Reese Bros Inc v. United States

Opinions of the United
2006 Decisions States Court of Appeals
for the Third Circuit

5-9-2006

Reese Bros Inc v. USA
Precedential or Non-Precedential: Precedential

Docket No. 05-2135

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 PRECEDENTIAL OPINION

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 05-2135

REESE BROTHERS, INC.

v.

UNITED STATES OF AMERICA,
Appellant

On Appeal from the United States District Court
For the Western District of Pennsylvania
(D.C. Civil Action No. 03-cv-00745)
District Judge: The Honorable Terrence F. McVerry

Argued on January 27, 2006
 BEFORE: RENDELL and SMITH, Circuit Judges,
and IRENAS, District Judge*

(Opinion Filed: May 9, 2006)

Stanley M. Stein
Feldstein, Grinberg, Stein & McKee
428 Boulevard of the Allies
Pittsburgh, Pennsylvania 15219

Stephen J. Rosen
Henry D. Levine (Argued)
Levine, Blaszak, Block & Boothby
2001 L Street, N.W.
Suite 900
Washington, DC 20036
Counsel for Appellee

Robert W. Metzler
Teresa E. McLaughlin (Argued)
United States Department of Justice
Tax Division
P.O. Box 502
Washington, DC 20044
Counsel for Appellant

OPINION OF THE COURT

*
The Honorable Joseph E. Irenas, Senior District Judge
for the District of New Jersey, sitting by designation.

2
SMITH, Circuit Judge.

The question presented in this appeal is whether the
federal communications excise tax set forth in 26 U.S.C. §
4251(a)(1) applies to long-distance telephone services that are
priced based on a fixed per-minute, non-distance-sensitive rate.
Based upon the plain language and structure of the statute, we
conclude that it does not. The District Court granted summary
judgment in favor of the taxpayer. We affirm.

I. Factual and Procedural Background

Taxpayer Reese Brothers, Inc. (“Reese Brothers”)
purchased intrastate, interstate, and international long-distance
telephone services (“Reese Services”) from LCI, Qwest, and
MCI (collectively “Carriers”) from the third quarter of 1998
through the first quarter of 2002. These Carriers charged Reese
Brothers a fixed-per minute rate for in-state long-distance calls
and different fixed-per minute rates for out-of-state and
international long distance calls. The Carriers collected a three-
percent federal communications excise tax from Reese Brothers
and remitted it to the Internal Revenue Service (“IRS”).

On November 21, 2001, Reese Brothers filed a claim
with the IRS, seeking a refund of $319,496.33 for the excise
taxes that the Carriers collected and remitted between July 1,
1998 and June 30, 2001; it filed a second claim for a refund of
$26,048.38 on August 2, 2002 for taxes collected for July 1,
2001 and March 31, 2002. Although the IRS apparently
received these claims, it did not respond to them, and Reese
Brothers filed suit in federal court on May 22, 2003. Reese
Brothers subsequently moved for partial summary judgment on
the issue of liability and the Government filed a cross-motion

3
for summary judgment.

Reese Brothers argued that, pursuant to 26 U.S.C. §
4252(b)(1)–which defines “toll telephone services” as services
“for which there is a toll charge that varies in amount with the
distance and elapsed transmission time of each individual
communication”–the federal communications excise tax applied
only to long-distance services for which the charges vary by
both distance and elapsed time. Because the charges for its
long-distance services were based on a fixed per-minute rate,
unrelated to distance, Reese Brothers claimed that the tax is
inapplicable to the services provided by the Carriers.

The Government, by contrast, argued that the tax applies
to charges that are based on either the distance or the elapsed
time or both, and therefore, claimed that the Reese Services are
taxable. The Government also offered two alternative bases for
imposing the excise tax on the Reese Services. First, the
Government suggested that if the Reese Services are not taxable
under § 4252(b)(1), they should be considered “toll telephone
services” under § 4252(b)(2), which defines such services as
those “which entitle[] the subscriber, upon payment of a
periodic charge (determined as a flat amount or upon the basis
of total elapsed transmission time), to the privilege of an
unlimited number” of calls to or from an area outside of the
local service area. Second, it argued that in the event the Reese
Services are not “toll telephone services” under any definition,
they constitute “local telephone services” under § 4252(a).

