HomeMy WebLinkAboutSecond Decl of Chesley Dillon11
DocuSign Envelope ID: 989F77D5-C78A-4780-A6A9-7B4704C6997E
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BEFORE THE HEARING EXAMINER OF THE CITY OF RENTON
RE:
Second Declaration of Chesley Dillon
TracFone Wireless, Inc.
Administrative Appeal
Chesley Dillon, being of full age, declares under penalty of perjury of the laws of the
State of Washington and the United States:
1. I am the Vice President Corporate Taxation for TracFone Wireless, Inc.
("TracFone") appellant in the above captioned action. This declaration is based on my
personal knowledge and on the books and records of TracFone.
2. I have reviewed the declarations of Nate Malone and Garth Ashpaugh
submitted by the City of Renton ("City") in support of the City's motion for partial summary
judgment.
3. Neither Mr. Malone nor Mr. Ashpaugh have communicated with anyone from
TracFone and neither of them claim to have done so.
4. Mr. Malone and Mr. Ashpaugh are incorrect when they mischaracterize
TracFone's wholesale sales of prepaid airtime to third party retailers (i.e. Walmart, Fred
Meyer, ....) as retail sales "to" end users "through" third party retailers (also inaccurately
I SECOND DECLARATION OF CHESLEY DILLON - 1
LANE POWELL Pc
1420 FIFTH AVENUE, SUITE 4200
P.O. BOX 91302
SEATTLE, WA 98111-9402
206.223.7000 FAX:206.223.7107
125110.0002/8358588.1
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DocuSign Envelope ID: 989F77D5-C78A-4780-A6A9-7B4704C6997E
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referred to in their declarations as "retail agents"). See Malone Decl. ¶¶8, 11-12 and
Ashpaugh Decl. ¶¶ 3, 9-12. TracFone's wholesale customers are independent resellers.
5. The graphic displayed at p. 2 of the City's motion also mischaracterizes
TracFone's wholesale sales of prepaid wireless airtime as retail sales "to" "end -users"
"through" (visually displayed by a curved arrow over) third -party retailers. A corrected
version of the graphic is attached as Exhibit II separately depicting: TracFone's wholesale
sales of prepaid wireless airtime to retailers (who make retail sales of prepaid wireless
airtime to consumers); TracFone's wholesale sales of prepaid wireless airtime to distributors
(who resell the prepaid wireless airtime at wholesale to retailers and to other distributors);
and TracFone's retail sales of prepaid wireless airtime to consumers.
6. The Malone and Ashpaugh declarations and the graphic ignore TracFone's
wholesale sale to distributors, who in turn resell to retailers or other distributors.
7. When TracFone makes a wholesale sale of prepaid wireless airtime, TracFone
I is selling prepaid wireless airtime, not a "plastic card."
8. Consequently, the revenue from TracFone's wholesale sales of prepaid
wireless airtime is accounted for in TracFone's financial statements as airtime revenue, not as
revenue from the sale of tangible personal property.
9. TRS never inquired of TracFone whether TracFone records its revenue from
wholesale sales of prepaid wireless airtime as sales of tangible personal property.
10. The declarations of Messrs. Malone and Ashpaugh are also factually
inaccurate when they suggest that consumers' retail purchases of prepaid wireless airtime
from third party retailers must be "activated" after the consumer's retail purchase from the
retailer. See Malone Decl. ¶ 9 and Ashpaugh Decl. ¶¶ 10, 12.
11. Retail sales of prepaid wireless airtime by retailers are sales of active airtime.
12. As I testified at trial in the TracFone v. Springfield, Missouri case, some
prepaid wireless airtime that TracFone sells at wholesale to customers like Walmart is active
SECOND DECLARATION OF CHESLEY DILLON - 2
LANE POWELL Pc
1420 FIFTH AVENUE, SUITE 4200
P.O. BOX 91302
SEATTLE, WA 98111-9402
206.223.7000 FAX: 206.223.7107
125110.0002/83585 88.1
II
DocuSign Envelope ID: 989F77D5-C78A-4780-A6A9-7B4704C6997E
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at the time the airtime cards are shipped to the wholesale customer, while some sales of
prepaid wireless airtime, generally referred to as POSA (point -of -sale activation) is activated
at the register immediately prior to the retailer's retail sale to a consumer.
13. At the conclusion of a two-day bench trial, the trial court in the Springfield
case found that TracFone's wholesale sales of prepaid wireless airtime, including sales of
POSA airtime, were "legitimate wholesale sales" of prepaid wireless airtime.
