CITY OF UNIVERSITY CITY MISSOURI CITY OF BLUE SPRINGS MISSOURI CITY OF CAPE GIRARDEAU MISSOURI CITY OF CHESTERFIELD MISSOURI CITY OF DEXTER MISSOURI CITY OF ELLISVILLE MISSOURI CITY OF FERGUSON MISSOURI CITY OF FLORISSANT MISSOURI CITY OF GLADSTONE MISSOURI CITY OF INDEPENDENCE MISSOURI CITY OF JENNINGS MISSOURI CITY OF KIRKSVILLE MISSOURI CITY OF MANCHESTER MISSOURI CITY OF MAPLEWOOD MISSOURI CITY OF MARYLAND HEIGHTS MISSOURI CITY OF NORTHWOODS MISSOURI CITY OF FALLON MISSOURI CITY OF VINITA PARK MISSOURI CITY OF WARSON WOODS MISSOURI CITY OF WELLSTON MISSOURI AND CITY OF WINCHESTER MISSOURI v. AT WIRELESS SERVICES INC ET AL (2026)

Introduction

This lengthy dispute began in 2001 when University City, Missouri and twenty-one other Missouri municipalities (the Cities), acting as the named plaintiffs and representatives of a class consisting of all but three of Missouri's more than 330 municipalities,¹ sued AT&T Mobility and dozens of its affiliated companies (hereinafter, AT&T) claiming that AT&T had been failing to fully pay each City's business license tax on the gross receipts generated from its business activities occurring in each municipality.

Much water has passed under this bridge since, most notably the parties’ 2007 settlement agreement, later incorporated into a final judgment, in which AT&T agreed to pay to the Cities portions of its past business license tax liability and the license taxes going forward as defined by the agreement.

The current iteration of this litigation springs from the Cities’ 2017 motion to enforce that settlement agreement and concerns the parties’ dueling summary judgment motions regarding the interpretation of that agreement. In its motion to enforce, the Cities claimed that AT&T was in material breach because it had been systematically underpaying the Cities’ license taxes on its gross revenue receipts generated in each City. The parties squared off and litigated at length in the trial court. This appeal centers on whether under the agreement AT&T's business license tax base includes the gross receipts generated from these four areas of its business:

1. Prepaid wireless voice and text service;

2. Equipment sales including telephones, accessories, phone cases, charges, and batteries among other items;

3. Miscellaneous contract charges including local source revenue such as contract termination charges, late payment fees, technical customer service support charges, bill reprint fees, returned check fees, and state sales tax collection income; and

4. Data service including internet access charges.

The parties’ summary judgment papers, of course, took opposite views on each of these main areas of contention. In a nine-and-a-half-page judgment issued on September 30, 2024, the trial court agreed with AT&T on all four issues. The Cities now appeal in seventeen points. Our holdings are as follows:

First, we find that AT&T's prepaid wireless services are within the agreement's purview so with regard to the prepaid wireless receipts we grant summary judgment in favor of the Cities on their motion to enforce. We remand the issue for further proceedings as follows: For the period from December 1, 2007 until the point in 2016 when AT&T began including its prepaid wireless receipts in its tax base, the matter is remanded for further proceedings including an accounting and to determine the Cities’ damages. For the period from 2016 to the present, we likewise remand for further proceedings to determine a remedy including a determination of the Cities’ damages for AT&T's failure to source those receipts consistent with the Mobile Telecommunications Sourcing Act.²

Next, as for the second and third categories of receipts, equipment sales and miscellaneous contract charges, we affirm based on our holding that the “future tax payments” provision of the agreement reflects the parties’ intent to exclude those areas of AT&T's business in its license tax base.

Finally, we hold that AT&T has established its right to summary judgment that internet access receipts are not part of AT&T's license tax base.

Background

The class action settlement agreement the parties reached in December 2007 – later incorporated into an April 18, 2008 final judgment – is at the heart of this case. To resolve the Cities’ claims to past unpaid license taxes for the period September 1, 2005 to November 30, 2007, AT&T agreed to pay the Cities’ claims to those taxes subject to the agreement's terms.

AT&T's future tax obligation, that is, its agreement to pay license taxes going forward from December 1, 2007, is at the center of this appeal. The relevant terms are as follows:

“Future Tax Payments. Subject to the provisions of this Settlement Agreement, AT&T Mobility agrees to pay, with respect to tax periods and partial tax periods commencing on and after December 1, 2007, the Business License Taxes of each Class Member that is bound by and complies with the terms of this Settlement Agreement. For such taxes that are imposed on gross receipts sourced consistent with the Mobile Telecommunications Sourcing Act, 4 U.S.C. sections 116-126 (“MTSA”), AT&T Mobility will pay such taxes at the tax rates set forth in each such Class Member's respective ordinance(s), subject to the provisions of Section IV.E concerning multiple rate ordinances, on all receipts from providing Telecommunications Service ․.”

