8x8, Inc. v. United States

United States Court of Appeals
for the Federal Circuit
______________________
8X8, INC.,
Plaintiff-Appellant
v.
UNITED STATES,
Defendant-Appellee
______________________
2016-1959
______________________
Appeal from the United States Court of Federal
Claims in No. 1:13-cv-00478-EDK, Judge Elaine Kaplan.
______________________
Decided: April 27, 2017
______________________
H. CHRISTOPHER BARTOLOMUCCI, Kirkland & Ellis
LLP, Washington, DC, argued for plaintiff-appellant.
Also represented by CHRISTOPHER GEORGE MICHEL.
JUDITH ANN HAGLEY, Tax Division, United States De-
partment of Justice, Washington, DC, argued for defend-
ant-appellee. Also represented by TERESA E.
MCLAUGHLIN, CAROLINE D. CIRAOLO.
______________________
Before WALLACH, CHEN, and HUGHES, Circuit Judges.
WALLACH, Circuit Judge.
2 8X8, INC. v. UNITED STATES
Appellant 8x8, Inc. (“8x8”) sued Appellee the United
States (“Government”) in the U.S. Court of Federal
Claims, seeking a refund of more than $1 million in
Federal Communications Excise Tax (“FCET” or “excise
tax”). The parties subsequently filed cross-motions for
summary judgment, and the Court of Federal Claims
denied 8x8’s Motion and granted the Government’s Cross-
Motion, thereby denying 8x8’s claim for a refund of the
FCET remitted. See 8x8, Inc. v. United States, 125 Fed.
Cl. 322, 331 (2016).
8x8 appeals. We have jurisdiction pursuant to 28
U.S.C. § 1295(a)(3) (2012). We affirm.
BACKGROUND
I. 8x8’s VoIP Services
8x8 is a provider of local and long-distance telephone
services over a broadband internet connection via Voice
over Internet Protocol (“VoIP”). This service allows
customers to make and receive calls over the internet via
a digital terminal adapter (“DTA”), which contains 8x8’s
proprietary firmware and software. J.A. 246. Part of
8x8’s VoIP service included the use of other transmission
services from Level(3) and Global Crossing—i.e., tradi-
tional telecommunications carriers. J.A. 246. The cus-
tomer’s call would be switched over to Level(3)’s or Global
Crossing’s traditional lines and circuits when necessary. 1
J.A. 365–66. However, 8x8 did not pay any FCET to
Level(3) or Global Crossing because it provided them with
an “exemption certificate[],” which “represent[ed] that
1 8x8 purchased service from Level(3) or Global
Crossing in order to hand over the VoIP signal, “which
would then convert the digital signal back to a voice
signal (if necessary) and deliver the signal to the recipient
of the call.” Appellant’s Br. 17.
8X8, INC. v. UNITED STATES 3
[8x8] was a provider of telephone service and was exempt
from the excise tax in [I.R.C.] § 4253 [(2006)].” 2 J.A. 246.
Subscribing to a plan offered by 8x8 included several
steps. First, customers seeking access to 8x8’s VoIP
service needed to purchase a DTA. J.A. 246. After mak-
ing the necessary physical connections to the DTA, the
customer then “went to 8x8’s website and signed up for a
subscription plan,” which included “accept[ing] 8x8’s
Terms and Conditions of Service.” J.A. 247. These Terms
and Conditions provided that 8x8 would collect the FCET
from its customers and remit the FCET to the Internal
Revenue Service (“IRS”) for the customers’ use of 8x8’s
VoIP domestic telephone service. See J.A. 259 (“8x8
will . . . bill all charges invoiced to End User’s ac-
count . . . . Such charges shall include . . . monthly service
fees, . . . toll charges, taxes and any other applicable
charges.”), 260 (“Prices for the Services do not include
any . . . sales, use, value added, excise, federal, state,
local, public utility or other similar taxes. All such taxes
shall be paid by the End User and will be added to any
amounts otherwise charged[,] unless [the] End User
provides 8x8 with an appropriate exemption certificate.”).