Adopting the Report and Recommendation of a
Magistrate Judge, the District Court granted Reese Brothers’
motion with respect to liability and denied the Government’s
cross-motion. The parties agreed to the amount of overpayment

4
and the District Court entered judgment on behalf of Reese
Brothers in the amount of $335,213.96. The Government now
appeals.

II. Jurisdiction and Standard of Review

This Court has appellate jurisdiction pursuant to 28
U.S.C. § 1291 and its review of a district court’s order granting
summary judgment is plenary. Camiolo v. State Farm Fire &
Cas. Co., 334 F.3d 345, 354 (3d Cir. 2003). We apply the
standard set forth in Federal Rule of Civil Procedure 56(c) and
therefore may affirm the district court’s order if, when viewing
the evidence in the light most favorable to the non-moving
party, there is “no genuine issue as to any material fact and the
moving party is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(c). Questions of statutory interpretation are
subject to de novo review. Fraser v. Nationwide Mut. Ins. Co.,
352 F.3d 107, 113 (3d Cir. 2003) (citation omitted).

III. Sections 4251 and 4252 of the Internal Revenue Code

Section 4251(a)(1) of the Internal Revenue Code
provides for a tax on “communications services.” As defined by
the Code, “communications services” include “local telephone
service,” “toll telephone service,” and “teletypewriter exchange
service.” 26 U.S.C. § 4251(b)(1). Section 4252 defines these
three services. In relevant part, that section states:

(a) Local telephone service. For purposes of this
subchapter, the term “local telephone service”
means–

(1) the access to a local telephone system,

5
and the privilege of telephonic quality
communication with substantially all persons
having telephone or radio telephone stations
constituting part of such local telephone system,
and

(2) any facility or service provided in
connection with a service described in paragraph
(1).

The term “local telephone service” does not
include any service which is a “toll telephone
service” or a “private communications service” as
defined in subsections (b) and (d).

(b) Toll telephone service. For purposes of this
subchapter, the term “toll telephone service”
means–

(1) a telephonic quality communication for
which (A) there is a toll charge which varies in
amount with the distance and elapsed
transmission time of each individual
communication and (B) the charge is paid within
the United States, and

(2) a service which entitles the subscriber,
upon payment of a periodic charge (determined as
a flat amount or upon the basis of total elapsed
transmission time), to the privilege of an
unlimited number of telephonic communications
to or from all or a substantial portion of the
persons having telephone or radio telephone
stations in a specified area which is outside the
local telephone system area in which the station
provided with this service is located.

6
 (c) Teletypewriter exchange service.–For
purposes of this subchapter, the term
“teletypewriter exchange service” means the
access from a teletypewriter or other data station
to the teletypewriter exchange system of which
such station is a part, and the privilege of
intercommunication by such station with
substantially all persons having teletypewriter or
other data stations constituting a part of the same
teletypewriter exchange system, to which the
subscriber is entitled upon payment of a charge or
charges (whether such charge or charges are
determined as a flat periodic amount, on the basis
of distance and elapsed transmission time, or in
some other manner). The term “teletypewriter
exchange service” does not include any service
which is “local telephone service” as defined in
subsection (a).

The District Court concluded that the Reese Services did not fall
within any of the definitions set forth in § 4252. We agree.

The current definitions of “local telephone service,” “toll
telephone service,” and “teletypewriter exchange service” were
enacted by Congress in 1965 as part of the Excise Tax
Reduction Act, which, among other things, reduced the
telephone tax from ten percent to three percent. See Excise Tax
Reduction Act of 1965, Pub. L. 89-44, 79 Stat. 136, 146 (1965).
At that time, American Telephone and Telegraph Corporation
(AT&T) had a monopoly on long-distance services in the United
States. See Pearce Decl., App. at 156, ¶¶ 23, 25. It offered two
types of long-distance–Message Telephone Service (MTS) and
Wide Area Telephone Service (WATS)–as well as local and
private line services. Id. at ¶¶ 17, 24, 26. MTS charges were
based on the duration of the call, the distance that the call

