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Can “And” Ever Be “Or”?
In 2003, OfficeMax sued the United States government
(the Internal Revenue Service) for a return of excise
tax that OfficeMax had paid for telephone service.
This was not a trivial financial matter–OfficeMax had
paid over $380,000.00 in telephone excise tax. To understand the nature of the argument, we need a brief
history of the federal tax on telephone service.
The first telephone tax was enacted by Congress in
1898 (22 years after the invention of the telephone by
Alexander Graham Bell). The tax was intended to help
pay the federal debt incurred by the Spanish-American
War, and it was repealed, as planned, in 1902. Over subsequent years, the telephone tax came and went with
fluctuating rates as the government incurred debt. Resurrected again in 1932, the tax, in one form or another,
has been in effect ever since. In 1965, Congress defined
local phone service and “toll telephone service” (longdistance calls) as two categories of taxable service, and it
set the tax rate at 3%. Of interest to this discussion is the
definition Congress gave at this time of “toll telephone
service,” which states in part that it is “a telephonic quality communication for which there is a toll charge which
varies in amount with the distance and elapsed transmission time of each individual communication.” Keep in
mind that in 1965, there was essentially only a single
telephone service provider in the United States, namely
AT&T, and at that time AT&T charges were based on both
the duration and the distance of each call. By the 1990s,
AT&T had been broken up and there were a number of
competitive telephone companies. In addition, telephone
companies began to charge a flat rate per minute for nationwide long-distance calls. The phone companies collected the federal excise tax from their customers and
passed the tax on to the federal government.
OfficeMax used MCI as its phone service provider
from 1999 to 2002, during which time MCI collected the
excise tax from OfficeMax. In 2003, OfficeMax sued the
federal government for a refund of the excise taxes MCI
had collected on the basis that MCI was not providing
“toll telephone service” as defined by Congress in 1965
because MCI was charging a rate based not on time and
distance but only on time. Here is the issue: What exactly is the meaning of the word “and” in “varies in amount
with the distance and elapsed transmission time”?
OfficeMax argument: “And” means the conjunctive “and,” as the truth table for “and” is defined in
formal logic. For the tax to apply, the phone company
had to charge its customers a rate based on both time
and distance.
Internal Revenue Service argument: Elsewhere
in this same legislation, Congress did use “and” in a
disjunctive sense when it defined “communication services” as “local telephone service, toll telephone service, and teletypewriter exchange service.” Because
these three are mutually exclusive, “and” here could
not have a conjunctive meaning.
The majority opinion of the United States Court
of Appeals for the Sixth Circuit, in 2005, agreed with
OfficeMax. Its reasoning was (1) dictionary definitions, legal usage guides, and case law assert that “and”
is generally conjunctive, (2) the conjunctive usage is
consistent with the billing mechanism used by the only
telephone company in existence at the time the law was
written, (3) the disjunctive interpretation would allow
the possibility of a telephone charge based solely on distance, which is a ridiculous idea that Congress surely
did not intend, and (4) lower courts had found in favor of
OfficeMax. In short, the IRS lost this case and a number of similar cases, and in 2006 it announced that
phone service that is charged on time and not distance
is not taxable. (The 3% excise tax on local telephone
service is still in effect.)
One must, however, appreciate the humor of the
dissenting opinion in the OfficeMax case: “A host separately asked two prospective guests what they liked to
drink. One said, “I like bourbon and water.” The other
said, “I like beer and wine.” When the second guest
arrived at the event, the host served the guest a glass of
beer mixed with wine. “What′s that awful drink?” said
the guest, to which the host answered, “You said you
liked beer and wine.” Sometimes we apparently do use
“and” in a disjunctive sense. So here is a legal—and
financial—case that hinged on the truth table for the
logical connective AND. How cool is that?!
OFFICEMAX, INC., Plaintiff-Appellee, v. UNITED
STATES of America, Defendant-Appellant,
No. 04-4009, United States Court of Appeals,
Sixth Circuit, Argued: July 29, 2005, Decided and
Filed: November 2, 2005, 428 F.3d 583. Online at
http://law.justia.com/cases/federal/appellate-courts/
F3/428/583/565375/
C h a p t e r
1 1
Can “And” Ever Be “Or”?