The subscription plans included (1) an unlimited local and
long distance plan permitting calls that were within
“reasonable personal use” for a set fee, J.A. 247; or
(2) plans for a set amount of minutes at a set price,
J.A. 246. After selecting a subscription plan, “the cus-
tomer would provide 8x8 with a credit card which would
2 Relevant here, § 4253 provides “[c]ommon carriers
and communications companies” an exemption from the
FCET “for any toll telephone service . . . to the extent that
the amount so paid is for use by a common carrier, tele-
phone or telegraph company, or radio broadcasting sta-
tion or network in the conduct of its business as such.”
I.R.C. § 4253(f).
4 8X8, INC. v. UNITED STATES
be used to pay all charges, fees, and taxes for the 8x8
service.” 3 J.A. 247. Finally, “the customer would be
provided with a 10 digit code that would be used to acti-
vate the 8x8 service.” J.A. 247.
II. Relevant History of the FCET
8x8’s VoIP services were subject to the FCET.
J.A. 246; see I.R.C. § 4251(a)(1) (imposing the FCET on
“communications services”); id. § 4251(b)(1) (defining
“communications services”). Beginning in 2005, several
appellate courts held that § 4251 did not permit the IRS
to tax telephone services that billed customers based on a
fixed per-minute, non-distance-sensitive rate. See, e.g.,
Reese Bros., Inc. v. United States, 447 F.3d 229, 234 & n.2
(3d Cir. 2006) (collecting cases).
In response to these rulings, the IRS ceased collecting
the FCET on “amounts paid for time-only service.” I.R.S.
Notice 2006-50, § 1(a), 2006-25 I.R.B. 1141 (“2006 No-
tice”) 4; see I.R.S. Notice 2007-11, 2007-5 I.R.B. 405 (clari-
fying and modifying the 2006 Notice). The IRS also
stated that VoIP services were non-taxable, 2006 Notice,
§ 3(a), (d), and established a process for taxpayers to seek
a refund of the FCET that had been exacted on non-
taxable services during the period between February 2003
and August 2006, id. § 5(d). Finally, the 2006 Notice
3 “In order for a customer’s VoIP bundled domestic
service to be active, the customer’s account had to be
prepaid in advance.” J.A. 247. However, any other appli-
cable charges were billed to the subscriber’s account at
the end of the month, along with the next month’s fee.
See J.A. 259.
4 The 2006 Notice was “prospectively vacated” on
April 9, 2012. 8x8, 125 Fed. Cl. at 324 n.1. “Because this
vacatur was not retroactive, it does not affect the outcome
of this case.” Id.
8X8, INC. v. UNITED STATES 5
stated that a “collector” 5 can request a refund of the
FCET collected from customers during the relevant period
if the collector either (1) “establishes that it repaid the
amount of the tax to the person from whom the tax was
collected”; or (2) “obtains the written consent of such
person to the allowance of such credit or refund.” Id.
§ 5(d)(4)(i); see I.R.C. § 6415(a) (similar).
8x8 subsequently filed a refund claim with the IRS for
the FCET imposed between March 2003 to July 2006.
J.A. 245–46. After its refund claim was denied in part,
8x8 exhausted its administrative remedies with the IRS.
J.A. 232–42. 8x8 then sued the Government in the Court
of Federal Claims, seeking a refund of more than $1
million for the FCET remitted to the IRS. J.A. 19–29.
The Court of Federal Claims concluded that 8x8 lacked
standing and granted the Government’s motion for sum-
mary judgment. 8x8, 125 Fed. Cl. at 330–31.
DISCUSSION
The parties have stipulated to the material facts of
this case. See J.A. 245–48. The legal issue in this appeal
is whether 8x8 is entitled to claim a refund of the FCET.
After articulating the applicable standard of review and
legal framework, we address this issue below.
