BNUMBER:  B-265776
DATE:  November 29, 1995
TITLE:  [Letter]

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B-265776

November 29, 1995

Jim Kranjc
Sales/Use Tax Manager
Ameritech
30 South Wacker Drive
Chicago, Illinois  60606

Dear Mr. Kranjc:

By letter dated August 15, 1995, you asked whether federal agencies in 
the state of Illinois are immune from paying the 9-1-1 emergency 
telephone surcharge imposed by the state.  Apparently, there is a 
disagreement on this issue between the Illinois Commerce Commission, 
which contends that the federal government is immune from paying the 
9-1-1 surcharge, and the city of Chicago which argues that federal 
agencies in the state are required to pay the surcharge.  Under 31 
U.S.C.  3529, certain federal officials are entitled to receive an 
"advance decision" from the Comptroller General concerning an agency's 
authority to make a particular payment, e.g., a payment for a 9-1-1 
surcharge imposed by a state.  Although you are not entitled to a 
Comptroller General decision under this statutory provision, we have 
summarized our prior decisions on this issue below.  We trust this 
information will be useful to you.

In prior decisions on 9-1-1 emergency telephone charges, we have 
repeatedly stated the unquestioned principle of constitutional law 
that the United States and its instrumentalities are immune from 
direct taxation by state and local governments.  Direct taxation 
occurs where the legal incidence of the tax falls directly on the 
United States as the buyer of goods, Kern-Limerick, Inc. v. Scurlock, 
347 U.S. 110 (1954), or as the consumer of services, 53 Comp. Gen. 410 
(1973), or as the owner of property, United States v. County of 
Allegheny, 322 U.S. 174 (1944).  These direct taxes, known as "vendee" 
taxes, are not payable by the federal government unless expressly 
authorized by Congress.  64 Comp. Gen. 655, 656-57 (1985).[1]

Our most recent decisions on the immunity of the federal government 
from state emergency telephone surcharges involved 9-1-1 surcharges in 
Wyoming and North Carolina.  B-254712, Feb. 14, 1994; B-254712, Feb. 
14, 1994.  In both of the cases the 9-1-1 surcharges at issue were 
vendee taxes not payable by the federal government.  Under the state 
statutes at issue in these decisions, the telephone companies were 
merely collection agents, i.e., required to collect the 9-1-1 
surcharges from their customers and then remit the amount collected to 
the state taxing authorities.  Cf. B-238410, Sept. 7, 1990.

Illinois 9-1-1 statute is not materially different from the Wyoming 
and North Carolina statutes.  Under the Illinois statute, the 
telephone companies operating in the state act as collection agents 
for the state authorities; the telephone companies collect the monthly 
9-1-1 surcharge[2] from network subscribers "as a separately stated 
item on the subscriber's bill."  Ill. Ann. Stat. ch. 50, para. 
750/15.3(f).  The telephone companies must hold the amount of the 
surcharge collected in a trust fund until it is paid over to the 
state.  Id. at para. 750/15.3(k).  The amount of the surcharge that is 
collected must "be paid to the [appropriate state authority] not later 
than 30 days after the surcharge is collected."  Id. at para. 
750/15.3(g).  The telephone company is allowed to retain 3% of the 
gross surcharge collected "for the expense of accounting and 
collecting the surcharge."  Id. at para. 750/15.3(k).  

The Illinois 9-1-1 surcharge appears to share the attributes of other 
state statutes that we have viewed as vendee taxes, the legal 
incidence of which falls directly on the federal government as a user 
of telephone services in the state.  As you know, our decisions have 
repeatedly held that the federal government is constitutionally immune 
from paying such surcharges.  I understand that Andrea Levine of my 
staff has already sent you copies of our decisions in this area.  
Nonetheless, if you would like to discuss this further, or need any 
additional information, please call Ms. Levine or me at (202) 
512-5644.  

Sincerely yours,

Gary L. Kepplinger 
Associate General Counsel
B-265776

DIGEST

     The 9-1-1 emergency telephone surcharge imposed by the state of 
     Illinois is a vendee tax, the legal burden of which falls 
     directly on the federal government as a user of telephone 
     services.  The federal government is constitutionally immune from 
     paying such surcharges whether styled a tax or a surcharge.
f:\userfile\duncane\kranzj

1. Although the Illinois statute labels the 9-1-1 emergency telephone 
charge as a "surcharge," it is, nonetheless, a tax.  In 65 Comp. Gen. 
879, 881 (1986), we identified the characteristics of telephone 
charges which make them taxes.  First, the telephone service is 
provided by a local government or by a quasi-governmental unit.  
Second, public funding of the service requires legal authority, e.g., 
an ordinance or referendum.  Third, the service charges charge is 
actually based on flat rate per telephone line and is unrelated to 
levels of service.  The 9-1-1 surcharge assessed under the Illinois 
statute satisfies all these criteria.

2. Under the Illinois statute, the monthly 9-1-1 surcharge is 
"impose[d] . . . on billed subscribers" of telephone services.  Ill. 
Ann. Stat. ch. 50, para. 750/15.3(a).  The surcharge is imposed "at a 
rate per network connection" and, in a municipality with a population 
over 500,000, "may not be in excess of $1.25 per network connection."  
Ill. Ann. Stat. Id., ch. 50, para. 750/15.3(h).