7
traveled, the time of day, and the day of the week. Id. at ¶ 17.
The distance portion of the rate was determined by reference to
“mileage bands,” of which there were thirty.1 Id. Charges for
WATS–a service which used a dedicated access line (for
example, 800 numbers)–were based on a flat rate for unlimited
calls. Id. The 1965 definition of “toll telephone service” in §
4252 replaced an earlier version which defined “toll telephone
service” as a service “for which . . . there is a toll charge,” and
appears to reflect an effort by Congress to conform the
definition to the long-distance pricing methods then in place.
Compare Excise Tax Reduction Act of 1965, Pub. L. 89-44, 79
Stat. 136, 146 (1965), with Excise Tax Technical Changes Act
of 1958, Pub. L. 85-859, 72 Stat. 1275, 1290 (1958).

Since then, however, AT&T has lost its monopoly status
and long-distance billing methods have changed. Pearce Decl.,
App. at 159-162, ¶¶ 29-35. As a general rule, charges for long-
distance telephone calls now are based only on the duration of
the call, though there remain some intrastate long-distance
services which are priced based on distance as well as time. Id.

On appeal, the Government offers three arguments
which, if accepted, would warrant reversal of the District Court.
The Government’s first and primary contention is that the Reese
Services are taxable under 26 U.S.C. § 4252(b)(1) as “toll
telephone services.” In the alternative, the Government argues
that if the Reese Services are not taxable under § 4252(b)(1),
they should be considered “toll telephone services” under §
4252(b)(2) or “local telephone services” under § 4252(a).

1
The number of bands was subsequently reduced to
eleven before the mileage band system was ultimately
abandoned.

8
 Recently, four other courts of appeals–the Second, Sixth,
Eleventh, and District of Columbia circuits–have considered the
meaning of § 4252(b)(1). In each case, the court has rejected
the same arguments that the Government advances in this case.
Fortis, Inc. v. United States, No. 05-cv-2518, 2006 U.S. App.
10749 (2d Cir. April 27, 2006) (per curiam); OfficeMax, Inc. v.
United States, 428 F.3d 583 (6th Cir. 2005), r’hrg en banc
denied, No. 04-4009, 2006 U.S. App. LEXIS 8294 (6th Cir.
March 30, 2006); Am. Bankers Ins. Group v. United States, 408
F.3d 1328 (11th Cir. 2005); Nat’l R.R. Passenger Corp.
(Amtrak) v. United States, 431 F.3d 374 (DC Cir. 2005).2 We
agree with the decisions reached by our sister circuits and will
join them in ruling in favor of the taxpayer.

A. “Toll Telephone Services” Under Section
4252(b)(1)

2
Every district court that has considered the
issue–except one which was subsequently reversed–has held that
§ 4252(b)(1) is inapplicable where the charges for long-distance
services do not vary by distance. See Hewlett-Packard Co. v.
United States, 2005 U.S. Dist. LEXIS 19972 (N.D. Cal. Aug. 5,
2005); Fortis, Inc. v. United States, 2004 U.S. Dist. LEXIS
18686 (S.D.N.Y. Sept. 16, 2004), aff’d No. 05-cv-2518, 2006
U.S. App. 10749 (2d Cir. April 27, 2006) (per curiam); Am.
Online, Inc. v. United States, 64 Fed. Cl. 571, 576-81 (Fed. Cl.
2005); Honeywell Int’l , Inc. v. United States, 64 Fed. Cl. 188,
198-203 (Fed. Cl. 2005); Nat’l R.R. Passenger Corp. v. United
States, 338 F. Supp. 2d 22 (D.D.C. 2004), aff’d, 431 F.3d 374
(D.C. Cir. 2005); OfficeMax, Inc. v. United States, 309 F. Supp.
2d 984 (N.D. Ohio 2004), aff’d, 428 F.3d 583 (6th Cir. 2005);
but cf. Am. Bankers Ins. Group v. United States, 308 F. Supp. 2d
1360 (S.D. Fl. 2004), rev’d, 408 F.3d 1328 (11th Cir. 2005).