I. Standard of Review and Legal Framework
We review the Court of Federal Claims’s “grant of
summary judgment de novo.” Frankel v. United States,
5 According to the 2006 Notice, I.R.C. § 4291 defines
a “collector” as “the person receiving the payment,” 2006
Notice, § 2(a)(3), and § 4291 states that “every person
receiving any payment for facilities or services on which a
tax is imposed upon the payor thereof under this chapter
shall collect the amount of the tax from the person mak-
ing such payment,” I.R.C. § 4291.
6 8X8, INC. v. UNITED STATES
842 F.3d 1246, 1249 (Fed. Cir. 2016) (citation omitted).
“The court shall grant summary judgment if the movant
shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of
law.” Court of Federal Claims Rule 56(a); see Celotex
Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). A genuine
dispute exists when “the evidence is such that a reasona-
ble jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
A material fact is one that “might affect the outcome” of
the case. Id. The party seeking summary judgment has
the initial burden of establishing that there is no genuine
dispute as to any material fact. See Celotex, 477 U.S. at
323.
II. The Court of Federal Claims Did Not Err in Granting
Summary Judgment in Favor of the Government
The Court of Federal Claims stated that “the material
facts have been stipulated by the parties and are not in
dispute” and that the “sole issues before the [c]ourt are
legal ones.” 8x8, 125 Fed. Cl. at 327. The Court of Feder-
al Claims then moved to the legal issue and concluded
that 8x8 lacked standing to seek a refund because it did
not pay the FCET; it only collected the FCET from paying
customers and then remitted that money to the IRS. See
id. at 327–28. In reaching this conclusion, the Court of
Federal Claims noted “the undisputed facts establish that
8x8 did not bear the economic burden of the taxes it
remitted to IRS.” Id. at 328; see J.A. 247 (stipulating to
the language of the “TAXES” provision included in the
Terms and Conditions).
8x8 argues that “under the special statutory rules
governing prepaid arrangements, 8x8 is not a collector.”
Appellant’s Br. 45. It contends that “the excise tax was
‘treated as paid,’ when 8x8 received the transfer of ser-
vices from Level[(3)] and Global Crossing, and 8x8 was
‘the person paying for such services.’” Id. at 46 (quoting
8X8, INC. v. UNITED STATES 7
I.R.C. § 4251(a)(2), (d)(1)(B)). According to 8x8, it “was
the ‘transferee’[6] and thus the ‘person liable for the tax.’”
Id. (quoting 26 C.F.R. § 49.4251-4(d)(1)). 8x8 further
argues that I.R.C. § 6415 does not bar its refund because
“8x8 is not a ‘person who collected’ excise tax,” id. at 49;
instead, 8x8 “paid the tax” and “pass[ed] along and sepa-
rately state[d] the amount of accrued federal excise tax on
its customers’ bills,” id. at 51. Thus, it contends that this
passing along is “an utterly commonplace economic trans-
action in which a retailer subjected by the [G]overnment
to higher costs of doing business raises customer prices.”
Id.
“[T]he ultimate question presented for decision, upon
a claim for refund, is whether the taxpayer has overpaid
his tax.” Lewis v. Reynolds, 284 U.S. 281, 283 (1932),
modified, 284 U.S. 599 (1932) (internal quotation marks
and citation omitted). To sue for a refund, “it is incum-
bent upon the claimant to show that the United States
has money which belongs to him.” Id. (internal quotation
marks and citation omitted). I.R.C. § 6415 allows a
“person who collected the tax and paid it” to the IRS to
seek a refund only if “such person establishes . . . that he
has repaid the amount of such tax to the person from
whom he collected it[] or obtains the consent of such
person to the allowance of such credit or refund.” I.R.C.
§ 6415(a).
We agree with the Court of Federal Claims that 8x8 is
a collector of the FCET and, as a collector, 8x8 has failed
to fulfill the necessary requirements of I.R.C. § 6415(a).