14. The Springfield court also expressly rejected the City of Springfield's factual
contention that TracFone's sales to retailers are consignment sales rather than wholesale
sales.
15. Wholesale sales of active airtime are invoiced to the wholesale buyer at the
time of shipment. Wholesale sales of POSA airtime are invoiced to the wholesale buyer
upon activation at the cash register, immediately prior to the retailer's retail sale of the
prepaid airtime. Thus, all wholesale sales of prepaid wireless airtime are sales of active
airtime at the time of sale to the wholesale buyer.
16. Contrary to the assertions in Mr. Malone's declaration at ¶ 9 and Mr.
Ashpaugh's declaration at ¶12, there is no second "step" in the activation process for
activation of POSA airtime. The retail consumer purchases active airtime from the retailer.
17. The resale certificates and reseller permit numbers that TracFone obtains from
its wholesale buyers, including the representative resale certificates attached as Exhibit I to
my first declaration in this case, apply to TracFone's wholesale sales of both airtime and
handsets.
18. While TracFone makes retail and wholesale sales of inactive handsets and
inactive sim cards, TracFone does not own, operate, or manage the handsets or Sim cards
owned by and used by consumers to place phone calls using prepaid wireless airtime.
19. TracFone collects Washington sales tax and Washington E-911 tax on its
retail sales of prepaid wireless airtime to consumers with a Washington billing address.
SECOND DECLARATION OF CHESLEY DILLON - 3
LANE POWELL Pc
1420 FIFTH AVENUE, SUITE 4200
P.O. BOX 91302
SEATTLE, WA 98111-9402
206.223.7000 FAX: 206.223.7107
125110.0002/8358588.1
II
DocuSign Envelope ID: 989F77D5-C78A-4780-A6A9-7B4704C6997E
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20. TracFone does not collect Washington sales tax or Washington E-911 tax on
its wholesale sales of prepaid wireless airtime.
21. Upon information and belief, businesses that purchase TracFone branded
prepaid wireless airtime at wholesale collect Washington sales tax and Washington E-911 tax
on their Washington retail sales of prepaid wireless airtime.
22. I have reviewed the receipts produced by the City for Mr. Malone's retail
purchase of prepaid wireless airtime from Fred Meyer. Consistent with my understanding,
the receipt shows that Fred Meyer collected both sales tax and E-911 tax on its retail sale of
prepaid wireless airtime to Mr. Malone.
23. The Malone receipts produced by the City also confirm that Mr. Malone
purchased active wireless airtime. This is reflected in the receipt provided by Fred Meyer
titled "Activation Status Receipt" showing that Mr. Malone's purchase of prepaid airtime
was "purchased from Fred Meyer."
24. Separate from TracFone's sales of prepaid wireless airtime, TracFone makes
wholesale and retail sales of handsets and accessories. The Renton utility tax assessment
issued by TRS did not impose Renton utility tax on any of TracFone's sales of handsets or
accessories.
FCC.
25. As I also testified in the Springfield case, TracFone is not licensed by the
EXECUTED at Miami, Florida, thiscil 11th day February, 2021.
DocuSigned by:
Gu.S �i( tv,
Ches ey ioE)Bn
SECOND DECLARATION OF CHESLEY DILLON - 4
LANE POWELL Pc
1420 FIFTH AVENUE, SUITE 4200
P.O. BOX 91302
SEATTLE, WA 98111-9402
206.223.7000 FAX: 206.223.7107
125110.0002/835 85 88.1
u
DocuSign Envelope ID: 989F7705-C78A-4780-A6A9-7B4704C6997E
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CERTIFICATE OF SERVICE
I hereby certify under penalty of perjury of the laws of the State of Washington and the
United States that, on the date listed below, I caused to be served a copy of the attached
document to the following persons via electronic mail:
Kari L. Sand
Ogden Murphy Wallace P.L.L.C.
901 Fifth Avenue, Suite 3500
Seattle, WA 98164
ksand(c,omwlaw.com
Cynthia Moya
Renton City Clerk
1055 So. Grady Way
Renton, WA 98057
cmoya@rentonwa.gov
olbrechtslaw(d) maig l.com
Executed on the 12th day of February, 2021, at Seattle, Washington.
SECOND DECLARATION OF CHESLEY DILLON - 5
s/Barbara LaBelle
Barbara LaBelle, Legal Assistant
LANE POWELL Pc
1420 FIFTH AVENUE, SUITE 4200
P.O. BOX 91302
SEATTLE, WA 98111-9402
206.223.7000 FAX: 206.223.7107
125110.0002/8358588.1
EXHIBIT II
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