9
 “Toll telephone services” are defined in § 4252(b)(1) as
services “for which there is a toll charge that varies in amount
with the distance and elapsed transmission time of each
individual communication.” 26 U.S.C. § 4252(b)(1) (emphasis
added). The Government urges us to conclude that the phrase
“varies with distance and elapsed time” is ambiguous and, based
on the statute’s structure, purpose, and legislative history,
encompasses the Reese Services. Second, it argues that IRS
Revenue Ruling 79-404, which construed similar non-distance-
sensitive ship-to-shore communications as taxable “toll
telephone services” under § 4252(b)(1), is entitled to deference
under Chevron USA, Inc. v. Natural Resources Defense Council,
Inc., 467 U.S. 837 (1984), and United States v. Mead Corp., 533
U.S. 218 (2001). Third, even if the Ruling was not originally
entitled to deference, the Government argues that because
Congress reenacted § 4252(b)(1) after Revenue Ruling 79-404
was issued, it now has the force of law under the legislative
reenactment doctrine. Finally, the Government suggests that
even if the District Court properly concluded that charges must
be based on distance as well as elapsed time, distance was a
factor in calculating the charges for the Reese Services to the
extent that the per-minute rate varied depending on whether the
call was intrastate, interstate, or international.

1. The Meaning of the Word “And”

Our role in interpreting a statute is to give effect to
Congress’ intent. Rosenberg v. XM Ventures, 274 F.3d 137, 141
(3d Cir. 2001) (citations omitted). Because we presume that
Congress’ intent is most clearly expressed in the text of the
statute, we begin our analysis with an examination of the plain
language of the relevant provision. Id. Section 4252(b)(1)
provides that toll telephone services are those for which the

10
amount varies by “distance and time.” The Government
contends–and we agree–that the word “and” can be either
conjunctive or disjunctive. See, e.g., Slodov v. United States,
436 U.S. 238 (1978) (concluding that the word “and” was used
disjunctively in 26 U.S.C. § 6672 which imposed a tax penalty
on “[a]ny person required to collect, truthfully account for, and
pay over any tax imposed by this title”); Peacock v. Lubbock
Compress Co., 252 F.2d 892 (5th Cir 1958), cert. denied, 356
U.S. 973 (1958) (holding that “and” was disjunctive in the
context of a statute that required an employer to pay overtime
wages to employees “engaged in the ginning and compressing
of cotton”). In fact, the word “and” is used to mean “or” within
§ 4252 itself. As the Sixth Circuit explained:

Section 4252(b)(1) requires that the toll charge
vary in amount with distance and elapsed time of
each individual communication “and” that the
charge be paid within the United States. Both
sides of this “and”. . . must be satisfied for the
telephone service to be taxable. . . . At times,
however, Congress used the word differently.
Take 4251: it defines “communications services”
as “local telephone service, toll telephone service,
and teletypewriter exchange service.” No one
doubts the disjunctive (or cumulative) nature of
this usage because these definitions of the
services in 4252 are generally mutually exclusive
and because no service exists that can satisfy all
three definitions at once. Section 4252 likewise
uses “and” to connect a list of alternative
definitions found in 4252(b)(1) and (b)(2). Here,
too, no one contests that a “toll charge which
varies in amount with the distance and elapsed
transmission time of each individual
communication,”. . . cannot simultaneously be a

11
 “periodic charge (determined as a flat amount or
upon the basis of total elapsed transmission time)
[for] the privilege of an unlimited number of
telephonic communications.”

OfficeMax, 428 F.3d at 588.