This provision employs two defined terms: “business license taxes” and “telecommunications service.” The agreement defines “business license taxes” as any tax imposed by one of the Cities on “any ‘telephone company,’ ‘exchange telephone company,’ ‘telecommunications company,’ ‘public utility,’ ‘utility’ or any other service provider for the privilege of engaging in the business of providing telephone, exchange telephone, telecommunications, or any other type of Telecommunications Service ․.”

For the definition of “telecommunications service,” the agreement borrows from Missouri's sales tax statute, section 144.010.1(16):³

“․ the transmission of information by wire, radio, optical cable, coaxial cable, electronic impulses, or similar means. As used in this definition, ‘information’ means knowledge or intelligence represented by any form of writing, signs, signals, pictures, sounds, or any other symbols.”4

Section 144.010.1(16) then conditionally excludes from the definition of Telecommunications Service “access to the internet ․ if such services are separately stated on the customer's bill or on records of the seller maintained in the ordinary course of business ․.”

For several years after the settlement, AT&T paid the Cities’ license taxes on its gross revenue receipts generated from its post-paid voice and texting service, that is, charges customers paid AT&T for the voice and texting service they had already used. AT&T also paid the Cities’ license taxes on data service including internet access revenue,⁵ and did so on a nationwide basis as well, but stopped in September 2010 after customers across the country including Missouri sued AT&T alleging that state and local taxes on data service violated the Internet Tax Freedom Act, 47 U.S.C. section 151 (1998) (ITFA). The settlement of that class action (the ITFA settlement) required AT&T to stop collecting taxes on data services and to seek refunds of such taxes paid between 2005 and 2010.

In November 2010, AT&T sent letters requesting that the Cities issue those refunds to AT&T's customers. In response, the Cities filed a motion in this case seeking the court's declaration that the parties’ agreement required AT&T to pay license taxes on internet access services notwithstanding the ITFA settlement. The parties litigated that issue and in August 2012, the trial court issued its order that AT&T's customers were not entitled to refunds on internet access tax payments made to the Cities between November 1, 2005, and September 30, 2010, in part because the parties’ agreement released those claims and in part because the refund requests were untimely.

The court's order also analyzed whether the parties’ agreement imposed on AT&T an on-going duty to pay license taxes on internet access charges despite the ITFA settlement. The trial court recognized that AT&T's duty to pay taxes on internet access under the settlement agreement might survive the ITFA settlement because the agreement incorporated the language from section 144.010.1(16)(a) that requires AT&T to do certain things to avoid including internet access receipts in its tax base. That is, the language of section 144.010.1(16)(a) contemplates license taxes on internet access “if such services are [not] separately stated on the customer's bill or on records of the seller maintained in the ordinary course of business.” But so does the ITFA and section 144.010.1(16)(a) closely tracks the ITFA's language at section 1106 of the Act that “If charges for Internet access are aggregated with and not separately stated from charges for telecommunications services or other charges that are subject to taxation, then the charges for Internet access may be subject to taxation unless the Internet access provider can reasonably identify the charges for Internet access from its books and records kept in the regular course of business.”

Nevertheless, the trial court declined to decide whether since September 7, 2010, AT&T had been complying with that provision of the agreement.

The issue is teed up now, however. In October 2012, the Cities requested an audit of AT&T's billing records to determine if it was “separately stat[ing] on the customer's bill” or in its records “maintained in the ordinary course of business” charges for access to the internet to satisfy section 144.010.1(16)(a). To prove that its billing practices qualified it to exclude its data services from its license tax base, AT&T offered a sample of five monthly bills and a set of spreadsheets purporting to demonstrate its data services tax calculations. The Cities did not follow up on this information until the present litigation which started in 2017.

Meanwhile, in September 2016, the City of Monett, Missouri, a member of the class here, reached a separate settlement with AT&T on Monett's claim that AT&T owed it license taxes on AT&T's prepaid wireless revenue. AT&T agreed to pay Monett a lump sum in back taxes and to pay on those prepaid wireless receipts going forward. AT&T also agreed to include equipment sales receipts going forward in its license tax base as to Monett only.

After the Monett settlement, AT&T began including in its license tax base as to all the Cities its prepaid wireless receipts. AT&T claims it began voluntarily paying the license taxes on prepaid because of the holding in TracFone Wireless, Inc. v. City of Springfield, 557 S.W.3d 439 (Mo. App. 2018) and their settlement agreement's “change in law” provision. AT&T did not agree to include equipment sales receipts with respect to any other City except Monett and our record is silent as to why.

