AMERICAN TELEPHONE AND TELEGRAPH COMPANY v. NEW YORK STATE DEPARTMENT OF
TAXATION AND FINANCE,
84 N.Y.2d 31, 637 N.E.2d 257, 614 N.Y.S.2d 366 (1994).
June 16, 1994
1 No. 109 (1994 NY Int. 111)
Decided June 16, 1994
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This opinion is uncorrected and subject to revision before publication
in the New York Reports.
BELLACOSA, J.:
Prior to 1990, American Telephone and Telegraph (AT&T) included, as
part of its New York taxable income, access fees which represented
charges imposed by local telephone carriers at each end of a long
distance intrastate telephone call. AT&T charged its customers for the
access fee and then transmitted those receipts directly to the
appropriate local exchange carrier (Tax Law §§184(4), 186-a). Long
distance carriers, like AT&T, however, were not given a deduction for
these pass-through transactions, and local telephone carriers were not
required to report receipt of the access fees as part of their tax
base.
In 1990, the Legislature amended Tax Law §186-a by requiring local
telephone carriers to include in their tax base the access service
fees, and correspondingly permitted the long distance carriers to
deduct those access fees from their income (Tax Law §186-a(2-a); L
1990, ch 190).
AT&T paid taxes to New York State in accordance with the amended
provision requiring that AT&T deduct its New York carrier access
expense from its total interstate and international receipts prior to
apportionment. AT&T subsequently sought a refund of taxes based upon
its recalculation of its tax liability applying the deduction for
carrier access expenses only to its New York revenues. AT&T's refund
claim was denied and it commenced this action seeking, in part, a
declaratory judgment that Tax Law §186-a(2-a) is unconstitutional.
Supreme Court denied AT&T's motion for summary judgment, but the
Appellate Division reversed and granted the motion. On this appeal,
taken as of right on constitutional grounds, AT&T contends that the
method of calculating the tax deduction under the 1990 amendment
offends the Commerce Clause of the United States Constitution (Art I,
sec 8). We agree with the Appellate Division that the State's method
SNIPPETS:
This opinion is uncorrected and subject to revision before publication in the New York
Prior to 1990, American Telephone and Telegraph included, as part of its New York taxable
AT&T charged its customers for the access fee and then transmitted those receipts directly to
Long distance carriers, like AT&T, however, were not given a deduction for these pass-through
In 1990, the Legislature amended Tax Law §186-a by requiring local telephone carriers to
AT&T paid taxes to New York State in accordance with the amended provision requiring that
AT&T subsequently sought a refund of taxes based upon its recalculation of its tax liability
AT&T's refund claim was denied and it commenced this action seeking, in part, a declaratory
Supreme Court denied AT&T's motion for summary judgment, but the Appellate Division reversed
On this appeal, taken as of right on constitutional grounds, AT&T contends that the method of
We agree with the Appellate Division that the State's method of calculating the deduction
long distance carriers that are unable to directly account for their New York revenues are
The Commerce Clause, phrased as a grant of regulatory power to Congress, has also been
This precept is premised on the "'principle that our economic unit is the Nation, which alone
In computing the allowable access fee deduction, the statute requires apportionment of access
Thus, the discriminatory calculation method, with its apportionment of the deduction, is not
Chief Judge Kaye and Judges Titone,
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