The usual meaning of the word “and,” however, is
conjunctive, and “unless the context dictates otherwise, the
‘and’ is presumed to be used in its ordinary sense. . . .” Am.
Bankers, 408 F.3d at 1332; see also OfficeMax, 428 F.3d at 588
(citing in part Crooks v. Harrelson, 282 U.S. 55, 58 (1930);
Webster’s Third New International Dictionary 80 (2d ed. 2002);
1A Norman J. Singer, Statutes and Statutory Construction 21.14,
at 179-80 (6th ed. 2002)). The Government argues that applying
the ordinary definition of the word “and” would not make sense
because “Congress could not possibly have meant to allow
telephone companies to opt their customers out of the tax
through nothing more than a change in billing methods.”
Appellant’s Br. at 12, 32. Applying the ordinary definition of
the word “and” in § 4252(b)(1), however, does not lead to an
anomalous or absurd result. In fact, such a reading is entirely
consistent with AT&T’s billing practices in 1965 when
Congress adopted the definition.3

The Supreme Court addressed and rejected an analogous
argument in Iselin v. United States, 270 U.S. 245 (1926). At

3
As the Sixth Circuit noted in OfficeMax, however,
“[t]here is something odd . . . about giving the distance-and-time
requirement a disjunctive interpretation.” 428 F.3d at 590. It
would be strange indeed “to impose a toll charge that varies
solely by distance, with all calls from, say, Columbus, Ohio to
Bozeman, Montana costing the same amount regardless of
whether they last 60 seconds, 60 minutes or 60 days.” Id.

12
issue in that case was a Revenue Act provision which imposed
a tax on the sale of theater tickets sold at places other than a
ticket box office. The amount of the tax was based on the
difference between the “established price” at the ticket office
and the actual sale price. The taxpayer, Georgine Iselin, as a
stockholder in the producing company, held a license to a
designated theater box and sold the license to use her box to
forty-seven of the season’s seventy performances. Iselin argued
that because the tickets she sold did not have an “established
price,” they were not taxable under the Revenue Act. The
Government, by contrast, argued:

that Congress clearly intended to tax all sales of
tickets; that there is in the section no indication of
intention to exempt from the tax any sale of
tickets or any resale at a profit; that the receipts
here taxed are in character substantially similar to
those specifically described in paragraph 3; that
this general purpose of Congress should be given
effect, so as to reach any case within the aim of
the legislation; and the act should, therefore, be
extended by construction to cover this case.

Iselin, 270 U.S. at 250.

The Iselin Court rejected the Government’s argument,
declining to expand the statute’s reach. It explained:

It may be assumed that Congress did not purpose
to exempt from taxation this class of tickets. But
the act contains no provision referring to tickets
of the character here involved; and there is no
general provision in the act under which classes
of tickets not enumerated are subjected to a tax.

Id. Likewise, in this case, the express language of the

13
statute–understood in its ordinary sense–does not include
communications which are based only on elapsed time and
whether they are interstate, intrastate, or international.
Following the Supreme Court’s analysis in Iselin, we will
therefore decline to extend the scope of § 4252(b)(1).

We also note that Congress clearly understood how to
draft a more expansive definition if it so chose. For example, in
defining “teletypewriter exchange service,” Congress did not
limit the tax to services based on the distance-and-time billing
method alone. Rather, it imposed a tax on teletypewriter
services “whether such charge or charges are determined as a
flat periodic amount, on the basis of distance and elapsed
transmission time, or some other manner.” 26 U.S.C. § 4252(c).
Had Congress desired to tax toll telephone services based on a
broader variety of billing methods, it could have so indicated.

Reading the statute as a whole, we conclude that “and”
is used in its conjunctive sense in § 4252(b)(1). Accordingly, in
order to be taxable under that provision, charges for long-
distance telephone services must be based on both distance and
elapsed transmission time.

2. The Effect of Revenue Ruling 79-404

The Government also contends that Revenue Ruling 79-
404, in which the IRS determined that a ship-to-shore satellite
service for which charges were based on the elapsed time of the
transmission alone nevertheless satisfied the definition of “toll
telephone service,” is entitled to deference under Chevron
U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 .S.
837 (1984), and United States v. Mead Corp., 533 U.S. 218
(2001). It therefore argues that the agency’s construction should
dictate the outcome of this case. Because we conclude that the
language of § 4252(b)(1) is plain, however, and that a
conjunctive reading of the word “and” effects the unambiguous

14
intent of Congress, we need not defer to the interpretation in
Revenue Ruling 79-404 under Chevron, nor consider the
appropriate level of deference to be afforded such rulings
generally.

