2014 Opinion No. 108.
As corrected January 20, 2015.
Appeal from the District Court of the Fourth Judicial District of the State of Idaho, in and for Ada County. Hon. James F. Judd, Senior District Judge.
The judgment of the district court is affirmed.
Ché rie R. Kiser, Cahill Gordon & Reindel LLP, Washington, D.C., argued for appellant.
Phil N. Skinner, Deputy Attorney General, Boise, argued for respondent.
EISMANN, Justice. Chief Justice BURDICK, and Justices J. JONES, HORTON and J. Pro Tem WALTERS CONCUR.
[157 Idaho 437] EISMANN, Justice.
This is an appeal out of Ada County from a determination that income earned in Idaho by a multistate corporation was Idaho taxable income. We affirm the judgment of the district court.
Cable One, Inc., is a Delaware corporation that is headquartered in Phoenix, Arizona. It provides cable television and internet services in nineteen states, including Idaho. In 2005, Cable One received business income from four types of activities in Idaho: cable television services, internet access services, advertising services, and cable modem leasing. In its Idaho income tax return for that year, it included revenues earned from all of those activities except revenues from providing internet access services to Idaho customers. It excluded those revenues on the ground that providing such services to customers in Idaho constituted Arizona sales, although it also excluded such revenues from its 2005 Arizona income tax return on the ground that they came from Idaho sales.
On December 16, 2008, the Idaho Tax Commission issued a notice of deficiency determination asserting a tax and interest deficiency
[157 Idaho 438] on Cable One for the 2005 tax year. Cable One timely filed a petition for redetermination, which the Tax Commission denied. Cable One then filed a complaint in the district court pursuant to Idaho Code section 63-3049(a). The district court tried the matter de novo, and it ruled in favor of the Tax Commission. Cable One then appealed to this Court.
Cable One operates in nineteen states, one of which is Idaho. In 2005, it operated forty-eight cable systems in its nineteen-state area, and each cable system served a distinct geographic area. Six of them were located in Idaho. Cable One's cable systems can carry many different channels, each carrying either video programming or high-speed data. It uses the high-speed data channels to provide internet access services.
The discrete parts of Cable One's broadband cable networks used to provide internet service were described by the district court as follows:
a) Cable modem -- the equipment located within the subscriber's home or office that allows the subscriber to connect to Cable One's broadband cable network and which controls the services available to the subscriber.
b) Drop -- the line from the subscriber's home to the local junction box.
c) Loop -- the section of Cable One's broadband cable network from the local junction box through the " nodes" to Cable One's " head end" . Cable One installs and owns the cables and equipment in this part ...