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Atheer Wireless LLC v. State Department of Revenue

Alabama Court of Civil Appeals

January 20, 2017

Atheer Wireless, LLC
v.
State Department of Revenue

         Appeal from Montgomery Circuit Court (CV-15-901031)

          ON APPLICATION FOR REHEARING

          MOORE, Judge.

         This court's opinion issued on November 10, 2016, is withdrawn, and the following is substituted therefor.

         Atheer Wireless, LLC ("Atheer"), appeals from a judgment entered by the Montgomery Circuit Court granting a motion for a summary judgment filed by the State Department of Revenue ("the Department") and denying Atheer's motion to amend the complaint. We affirm the summary judgment and dismiss the appeal insofar as it relates to the motion to amend the complaint.

         Procedural History

         On August 21, 2013, the Department sent Atheer a final assessment of sales tax, notifying Atheer that it owed $60, 028.68 in taxes, plus $4, 391.11 in interest, for the prepaid wireless services it had sold during the period occurring from September 1, 2009, through August 31, 2012. At the time of the notice and during the period of the assessment, Ala. Code 1975, § 40-23-1(a)(13), provided:

"Prepaid Telephone Calling Card. A sale of a prepaid telephone calling card or a prepaid authorization number, or both, shall be deemed the sale of tangible personal property subject to the tax imposed on the sale of tangible personal property pursuant to this chapter."

         On August 26, 2013, Atheer filed with the Department's Administrative Law Division its notice of appeal from the final assessment, arguing that prepaid wireless services were not subject to sales tax under § 40-23-1(a)(13), and that appeal was ultimately heard by the recently created Alabama Tax Tribunal, see Ala. Code 1975, § 40-2B-2(a) (creating the tax tribunal to "to resolve disputes between the Department ... and taxpayers").[1] On September 30, 2013, the Department filed an answer to the appeal.

         On October 3, 2013, the appeal was held in abeyance pending a decision in a case that involved a similar issue, Beauty & More, Inc. v. State of Alabama, Docket No. S. 12-236, Montgomery Circuit Court Case No. CV-13-901682. On August 27, 2014, the Department filed an amended answer and a motion to set the case for a hearing. The Department asserted that the legislature had passed Act No. 2014-336, Ala. Acts 2014 ("the 2014 Act"), effective July 1, 2014, amending § 40-23-1(a)(13) by clarifying that sales of prepaid wireless services are subject to sales tax. Specifically, § 40-23-1(a)(13) was amended to provide:

"Prepaid Telephone Calling Card. A sale of a prepaid telephone calling card or a prepaid authorization number, or both, shall be deemed the sale of tangible personal property subject to the tax imposed on the sale of tangible personal property pursuant to this chapter. For purposes of this subdivision, the sale of prepaid wireless service that is evidenced by a physical card constitutes the sale of a prepaid telephone calling card, and the sale of prepaid wireless service that is not evidenced by a physical card constitutes the sale of a prepaid authorization number."

         Additionally, pursuant to the 2014 Act, Ala. Code 1975, 40-23-1(a)(14), was added; that subsection provides:

"Prepaid Wireless Service. The right to use mobile telecommunications service, which must be paid for in advance and that is sold in predetermined units or dollars of which the number declines with use in a known amount, and which may include rights to use non-telecommunications services or to download digital products or digital content. For purposes of this subdivision, mobile telecommunications service has the meaning ascribed by Section 40-21-120[, Ala. Code 1975]."

         In response to the Department's amended answer and motion to set the matter for a hearing, Atheer asserted that the 2014 Act was unconstitutional.

         After a hearing, the tax tribunal entered an order on June 5, 2015, finding that "[the] Department [had] correctly assessed [Atheer] pursuant to § 40-23-1(a)(13), as amended by [the 2014 Act]." The tax tribunal also noted that it was without jurisdiction to consider Atheer's constitutional ...


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