are sold, leased or rented, valued in money, whether
received in money or otherwise, without any deduction for the cost
of materials used, labor or service cost, interest, losses and any
other expense of the seller. “Sale price” includes any consideration
for services that are a part of a sale.

36 M.R.S. § 2551(15) (2016). The version of the statute in effect at the time the

tax was assessed had several exclusions from the definition of “[s]ale price,”

none of which were applicable here. See id. The service provider tax is a “levy

on the seller” but can be passed to the consumer. 36 M.R.S. § 2552(2). TracFone

argues that it is not subject to the service provider tax because no sale occurred,

7 “Telecommunications services” are defined as “the electronic transmission, conveyance or
routing of voice, data, audio, video or any other information or signals to a point or between or among
points.” 36 M.R.S. § 2551(20-A) (2016). An “ancillary service” is “a service that is associated with or
incidental to the provision of telecommunications services, including, but not limited to, detailed
telecommunications billing service, directory assistance, vertical service and voice mail service.” Id.
§ 2551(1-C). There is no dispute that TracFone’s SafeLink service was a telecommunications service
that offered ancillary services during the audited period.
12

and, even if a sale had occurred, subsequent legislative history indicates that

the Legislature never intended to subject SafeLink and other Lifeline services

to taxes and fees. These arguments are both unpersuasive.

a. The SafeLink Transaction

[¶19] A “sale” is “fundamentally an exchange of goods or services for a

price or consideration.” State Tax Assessor v. MCI Commc’ns Servs., Inc., 2017

ME 119, ¶ 14, 164 A.3d 952; 36 M.R.S. § 1752(13) (2022) (defining “[s]ale” for

the purposes of the sales tax as “any transfer, exchange or barter, in any manner

or by any means whatsoever, for consideration.”). Sale price can include any

value received for a retail sale, Flippo v. L.L. Bean, Inc., 2006 ME 62, ¶ 10, 898

A.2d 942, and can include payments made by third parties, see Apple Inc., 2021

ME 8, ¶¶ 16-17, 254 A.3d 405; Flippo, 2006 ME 62, ¶¶ 12-13, 898 A.2d 942; Flik

Int’l Corp. v. State Tax Assessor, 2002 ME 176, ¶ 19, 812 A.2d 974. A sale can

also occur even when the consideration is not received until a later time. See

Flippo, 2006 ME 62, ¶ 16, 898 A.2d 942.

[¶20] There is no ambiguity in the statute; it applies to the value of

telecommunications services sold in Maine. It is undisputed that TracFone

received consideration for the services that it provided under the SafeLink

program. TracFone does not contest that it purchases telecommunications
13

services for resale. The mechanics of the process amount to a sale: the user

signs up for a service and receives minutes from TracFone, and TracFone then

receives payment from USAC. There is no requirement that the payment to a

seller must be made by the customer in order for the transaction to be

considered a retail sale; the sale price may be paid to the seller by a third party

after the transaction.8 Cf. Apple Inc., 2021 ME 8, ¶¶ 16-17, 254 A.3d 405. For

the above reasons, TracFone’s SafeLink service is “sold” and therefore taxable

under 36 M.R.S. § 2552.

b. Subsequent Legislative Action

[¶21] TracFone argues that, even if SafeLink was “sold” for the purposes

of the service provider tax, the 128th Legislature’s passage of chapter 422 of

Public Law 2017, enacted following the audit, demonstrates that the

Legislature never intended to tax SafeLink and other Lifeline programs.

TracFone argues that statements made during the 128th Legislature’s passage

of P.L. 2017, ch. 422, indicate the 128th Legislature’s intention to clarify that

the 121st Legislature did not intend for the statute providing for the service

8 In the period at issue, there was no exception for payments from a federal program. See id.
§ 2551(15), amended by P.L. 2017, ch. 422, §§ 7-9 (effective Jan. 1, 2019).
14

provider tax statute to apply to services paid for with federal universal support

funds.

[¶22] As noted, the plain language of the applicable statute clearly stated,

“‘Sale price’ means the total amount of consideration, including cash, credit,

property and services, for which personal property or services are sold, leased

or rented, valued in money, whether received in money or otherwise . . . .”

36 M.R.S. § 2551(15). There was no exception for government payments. See

id.

