In a recent ruling, the Washington Court of Appeals affirmed that TracFone Wireless, Inc. is liable for municipal utility taxes under the City of Renton’s ordinance. The decision, which follows a comprehensive audit and a series of legal challenges, clarifies that both TracFone’s consumer and wholesale sales are subject to the tax. This ruling upholds previous decisions by the Renton hearing examiner and the King County Superior Court.
The case originated from an audit conducted by Taxpayer Recovery Services (TRS) between January 2007 and October 2017. TRS recommended waiting for the outcome of a related Missouri state court appeal before assessing TracFone, which concluded in 2019. Subsequently, Renton issued a utility tax assessment on TracFone for both its consumer and wholesale sales. TracFone’s appeal to the Renton hearing examiner resulted in a summary judgment favoring the city, a decision that was later affirmed by the King County Superior Court in February 2023.
TracFone contended that it should not be considered a “telephone business” under RCW 35A.82.060 and that its wholesale sales should be exempt from the tax. However, the court found that TracFone’s activities fit within the statutory definition of a telephone business because it provides access to a telephone network and retains control over the end user’s access to the network, so no resale occurred, thereby justifying the tax assessment. This decision underscores the city’s authority to impose utility taxes on businesses that provide access to essential services like telephone networks, reinforcing the broader applicability of municipal tax ordinances.
This ruling has significant implications for other companies operating under similar business models, as it affirms the broad taxing authority of municipalities over utility services. It also highlights the necessity for businesses to thoroughly understand their tax obligations within the jurisdictions they operate. (TracFone Inc. v. City of Renton, Washington Court of Appeals, April 29, 2024)