Comcast Corp. v. Dept. of Rev. (TC 5265) ( 2016 )

No. 30 October 11, 2016 295
IN THE OREGON TAX COURT
REGULAR DIVISION
COMCAST CORPORATION
and Subsidiaries,
Plaintiff,
v.
DEPARTMENT OF REVENUE,
Defendant.
(TC 5265)
Plaintiff (taxpayer) requested a declaration that its sales factor be deter-
mined under the provisions of ORS 314.655 regarding situs of receipts from
sales other than sales of tangible personal property. Defendant Department of
Revenue (the department) requested a declaration that taxpayer was subject to
subscriber apportionment under ORS 314.680 to 314.684 and OAR 150-314-0465
(“the Broadcaster Statutes”). Taxpayer argued that it was not subject to appor-
tionment per the Broadcaster Statutes because only a portion of its revenues
were derived from transmission of one-way electronic signals. As to its other rev-
enue, apart from any revenue from sales of real or tangible personal property,
taxpayer also objected to apportionment of that revenue based on the subscriber
ratio, requesting that revenue be apportioned following a costs-of-performance
test. Granting the department’s motion and denying taxpayer’s motion for partial
summary judgment, the court ruled that a taxpayer is an interstate broadcaster
if it engages in one-way transmission of electronic signals, and that taxpayer had
admitted that it engaged in some transmission of one-way electronic signals to
subscribers in Oregon and outside of Oregon, therefore meeting the definition of
an “interstate broadcaster” under the Broadcaster Statutes. Further, the court
ruled that no statutory provision in the Broadcaster Statutes makes a cross-
reference to ORS 314.665 as a default rule to be applied to the extent the
Broadcaster Statutes do not apply, therefore the apportionment per the
Broadcaster Statutes was appropriate.
Oral argument on cross-motions for partial summary
judgment was held June 17, 2016, in the courtroom of the
Oregon Tax Court, Salem.
Gregory A. Chaimov, Davis Wright Tremaine LLP,
Portland, filed the motion and argued the cause for Plaintiff
(taxpayer).
Marilyn J. Harbur, Senior Assistant Attorney General,
Department of Justice, Salem, filed the cross-motion and
argued the cause for Defendant Department of Revenue (the
department).
Decision for Defendant rendered October 11, 2016.
296 Comcast Corp. v. Dept. of Rev. (TC 5265)
HENRY C. BREITHAUPT, Judge.
I. INTRODUCTION
This corporation excise tax matter is before the
court on cross-motions for partial summary judgment. The
tax years at issue are those ending December 31, 2007,
2008, and 2009. The purpose of the cross-motions is to
receive a declaration from the court as to the application of
ORS 314.680 to 314.686 to Plaintiff (taxpayer) in the years
at issue.
II. FACTS
Taxpayer is a corporation, with portions of its reve-
nue derived from the provision of cable television, internet,
and voice over internet protocol services to subscribers in
Oregon and other states. The cable and other facilities used
for transmission of television services are also employed for
internet and voice over internet protocol services. Taxpayer
also derives revenue from sales of advertising time, commis-
sions and fees related to its cable operations, franchise fees
that must be paid on to local governments and are collected
from its subscribers, and license fees from the licensing of
rights to its national programming networks.
A declaration submitted by taxpayer for the years
at issue states that taxpayer’s “video service offerings
included analog service, one-way digital service, [and] two-
way digital service. * * * Comcast revenues from video ser-
vices included services that involved one-way and/or two-
way transmissions of electronic signals.”
Taxpayer uses coaxial cables to transmit electronic
signals, including one-way electronic signals.
III. ISSUE
The issue for decision is whether taxpayer is
required to determine the sales factor for apportionment
of income under ORS 314.680 to 314.690 (the Broadcaster
Statutes).1
1
The court’s references to the Oregon Revised Statutes (ORS) are to the
2007 through 2009 editions.
Cite as 22 OTR 295 (2016) 297
IV. ANALYSIS
Defendant Department of Revenue (the depart-
ment) requests a declaration that taxpayer is subject to sub-
scriber apportionment under ORS 314.680 to 314.684 and
OAR 150-314-0465.2
Taxpayer requests a declaration that its sales factor
must be determined under the provisions of ORS 314.655
regarding situs of receipts from sales other than sales of
tangible personal property.
Interstate broadcasters must determine their sales
factor under the Broadcaster Statutes. The term “inter-
state broadcaster” means “a taxpayer that engages in the
for-profit business of broadcasting to subscribers or to an
audience located both within and without this state.” ORS
314.680(3).
“Broadcasting” is defined as “the activity of trans-
mitting any one-way electronic signal by radio waves, micro-
waves, wires, coaxial cables, wave guides or other conduits
of communications.” ORS 314.680(1).
The consequence of a taxpayer engaging in any
interstate broadcasting is that the numerator of the sales
factor for that taxpayer includes “all gross receipts attrib-
utable to this state, with gross receipts from broadcasting to
be included as specified in subsection (4) of [ORS 314.684].”
ORS 314.684(3) (emphasis supplied).
Subsection (4) in turn apportions “gross receipts
from broadcasting” according to a ratio of subscribers in
Oregon to subscribers both within and without the state.
The phrase “gross receipts from broadcasting” is
defined as meaning “all gross receipts of an interstate broad-
caster from transactions in the regular course of its trade or
business except receipts from sales of real or tangible per-
sonal property.” ORS 314.680(2) (emphasis supplied).
2
Since the briefing of this case, the department renumbered its administra-
tive rules to conform to the requirements of the Secretary of State and its upcom-
ing Oregon Administrative Rules Database. Although the parties briefed this
rule as OAR 150-314.684(4), it has since been renumbered to OAR 150-314-0465.
