Petition of CAROLINA TELEPHONE AND TELEGRAPH COMPANY for Administrative Review of Decision of Commissioner of Revenue concerning an Assessment of Additional Franchise Taxes for the Quarters ended June 30, 1958, through March 31, 1961.
Petition of the COMMISSIONER OF REVENUE for the State of North Carolina for Judicial Review of the Tax Review Board's Administrative Decision Number 71.
No. 68SC22.
Court of Appeals of North Carolina.
March 27, 1968.*130 Thomas Wade Bruton, Atty. Gen., and Robert L. Gunn, Asst. Atty. Gen., for petitioner appellant.
*131 Taylor, Brinson & Aycock, by Herbert H. Taylor, Jr., Tarboro, and Joyner & Howison, by W. T. Joyner, Raleigh, for respondent appellee.
BRITT, Judge.
The statutory provisions pertinent to this appeal are as follows:
G.S. 105-120. "Franchise or privilege tax on telephone companies.(a) Every person, firm, or corporation, domestic or foreign, owning and/or operating a telephone business for the transmission of messages and/or conversations to, from, through, in or across this State, shall, within thirty days after the first day of January, April, July and October of each year, make and deliver to the Commissioner of Revenue a quarterly return, verified by the affirmation of the officer or authorized agent making such return, showing the total amount of gross receipts of such telephone company for the three months ending the last day of the month immediately preceding such return, and pay, at the time of making such return, the franchise, license or privilege tax herein imposed.
"(b) An annual franchise or privilege tax of six per cent (6%), payable quarterly, on the gross receipts of such telephone company, is herein imposed for the privilege of engaging in such business within this State. Such gross receipts shall include all rentals, other similar charges, and all tolls received from business which both originates and terminates in the State of North Carolina, whether such business in the course of transmission goes outside of this State or not: * * *
* * * * * *
"(e) Nothing in this section shall be construed to authorize the imposition of any tax upon interstate commerce."
Petitioner contends that the revenue received from Southern Bell for "joint private line service" was for the rental of respondent's facilities, all of which were located in this State, and that said revenue comes within the taxability purview of the foregoing statute.
Respondent contends that its arrangement with Southern Bell was not a rental but a service rendered by respondent. Respondent contends that in the transmission of what was unquestionably interstate intelligence, respondent actually carried (transmitted physically) each message in its course in the respondent's territory; that between the point of origin and the point of exchange in North Carolina with the Bell System, respondent rendered every service necessary to transmit physically the message.
Thus, the question presented by this appeal: Did respondent actually transmit, in and through its territory, the interstate communications involved in this action; or did respondent merely rent its property to Southern Bell for transmission by Southern Bell in respondent's territory?
We hold that respondent actually transmitted the communications through its territory and said service was interstate commerce.
A telephone or telegraph company occupies the same relation to commerce as a carrier of messages that a railroad company does as a carrier of goods. Both companies are instruments of commerce, and their business is commerce itself. Telegraph Co. v. Texas, 105 U.S. 460, 26 L.Ed. 1067 (1882).
Although all of respondent's facilities are located in North Carolina, in performing the service involved in this proceeding, said facilities connected with those of another company to transmit intelligence between this State and other states and the intelligence transmitted was interstate from its origin to its termination. United States v. Yellow Cab Co., 332 U.S. 218, 67 S.Ct. 1560, 91 L.Ed. 2010 (1947); Telegraph *132 Co. v. Texas, supra; Ward v. Northern Ohio Tel. Co., 300 F.2d 816, (U.S.Ct. of App., 6th Cir. 1962).
It is stipulated that respondent, in its cooperation with Southern Bell in providing joint private line service, not only provided facilities and equipment in its area but also provided a continuous servicing of its facilities and equipment. The facts clearly show that the relationship between respondent and Southern Bell was not that of lessor and lessee. Tax statutes are to be strictly construed against the State and in favor of the taxpayer. Watson Industries v. Shaw Commr. of Rev., 235 N.C. 203, 69 S.E.2d 505 (1952).
Petitioner relies very heavily on the decision of our Supreme Court in Southern Bell Tel. & Tel. Co. v. Clayton, 266 N.C. 687, 147 S.E.2d 195 (1966). The facts and principles of law in that case are clearly distinguishable from those of the case at bar.
We have carefully considered each of petitioner's assignments of error but find that neither has merit. Each of them is overruled.
The judgment of the Superior Court is
Affirmed.
MALLARD, C. J., and BROCK, J., concur.