On November 29, 2017, after learning of the Monett settlement, the Cities filed the motion to enforce that is before us now claiming that AT&T had been breaching the settlement agreement by excluding from its license tax base the gross revenue receipts on the four business sectors at issue here. The Cities prayed for an accounting, back taxes, and injunctive relief going forward.

In early 2019, AT&T launched what it calls Project Mercury, a fundamental change in its billing practices. Instead of separately billing customers for each service (e.g., voice, text, and data), AT&T began bundling those services under a single charge on the customer's bill. Mercury's relevance to this case, as considered below, centers on the extent to which AT&T is able to separate out those charges for license tax calculation purposes. AT&T claims it can do so and provided certain documentation and testimony explaining the unbundling method.

In November 2023, AT&T moved for summary judgment on the Cities’ motion to enforce while the Cities moved for partial summary judgment on liability only. On September 30, 2024, the trial court granted AT&T's motion in toto. First, the court found that section 144.010.1(16)’s definition of “telecommunications service” barred the Cities’ claims entirely because none of the four categories of receipts at issue are included in that definition. Next, the court found the Cities’ claims were also barred by the parties’ “practical construction” because “[a]t no point during the negotiations” leading to the agreement did the parties construe “telecommunications service” to include data services, equipment sales, or prepaid wireless. Third, the court held that “governmental estoppel” barred the Cities’ claims because the “Cities expressly agreed to the exclusion of internet access from taxation and have acted inconsistently with that statement by requesting taxes be paid and suing thereon.” Fourth, that the settlement agreement contained no meeting of the minds on prepaid wireless services.

The Cities’ seventeen points on appeal focus on whether AT&T owes the Cities’ license taxes on the four areas of its business described above.⁶ For ease of analysis, we group the points under each of those matters.

Standard of Review

This court reviews de novo an appeal challenging the grant of a motion for summary judgment. Day Advertising, Inc. v. Hasty, 606 S.W.3d 122, 129 (Mo. App. 2020). We do not defer to the trial court's order granting summary judgment “because the trial court's initial judgment is based on the record submitted and amounts to a decision on a question of law.” Barry Harbor Homes Ass'n v. Ortega, 105 S.W.3d 903, 906 (Mo. App. 2003). “Rather, we use the same criteria the trial court should have employed in initially deciding whether to grant summary judgment.” Id. This court views the record in the light most favorable to the nonmoving party and affords that party the benefit of all inferences which may be reasonably drawn from the record. Barekman v. City of Republic, 232 S.W.3d 675, 677 (Mo. App. 2007) (citing ITT Commercial Finance Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993)). But summary judgment is an extreme and drastic remedy, and appellate courts should remain cautious in affirming such judgments. Boone County v. County Employees’ Retirement Fund, 26 S.W.3d 257, 260 (Mo. App. 2000).

“In actions arising out of a contract, summary judgment is inappropriate where the disputed language of the contract is ambiguous and parol evidence is required to interpret the contract and the parties’ intent.” Loomis v. State Farm Fire and Casualty Company, 567 S.W.3d 664, 668-69 (Mo. App. 2018). “Summary judgment, therefore, is only appropriate in contract cases where there is no ambiguity and the apparent meaning of contract terms can be determined within the four corners of the document.” Id. (internal citation omitted). We likewise review contracts and the interpretation of statutes de novo. Lee v. Bass, 215 S.W.3d 283, 288 (Mo. App. 2007) (contracts); Dickemann v. Costco Wholesale Corporation, 550 S.W.3d 65, 67 (Mo. banc 2018) (statutes).

Moreover, “[a] denial of a summary judgment motion ‘will only be reviewed when its merits are completely intertwined with a grant of summary judgment in favor of an opposing party.’ ” Stacy v. Bar Plan Mutual Insurance Company, 522 S.W.3d 914, 918 (Mo. App. 2017) (quoting Iowa Steel & Wire Co., Inc. v. Sheffield Steel Corp., 227 S.W.3d 549, 558 (Mo. App. 2007)); Karr v. Kansas City Life Insurance Company, 702 S.W.3d 1, 27 (Mo. App. 2024) (where both parties asserted mirror image claims on a statute of limitations defense in their motions for summary judgment and thus the denial of summary judgment could be considered since the motions were “intertwined.”).⁷

Discussion

Our analysis of the taxability of these four areas of AT&T's business – prepaid wireless, equipment sales, miscellaneous contract charges, and data service/internet access – depend on our interpretation of the parties’ 2007 settlement agreement under Missouri's well-worn contract construction principles. Muilenburg, Inc. v. Cherokee Rose Design and Build, L.L.C., 250 S.W.3d 848, 851 (Mo. App. 2008). “When interpreting any contract, a court must follow the terms of the contract as written if those terms are plain, unequivocal, and clear.” Id. (internal citation omitted)). “Unless an ambiguity is present in the contract, a court will not look outside of the four corners of the contract to determine the intent of the parties.” Id.

