FIXRR.COM  --> Tax Issues Page 1                 Next: Tax Issues Page 2     Page 3: DCCA Complaint

Hawaii Road Runner Customers:
Tax and franchise fees do not apply to Internet Access:

SUMMARY: On Oct. 19, 2001, Marilyn, a Hilo Road Runner customer suggested to Hilo Hawaiian Cablevision (an Oceanic affiliate) that the charges for TAX and Franchise Fees included in her bill were invalid under current laws, and that both charges should be stopped, and refunds issued for these fees improperly collected.

Linda Thompson at Hilo Hawaiian Cablevision promised to research and escalate; Marilyn then sent a message to Oceanic Internet GM Kiman Wong, and Oceanic Public Relations Director Kit Beuret.

On October 25, Wong acknowledged receipt of Marilyn's message, suggesting that Oceanic was preparing a response which it would hopefully deliver around October 29.

OVER THREE WEEKS LATER - there was still no response. On November 14, Marilyn sent a followup, and finally received a reply from Mr. Wong later on the 14th. On November 16, Marilyn sent a message with additional questions to Mr. Wong.

On November 19, Marilyn, another Big Island customer, an Oahu Road Runner customer, and I filed a complaint with the State of Hawaii Department of Commerce and Consumer affairs. The complaint requests refunds for State Cable Franchise Fees and State General Excise Tax charged by Oceanic and its affiliates.

This page contains a copy of the original October 21, 2001 message to Oceanic and Marilyn's November 14, 2001 followup.

Page 2 - contains the Oceanic response received November 14, and Marilyn's reply of November 16. (No response has been received to this last e-mail as of the end of business Nov. 19.)

Page 3 - contains the complaint filed November 19, 2001 with the DCCA.

Here is Marilyn's October 21 request:

Dear Mr. Wong and Mr. Beuret,
My monthly RR bill from Hawaiian Cablevision includes a charge for the state cable franchise fee and state excise tax.  I believe that both charges are invalid, under current laws, and that Oceanic/Hawaiian Cablevision,etc. should stop the charges and issue a refund for charges previously collected.
On October 19, I spoke with Linda Thompson, Hawaiian Cablevision, about this matter.  She had no answers for me but said she would escalate the matter and research it. 
 Under the Internet Tax Freedom Act of 1998, no state can impose a tax on internet access.  (This act is due to expire on Oct 21, 2001 but has been extended by the U.S. House of Representatives and the Senate has not yet acted upon this. If the act is not extended then any refund would be limited to taxes collected before this date).  According to the archives at http://www.vertexinc.com/cybrary/internet/state_by_state.asp#HAWAII, internet access in Hawaii is exempt from taxation. This would include the state excise tax that I have been paying on my RR bill.  Before I got RR in June 2001, I never paid any internet access tax (in the form of the excise tax or any other form) to my ISP. 
I am aware of several instances where RR/TW has stopped collecting state sales tax and franchise tax/fee.  I am attaching correspondence between a South Carolina RR/TW user and Larry Michalec, Jr., Vice President and General Manager RR/TW Cable in Columbia, South Carolina.  In this instance, after the imposition of state sales tax and the cable franchise fee to a RR bill was questioned by a user, RR/TW stopped collecting both taxes and refunded all previously collected taxes.
There are many instances also where other providers of RR such as Cox in Kansas, have removed all sales tax and franchise fees/taxes relating to RR (not cable tv) from users bills and have refunded previously improperly collected fees.
There is another consideration regarding the imposition of franchise fees/taxes in Hawaii.  In AT&T Corporation v the City of Portland, the Ninth Circuit Court of Appeals in June 2000 ruled that cable modem is is not cable but is telecommunications.  http://www.ca9.uscourts.gov/ca9/newopinions.nsf/04485f8dcbd4e1ea882569520074e698/34f734e8169bb75988256952007579ed?OpenDocument
 This ruling is final (there was no appeal) and is binding on all states within the jurisdiction of the Ninth Circuit which includes the state of Hawaii.  Unless and until the FCC issues a ruling on this matter, the Ninth Circuit ruling is applicable in Hawaii.  AT&T and Cox have refused to pay franchise fees/taxes in all nine states within the Ninth Circuit's jurisdiction and have removed these charges from the user's bill.   
Marilyn Wells


From: "Flatus Ohlfahrt" <flatus@tricare.org>
Subject: Re: Time Warner v Earthlink--Such a deal.
Date: Thursday, October 18, 2001 6:55 AM

wbe @ubeblock.psr.com.invalid (Winston Edmond) wrote in

> Flatus Ohlfahrt <flatus@tricare.org> writes:
>> Yes, I got them to stop charging state sales taxes and local
>> franchise fees. It was based on a South Carolina
>> implementation of the federal policy prohibiting taxation of
>> the internet. It amounted to a sizable dollar figure because
>> the franchise fees, especially, can be quite steep.
> Oh, really?! <:-) Hmmm, let's see... Interesting...
> Comparing a non-RR bill with a RR bill I find:
> * SC sales tax stayed the same, but
> * the franchise fee went up $2/month.
> So, yup, it looks like the franchise fee is a 5% tax on the
> total bill, including internet service.
> Now, how exactly did you convince TWC to rebate $2 * N months
> and lower your monthly bills?
> -WBE

Here's the correspondence with my name edited out:

From: "Larry Michalec" <larry.michalec@twcable.com>
To: me@sc.rr.com>
Subject: RE: Internet Taxation
Date: Mon, 27 Mar 2000 08:44:27 -0500
X-Mailer: Internet Mail Service (5.5.2448.0)

We will be crediting accounts where taxes were improperly
applied. Thanks again.

