The Indiana Tax Court agreed that a telecommunications company’s use of cell phones is exempt from use tax. New Cingular Wireless PCS, LLC v. Ind. Dep’t of Rev., Case No. 24T-TA-00004 (Mar. 31, 2026).
The Facts: New Cingular Wireless PCS, LLC (“New Cingular”) is a telecommunications company that sells retail wireless telecommunications services and mobile phones. It purchased cell phones for the purpose of reselling them to its customers. Because the phones were intended for resale, it did not pay sales tax on its purchase of the phones and, instead, provided its suppliers with exemption certificates.
However, New Cingular did not resell all of the phones purchased. Instead, it gave some to customers free of charge in connection with the customer’s execution of a wireless telecommunication service contract. It also provided some new phones to existing customers to replace their broken phones pursuant to a mobile phone insurance policy purchased by the customers.
When New Cingular withdrew the phones used to fulfill these contractual obligations from its inventory, it paid use tax to Indiana on the purchase price of the phones. Later, New Cingular requested a full refund for the use tax it paid, claiming the phones were exempt from tax pursuant to a statute that exempts purchases of certain telecommunications equipment from sales and use tax if the equipment is purchased by a person that provides retail telecommunications services.
The Department denied the refund claims. It asserted that the exemption is not applicable because, first, while cell phones are “radio or microwave transmitting or receiving equipment,” the context of the exemption is limited to a provider’s “central infrastructure” that provides service to all customers and remains within the provider’s custody and control. It also asserted that, even if cell phones are covered, the exemption still did not apply because New Cingular was not the person “acquiring” the phones as required by the exemption statute when it used the phones to fulfill its contractual obligations to its customers and, instead, it was its customers who were acquiring the phones.
The Decision: The Court rejected both of the Department’s assertions and held that New Cingular’s use was exempt from Indiana use tax. It found that when the words “radio or microwave transmitting or receiving equipment” are understood by their plain and ordinary meaning, the phrase broadly describes items, such as cell phones, that are used in and adapted to facilitate either the sending or receiving of radio waves or microwaves. Since New Cingular’s cell phones contain devices that allow the transmission and reception of radio waves or microwaves and are necessary to access New Cingular’s telecommunications services, the exemption applies to the cell phones. The Court found “[t]he Department’s position simply lacks textual support.”
The Court then found that New Cingular is “the person acquiring the property” for use tax purposes. It ruled that “the relevant acquisition is New Cingular’s (from its suppliers) and the relevant use is New Cingular’s (to fulfill its contractual obligations).” Since the parties stipulated that New Cingular was engaged in the business of furnishing and selling intrastate telecommunications services in retail transactions to customers within and outside Indiana, the Court held that New Cingular’s acquisition of the phones from its suppliers was exempt from tax.
The Court granted New Cingular’s motion for summary judgment, in part (unable to do so in full), as there was a remaining factual question regarding the amount of tax due on the phones at issue.
The Takeaway: The Indiana Tax Court has long been known as a Court that calls it as it sees it and has issued many taxpayer victories over the years. This case illustrates the importance of focusing on the words in a statute despite a department of revenue’s attempt to limit the scope or meaning of those words.