In Revenue Ruling 79-404, the IRS acknowledged that
“literally, the [ship-to-shore] service provided in this case does
not come within the definition of . . . ‘toll telephone service’ . .
. because the charge for the service does not vary with distance
and therefore does not meet the requirement of section
4252(b)(1).” Rev. Rul. 79-404, 1979 C.B. 382. Nevertheless,
it concluded:

The service in this case is essentially “toll
telephone service” as described in section
4252(b)(1) of the Code, even though the charge
for calls between remote maritime stations and
stations in the United States vary with elapsed
transmission time only. The toll charges
described in section 4252(b)(1), that vary in
amount with both distance and elapsed
transmission time of the individual
communication, reflect Congress’ understanding
of how the charges for long distance calls were
computed at the time the section was enacted.
The intent of the statute would be frustrated if a
new type of service otherwise within such intent
were held to be nontaxable merely because
charges for it are determined in a manner which is
not within the literal language of the statute.

Id. at 383. The Government relies on Mead, arguing that
although revenue rulings are not subject to notice and comment,
they nevertheless should be entitled to Chevron deference
because Congress intended to grant the IRS the power to make
rules with the “force of law” and Revenue Ruling 79-404 “was

15
promulgated in the exercise of that authority.” Appellant’s Br.
at 46 (citing United States v. Mead Corp., 533 U.S. 218, 226-27
(2001)).

In Geisinger Health Plan v. Commissioner, 985 F.2d
1210, 1216 (3d Cir. 1993), this Court explained that although
“revenue rulings are entitled to great deference, . . . courts may
disregard them if they conflict with the statute they purport to
interpret or its legislative history, or if they are otherwise
unreasonable.” See also In re Kaplan, 104 F.3d 589, 599 (3d
Cir. 1997) (citations omitted). Acknowledging Geisinger and
Kaplan, the Government nevertheless suggests that we should
revisit the issue of the proper level of deference to be afforded
revenue rulings because Mead was decided after those cases.
Even assuming that Chevron applied to revenue rulings,
however, the Government’s argument would fail, and therefore,
we need not reconsider our decisions regarding the deference
owed such rulings. As the Eleventh Circuit explained:

Under Chevron, the court must first determine
whether the congressional intent is clear. If the
intent is clear, the inquiry ends; the court and
agency “must give effect to the unambiguously
expressed intent of Congress.” Chevron U.S.A.,
Inc., 467 U.S. at 843-44.

Accordingly, because we hold that §
4252(b)(1) is clear and directly answers the
question here, the inquiry ends; we need not give
deference to Revenue Ruling 79-404. Moreover,
we need not determine the proper level of
deference to be given Revenue Ruling 79-404.

Am. Bankers, 408 F.3d at 1335 (citations omitted); see also
Amtrak, 431 F.3d at 379 (“Even if we were to afford Chevron
deference to the ruling, we could not let stand an agency

16
decision that deviates from the statute’s unambiguous
meaning.”); OfficeMax, 428 F.3d at 595 (“Even if this circuit
gave Chevron deference to revenue rulings, which it does not,
this revenue ruling would not clear step one of the Chevron
test”) (citations omitted). As discussed above, we conclude that
the meaning of the phrase “varies in amount with distance and
elapsed transmission time” is clear from the context of §
4252(b)(1) and, therefore, deference need not be afforded to
Revenue Ruling 79-404.

3. The Legislative Reenactment Doctrine

Even if Revenue Ruling 79-404 is not entitled to
deference under Chevron and Mead, the Government contends
that the Ruling is nevertheless entitled to “especially great
weight” under the legislative reenactment doctrine, because
Congress has reenacted the statute several times since the
Revenue Ruling was issued in 1979. Appellant’s Br. at 50.