“[C]ourts are prohibited from creating ambiguities by distorting contractual language that may otherwise be reasonably interpreted.” Rabius v. Brandon, 257 S.W.3d 641, 645 (Mo. App. 2008) (quoting Care Ctr. of Kansas City v. Horton, 173 S.W.3d 353, 355 (Mo. App. 2005)). “Thus, we must avoid an ‘overly technical reading’ of contractual language, because it will produce an ‘unlikely[ ] construction’ of the agreement.” Id. (quoting Schell v. LifeMark Hosps. of Mo., 92 S.W.3d 222, 229 (Mo. App. 2002)). Further, “Missouri courts express a preference for constructions which give effect to a contract's terms; unless it cannot be avoided, language should not be interpreted to nullify contractual provisions.” Id. (internal citations omitted). “It is preferable to attribute a reasonable meaning to each clause and harmonize all provisions, rather than leave some provisions non-functional or nonsensical.” Id. at 646 (internal citations omitted). “There is a presumption in favor of a construction of a contract that will uphold its validity, if reasonably available.” Id. (internal citations omitted).

Finally, “[c]ourts enforce the objective terms of contracts between sophisticated businesses, without regard to the parties’ subjective intent. The character and quality of negotiations do not vary the terms of a written contract between sophisticated businesses.” Util. Serv. & Maint., Inc. v. Noranda Aluminum, Inc., 163 S.W.3d 910, 914 (Mo. banc 2005).

PREPAID WIRELESS

The Cities claim the trial court erred in finding that the parties’ agreement excludes prepaid wireless service receipts from AT&T's license tax base. In its order and judgment, the trial court held that “[a]t no point during the negotiations leading to the [agreement] did the parties construe [it]” to include prepaid wireless service and further that the agreement did not specifically refer to prepaid wireless service nor did it determine the taxing jurisdiction or “sourcing” of such service. The trial court missed the mark here in several ways. First, its reliance on pre-agreement negotiations violates the parol evidence rule.⁸ Next, its reasoning, that the settlement agreement did not use the word “prepaid,” is debunked because the agreement is also silent on postpaid wireless and there is no dispute here that the agreement covers postpaid wireless receipts. Finally, the court ignored that AT&T voluntarily included prepaid wireless in its tax payments before the ITFA settlement and then again after the Monett settlement.

With all that said, and since this is de novo review, we hold that under the terms of the agreement, prepaid wireless receipts are included in AT&T's license tax base. Before we reach our reasoning, however, a robust analysis of the parties’ agreement is warranted.

Future Tax Payments

The agreement's key provision titled “Future Tax Payments” defines AT&T's obligation to pay the Cities’ license taxes from December 1, 2007 onward. We repeat it here:

“Future Tax Payments. Subject to the provisions of this Settlement Agreement, AT&T Mobility agrees to pay, with respect to tax periods and partial tax periods commencing on and after December 1, 2007, the Business License Taxes of each Class Member that is bound by and complies with the terms of this Settlement Agreement. For such taxes that are imposed on gross receipts sourced consistent with the Mobile Telecommunications Sourcing Act, 4 U.S.C. sections 116-126 (“MTSA”), AT&T Mobility will pay such taxes at the tax rates set forth in each such Class Member's respective ordinance(s), subject to the provisions of Section IV.E concerning multiple rate ordinances, on all receipts from providing Telecommunications Service ․.”9

This provision is a bit hazy. Yet, we agree with the parties that it is not ambiguous and our contract construction rules permit this court to glean the parties’ meaning and intention. Muilenburg, Inc., 250 S.W.3d at 851; Rabius, 257 S.W.3d at 645.

The provision's first sentence states AT&T's “agree[ment] to pay” each class member's business license taxes going forward from December 1, 2007. The agreement defines “business license taxes” broadly to be the Cities’ taxes on any telephone or telecommunications company “for the privilege of engaging in the business of providing” within its borders “telecommunications services” as defined by section 144.010.1(16). This is simple and straightforward enough and indicates in our judgment the parties’ initial intention to apply a broad brush to AT&T's taxable revenue receipts.¹⁰

Alas, the provision continues and in its second sentence, the parties modify the broad tax base outlined in the first sentence with the critical phrase: “For such taxes that are imposed on gross receipts sourced consistent with the Mobile Telecommunications Sourcing Act, [AT&T] will pay such taxes at the rates set forth in each Class Member's respective ordinance(s)․.” This is the agreement's first and only reference to the MTSA but our rules of contract construction require that we give it the meaning the parties intended. Public Communications Service, Inc. v. Simmons, 409 S.W.3d 538, 548 (Mo. App. 2013).

