Vodafone Americas Holdings Inc. & Subsidiaries v. Richard H. Roberts, Commissioner of Revenue, State of Tennessee

At issue in this case is the methodology by which multi-state taxpayers are to compute their liability for franchise and excise taxes to Tennessee and, specifically, the authority of the Commissioner of Revenue to require the taxpayers to use an apportionment methodology other than the standard cost of performance methodology codified in Tenn. Code Ann. §§ 67-4-2012and67-4-2110.Plaintiffs,taxpayers thatprovide wirelesscommunication anddata services within and without Tennessee, contend they are entitled to apportion their receipts (income) based upon Tennessee’s standard apportionment formulas because the majority of their “earnings producing activities” occurred in a state other than Tennessee. The Commissioner of Revenue disagreed, insisting that Plaintiffs’ approach, even if statistically correct and derived from the language of Tenn. Code Ann. § 67-4-2012(i)(2), fails to meet the higher goal of fairly representing the business Plaintiffs derive from Tennessee. For this reason the Commissioner, acting pursuant to Tenn. Code Ann. § 67-4-2014(a), varied the standard formula requiring Plaintiffs to include “as Tennessee sales” its receipts from service provided to customers with Tennessee billing addresses.The trialcourtaffirmedthedecision. In this appeal, Plaintiffs contend the Commissioner does not have authority to impose a variance unless “unusual fact situations,” which are unique to the particular taxpayers, produce “incongruous results” unintended by Tenn. Code Ann. § 67-4-2012; they also insist that no unusual fact situations exist and that no incongruous results occurred when the statutorily-mandatedcostofperformancemethodologywas applied.We have determined that the Commissioner acted within the scope of the discretion granted to him by the statutes and rules. Therefore, we affirm the trial court’s decision.