In 2003, OfficeMax sued the United States government
(the Internal Revenue Service) for a return of excise
tax that OfficeMax had paid for telephone service.
This was not a trivial financial matter–OfficeMax had
paid over $380,000.00 in telephone excise tax. To understand the nature of the argument, we need a brief
history of the federal tax on telephone service.
The first telephone tax was enacted by Congress in
1898 (22 years after the invention of the telephone by
Alexander Graham Bell). The tax was intended to help
pay the federal debt incurred by the Spanish-American
War, and it was repealed, as planned, in 1902. Over subsequent years, the telephone tax came and went with
fluctuating rates as the government incurred debt. Resurrected again in 1932, the tax, in one form or another,
has been in effect ever since. In 1965, Congress defined
local phone service and “toll telephone service” (longdistance calls) as two categories of taxable service, and it
set the tax rate at 3%. Of interest to this discussion is the
definition Congress gave at this time of “toll telephone
service,” which states in part that it is “a telephonic quality communication for which there is a toll charge which
varies in amount with the distance and elapsed transmission time of each individual communication.” Keep in
mind that in 1965, there was essentially only a single
telephone service provider in the United States, namely
AT&T, and at that time AT&T charges were based on both
the duration and the distance of each call. By the 1990s,
AT&T had been broken up and there were a number of
competitive telephone companies. In addition, telephone
companies began to charge a flat rate per minute for nationwide long-distance calls. The phone companies collected the federal excise tax from their customers and
passed the tax on to the federal government.
OfficeMax used MCI as its phone service provider
from 1999 to 2002, during which time MCI collected the
excise tax from OfficeMax. In 2003, OfficeMax sued the
federal government for a refund of the excise taxes MCI
had collected on the basis that MCI was not providing
“toll telephone service” as defined by Congress in 1965
because MCI was charging a rate based not on time and
distance but only on time. Here is the issue: What exactly is the meaning of the word “and” in “varies in amount
with the distance and elapsed transmission time”?
OfficeMax argument: “And” means the conjunctive “and,” as the truth table for “and” is defined in
formal logic. For the tax to apply, the phone company
had to charge its customers a rate based on both time
and distance.
Internal Revenue Service argument: Elsewhere
in this same legislation, Congress did use “and” in a
disjunctive sense when it defined “communication services” as “local telephone service, toll telephone service, and teletypewriter exchange service.” Because
these three are mutually exclusive, “and” here could
not have a conjunctive meaning.
The majority opinion of the United States Court
of Appeals for the Sixth Circuit, in 2005, agreed with
OfficeMax. Its reasoning was (1) dictionary definitions, legal usage guides, and case law assert that “and”
is generally conjunctive, (2) the conjunctive usage is
consistent with the billing mechanism used by the only
telephone company in existence at the time the law was
written, (3) the disjunctive interpretation would allow
the possibility of a telephone charge based solely on distance, which is a ridiculous idea that Congress surely
did not intend, and (4) lower courts had found in favor of
OfficeMax. In short, the IRS lost this case and a number of similar cases, and in 2006 it announced that
phone service that is charged on time and not distance
is not taxable. (The 3% excise tax on local telephone
service is still in effect.)
One must, however, appreciate the humor of the
dissenting opinion in the OfficeMax case: “A host separately asked two prospective guests what they liked to
drink. One said, “I like bourbon and water.” The other
said, “I like beer and wine.” When the second guest
arrived at the event, the host served the guest a glass of
beer mixed with wine. “What′s that awful drink?” said
the guest, to which the host answered, “You said you
liked beer and wine.” Sometimes we apparently do use
“and” in a disjunctive sense. So here is a legal—and
financial—case that hinged on the truth table for the
logical connective AND. How cool is that?!
OFFICEMAX, INC., Plaintiff-Appellee, v. UNITED
STATES of America, Defendant-Appellant,
No. 04-4009, United States Court of Appeals,
Sixth Circuit, Argued: July 29, 2005, Decided and
Filed: November 2, 2005, 428 F.3d 583. Online at
http://law.justia.com/cases/federal/appellate-courts/
F3/428/583/565375/
C h a p t e r
1 1