The overwhelming weight of the record demonstrates
8x8’s role as a collector and refutes 8x8’s argument to the
contrary. See J.A. 139 n.1 (IRS stating in the Notice of
6 “Transferee” is defined as “the first person that is
not a carrier to whom a [prepaid telephone card] is trans-
ferred by a carrier.” 26 C.F.R. § 49.4251-4(b) (2006).
8 8X8, INC. v. UNITED STATES
Proposed Adjustment that “8x8 admitted . . . that it
collected an additional 3% [excise tax] from its [custom-
ers] in addition to the monthly service fee” and that 8x8’s
Fiscal Year 2006 Form 10-K filing with the U.S. Securi-
ties and Exchange Commission stated “that it ceased
‘collecting and remitting’ Federal Excise Taxes in June
2006 pursuant to the [U.S.] Treasury Department’s news
release addressing collection of the [excise tax]”), 348
(Form 10-K filing stating that 8x8 “do[es] not collect state
and federal telecommunications taxes, other than federal
excise tax” (emphasis added)), 389 (8x8’s Chief Financial
Officer admitting the same). The Terms and Conditions
to which customers agreed also states that “[p]rices for
the Services do not include any . . . excise . . . or other
similar taxes. All such taxes shall be paid by End User
and will be added to any amounts otherwise charged to
End User . . . .” J.A. 247; see J.A. 248 (“Each of the
monthly invoices separately stated the [excise tax] appli-
cable to the telephone service used by the customer that
month.”).
The record also demonstrates that 8x8 failed to fulfill
the requirements of I.R.C. § 6415(a) because 8x8 neither
refunded its customers the FCET nor obtained their
consent to seek the refund. First, the record shows that
8x8 did not refund the FCET that it collected from its
customers. See J.A. 247 (“[A]pplicable taxes may not be
refundable.”). The only discussion of refunding money to
customers appears when 8x8 addresses its obligations to
customers when services are terminated. Yet, this only
covers refunding money used to purchase a DTA and any
money paid for services provided by 8x8; it does not cover
the FCET. See J.A. 247 (“In the event a customer termi-
nated its 8x8 service within the first 30 days, 8x8 would
refund the purchase price of the DTA to the customer and
the customer would return the DTA to 8x8.”), 247–48 (“If
a customer decided to terminate its prepaid service during
the month, it was 8x8’s policy to continue the service for
8X8, INC. v. UNITED STATES 9
the remainder of the month which had already been
prepaid. Occasionally, if a customer requested a refund,
8x8 would refund the monthly charge to the customer, to
avoid arguing over the service fee.”). Second, 8x8 does not
dispute that it did not obtain its customer’s consent to
seek a refund. See generally Appellant’s Br.
Moreover, 8x8 confirmed its intention to keep any
FCET it may be refunded. See Oral Arg. at 0:32–0:53,
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20
16-1959.mp3. In fact, 8x8 and the Government stipulated
“[a] majority of 8x8’s customers probably received refunds
from the IRS of the [excise tax] that 8x8 collected from
them during the period.” J.A. 248. This stipulation
supports the conclusion that 8x8 did not obtain consent
from its customers to seek the FCET. The record unques-
tionably demonstrates that 8x8 failed to comply with the
requirements of I.R.C. § 6415(a) and, thus, may not seek a
refund pursuant to § 6415(a). See Lewis, 284 U.S. at 283.
Although 8x8 fails to meet the requirements of I.R.C.
§ 6415(a), it may nevertheless obtain a refund if it had
“borne the economic burden of the taxes by paying them
out of [its] own pocket and had not collected them from
members.” Epstein v. United States, 174 Ct. Cl. 1158,
1174 (1966) (footnote omitted). The question that must be
answered here is whether 8x8 passed the expense on to
its customers or bore the burden of the tax by paying it.
