Date: May 16, 2004
Contact: Kelly Griffith, Marketing Manager
Phone: (612) 492-7514
Email: kgriffith@fredlaw.com

For Immediate Release

Fredrikson & Byron's Thomas R. Muck wins important sales tax case--system equipment of telecommunication companies is exempt from Minnesota sales tax because it is capital equipment.

Minneapolis, MN May 16, 2004 - - Thomas R. Muck, a tax litigation attorney at Fredrikson & Byron, was lead counsel in a case before the Minnesota Supreme Court that determined that telecommunications equipment incorporated into the telecommunication systems of wireless, long distance and local exchange telecommunications companies is exempt from Minnesota sales tax because it is "capital equipment."

Fredrikson & Byron represented Sprint Communications and two related companies in the case. The companies claimed approximately $9 million in sales tax refunds.

Minnesota taxes all retail transactions in tangible personal property with its sales tax. It exempts capital equipment used to produce tangible personal property, however, on the theory that the State should not tax a business "input," which is used to produce tangible personal property which itself is subject to sales tax when sold. The Sprint companies had already paid Minnesota nearly $54 million it collected from Minnesota customers on telephone charges.

The issue in the case was whether the telecommunications equipment produced tangible personal property, and turned on the definition of "tangible personal property." Muck argued to the Minnesota Supreme Court that because telecommunications signals can be perceived by the sense of hearing, telecommunication companies produce tangible personal property. The State argued that property was tangible only if it can be both seen and touched.

The Supreme Court applied a modern and common sense approach and ruled that tangible personal property is any property which may be perceived by any of the bodily senses, including touch, sight and hearing.

The ruling is significant for any companies that employ electronic media.

Last April, Muck won another multi-million dollar tax case on behalf of Amoco. He is a member of Fredrikson & Byron's Tax Disputes and Litigation Practice Group, which includes a number of attorneys who have had experience in government. Muck was formerly Chief Litigator for the Minnesota Department of Revenue. Sue Ann Nelson was formerly a litigator with the IRS District Counsel. Steve Kaplan was formerly a U.S. Justice Department Tax Division trial attorney. Tom Wilhelmy is a property tax litigator with years of experience in that field.

Fredrikson & Byron is one of the largest law firms in the Upper Midwest. It is based in Minneapolis with an office in London, and affiliates in Mexico City, Warsaw, Montreal, Toronto and Vancouver. The firm's 170 attorneys offer a full range of legal and business services in four primary service areas that contain their many practice groups and specialties: Business and Finance, Dispute Resolution and Litigation, Intellectual Property, and Personal Legal Services. They serve a broad range of clients, including multinational corporations, public companies, privately held businesses, entrepreneurs, government agencies, family businesses and private individuals. The firm web site is www.fredlaw.com.