Washington State Supreme Court Ruling Locks in Lower Tax Rate for OmniTracs

By Dan Leone, Staff Reporter

This story appears in the March 21 print edition of Transport Topics. Click here to subscribe today.

Purchasers of Qualcomm Inc.’s OmniTracs system in Washington state dodged a tax hit following a March 10 decision about the legal classification of that system by the Washington Supreme Court.

The court wrote that under state law, Qualcomm’s services are “information services” rather than “network telephone services.” Under Washington law, information services are subject to lower tax rates than are telephone services.

The court said that while OmniTracs performs functions associated with both types of service, classification ultimately depended upon whether purchasers of OmniTracs — trucking companies — intended to use it primarily for communicating with drivers or primarily for gathering the data generated by Qualcomm’s systems.

“The primary purpose of Qualcomm’s system is to provide companies with specific information about trucks, not to communicate with drivers,” the Washington Supreme Court wrote in its March 10 decision.

The Washington Department of Revenue sought about $1 million in unpaid taxes from Qualcomm. The department’s assessment was for the period spanning 1998 to 2002, according to the March 10 ruling.

“Qualcomm has aggressively advocated for its customers that Qualcomm’s fleet management services should be treated as ‘information services’ and not be subject to telecommunications sales and use taxes under most state laws,” Marc Sands, vice president and division counsel of Qualcomm Enterprise Services, wrote in an e-mail to Transport Topics. “We are pleased that the Washington Supreme Court has agreed with Qualcomm’s position which will benefit our customers in Washington.”

A spokesman for the Washington Department of Revenue said that the department won’t pursue the classification issue any further.

“We don’t have any plans for seeking reconsideration” of the state Supreme Court’s decision, said Mike Gowrylow, a spokesman for the Washington Department of Revenue told TT.

In its ruling, the Washington Supreme Court sent the case back to the trial court “for further proceedings consistent with this opinion.” The nine-member Supreme Court was split on the issue, with three justices dissenting.

American Trucking Associations cheered the verdict. The trucking-industry trade group had filed an amicus brief with the Washington court in which it said that trucking companies that purchase OmniTracs or similar systems “are buying a vital truck and driver management tool that utilizes processed data or information to enable them to supervise their drivers and to ensure efficient deliveries.”

Qualcomm has prevailed in litigation regarding the classification and taxation of the OmniTracs service before.

A judge for the 11th Judicial Circuit Court of Florida ruled in 2010 that Qualcomm was entitled to a refund from the Florida Department of Revenue because OmniTracs was not a taxable “communications system” under Florida law.

Likewise, the Tennessee Court of Appeals in 2007 agreed with Qualcomm that the OmniTracs service was an “information service” under that state’s laws, and therefore not subject to Tennessee’s telecommunications sales tax.

OmniTracs is Qualcomm’s oldest mobile communications and truck-tracking system. OmniTracs allows drivers and dispatchers to exchange text messages over a satellite network. OmniTracs also generates time-stamped position data that dispatchers can use to track trucks.