The opinion of the court was delivered by: Tone, District Judge.
The United States has moved to dismiss the complaint on the
ground that this Court lacks subject matter jurisdiction of
the controversy, and Illinois Bell has answered the complaint
with the same contention.
At issue in the case is the proper construction of Sections
4251-4253 of the Internal Revenue Code. Section 4251 imposes
a federal excise tax on the charges for telephone service,
defined and subject to exemptions as follows:
"(b) Toll telephone service. — For purposes of
this subchapter, the term `toll telephone service'
"(1) a telephonic quality communication for
which (A) there is a toll charge which varies
in amount with the distance and elapsed
transmission time of each individual
communication and (B) the charge is paid within
the United States, and
"(2) a service which entitles the subscriber,
upon payment of a periodic charge (determined
as a flat amount or upon the basis of total
elapsed transmission time), to the privilege of
an unlimited number of telephonic
communications to or from all or a substantial
portion of the persons having telephone or
radio telephone stations in a specified area
which is outside the local telephone system
area in which the station provided with this
service is located."
"(f) Common carriers and communications
companies. — No tax shall be imposed under section
4251 on the amount paid for any toll telephone
service described in section 4252(b)(2) to the
extent that the amount so paid is for use by a
common carrier, telephone or telegraph company, or
radio broadcasting station or network in the
conduct of its business as such."
Econ's claim is based upon the contention that the service
provided to it falls within Section 4252(b)(2) rather than
4252(b)(1) and is therefore exempt from taxation. The
telephone company and the Government argue to the contrary.
The defendants say that the plaintiff primarily seeks a
refund of a federal tax, with incidental injunctive and
declaratory relief. They argue, and plaintiff appears to
concede in its reply brief, that plaintiff cannot sue for a
tax refund in either a federal or a state court without first
filing a claim for a refund with the Internal Revenue Service,
26 U.S.C. § 7422. There is no allegation in the complaint that
a claim for refund was filed. If this is indeed a suit to
recover a federal tax refund, the absence of such an allegation
is a fatal jurisdictional defect. 26 U.S.C. § 7422(a); England
v. United States, 261 F.2d 455 (7th Cir. 1958); Agron v.
Illinois Bell Telephone Co., No. 67 C 2041, decided August 4,
1969 (N.D.Ill.). Moreover, a state court has no jurisdiction to
entertain an action to recover federal tax payments, because
the United States has waived its sovereign immunity from suit
only for tax refund actions brought in the federal district
courts or the Court of Claims. 26 U.S.C. § 7422, 28 U.S.C. § 1346.
Removal from the state court does not cure the
jurisdictional defect. Minnesota v. United States,
305 U.S. 382, 388, 59 S.Ct. 292, 83 L.Ed. 235 (1939).
Plaintiff contends, however, that this action seeks not the
refund of a federal tax but the recovery of "an exaction
merely in the guise of a tax" and an injunction against future
"exactions" of this kind. Plaintiff relies on Enochs v.
Williams Packing Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292
(1962), which holds that where, "under the most liberal
view of the law and the facts, the United States cannot
establish its claim" that the monies paid to the United States
constitute a valid tax, and where plaintiff has no adequate
remedy at law, the provision proscribing suits for injunctive
relief restraining the collection of federal taxes, 26 U.S.C. § 7421(a),
is inapplicable. We need not reach the question
whether the Enochs rule permits recovery of past "exactions" in
addition to an injunction. The Enochs case has no application
here because it cannot be said "that, under the most liberal
view of the law and the facts" the exaction was not authorized
by the Internal Revenue Code. Rather, it appears that the
defendants may very well establish their claim that 26 U.S.C. § 4253(f)
does not exempt common carriers from the federal excise
tax on the telephone service in question, which is ordinary
long distance calls and calls of two or more units of service.
Indeed, without attempting to decide finally the substantive
question of statutory construction, the ordinary, common-sense
meaning of the words of the statute seem to lend support to the
Government's interpretation. At any rate, the payments in
question here were clearly collected by Illinois Bell and
remitted to the United States in good faith as excise taxes.
The issue in the case is whether they were properly collected
as excise taxes, and there is enough basis in the statute to
assume that their collection may have been proper as excise
taxes to make this action essentially a suit for a federal tax
refund and not a suit for recovery of "an exaction merely in
the guise of a tax." The case must therefore be governed by ...