Telephone companies are considered manufacturers of “tangible personal property,” the Minnesota Supreme Court said.

Three phone companies in Minnesota that provide local telephone, wireless and long-distance service sued for refunds of state sales taxes they paid on equipment they purchased for use in their telephone businesses. Minnesota exempts from sales taxes equipment that will be used by the purchaser to manufacture “tangible personal property . . . to be sold ultimately at retail.”

The Minnesota tax department turned down the refund claim. So did a lower court. However, the Supreme Court agreed in April with the phone companies. It said voice transmission through telephones involves turning a customer’s voice into electronic form for transmission and then recovering the voice so that the caller on the other end can hear it. The voice heard in the telephone receiver is a “tangible” product because it can be felt by the senses — in this case, the human ear.

The case is Sprint Spectrum LP v. Minnesota Commissioner of Revenue. The court likened the voice heard in the telephone receiver to electricity, which is also considered tangible.

Keith Martin