[¶23] The statute was amended by P.L. 2017, ch. 422, § 10, effective

January 1, 2019, to exclude from the definition of sale price “[f]ederal universal

service support funds that are paid directly to the seller pursuant to 47 Code of

Federal Regulations, Part 54.” In other words, the transaction at issue here

would now be excluded from the service provider tax. Because the statute as it

existed at the time of these events was unambiguous, however, we apply that

plain language and do not look to legislative history. See Wawenock, LLC v. Dep’t

of Transp., 2018 ME 83, ¶ 7, 187 A.3d 609 (“If the statute is unambiguous, we

interpret the statute according to its unambiguous language.”).
15

B. Motion to Compel

[¶24] In the trial court, TracFone sought to invoke 36 M.R.S. § 112(1)

(2022) as a defense, arguing that, when the Assessor assessed the prepaid

wireless fee and service provider tax against TracFone, it was a change in the

Assessor’s policy and practices. In relevant part, 36 M.R.S. § 112(1) provides

that “[w]hen a significant change has occurred in bureau policy or practice or

in the interpretation by the bureau of any law, rule or instruction bulletin, the

assessor shall, within [sixty] days of the change, provide to [a] publishing entity

or entities written notice, suitable for publication, of the change.” TracFone

contends that the Assessor’s decision to assess the service provider tax during

the audit period amounted to a “significant change,” and, during discovery,

TracFone sought the production of documents that it believed would support

this contention.9 Because section 112 would have to provide taxpayers a

9 “[S]ignificant change” is not defined in statute. See 36 M.R.S § 112 (2022). The term is used only

in one other statute in Title 36. See 36 M.R.S. § 194-A(1) (2022) (“Before implementing a significant
change in policy, practice or interpretation of the sales and use tax law that would result in additional
revenue, the State Tax Assessor shall consult with the Office of the Attorney General.”) The trial court
assumed that there was a significant change in this case. TracFone was assessed for the service
provider tax and, because SafeLink had been operating since March 2010, because the service
provider tax had been in effect prior to then, see P.L. 2007, ch. 627, § 69 (adding “ancillary services”
to the service provider tax); P.L. 2003, ch. 673, pt. v, §§ v-25, v-29 (enacting the service provider tax),
and because the service provider tax had assumedly not been assessed for that prior period, there
likely was a significant change in regard to the service provider tax.
16

defense for the documents to be admissible in evidence, we first address section

112’s meaning and application.

[¶25] The plain language of section 112 provides neither any defense for

those who have been affected by the Assessor’s actions (or lack thereof) nor

any consequence for the Assessor should it fail to comply. See Bureau v. Staffing

Network, Inc., 678 A.2d 583, 590 (Me. 1996) (“We do not create a remedy or

penalty when a statute is silent regarding the sanction for failure of an agency

to timely act.”). Section 112(1) is not mere surplusage, however, because 5

M.R.S. § 11001(2) (2022) permits taxpayers “aggrieved by the failure or refusal

of an agency to act” to seek relief in the form of a court order requiring the

agency—here the Assessor—to act.

[¶26] We reject TracFone’s argument that, because 36 M.R.S. § 194-A(4)

(2022) expressly provides that the Assessor’s failure to take a different

procedural step within a certain period provides no defense,10 a defense is

10 The statute reads:

1. Consultation. Before implementing a significant change in policy, practice or
interpretation of the sales and use tax law that would result in additional revenue,
the State Tax Assessor shall consult with the Office of the Attorney General.

....

4. Assessment validity. This section establishes a procedural consultation and
notification requirement to assist routine legislative oversight and does not affect
the validity of any assessment or tax liability issued pursuant to or arising under
this Title.
17

impliedly found in section 112. If we were to invalidate the acts of the Assessor

for not complying with section 112, we would be reading language into section

112(1) that does not exist. See Bureau, 678 A.2d at 590. Additionally, if we

were to interpret the absence of language like that found in section 194-A(4) to

mean that section 112(1) provided a defense, any law that did not state

otherwise and used the term “shall” could then be used as a defense. See, e.g.,

36 M.R.S. § 1760-D(1) (“The assessor shall post on the bureau’s publicly

accessible website, and update quarterly, a list of products . . . to which the

assessor has made a written determination on the applicability of a sales tax

exemption.”). Because TracFone’s section 194-A argument would require us to

read language into a law and would have broad implications on Maine’s tax

code, we reject this argument.

[¶27] Because section 112 does not provide TracFone a defense, the trial

court did not abuse its discretion in denying TracFone’s motion to compel the

production of the documents.

The entry is:

Summary judgment in the Assessor’s favor on
the prepaid wireless fee vacated. Remanded for
entry of summary judgment in TracFone’s favor.
Summary judgment in the Assessor’s favor on

36 M.R.S. § 194-A.
18

the service provider tax affirmed. Denial of
TracFone’s motion to compel affirmed.

Jonathan M. Duntiz, Esq. (orally), Verrill Dana LLP, Portland, for appellant
TracFone Wireless, Inc.

Aaron M. Frey, Attorney General, Thomas A. Knowlton, Dep. Atty. Gen. (orally),
and Kimberly L. Patwardhan, Asst. Atty. Gen., Office of the Attorney General,
Augusta, for appellee State Tax Assessor

Business and Consumer Docket docket number AP-2019-1
FOR CLERK REFERENCE ONLY