This MTSA language is critical to our analysis because when harmonized with the entire provision, its effect is to narrow the tax base from all receipts for the privilege of doing a telecommunications services business in the municipality to those receipts that are sourced consistent with the MTSA. We reach the conclusion that this MTSA language results in an across-the-board narrowing of the tax base for several reasons. First and foremost, by including the one and only reference to the Cities’ tax rates at which the future tax payments was to be calculated, the parties have indicated their intention that this MTSA sourcing requirement applies to the entire tax base. We concede that the “for such taxes” phrase at the outset of the MTSA language is a bit clumsy and might hint at the creation of just an MTSA-sourced subset of the broad business license tax definition in the first sentence. But we believe that notion is dispelled by the reference to the tax rates because if they had intended the MTSA language to merely create a subset of taxable receipts, they would have identified other subsets and the tax rates applicable to those.

Finally, we turn to the last material phrase of the provision — “on all receipts from providing Telecommunications Service․.” It is upon this language — and the absence of the words “in the business of providing” — that AT&T largely bases its argument that the only taxable sector of its business is that which is strictly engaged in the “transmission of information.” But AT&T would have us read this phrase in isolation, something we cannot do. Id. (quoting U.S. Neurosurgical, Inc. v. Midwest Div. – RMC, LLC, 303 S.W.3d 660, 665 (Mo. App. 2010)).

Ultimately, we find that the “future tax payments” provision when stripped down to its brass tacks and given its reasonable intendment means that AT&T agreed to pay those business license taxes – i.e., gross receipts derived from the privilege of engaging in the business of Telecommunications Service within each City – that are subject to MTSA sourcing requirements. While we reject AT&T's and the trial court's interpretation that focuses solely on the definition of telecommunications service included at the end of the future tax payments provision, our reading of that provision as a whole leads us largely to the same place at which AT&T has landed. That is because the MTSA, by its terms, is limited to mobile telecommunications service.

The Mobile Telecommunications Sourcing Act (MTSA)

With the foregoing contract interpretation in hand, we return to the prepaid wireless question, the resolution of which centers on the agreement's MTSA sourcing language. Ultimately, we find (1) that AT&T's prepaid wireless receipts are covered by the agreement because they satisfy the agreement's broad definition of “business license tax[es],” and (2) they are mobile telecommunications subject to the MTSA's sourcing rules.

In 1989, the United States Supreme Court in Goldberg v. Sweet, 488 U.S. 252, 256 n.6 (1989) identified the challenge the rise of mobile telecommunications posed to taxing jurisdictions. People ex rel. Schneiderman v. Sprint Nextel Corp., 42 N.E.3d 655, 657 (N.Y. 2015). With landlines, taxation was simple: “A telephone call was taxable only if it originated or terminated within the state and was charged to an in-state billing or service address.” Id. Mobile phones blurred those clear lines so states developed different taxation methods resulting in some calls being taxed by more than one taxing jurisdiction. Id. In response, Congress enacted the MTSA to establish a uniform “sourcing” rule for mobile telecommunications service so that the only state authorized to tax those services is the state of the customer's “place of primary use” – either a residential or primary business address, as selected by the customer and given to the provider. Id. The MTSA applies broadly to all states and their political subdivisions including cities. 4 U.S.C. sec. 124(12).

The MTSA's sourcing rules provide that “mobile telecommunications services provided in a taxing jurisdiction to a customer, the charges for which are billed by or for the customer's home service provider, shall be deemed to be provided by the customer's home service provider. 4 U.S.C. sec. 117(a). The rules then provide that “the taxing jurisdictions whose territorial limits encompass the customer's place of primary use” may tax those charges “regardless of where the mobile telecommunications services originate, terminate, or pass through, and no other taxing jurisdiction may impose taxes, charges, or fees” on such charges. 4 U.S.C. sec. 117(b).

The Act's sourcing rules “do not apply to the determination of the taxing situs of prepaid telephone calling services.” 4 U.S.C. sec. 116(c)(1). The MTSA defines “prepaid telephone calling services” as “the right to purchase exclusively telecommunications services that must be paid for in advance, that enables the origination of calls using an access number, authorization code, or both, whether manually or electronically dialed, if the remaining amount of units of service that have been prepaid is known by the provider of the prepaid service on a continuous basis.” 4 U.S.C. sec. 124(9).