298 Comcast Corp. v. Dept. of Rev. (TC 5265)
Central to the objection of taxpayer in this proceed-
ing is its argument that only a portion of its revenues arise
from transmission of one-way electronic signals. As to other
revenue, apart from any revenue from sales of real or tangi-
ble personal property, taxpayer objects to apportionment of
that revenue based on the subscriber ratio. Taxpayer argues
that it is not subject to the Broadcaster Statutes as to reve-
nue that, although arising in the ordinary course of its trade
or business, does not arise from transmission of one-way
electronic signals.
Taxpayer requests the court to declare that (1) its
“one-way” revenue be apportioned according to the Broad-
caster Statutes; and (2) its revenues from all other activi-
ties, except for sales of real and tangible personal property,
be apportioned according to the provisions of ORS 314.665.
Under that statute, revenue would be sourced according to a
costs of performance test.3
That is not what the Oregon statutes allow or
require. A taxpayer is an interstate broadcaster if it engages
in one-way transmission of electronic signals. Without a
clear indication of legislative intent, the court cannot accept
taxpayer’s invitation to read the words “only if” or “only to
the extent that” into the statutory scheme.4 Taxpayer has
offered no legislative history suggesting that the court
would be justified in adding those words.
Further, the text of the Broadcaster Statutes and
the context of all of the Oregon apportionment statutes
indicate that taxpayer’s position is not well taken. If the
Oregon legislature had intended to separately apportion the
revenue streams of a company as between “one-way” and
other streams, it would have at least given some signal, if
3
ORS 314.665(4) provides:
“Sales, other than sales of tangible personal property, are in this state if
(a) the income-producing activity is performed in this state; or (b) the
income-producing activity is performed both in and outside this state and a
greater proportion of the income-producing activity is performed in this state
than in any other state, based on costs of performance.”
4
A no more attractive option would be to judicially re-write ORS 314.680(2)
so that it would define “gross receipts from broadcasting” as all gross receipts of
a broadcaster except for receipts from not only sales of tangible property, but also
those from services not involving transmission of “one-way” signals.
Cite as 22 OTR 295 (2016) 299
not explicit statutory language, that the “one-way” stream
would be apportioned under the Broadcaster Statutes with
the remainder subject to ORS 314.665. No such signal
exists. No statutory provision in the Broadcaster Statutes
makes a cross-reference to ORS 314.665 as a default rule
to be applied to the extent the Broadcaster Statutes do not
apply. And, nothing in the general apportionment statutes,
of which ORS 314.665 is a part, indicates that those general
statutes are to apply to the extent that the special rules of
statutes such as the Broadcaster Statutes do not apply.
In both the Donnelly Declaration cited above,
and in statements at the hearing on this matter, taxpayer
admitted that it engages in some transmission of one-way
electronic signals to subscribers in Oregon and outside of
Oregon. Therefore it meets the definition of an “interstate
broadcaster” under the statutes.5 The Broadcaster Statutes
subject all revenues from transactions and activities in the
regular course of taxpayer’s trade or business to apportion-
ment under the Broadcaster Statutes. There is no exception
for any portion of revenues except for those arising from the
sale of real and tangible personal property.6
At the hearing on this matter, taxpayer conceded
that it makes no argument that the construction of the
Broadcaster Statutes urged by the department and adopted
by this court, violates any constitutional limitation on
the Oregon legislature. Nor did taxpayer assert that such
5
At the hearing on this matter, and in briefing, there has been a discussion
of the difference between “transmission of one-way electronic signals” as opposed
to “one-way transmission of electronic signals.” There has also been a discussion
of whether, as a matter of physics, all electronic signals are “one-way.” The admis-
sions of taxpayer establish that it engages in at least some activity covered by the
definition of “broadcasting” found in ORS 314.680(1) such that it is an “interstate
broadcaster” under ORS 314.680(3). Therefore, there is no need for the court to
address, in this case, the question of the actual physics of transmission of elec-
tronic signals in general or as accomplished by taxpayer.
6
At the hearing on this matter, there was a discussion of the possibility that
some taxpayer might show that it engaged in multiple trades or businesses, only
one of which was interstate broadcasting. The department indicated that what
might follow in such a case would be application of two or more apportionment
regimes, with the Broadcaster Statutes only applying to the separate interstate
broadcaster business. Taxpayer in this case makes no assertion that it is such
an organization of companies or activities, and the court does not address the
question of whether the department’s discussion at the hearing was a correct
statement of law.
300 Comcast Corp. v. Dept. of Rev. (TC 5265)
construction violated any valid federal statute. Finally, tax-
payer also conceded that it makes no challenge to any of the
rules promulgated by the department under the Broadcaster
Statutes, to the extent they might apply to this issue.
The facts established in this case are such that the
court finds that taxpayer is an interstate broadcaster for
purposes of the Broadcaster Statutes. The legislative his-
tory supplied by the department indicates that the court’s
conclusion is fully consistent with the intent of the legisla-
ture to subject cable companies to the Broadcaster Statutes
for the years at issue.
V. CONCLUSION
The motion of the department is granted and the
motion of taxpayer is denied. The court declares that the
determination of the sales factor for taxpayer for the subject
years is to be determined under ORS 314.680 to 314.690.
The court makes no determination as to whether there are
“gross receipts attributable to this state” that may not be
subject to inclusion in the numerator of the sales factor
by application of the subscriber ratio but rather would be
included because they are “attributable to this state.” See
ORS 314.684(3). Now, therefore,
IT IS ORDERED that Defendant’s motion for par-
tial summary judgment is granted; and
IT IS FURTHER ORDERED that Plaintiff’s motion
for partial summary judgment is denied.