B-144078, OCT. 10, 1960
Highlights
THE FRANCHISE TAXES ARE ASSESSED BY LOCAL ORDNANCE AND ARE SIMILAR IN CHARACTER TO OCCUPATION OR LICENSE TAXES. THESE TAXES ARE INITIALLY BORNE BY THE COMPANY AS A GENERAL OPERATING EXPENSE. THE TAXES ARE ULTIMATELY COVERED IN THE RATES PAID BY SUBSCRIBERS. BECAUSE THE TAXES INVOLVED ARE NOT UNIFORM AS BETWEEN COMMUNITIES. - AND SINCE THE ONLY BENEFICIARIES OF THE EXACTION OF THESE TAXES ARE THE RESIDENTS OF THE PARTICULAR CITY OR DISTRICT INVOLVED. THUS ELIMINATING WHAT WAS CONSIDERED AN UNJUST DISCRIMINATION UNDER THE FORMER PRACTICE. IT IS WITH RESPECT TO THESE SO-CALLED "ADDITIVES" THAT YOUR REQUEST FOR AN OPINION IS CONCERNED. UNDER THE ABOVE CIRCUMSTANCES IT IS CLEAR THAT THE FRANCHISE TAX ADDED TO BILLINGS IN THE COMMUNITIES WHICH IMPOSE THE TAX CONSTITUTES AN AUTHORIZED INCREASE IN RATES APPLICABLE TO SUBSCRIBERS CONSTITUTES AN AUTHORIZED INCREASE IN RATES APPLICABLE TO SUBSCRIBERS IN THOSE COMMUNITIES.
B-144078, OCT. 10, 1960
TO HONORABLE WARREN OLNEY III, DIRECTOR, ADMINISTRATIVE OFFICE OF THE UNITED STATES COURTS:
BY LETTER OF SEPTEMBER 23, 1960, YOU REQUESTED OUR OPINION AS TO WHETHER CHARGES REPRESENTING CITY FRANCHISE TAXES ASSESSED AGAINST THE TELEPHONE COMPANY IN FORT SCOTT, TOPEKA, WITCHITA, AND KANSAS CITY, KANSAS, MAY BE PAID BY THE FEDERAL GOVERNMENT.
AS STATED IN YOUR LETTER AND AMPLIFIED IN THE ACCOMPANYING ORDER AND MEMORANDUM OPINION OF THE STATE CORPORATION COMMISSION OF KANSAS, THE FRANCHISE TAXES ARE ASSESSED BY LOCAL ORDNANCE AND ARE SIMILAR IN CHARACTER TO OCCUPATION OR LICENSE TAXES. THESE TAXES ARE INITIALLY BORNE BY THE COMPANY AS A GENERAL OPERATING EXPENSE; HOWEVER, AS WITH OTHER EXPENSES, THE TAXES ARE ULTIMATELY COVERED IN THE RATES PAID BY SUBSCRIBERS. THE TELEPHONE COMPANY FORMERLY RECOUPED THE TAXES BY SPREADING THEM OVER THE ENTIRE RATE SCHEDULE FOR THE STATE OF KANSAS. BECAUSE THE TAXES INVOLVED ARE NOT UNIFORM AS BETWEEN COMMUNITIES--- SOME COMMUNITIES HAVING NO SUCH TAX WHATEVER--- AND SINCE THE ONLY BENEFICIARIES OF THE EXACTION OF THESE TAXES ARE THE RESIDENTS OF THE PARTICULAR CITY OR DISTRICT INVOLVED, THE COMPANY CONTENDED AND THE COMMISSION FOUND THAT THE BURDEN OF THE FRANCHISE TAXES SHOULD BE PLACED UPON THE RESPECTIVE SUBSCRIBERS WHO RECEIVE THE BENEFITS THEREFROM, THUS ELIMINATING WHAT WAS CONSIDERED AN UNJUST DISCRIMINATION UNDER THE FORMER PRACTICE. IN ESTABLISHING RATES FOR TELEPHONE SERVICE IN THE VARIOUS LOCALITIES WHICH IMPOSE THE FRANCHISE TAX, THE TELEPHONE COMPANY, PURSUANT TO DIRECTION FROM THE STATE CORPORATION COMMISSION, CONSIDERED THE TAXES AND NOW ADDS TO THE BILLS FOR SERVICE IN THOSE LOCALITIES AN AMOUNT REPRESENTING THE COST OF THE TAXES. IT IS WITH RESPECT TO THESE SO-CALLED "ADDITIVES" THAT YOUR REQUEST FOR AN OPINION IS CONCERNED.
UNDER THE ABOVE CIRCUMSTANCES IT IS CLEAR THAT THE FRANCHISE TAX ADDED TO BILLINGS IN THE COMMUNITIES WHICH IMPOSE THE TAX CONSTITUTES AN AUTHORIZED INCREASE IN RATES APPLICABLE TO SUBSCRIBERS CONSTITUTES AN AUTHORIZED INCREASE IN RATES APPLICABLE TO SUBSCRIBERS IN THOSE COMMUNITIES; AND SINCE THERE IS NO SHOWING THAT SUCH INCREASE IS UNREASONABLE OR NOT UNIFORM IN ITS APPLICATION TO THE GENERAL PUBLIC, THERE IS PERCEIVED NO LEGAL BASIS FOR OBJECTION TO PAYMENT THEREOF. SEE 32 COMP. GEN. 577.