That brings us to the issue whether the prepaid wireless services that AT&T has provided within the Cities satisfy the “prepaid telephone calling service” exception to MTSA's sourcing rules. We find that they do not. Here, AT&T admitted in its response to the Cities’ statement of uncontroverted facts that its “prepaid customers are not required to input an access number or an authorization code each time they place a call.” This admission alone fails one of the elements of the MTSA's definition of “prepaid telephone calling services” — that calls are originated using an access number, authorization code, or both. Thus, the revenue AT&T receives from those prepaid wireless services should be considered “sourced consistent with the MTSA”

Thus, we grant summary judgment on the Cities’ motion to enforce in that regard. As for the period from December 1, 2007 until the point in 2016, following the Monett settlement, when AT&T began including its prepaid wireless receipts in its tax base, the matter is remanded for further proceedings to determine the Cities’ damages.

As for the period since 2016, we likewise remand for further proceedings. The issue on remand will likely center on what the parties meant by the phrase “sourced consistent with the MTSA.” To this court, there are two possibilities. Either the parties intended the phrase to be a mandate, i.e., that AT&T was required to adhere to the MTSA's sourcing rules in connection with its services subject to the MTSA; or the parties intended to rely on AT&T for sourcing protocols, in other words it would be up to AT&T on whether to source the various receipts consistently with the MTSA rules or not. We reject that latter notion as an absurdity. TNT Amusements, Inc. v. BFC Enterprises, Inc., 613 S.W.3d 403, 409 (Mo. App. 2020); Finova Capital Corp. v. Ream, 230 S.W.3d 35, 45 (Mo. App. 2007) (“A party may not utilize contract language that allows unilateral action to improperly deny the other party from expected benefits flowing from the contract.”).

It makes far more sense that the parties’ inclusion of the MTSA language, a statute enacted for the purpose of simplifying and clarifying the taxation of mobile telecommunications service among competing jurisdictions, was meant to be a mandate and since MTSA sourcing depends on the provider collecting information from customers, the mandate is on AT&T. 4 U.S.C. sec. 116.

Here, the record shows that for prepaid wireless service receipts since 2016, AT&T has been using a sourcing system referred to as NPA/NXX. At the activation of the service, AT&T collects from the customer the service zip code which allows AT&T to localize prepaid wireless revenues to a particular area code. The Cities complain that this system is faulty because when there is more than one municipality located within a particular area code, AT&T cannot differentiate which service occurred in which municipality and therefore AT&T assigns all of the revenue to just one of the municipalities.

While its use of area codes and zip codes gets close, AT&T's sourcing system is not consistent with the MTSA. The MTSA requires the service provider to gather information from the customer to establish the customer's “place of primary use,” a term defined as “․ the street address representative of where the customer's use of the mobile telecommunications service primarily occurs, which must be ․ the residential street address or the primary business street address of the customer; ․.” 4 U.S.C. secs. 122, 124(8).

So, our remand regarding the post-2016 prepaid wireless receipts is for further proceedings to determine a remedy which may include a determination of the Cities’ damages for AT&T's failure to source those receipts consistent with the MTSA.¹¹

EQUIPMENT SALES and MISCELLANEOUS CONTRACT CHARGES

Our foregoing interpretation of the “future tax payments” provision, particularly the critical impact of the parties’ inclusion of the MTSA language, likewise drives our decision to exclude from the tax base these two sectors of AT&T's business activities. The Cities have failed to demonstrate as a matter of undisputed fact that these two groupings of receipts are subject to MTSA sourcing. And it stands to reason that they are not because they do not satisfy the MTSA's definition of “mobile telecommunications service.” That definition referenced title 47 C.F.R. section 20.3’s definition of “commercial mobile radio service (CMRS).” The parties are certainly familiar with CMRS because they used the term several times in the settlement agreement to describe the claims brought by Cities in the underlying lawsuit.

Having reviewed the C.F.R.’s definition of CMRS, we find nothing there to support the notion that receipts for equipment sales and miscellaneous contract-related charges constitute CMRS. Moreover, Missouri statute section 190.460.1(8) conducts us back to the parties’ agreement. That section equates 47 C.F.R. sec. 20.3’s CMRS definition with “wireless telecommunications service” under Missouri law which largely mirrors section 144.010.1(16)’s definition of “telecommunications service” that likewise has no language that would encompass these types of receipts.

