                                                                                                                           FILED
                                                                                                               CV 0.U'5RT OF APPE           LS
                                                                                                                      DMIS1014 11

                                                                                                              2011   FEB            AM 9         t

                                                                                                                                        t
                                                                                                                 . 1 E
                                                                                                               5 f +'
                                                                                                                 r           i'     i i? 1 Lil
                                                                                                                                       HG


                                                                                                                           c t l!   Y




                     IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

                                                                DIVISION II

                 TRACFONE WIRELESS, INC., a Delaware
                 corporation,




                                                     Appellant,                            No. 43805 -4 -II


                          V.



                 WASHINGTON STATE DEPARTMENT OF                                      UNPUBLISHED OPINION
                 REVENUE,


                                                     Respondent.




                          MAXA, J. — TracFone Wireless Inc. appeals the trial court' s CR 12( b)( 6) dismissal of its


I___ __ __ _ _   lawsuit against the Washington State Department of Revenue_(DOR) for declaratory and _

                 injunctive relief related to TracFone' s method of collecting an excise tax from subscribers of its

                 prepaid cellular telephone services. Because recently enacted legislation has made the dispute

                 moot and the case does not present an issue of continuing and substantial public interest, we

                 dismiss TracFone' s appeal.


                                                                      FACTS


                          TracFone sells cellular services through the sale of prepaid cellular phones and airtime


                 cards. TracFone sells the phones and airtime cards wholesale to independent retailers, who then

                 market   the   merchandise   to   consumers.   The   airtime cards represent a   block   of cellular phone
No. 43805 -4 -II



minutes that consumers use by loading onto prepaid cellular phones. TracFone' s retailers collect

sales tax on retail purchases and then remit the tax to the DOR.


          Effective January 1, 2003, the legislature imposed a county and state enhanced 911

excise    tax ( E -911)     used   to fund emergency         communications systems on " `              all radio access lines


whose place of           primary   use   is located   within   the   state.' "   TracFone Wireless, Inc. v. Dep' t of

Revenue, 170 Wn.2d 273, 280, 277, 242 P. 3d 810 ( 2010) ( quoting LAWS of 2002,                                  ch.   341, § 8);


former RCW 82. 14B. 030( 2),( 4) ( 2003); RCW 38: 52. 501.                        At that time, the tax imposed was a


flat   rate   tax   of   twenty   cents per month     for   each phone      line. LAWS     of   2002,   ch.   341, § 8; see


TracFone, 170 Wn.2d at 279.


              TracFone paid the E -911 tax and then commenced a lawsuit to recover the amounts paid

and to contest further payments. TracFone, 170 Wn.2d at 280. The case ultimately was

appealed        to the Supreme Court. See TracFone, 170 Wn.2d                      at   280. Our Supreme Court held that


TracFone' s business was clearly within the scope of the statutes and that TracFone was

responsible for collecting the E -911 tax from its subscribers or paying the tax itself. TracFone,

 170 Wn.2d at 282, 297.


              Following the TracFone decision, TracFone developed a plan for adjusting the price of

 its   products     to include the E -911 tax ( Price Adjustment Plan). Under the plan, TracFone


 adjusted its prepaid pricing by calculating the E -911 tax due for each airtime card, thereby

 causing the amount allocable to the E -911 tax to be included in the total wholesale price of the
 airtime card sold to retailers for resale. TracFone took the position that no sales tax should be

 collected on the price adjustment corresponding to the amount of the E -911 tax. However, the

 DOR continued to direct retailers to collect and remit sales tax on the entire sales price.




                                                                     2
No. 43805 -4 -II



        TracFone filed a lawsuit against the DOR seeking a declaratory judgment that ( 1) the

Price Adjustment Plan      complies with           Washington law; ( 2) the DOR' s imposition of retail sales


tax on the portion of the TracFone' s airtime cards' selling price allocable to the E -911 tax is

unlawful, including violating the state and federal constitutions; and ( 3) the retailers' calculation

of retail sales tax on the entire purchase price of an airtime' card without excluding the portions

of the purchase price allocable to the E -911 tax is inconsistent with Washington law and the state

and federal constitutions. TracFone also sought an injunction requiring the DOR to refrain from

imposing or knowingly accepting retail sales tax calculated on the portion of a TracFone airtime

card' s purchase price allocable to the E -91.1 tax. The trial court granted the DOR' s motion to

dismiss for failure to    state a claim under          CR 12( b)( 6).   TracFone appealed to this court.


        During the pendency of this appeal, the Legislature addressed the substantive tax issues

presented   in this   appeal    in   a   bill relating to   communication services reform —Second     Engrossed


Second Substitute House Bill 1971.                The bill was approved on June 30, 2013, and became


effective January 1, 2014. LAWS of 2013, 2d Spec. Sess., ch. 8. Under the new legislation,

independent retailers Ofprepaid wireless telephone services are now authorized and required to --


collect and remit the E -911 tax when making sales of airtime cards to customers in their stores.

RCW 82. 14B. 040( 2)(     a).        The legislation also mandates that retailers must segregate the E -911


tax in any sales receipt provided to consumers. RCW 82. 14B. 040( 2)( c).