Pursuant to the legislative re-enactment doctrine,
Congress is “presumed to be aware of an administrative or
judicial interpretation of a statute and to adopt that interpretation
when it re-enacts a statute without change.” Lorillard v. Pon,
434 U.S. 575, 580 (1978) (citations omitted). As the Court
recognized in United States v. Rutherford, 442 U.S. 544, 554
n.10 (1979)), however, “it may not always be realistic to infer
approval of judicial or administrative interpretation from
congressional silence alone.” Nevertheless, “once an agency's
statutory construction has been ‘fully brought to the attention of
the public and the Congress,’ and the latter has not sought to
alter that interpretation although it has amended the statute in
other respects, then presumably the legislative intent has been
correctly discerned.” Id.; see also North Haven Bd. of Educ. v.
Bell, 456 U.S. 512, 535 (1982). In this case, the Government
points to legislative history in which the Congress seems to
equate “toll telephone service” with “long-distance,” but fails to

17
identify any evidence that Congress was aware of Revenue
Ruling 79-404. We therefore cannot find that the construction
has been “fully brought to the attention” of Congress.
Moreover, even if we presume that Congress was aware of
Revenue Ruling 79-404, the Supreme Court has held that
“where the law is plain, subsequent reenactment does not
constitute an adoption of a previous administrative
construction.” Brown v. Gardner, 513 U.S. 115, 121 (1994).
Given the ordinary meaning of the word “and” and the structure
and context of § 4252, we view the law as “plain” and conclude
that the legislative re-enactment doctrine does not apply in this
case.

4. The Meaning of the Word “Distance”

Finally, with respect to the application of § 4252(b)(1),
the Government argues that because the rates for the Reese
Services varied depending on whether the communications were
intrastate, interstate, or international, they were in fact based on
both “distance and elapsed transmission time.” The District
Court held that the charges vary by “jurisdictional
classification,” not distance, and therefore, were not covered by
§ 4252(b)(1). We agree with the District Court’s determination.

According to the Government, “distance” means “the
quality or state of being distant or spatially remote,” and
therefore, a charge need not vary directly with linear distance to
meet the definition in § 4252(b)(1). The characterization of a
communication as interstate, intrastate, and international does
not directly correlate to distance, however, as a call between
states, or even countries, may be shorter in distance than a call
within the same state. Moreover, as the American Bankers court
explained, “The jurisdictional boundaries–interstate, intrastate,
and international–are divisions of regulatory authority between
the Federal Communications Commission and state regulators.”
408 F.3d at 1336. In other words, the different rate structures

18
are not related to how far a call travels, but rather, which
governmental body regulates the communication. Accordingly,
the charges for the Reese Services–which are based on their
characterization as intrastate, interstate, or international–do not
vary by distance and, therefore, are not covered by § 4252(b)(1).

B. “Toll Telephone Services” Under Section
4252(b)(2)

Having concluded that the Reese Services are not “toll
telephone services” under § 4252(b)(1), we now turn to the
Government’s alternative argument that they constitute “toll
telephone services” under § 4252(b)(2). Section 4252(b)(2)
describes such services as those “which entitle[] the subscriber
upon payment of a periodic charge (determined as a flat amount
or upon the basis of total elapsed transmission time), to an
unlimited number of telephonic communications to or from all
or a substantial portion of the persons having a telephone or
radio telephone stations in a specified area which is outside the
local telephone system area in which the station provided with
this service is located.” The Government contends that: (1)
there was no contractual limitation on the number of calls Reese
Brothers could make and, therefore, they were entitled to an
“unlimited number” of calls; (2) Reese Brothers received a
monthly bill and, hence, they were subject to a “periodic
charge”; and (3) the monthly bill was based upon a “total
elapsed transmission time”; and (4) although it was
large–essentially, anywhere outside the local calling
region–Reese Brothers were permitted to make calls to a
“specified area.”

Given the context of the provision, the Government’s
reading is an implausible one. First, the Carriers charged Reese
Brothers on a per call basis. Although it was not restricted in
the number of calls it could make, Reese Brothers was not,
under any reasonable interpretation of the phrase, entitled to