INTERNET ACCESS RECEIPTS

In ruling in favor of AT&T that the agreement does not include internet access charges in AT&T's license tax base, the trial court declared that section 144.010.1(16)’s “telecommunications services” definition “expressly excepts internet access.” This is only partly true. The exception applies only if AT&T satisfies one or both conditions the provision imposes on the exception's applicability — that AT&T either “separately stated [its charges for internet access] on the customer's bill or on records [AT&T] maintained in the ordinary course of business.” In this case, both conditions are implicated and we find that AT&T has satisfied the conditions such that its internet access receipts are not part of its tax base contemplated by the agreement and by application of the Internet Tax Freedom Act.

The Internet Tax Freedom Act (ITFA)

The ITFA largely dictates our resolution of this issue. AT&T argues (1) that the ITFA bars state or local taxation of internet access, (2) that section 144.010.1(16)’s internet access tax exemption mirrors the ITFA bar, and (3) that AT&T's billing and recordkeeping practices satisfy both conditions in section 144.010.1(16) in order to satisfy AT&T's claim to the exemption.¹² The Cities argue that the ITFA is no impediment to taxation here, that AT&T has satisfied neither condition required to satisfy the exemption including specifically that AT&T's unbundling calculations are inaccurate since they rely on customers’ historical usage and not on exact figures. We disagree because the ITFA controls our analysis particularly since section 144.010.1(16)’s language regarding the internet access question is unmistakably derived from the ITFA's requirements on the subject.¹³

First, the ITFA broadly defines internet access service to include the sale of any telecommunications service for the purpose of providing internet access.¹⁴ ITFA, sec. 1105(5), 47 U.S.C. sec. 151 note (2026). ITFA then broadly bars taxation on internet access. Sec. 1101(a)(1). The language from section 144.010.1(16) before us mirrors that tax prohibition. And in 2004, Congress amended the ITFA to add the following:

SEC. 1106. ACCOUNTING RULE

(a) IN GENERAL.—If charges for Internet access are aggregated with and not separately stated from charges for telecommunications services or other charges that are subject to taxation, then the charges for Internet access may be subject to taxation unless the Internet access provider can reasonably identify the charges for Internet access from its books and records kept in the regular course of business.

We find this provision highly relevant to whether, on its customers’ bills from 2007 to 2019 or in its records from 2019 onward, AT&T has separately stated its data services charges. And if these internet access charges are in fact separately stated during each time period, then they are not taxable since telecommunications service under the agreement does not include internet access services. Section 144.010.1(16).

We hold that AT&T has established its right to summary judgment on the internet access question. First, as for the period from December 1, 2007 to the point in 2019 when it began bundling its voice, data, and text services, we find that the record adduced by AT&T establishes that it “separately stated on the customer's bill” the amounts charged for internet access.

We acknowledge that AT&T has not established with precision the exact amount of voice, data, and text charges on each customer's bill. But we do not believe that the ITFA or its Missouri iteration, section 144.010.1(16), requires such precision. Congress established as a matter of public policy and law that internet access is not taxable. For the courts to require an unattainable level of precision in the billing and record keeping in this context would allow the exception to swallow the law. Moreover, in its accounting rule, Congress has already lessened the burden by requiring that the provider only “reasonably identify” the internet access charges. ITFA, sec. 1106(a).

As for AT&T's post-2019 internet access charges, we likewise find that AT&T is entitled to summary judgment because it has demonstrated as a matter of undisputed fact that its unbundling method “reasonably identif[ies]” the internet access charges. AT&T produced several witnesses, exhibits, and documents detailing its unbundling method and how it relies on historical customer usage. Again, we find this complies with the lenient standard set forth in the ITFA.

At its essence, the Cities argument is that AT&T's unbundling method does not precisely identify how much customers’ bundled charge consists of non-taxable internet access service and how much consists of taxable services like voice and texting. The ITFA's accounting rule disposes of this argument.

Therefore, we affirm summary judgment in favor of AT&T on the internet access receipts issue.¹⁵

CONSTITUTIONAL ARGUMENTS

Here, the Cities broach the applicability of two constitutional provisions, the Hancock Amendment, Mo. Const., Art. X, section 22, and Mo. Const., Art. X, section 26 which AT&T raised in the trial court as an additional basis for summary judgment. The trial court did not rely on either in its grant of summary judgment and AT&T, in its brief here, referenced only the foregoing section 26 and only as to the internet access question upon which it has prevailed.

Nevertheless, AT&T has not directed our attention to any authority that this contract enforcement action has Hancock Amendment or Art. X, section 26 implications. The Hancock Amendment prohibits political subdivisions from levying new taxes or increasing existing taxes without a majority vote and also restricts the broadening of a tax base. Art. X, section 22(a). But the dispute here concerns what the parties’ meant by their “future tax payments” provision from their 2007 settlement agreement. Our holdings here do not represent new taxes, are not increases in existing taxes and do not broaden an existing tax base. Instead, our holdings merely define what the parties agreed to in 2007.