        The DOR filed a motion to dismiss the appeal as moot under RAP 18. 9( c)( 2) as a result

of the new legislation. TracFone opposed the motion to dismiss. We requested supplemental


briefing on the issue.




                                                                3
No. 43805 -4 -II



                                                           ANALYSIS


          At issue in this case is the intersection of the E -911 tax and the state sales tax. RCW


82. 14B. 030( 6)( b) provides that the E -911 tax is not subject to the state sales tax or any local tax.

On the other hand, the retail sales tax act, chapter 82. 08 RCW, determines the amount of sales


tax that retailers are required to charge and remit to the DOR, which requires tax on the " selling

price."   RCW 82. 08. 020( 1).             The " selling price" is the total amount of consideration, and no

deductions are allowed for the seller' s cost of the property sold or any other expense of the seller.

RCW 82. 08. 010( 1)( a).


          However, the threshold issue is whether this case is moot based on the legislature' s


significant amendments to the tax statutes at issue. The DOR argues that there is no need for this


court to provide declaratory and injunctive relief because the new legislation has provided the

prospective relief TracFone sought. TracFone opposes dismissal, arguing that even if the case is

moot we should reach the merits because the issues presented are of continuing and substantial

public interest. We agree with the DOR and dismiss the case as moot.


          ooTNEss



          A   case   is   moot    if the   court " ` cannot provide    the basic   relief   originally   sought ...   or can



no   longer   provide effective relief.' "            Bavand v. One West Bank, FSB, 176 Wn. App. 475, 510,

309 P. 3d 636 ( 2013) (       alteration       in   original) ( internal quotations marks omitted) ( quoting




Dioxin /Organochlorine Ctr. v. Pollution Control Hearings Bd., 131 Wn.2d 345, 350 -51, 932

P. 2d 158 ( 1997)).        If a   case   is   moot, we   generally   will   dismiss the   appeal.   Wash. OffHighway

Vehicle Alliance v. State, 176 Wn.2d 225, 232, 290 P. 3d 954 ( 2012).


          Here, the parties' dispute about the propriety of collecting sales tax on the price

adjustment on TracFone' s product that corresponds with the amount of the E -911 tax is now

                                                                 0
No. 43805 -4 -II



irrelevant. The new legislation requires independent retailers of prepaid wireless telephone


services to collect and remit the E -911 tax when making sales of airtime cards to consumers.

RCW 82. 14B. 040( 2).         With retailers now collecting and remitting the tax, the wholesale

purchase price will no longer need to include an amount allocable to the E -911 tax, and the issue

about whether this extra amount is subject to sales tax disappears. We cannot grant effective


relief by declaring that the " extra" sales tax is unlawful or enjoining the DOR' s acceptance of it

because under the current law the allegedly " extra" sales tax at issue no longer exists.

B.     CONTINUING AND SUBSTANTIAL PUBLIC INTEREST EXCEPTION


            Even if a case is moot, we still may reach the merits to provide guidance to lower courts

if the case presents an issue of continuing and substantial public interest. Alliance, 176 Wn.2d at

232. " Whether the         case presents such an      issue depends      on `(   1) whether the issue is of a public or


private nature; (    2) whether an authoritative determination is desirable to provide future guidance


to   public officers; and (    3)   whether   the issue is   likely to   recur.' "   Alliance, 176 Wn.2d at 233


 internal   quotation marks omitted) (         quoting In re Marriage ofHorner, 151 Wn.2d 884, 892, 93

P. 3d 124 ( 2004)). We also consider the " ` level of genuine adverseness and t
                                                                              the                        ity o - -

advocacy     of   the issues' "     and whether the nature of the issue tends to evade review. Alliance,


176 Wn.2d at 233 ( reasoning that challenges to legislative appropriations of refund accounts for

the benefit of all affected taxpayers evade review because the appropriations last only two years,

which    may   not   be   sufficient   time for   an appeal) (   internal   quotation marks omitted) ( quoting




Horner, 151 Wn.2d at 892).


          Applying these factors, we hold that review in not appropriate. The three primary factors

do not support addressing the merits. First, the dispute between TracFone and DOR primarily is

private because it concerns the parties' differing interpretations of tax statutes as they apply to

                                                               5
No. 43805 -4 -II



TracFone' s unique business model. Second, an authoritative determination is not needed


because the legislature already has provided that guidance in the form of new legislation. Third,

the issue is not likely to reoccur in this context because of the new legislation. TracFone argues

that the issue may reoccur if the DOR attempts to collect sales tax on top of an excise tax on

another product or service. But the nature of such a future dispute is too speculative to warrant

review as an exception to the mootness doctrine.


          With regard to the other two factors, the issues were properly briefed by the parties and

the advocacy is strong. However, this case was dismissed by the trial court under CR 12( b)( 6)

based on standing issues, so our analysis would be limited to those issues. There is no indication

that the issue presented here is the type that regularly evades review.

          After consideration of all these factors, we conclude that this case does not present an

issue of continuing and substantial public interest. Accordingly, we dismiss this case as moot.

          A majority of the panel having determined that this opinion will not be printed in the

Washington Appellate Reports, but will be filed for public record in accordance with RCW

2. 06. 040, it is so ordered.




                                                          MAXA, J.
We concur:




Lee, J.



                                                    Con
