MCI Airsignal, Inc. v. State Board of Equalization

This appeal presents an issue of first impression in California: whether the Sales and Use Tax Law applies to receipts from the furnishing of paging devices in conjunction with telephone paging services. We conclude it does not.

Facts

During the years involved in this appeal, 1974-1981, MCI Airsignal, Inc., (hereafter MCI) was in the business of providing telephone paging services. Each customer was assigned a specific telephone number purchased by MCI from the local telephone company. To reach the customer, a caller dialed the customer’s telephone number from any telephone. The call was received by an MCI computer, which then sent a message to MCI’s radio transmitting towers. The towers converted the message to a unique radio signal, which was transmitted through the airwaves to the customer’s paging device. The radio signal activated the customer’s paging device, either by a tone-only notification or a tone-voice notification, whereby a 10-second voice message could be received.

MCI provided this paging service, along with the paging devices, to its customers for a flat monthly fee. To obtain the service the customer completed an “Application for Service,” which…