Similarly, Art. X, section 26, which prohibits an increase in “state and local sales and use taxes (or any similar transaction-based tax) ․ on any service or transaction that was not subject to sales, use or similar transaction-based tax on January 1, 2015,” is not implicated here. No new sales or use taxes are involved and AT&T has cited no authority that the license taxes at issue here are a “transaction-based tax.” License taxes are calculated on gross receipts, not individual transactions. Collector of Winchester v. Charter Comm'ns, Inc., 660 S.W.3d 405, 425 (Mo. App. 2022).

Conclusion

For the reasons set forth above, we affirm in part and reverse and remand in part.

FOOTNOTES

1.   The cities of Springfield, Clayton, and Jefferson City are not involved in this lawsuit.

2.   The MTSA is a federal law that designates the source or geographic location of telecommunications for purposes of discerning which jurisdiction is allowed to tax it. 4 U.S.C. sec. 117(b).

3.   The agreement cites to section 144.010.1(13) but in 2007 the legislature recodified the provision and it is now section 144.010.1(16).

4.   Statutory references are to the Revised Statutes of Missouri (2016) unless otherwise stated.

5.   The parties skirmished extensively on whether data service and internet access charges are synonymous. For purposes of this opinion and based on our review of the summary judgment record, we adopt AT&T's view that there is no material difference between the two and they may be used interchangeably.

6.   We need not address the Cities’ points one through four because our holdings in points five through thirteen, where we address whether the agreement includes the four sectors of AT&T's business in its tax base, dispose of all issues before us. The issues raised in the first four points have been essentially subsumed into our discussion in those other points.

7.   We find to be reviewable the trial court's denial of the Cities’ motion for partial summary judgment because its merits are completely intertwined with the court's grant of AT&T's motion for summary judgment. Stacy, 522 S.W.3d at 918.

8.   “Parol evidence may not be used to vary or contradict terms of an unambiguous and complete written instrument absent fraud, common mistake, accident or erroneous omission.” Craig v. Jo B. Gardner, Inc., 586 S.W.2d 316, 324 (Mo. banc 1979). It also “may not be used to create ambiguity in an otherwise unambiguous contract or to show that an obligation is other than that expressed in the written instrument. While collateral facts and circumstances may be introduced to ascertain the subject matter of the contract and to aid in interpreting it, such facts cannot cause the court to read into the contract something which it does not say.” Id.

9.   The remainder of this section is not germane to the issues before us.

10.   “A license tax on gross receipts is a tax on persons or entities for the privilege of doing business in the jurisdiction ․ Gross receipts are merely a means to calculate the license tax; what is being taxed is the privilege of doing business in [the jurisdiction].” Collector of Winchester v. Charter Comm'ns, Inc., 660 S.W.3d 405, 425 (Mo. App. 2022) (quoting Kansas City v. Graybar Elec. Co., Inc., 485 S.W.2d 38, 40, 41 (Mo. banc 1972)).

11.   Our holding here also encompasses the Cities’ fourteenth point which claims that the trial court erred in rejecting their challenge to AT&T's prepaid sourcing rule used since 2016 because it contravenes their agreement.

12.   In response to the Cities’ argument that no governing body or court in Missouri has approved AT&T's unbundling method, AT&T claims that the Federal Communications Commission has endorsed its unbundling calculations. Regardless, our analysis here is driven by the language of ITFA's accounting rule, ITFA sec. 1106, and whether AT&T's evidence satisfies the “reasonably” identifiable language in that statute.

13.   In point fifteen, the Cities argue that the ITFA does not preempt section 144.010.1(16). Even though the trial court did not address ITFA preemption, we may address the ITFA's impact here since this is de novo review. And based on our analysis here, we need not address point fifteen separately. Moreover, we do not consider this to be a preemption situation because the ITFA and section 144.010.1(16) are readily harmonized.

14.   The Cities rely on language in section 144.010.1(16) that purports to exclude from the internet access exemption “the amount paid for the telecommunications service used to provide such access.” We consider this a red herring because the ITFA unequivocally rejected that notion as did another section of Missouri's sales tax law, section 144.030.2(45), which prohibits sales tax on internet access charges and defines those charges to include charges for telecommunications services that may be used to access the internet.

15.   Our holding here also disposes of the Cities’ final point on appeal which concerns their proposed damage model applicable to their claim regarding the internet access issue. Our holding in AT&T's favor renders this point moot.

James M. Dowd, Judge

John P. Torbitzky, Chief Judge and Rebeca Navarro-McKelvey, Judge concur.