State Taxation of Transportation, Telecommunications, and Energy Companies (Portfolio 1810)

Be a trusted advisor to your clients with Bloomberg BNA Tax Portfolios. In this Portfolio, our expert authors analyzes the ad valorem taxation of transportation, telecommunications, and energy companies property, the application of state income taxes to transportation, telecommunications, and energy companies, sales taxes on telecommunications services, and the restrictions placed by federal legislation on state taxation of transportation, telecommunications, and energy companies.  

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The State Taxation of Transportation, Telecommunications, and Energy CompaniesPortfolioassesses the effects of deregulation, increased competition and other market forces that have substantially changed the structure and outlook of these specific industries.




The Portfolio also includes a brief summary of the regulatory process in order to provide background for the discussion throughout.



James A. Amdur, Esq.

James A. Amdur, Esq., is a Special Consultant to Bloomberg BNA Tax Management and has extensive experience in federal, state, and local tax planning and proceedings, emphasizing telecommunications and regulated utilities. James has been an Attorney–Advisor to the U.S. Tax Court, has practiced law in Cleveland, Washington, D.C., and San Francisco, and served for many years as in–house tax and corporate counsel for a telecommunications corporation. He is a member of the American Bar Association (Section of Taxation), the State Bar of California, and the District of Columbia Bar.




Credentials / B.B.A. and J.D., Case Western Reserve University and LL. M. in Taxation, Georgetown University.


