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AGRON v. ILLINOIS BELL TELEPHONE COMPANY

United States District Court, Northern District of Illinois, E. D


October 16, 1970

ROBERT C. AGRON, ON BEHALF OF HIMSELF AND ALL OTHER TELEPHONE SUBSCRIBERS TO THE ILLINOIS BELL TELEPHONE COMPANY WHO ARE SIMILARLY SITUATED TO HIM, PLAINTIFF,
v.
ILLINOIS BELL TELEPHONE COMPANY, AN ILLINOIS CORPORATION, AND UNITED STATES OF AMERICA, DEFENDANTS.

The opinion of the court was delivered by: Marovitz, District Judge.

MEMORANDUM OPINION

Cross-motions for Summary Judgment on Count I

This is an action for the refund of certain federal excise taxes on telephone service alleged to have been overpaid since and including the last quarter of 1965. In addition to the alleged overpayments or overcollections, depending on one's view, plaintiff seeks statutory interest.

The Complaint consists of three counts: Count I, brought by Robert C. Agron, a subscriber to the telephone services of the Illinois Bell Telephone Company (IBT), against the United States raises the narrow, if perplexing, legal issue of the taxability of certain amounts set forth on plaintiff's telephone bill. Count II is brought as a class action by plaintiff on behalf of all telephone subscribers similarly situated. The Illinois Bell Telephone Company is joined as a defendant in this count. Count III is brought not only on behalf of all IBT subscribers, but also on behalf of IBT. Presently pending before this Court are cross-motions for summary judgment on Count I, IBT's motions for summary judgment on Counts II and III, and the Government's motions to dismiss Counts II and III. While Counts II and III raise jurisdictional and procedural questions, the ultimate substantive issue in all counts, the propriety of the challenged federal tax on telephone service, is the same. We turn now to the cross-motions for summary judgment on Count I. "(S)ummary judgment is appropriate where, as here, there are no material factual issues in dispute and only legal issues need be resolved." Chicago Joint Board Amalgamated Clothing Workers of America, A.F.L.-C.I.O. v. Chicago Tribune Co., 307 F. Supp. 422, 424 (N.D.Ill. 1969).

The Government, under 26 U.S.C. § 4251(a), imposes a communications excise tax on persons who pay for local and toll telephone service. Local and toll telephone service is defined in the following section, 26 U.S.C. § 4252(a, b). Telephone companies, such as IBT, are required to collect the federal communications tax imposed on their subscribers under Section 4251. 26 U.S.C. § 4291.

The State of Illinois also imposes taxes on telephone companies engaged in transmitting messages. Ill.Rev.Stats. Ch. 120, § 467.2 (1969). The companies are authorized to pass a portion of that tax on to their subscribers or customers. Ill.Rev.Stats. Ch. 111 2/3, § 36(b). Similarly, some local municipalities impose a tax on telephone companies. Ill.Rev.Stats. Ch. 24, § 8-11-2 (1969), which charge may also be passed on to customers. Ill.Rev.Stats. Ch. 111 2/3, § 36(a) (1969).

On its bills to its customers, the IBT separately lists the amount due on account of state and local taxes. See Complaint, Ex. 2 to Ex. 1. The Government, through the IBT as its collector or conduit, has been collecting its communications services tax, currently at the rate of 10%, on the total of the charges set forth for both telephone service and state and local taxes. For instance, one IBT bill sent to plaintiff provided in part:

                                  Due to        U.S.
                                  Taxes*fn*    Tax
Telephone Service        17 50      59          1 81    19 90


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