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“unlimited” calls “upon payment of a periodic charge.” See
OfficeMax, 428 F.3d at 599. Second, the bill that Reese
Brothers received was not based on the “total elapsed
transmission time,” but rather the sum of the charges for each
individual call, which vary by both the elapsed transmission
time and the character of the call (i.e., interstate, intrastate, or
international). For purposes of calculating the total amount of
Reese Brothers’ monthly bill, the Carriers added the toll charges
for each individual call and rounded up to the next highest
billing increment. The bill was based on the sum of the
individual calls, not the “total elapsed transmission time.” As
the OfficeMax Court explained, “[t]he end result is not a
“periodic charge” based on total elapsed time (or even total
elapsed time itself rounded up to the next billing increment), but
rather a monthly bill based on the summation of toll charges for
individual communications.” Id. Finally, the Government’s
argument that “specified area” means any location outside of the
local calling area strains credulity. As the other circuits have
pointed out, § 4252(c) is reflective of AT&T’s WATS service,
which permitted a customer to make calls to or receive calls
from one of AT&T’s six U.S. service areas. See id.; see also
Am. Bankers, 408 F.3d at 1337 (“Section 4252(b)(2) applies to
WATS service . . . .”). With that in mind, it is unreasonable to
equate “specified” with “anything but local.”

We agree with Reese Brothers’ contention that section
4252(b)(2) describes a toll service for which the customer pays
either a fixed dollar amount per month for an unlimited number
of calls, or a fixed dollar amount per month for a fixed number
of minutes or hours of use without regard to the number of calls
placed. Under this view, the Reese Services do not meet the
definition set forth in § 4252(b)(2).

C. “Local Telephone Services Under Section
4252(a)

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 Finally, the Government urges this Court to conclude that
the Reese Services are “local telephone services” under the
definition provided in § 4252(a). That section defines the phrase
to mean:

(1) the access to a local telephone system, and the
privilege of telephonic quality with substantially
all persons having telephone or radio telephone
stations constituting a part of such local telephone
system, and

(2) any facility or service provided in connection
with a service described in paragraph (1). The
term “local telephone service” does not include
any service which is a “toll telephone service” or
a “private communication service” as defined in
subsection (b) and (d).

26 U.S.C. § 4252(a). The Government contends that Congress
intended to tax all telephone services other than private
communications services, and as such, if the Reese Services are
not considered “toll telephone services,” they must, by default,
be considered “local telephone services.” The “local telephone
service” designation, in other words, is a residual category,
intended to capture all telephonic communications that are not
“toll telephone services” or “private communications services.”

Local networks are indeed used to some extent to carry
long-distance call traffic and, in connection with its long-
distance services, Reese Brothers had “access” to various local
telephone services. However, as the Sixth Circuit pointed out,
“the definition of local-telephone service requires ‘access to a’
local telephone system, not ‘access to every’ local telephone
system included within the boundaries of a long-distance plan.”
OfficeMax, 428 F.3d at 600. The Court concluded: “Not

21
surprisingly, given its application to ‘local’ telephone service,
the definition contemplates a service with limited geographic
reach, not a plan that makes use of an untold number of local
services.” Id. We agree.

We note also that, rather than creating a residual
category, the final sentence in § 4252(a)(2) is more
appropriately viewed as an effort to avoid double taxation of
communications that are taxed under a different provision.4
Once again, the Government is arguing that because Congress
intended to tax all types of telephonic communications to be
taxed, Reese Services must fit within one of the definitions in §
4252. Our reading of Iselin suggests that the opposite is true:
we should not enlarge the statute by including within its scope
that which was omitted. Iselin, 270 U.S. at 251. Accordingly,
we conclude that the Reese Services are not “local telephone
services” as defined by § 4252(a).

IV. Conclusion

Based upon the plain language and structure of §§ 4251
and 4252, we conclude that the federal communications excise
tax does not apply to long-distance telephone services that are
priced based on a fixed per-minute, non-distance-sensitive rate.
The Government would have us extend the reach of the federal
communications excise tax beyond its text. Following the

4
Specifically, insofar as a communication fits the
definition of a “toll telephone service” under § 4252(b) or a
private communication service under § 4252(d), but would also
otherwise fit the definition of a “local telephone service” under
§ 4252(a), it could have been taxed twice. The sentence
removes from the definition of “local telephone service”
anything that fits the definition of § 4252(b) or § 4252(d).

22
Supreme Court’s analysis in Iselin, and that of our sister circuits
in Fortis, OfficeMax, American Bankers, and Amtrak, we
decline to do so. We will therefore AFFIRM the judgment of
the District Court.

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