Larry Michalec, Jr.
Vice President and General Manager - Road Runner
Time Warner Cable
293 Greystone Blvd.
Columbia SC 29210
Phone: 803.251.5290
Fax: 803.251.5345
E-mail: larry.michalec@twcable.com

> -----Original Message-----
> From: Me@sc.rr.com]
> Sent: Friday, March 24, 2000 8:00 AM
> To: Larry Michalec
> Subject: RE: Internet Taxation
> I'm glad you were able to get things sorted out (you are
> going to make an accommodation for taxes that were improperly
> collected?)
> FWIW, I did call the number on my statement when I received
> my bills. Gave the woman I talked with in January all the
> particulars. Never heard anything back. After February's
> bill, called again and was rerouted to etherspace. Did make a
> mention of it in one of the RR newsgroups, but nothing
> transpired. Chris Clark finally shook it loose when he was
> following-up on another matter.
> No one ever said ramping-up a new service would be
> easy---especially when it's layered on a similar technology,
> but totally different culture.
> Thanks for your help!
> Me.
> At 08:07 AM 3/23/00 -0500, you wrote:
> >Dear Mr. Me,
> >I wanted to follow-up with you regarding the internet
> >taxation issue that you brought to our attention. We have
> >investigated the issue as I noted below and have arrived at
> >a resolution. We are going to discontinue the
> tax
> >on Road Runner service you have seen in the past in your
> >bill. Per our Controller, this change will be put in effect
> >immediately.
> >
> >Please do not hesitate to contact me regarding this issue or
> >any other
> that
> >your have concern over. I am also an experienced user of
> >news groups and
> we
> >at Road Runner intently focus on resolving issues that are
> >brought to our attention. Please do not feel like using the
> >news groups is the last
> resort
> >or preferred way to catch our attention. Please keep my
> >number at hand. As VP for Road Runner you have a direct
> >access line to the top.
> >
> >Again, thanks for your help.
> >
> >Larry Michalec, Jr.
> >Vice President and General Manager - Road Runner
> >Time Warner Cable
> >293 Greystone Blvd.
> >Columbia SC 29210
> >Phone: 803.251.5290
> >Fax: 803.251.5345
> >E-mail: larry.michalec@twcable.com
> >www.sc.rr.com
> >
> >> -----Original Message-----
> >> From: Larry Michalec
> >> Sent: Monday, March 20, 2000 3:14 PM
> >> To: 'me@sc.rr.com'
> >> Cc: Dean Morman
> >> Subject: Internet Taxation
> >>
> >> Dear Mr. Me,
> >> Thank you for your recent e-mail expressing concern
> >> regarding taxation
> of
> >> your Road Runner account with reference to SC Information
> >> letter #99-9.
> >>
> >> I have reviewed the document and forwarded for action the
> >> document to
> Time
> >> Warner corporate headquarters. I want to assure you and
> >> all Road
> Runner
> >> subscribers that we are investigating the issue fully. In
> >> the event
> there
> >> is a resolution that impacts the taxes already paid to us,
> >> we will act swiftly to remedy the issue and credit back
> >> funds that might have been inappropriately collected.
> >>
> >> We will be back in touch with you as soon as we hear from
> >> Corporate. Thanks again for making this issue visible to
> >> us.
> >>
> >> Larry Michalec, Jr.
> >> Vice President and General Manager - Road Runner
> >> Time Warner Cable
> >> 293 Greystone Blvd.
> >> Columbia SC 29210
> >> Phone: 803.251.5290
> >> Fax: 803.251.5345
> >> E-mail: larry.michalec@twcable.com
> >> www.sc.rr.com
> >>
> >

----- Original Message -----
From: Kiman Wong
To: Marilyn
Sent: Thursday, October 25, 2001 10:00 AM
Subject: RE: Internet access tax and franchise fees


 Thank you for your e-mail. I wanted to let you know we have receive it and we are in the process of preparing a response and hope to have that to you early next week.

 Thank you,

Kiman Wong
Kiman K. L. Wong
General Manager-Internet Services
Oceanic Cable

Phone: (808) 625-8335
Fax:     (808) 625-5888


----- Original Message -----
From: Marilyn
Sent: Wednesday, November 14, 2001 12:40 AM
Subject: Re: Internet access tax and franchise fees

Dear Mr. Wong,
I have been waiting for three weeks for your response.  I believe that Oceanic/Time Warner has had more than adequate time to prepare a response. In the absence of any reasonable explanation, for the lack of a timely response, I believe it is necessary that I take this matter to the next level.   I will be filing a complaint with the Hawaii Department of Commerce and Consumer Affairs within a few days.

Later on November 14, Marilyn received an unbelievable response from Kiman Wong, General Manager, Oceanic Internet Services.....