AT&T Corp. v. Dept. of Rev.

Appellant AT&T (together with subsidiaries) appealed a Tax Court judgment that denied AT&T's claim for a refund of a portion of the Oregon corporate excise taxes it paid for tax years 1996 through 1999. The dispute centered on AT&T's sale of interstate and international phone and data transmissions. The issue this case presented on appeal to the Supreme Court was whether those sales were counted in determining the fraction of AT&T's income that Oregon can tax. AT&T presented a cost study that purported to show that Oregon did not have the greatest share of the "costs of performance." The Department of Revenue challenged AT&T's interpretation of "income-producing activity" and attacked the validity of its cost study. The Tax Court ruled in favor of the department. Upon review, the Supreme Court concluded that AT&T did not use a correct definition of "income-producing activity [:] AT&T's proposed interpretation [was] network-based; it focused on the operation of its network as a whole. The correct understanding, however, is transaction-based; it examines individual sales to customers. AT&T thus failed to meet its burden of proof, because it did not correctly calculate the 'costs of performance' for the correct 'income-producing activities.'" View "AT&T Corp. v. Dept. of Rev." on Justia Law