Wash. Supreme Court Agrees to Hear Assurance Wireless Lifeline Petition

The Washington Supreme Court agreed to hear Assurance Wireless' petition for review of a lower court ruling that rejected its argument that the carrier's Lifeline services didn't involve a retail sale. The case (101873-8) is to be heard during the court's fall term. Assurance said in an April petition the state's retail sales tax for telecom services isn't possible for its Lifeline service because that service is free to eligible consumers, and the carrier "cannot be held secondarily liable for failing to collect sales tax from an unidentified buyer."

Assurance claimed the Washington State Court of Appeals Division 1's decision "puts Lifeline carriers in the untenable position of being required to collect without knowing from whom to collect the tax" because the court identified Lifeline recipients or the Universal Service Administrative Co. as a buyer. "Deeming USAC the buyer of a taxable service effectively and unconstitutionally imposes tax on the FCC," the carrier said.

Washington's Department of Revenue (DOR) disagreed, saying Assurance "seeks discretionary review to rehash the same arguments it offered." The FCC "does not incur the legal obligation to pay Assurance and is not the 'buyer' of Lifeline service under this court’s precedent," said Attorney General Robert Ferguson (D) in a May response on behalf of DOR: "Assurance throughout this appeal has pushed factual and legal arguments that are unsupported by the record or relevant law."

The Multicultural Media, Telecom and Internet Council, NAACP Alaska Oregon Washington State-Area Conference, and Washington Build Back Black Alliance filed a joint amicus brief supporting the petition. The groups said Lifeline carriers "must either face the quandary of collecting sales tax from the federal government, charging low-income individuals with whom they often have no billing relationship, or assuming the additional cost of providing service itself" as a result of the sales tax.

Former FCC Commissioner Robert McDowell and former acting Chairwoman Mignon Clyburn also filed a joint amicus brief backing Assurance's petition, saying the ramifications of the appellate court's ruling could extend to other states or the affordable connectivity program. "Imposing state taxes on this free service would threaten the viability of the program and would undermine the FCC's constitutionally-mandated control over its programs and funds," they said. The lower court's ruling that USAC acts independently of the FCC was "misguided" and "presents an existential threat" to Lifeline, they said.

The DOR disagreed with both amici, saying the advocacy organizations sought a ruling on whether the sales tax was good policy. "This court is not a legislative body," it said in a June response brief: "While it can take cases and controversies and determine whether a particular law was applied correctly or violates constitutional limits, it cannot set policy in the same way as the legislature." The FCC can't "confer federal tax immunity" on USAC, it said in response to the former commissioners, adding that such action is "a power only Congress can wield." The former commissioners "offer a slippery-slope argument" that is "almost certainly incorrect," the DOR said.