A team comprised of Kari Sand, with support from Julia Norwood, Aaron Riensche, and Nick Morton obtained a resounding victory for their client, the City of Renton, after the Washington State Supreme Court denied TracFone Wireless’s petition for review. Division I of the Court of Appeals found for Renton, affirming the City of Renton hearing examiner’s order granting summary judgment to the City of Renton.
This win comes nearly five years after TracFone administratively appealed Renton’s telephone utility tax assessment for TracFone’s airtime sales revenues within the city, plus interest and penalties. TracFone argued that it was not a telephone business because, under its business model, TracFone contracts with various network carriers to provide the prepaid wireless service, and thus, TracFone is not subject to telephone utility tax; further, TracFone argued that only its gross revenues from direct, local sales through its website and toll-free number are subject to local telephone utility tax, and its remaining gross revenues (approximately 80%) from local retailers, such as Fred Meyer and Walmart, are exempt under a proviso of RCW 35A.82.060 because the retailers, not TracFone, are selling the prepaid wireless service. The Hearing Examiner found for Renton, holding that: (1) TracFone is providing wireless services, and its gross revenues from local airtime sales were subject to the telephone utility tax authorized by RCW 35A.82.060; and (2) TracFone's gross revenues through third-party retailers were subject to tax and not exempt under RCW 35A.82.060 because TracFone, not the retailers, provides the prepaid wireless services.
TracFone petitioned for review to the King County Superior Court, and the superior court affirmed the hearing examiner’s decision. TracFone again appealed, in 2023, to the Washington Court of Appeals, Division I. In a published opinion, filed on April 29, 2024, the appellate court again affirmed the hearing examiner’s decision, maintaining TracFone’s tax liability to Renton as a telephone business, including its gross revenues from local third-party retailers. The superior and appellate courts ultimately rejected each of TracFone’s arguments, finding that TracFone’s terms of service with its customers and contracts with network carriers and the third-party retailers clearly showed that TracFone (not carriers nor retailers) provides access to network telephone services for its customers. This years-long litigation finally came to an end upon the Washington State Supreme Court’s denial of TracFone’s petition for review, finalizing Division I’s decision.
The attorneys of Ogden Murphy Wallace are dedicated to helping municipalities and other public entities navigate the myriad of legal challenges facing the public sector. Our attorneys are experienced in handling high-stakes litigation and providing guidance on daily operations, as demonstrated in this case. For questions about this case or other municipal law matters, please contact the Municipal Practice Group at OMW.