Table of Contents

Detailed Analysis



A. Statutes

1. In General

2. Local Assessments

3. Central Assessments

4. Centrally Assessed Companies

a. Telecommunications Companies

b. Energy Companies

c. Airlines

5. Unit Method

B. Unitary Assessments

1. Procedure

2. Constitutional Requirements

a. Nexus

b. Fair Apportionment

c. Equality and Uniformity

3. Property Included in Unit

a. Property Owned and Used

b. Property Used But Not Owned

c. Property Not in Service

d. Taxable Intangibles

4. Property Excluded from Unit

a. Separately Assessed Property

b. Tax-Exempt Tangible Property

c. Tax-Exempt Intangibles

C. Valuation Approaches - In General

D. Cost Approach

1. In General

2. As Value Indicator

a. Historical Cost

b. Reproduction and Replacement Cost

3. As Mandated Method

4. Cost Computation

a. Methods

b. Costs Included

5. Depreciation

a. Elements

b. Computation

6. Obsolescence

a. Excess Capital Cost

b. Excess Operating Cost

c. Accumulated Deferred Income Taxes

d. Income Shortfall

e. Loss of Tax Benefits

f. Adverse Market Conditions

E. Income Approach

1. In General

2. Yield Capitalization (Perpetuity)

a. In General

b. Amount Capitalized

c. Capitalization Rate

3. Yield Capitalization (Limited Life)

4. Direct Capitalization

a. In General

b. Amount Capitalized

c. Capitalization Rate

5. Consistency Between Income and Capitalization Rate

6. Relevance of Strategic Business Plans

7. Subtractions

F. Market Approach

1. In General

2. Stock Value

a. In General

b. When Taxpayer is a Subsidiary

3. Debt Value

a. Debt Securities

b. Other Liabilities

4. Subtractions

G. Additions to Value Indicators

1. Leased Operating Property

2. Construction Work in Progress

H. Correlation

1. Weighting of Value Indicators

2. Appraisal Judgment

I. Interstate Allocation

J. Intrastate Apportionment

K. Equalization

1. In General

2. Classification Systems

a. Definition of Class

b. Equality and Uniformity

3. De Facto Inequality

4. Effect of Federal Statutes


Introductory Material

A. State Jurisdiction to Tax

1. Constitutional and Statutory Requirements

2. Railroad Car Companies

3. Motor Carriers

B. Classification of Taxpayer

C. Division of Income

1. Constitutional Requirements

2. Formula Apportionment

a. In General

3. Transportation Companies

a. In General

b. Railroads

c. Airlines

d. Motor Carriers

4. Telecommunications Companies

a. Property Factor - Outer-Jurisdictional Property

b. Sales Factor

5. Energy Companies

a. Gas Pipeline Companies

b. Property Factor - Construction Work in Progress

6. Separate Accounting


Introductory Material

A. In General

B. Imposition of Tax

1. In General

2. Intrastate Telecommunications

3. Interstate Telecommunications

a. In General

b. Service Address

c. Constitutionality of Tax

4. International Telecommunications

5. Measure of Tax

C. Taxability of Specific Types of Services

1. Statutory Definitions

2. Telephone Services

a. Local Telephone Service

b. Long Distance Telephone Service

c. Wide Area Telephone Service

d. Coin-Operated Telephone Service

e. Prepaid Telephone Calling Cards

f. Telephone Answering Service

3. Private Line Services

a. Taxability

b. Taxable Amounts; Service Address

4. Mobile and Wireless Services

a. Taxability

b. Service Address

5. Information and Data Transmission Services

a. Transmission Services

b. "Enhanced" or "Value Added" Services

c. Other Data Processing Services

d. Internet Access

e."900" and Similar Services

6. Television Services

a. Cable and Other Pay Television Services

b. Television Transmission Services

7. Ancillary Services

8. Customer Equipment

a. Rentals

b. Installation and Maintenance

D. Exclusions From Tax Base

1. Taxes and Surcharges

2. Bad Debts

3. Services to Affiliated Entities

4. Sales for Resale

a. Carrier Access Charges

b. Other Sales for Resale

5. Sales to Governments and Universities

a. Vendee Statutes

b. Vendor Statutes

6. Receipts Otherwise Taxed

E. Credit for Tax Paid to Other State

F. Collection and Payment

1. Vendee Statute

2. Vendor Statute

3. Retailer

G. The Mobile Telecommunications Sourcing Act

1. Background

2. Provisions of the Act

a. Sourcing Rules

b. Electronic Database and Hold Harmless Provisions

c. Applicable Taxes

d. Bundling

3. Constitutional Considerations

4. State Conformity to the Mobile Telecommunications Sourcing Act

a. Implementing the Mobile Telecommunications Sourcing Act

b. Summary of States' Conformity to the Mobile Telecommunications Sourcing Act

(1) Alabama

(2) Alaska

(3) Arizona

(4) Arkansas

(5) California

(6) Colorado

(7) Connecticut

(8) Delaware

(9) District of Columbia

(10) Florida

(11) Georgia

(12) Hawaii

(13) Idaho

(14) Illinois

(15) Indiana

(16) Iowa

(17) Kansas

(18) Kentucky

(19) Louisiana

(20) Maine

(21) Maryland

(22) Massachusetts

(23) Michigan

(24) Minnesota

(25) Mississippi

(26) Missouri

(27) Montana

(28) Nebraska

(29) Nevada

(30) New Hampshire

(31) New Jersey

(32) New Mexico

(33) New York

(34) North Carolina

(35) North Dakota

(36) Ohio

(37) Oklahoma

(38) Oregon

(39) Pennsylvania

(40) Rhode Island

(41) South Carolina

(42) South Dakota

(43) Tennessee

(44) Texas

(45) Utah

(46) Vermont

(47) Virginia

(48) Washington

(49) West Virginia

(50) Wisconsin

(51) Wyoming


A. Statutes

B. Federal Court Jurisdiction

1. 4-R Act and Motor Carrier Act

a. General Federal Court Jurisdictional Requirements

b. Tax Injunction Act

c. Eleventh Amendment

d. Judicial Abstention

2. Airport Act

C. Assessment Ratio Discrimination

1. Prohibited Action

2. Burden of Proof

3. Assessment Ratio of Transportation Property

a. Transportation Property

b. Assessed Value

c. True Market Value

4. Assessment Ratio of Other Commercial and Industrial Property

a. Commercial and Industrial Property

b. Assessment Jurisdiction

c. Assessed Value

d. True Market Value

e. Assessment Ratio

5. Comparison of Assessment Ratios

6. Threshold Requirement for Relief

D. Levy or Collection of Tax on Discriminatory Assessment

E. Tax Rate Discrimination

F. Exception for "In Lieu Tax" on Airline

G. Other Discriminatory Railroad Taxation

1. Prohibited Action

2. Taxes

a. Non-Property Taxes

b. Property Taxes

c. Other Governmental Fees and Charges

3. Discrimination

a. In General

b. Exemptions from Generally Applicable Taxes

c. Taxes "Singling Out" Railroads

d. Competing Modes of Transportations

e. Effect of Overall Tax Burdens

f. De Minimis Disparities

H. Other Jurisdictional and Procedural Matters

1. Standing to Sue

a. Railroad Car Companies

b. Airlines

2. Timeliness of Complaint

3. Referral to Special Master

4. Relief Granted

a. Injunction

b. Tax Refund

5. Liability For Interest


A. Airline Taxation

1. Anti-Head Tax Act

a. In General

b. Taxes on Transportation of Persons

c. Sales and Gross Receipts Taxes

d. Airport User Fees

e. Private Right of Action

2. Taxation of Overflight Activities

3. Taxation of Airport Businesses

B. Motor Carrier Taxation

C. Electricity Taxation

D. Satellite Service Taxation

Working Papers

Working Papers

Item Description Sheet

Worksheet 1 Railroad Revitalization and Regulatory Reform Act of 1976-  Excerpt P.L. 94-210

Worksheet 2 Motor Carrier Act of 1980 - Excerpt P.L. 96-296

Worksheet 3 Airport and Airway Improvement Act of 1982 - Excerpt P.L. 97-248

Worksheet 4 49 U.S.C. § 1513(a), (b) and (f) - AIRLINES Sec. 1513. State taxation of air commerce

Worksheet 5 15 U.S.C. § 391 - ELECTRICITY


Worksheet 7 Multistate Tax Commission Regulations § IV.18.(e) Apportionment Special Rules: Railroads

Worksheet 8 Multistate Tax Commission Regulation § IV.18.(f) Apportionment Special Rules: Airlines

Worksheet 9 Multistate Tax Commission Regulation § IV.18.(g) Apportionment Special Rules: Trucking Companies

Worksheet 10 Multistate Tax Commission Regulation § IV.18.(h) Apportionment Special Rules: Television and Radio Broadcasting

Worksheet 11 Multistate Tax Commission Regulation § IV.18.(j) Apportionment Special Rules: Publishing

Worksheet 12 Uniform Principles Governing State Transactional Taxation of Telecommunications-Vendee Version

Worksheet 13 Uniform Principles Governing State Transactional Taxation of Telecommunications-Vendor Version

Worksheet 14 Goldberg v. Sweet


Worksheet 15 Federal Mobile Telecommunications Sourcing Act (4 U.S.C. § § 116-126)

Worksheet 16 COST Decries Class Action Litigation in State Tax Disputes, Says Cert. Denied in AT& T v. Allen Opens Door to More Suits (11 Multistate Tax Report 405, July 23, 2004)