See Gumpert v. United States, 155 Ct. Cl. 721, 725 (1961)
(“If [the collector] has passed this expense on to [its]
customers, then [the collector] does not have the proper
standing to maintain” its refund suit.); see also United
States v. Jefferson Elec. Mfg. Co., 291 U.S. 386, 402 (1934)
(“If [the taxpayer] has shifted the burden to the purchas-
ers, they and not he have been the actual sufferers and
are the real parties in interest; and in such a situation[,]
there is nothing arbitrary in requiring, as a condition to
refunding the tax to him, that he give a bond to use the
refunded money in reimbursing them.”).
10 8X8, INC. v. UNITED STATES
8x8 contends that it paid the excise tax by “rais[ing]
customer prices.” Appellant’s Br. 51. Whether an in-
crease in pricing is tantamount to the payment of a tax
generally presents a question of fact, see Worthington
Pump & Mach. Corp. v. United States, 129 Ct. Cl. 87, 93
(1954), and the parties stipulated to the facts relevant
here. Our predecessor court in Worthington, the seminal
case on this question, laid out several factors to consider.
For example, “[c]ourts have laid great stress on an in-
crease in price associated with the imposition of tax as
indicating a shift of the tax burden” to the customers. Id.at 93–94 (citations omitted). “In some cases the price
increase was explained by other causes, such as a rise in
other costs, and the tax was held not to have been passed
on.” Id. at 94 (citations omitted). “Where there was no
increase in prices and there were other facts indicating
that the seller had absorbed the tax, it was held that the
tax was absorbed.” Id. (citations omitted). Finally, an
intent or attempt “to pass on the tax” can be “taken as
some evidence of its actual occurrence” when better
evidence is absent. Id.
A comparison of these principles against the undis-
puted record reveals that 8x8 did not bear the economic
burden of the FCET. Rather, the record demonstrates
that “[p]rices for the Services do not include . . . any
excise, federal, . . . or other similar taxes.” J.A. 247. The
customer “would first have to accept 8x8’s Terms and
Conditions of Service” and “[t]hen the customer would
provide 8x8 with a credit card which would be used to pay
all charges, fees, and taxes for the 8x8 service.” J.A. 247
(emphases added). Additionally, “[e]ach of the monthly
invoices separately stated the [FCET] applicable to the
telephone service used by the customer that month.” J.A.
248. These stipulated facts demonstrate that 8x8 passed
the FCET on to its customers. The FCET was a separate
line item on the monthly bill, and the Terms and Condi-
tions explicitly stated the customers were responsible for
8X8, INC. v. UNITED STATES 11
the FCET. This leaves no room for doubt that 8x8 did not
bear the economic burden of the FCET. Rather, 8x8 is
seeking to recover costs borne by its customers, in direct
contradiction of the Internal Revenue Code. 7 There is no
genuine issue of material fact, and 8x8, a collector of the
FCET, does not have standing as a matter of law to seek a
refund of the FCET paid by its customers.
CONCLUSION
We have considered 8x8’s remaining arguments and
find them unpersuasive. Accordingly, the decision of the
U.S. Court of Federal Claims is
AFFIRMED
COSTS
Costs to Appellee.
7 8x8 makes vague references to unjust enrichment.
See Appellant’s Br. 49, 54–56 (arguing that barring a
refund to 8x8 would mean that no one could collect a
FCET refund and, therefore, the Government would be
unjustly enriched). To the extent 8x8 alleges a separate
equitable claim for unjust enrichment, this argument
fares no better. 8x8 did not allege a claim for unjust
enrichment in its Complaint, see J.A. 19–29, and the
Court of Federal Claims does not have jurisdiction over
such unjust enrichment claims, see Brown v. United
States, 105 F.3d 621, 624 (Fed. Cir. 1997) (explaining that
the Tucker Act generally does not provide jurisdiction
over claims for equitable relief); Cleveland Chair Co. v.
United States, 214 Ct. Cl. 360, 364 (1977) (“Unjust en-
richment cannot in itself be the basis for a recovery here,
for it lacks the consensual element needed to find a con-
tract implied in fact, and only provides support for the
remedial device known as a contract implied in law, over
which this court has no jurisdiction.” (citation omitted)).