Iowa Supreme Court Opens Door to State Taxation of Fixed Interconnected VoIP Underlying Facilities


A recent decision by the Iowa Supreme Court confirms that facilities-based Interconnected VoIP service providers must pay Iowa state telephone property taxes on cable wiring that is used to provide Interconnected VoIP services.

The ruling came in response to a challenge from Cable One, Inc., a provider of cable, Internet access and Interconnected VoIP services. In 2008, the Iowa Department of Revenue began assessing telephone property taxes on Cable One’s cable lines used to provide Interconnected VoIP services.  Cable One appealed, arguing that it was not a telephone company subject to property tax assessment, because Interconnected VoIP is not the equivalent to telephone service.  While two earlier decisions ruled in favor of Cable One, the Supreme Court sided with the Department of Revenue, and concluded that wiring installed initially for cable television purposes that is used to provide VoIP services is a “telephone line” subject to property tax assessment. 

The Supreme Court bolstered its decision by citing to precedent from as far back as 1886.  The Supreme Court noted that in these early decisions, automobiles, the telephone, and spiked snow tires did not exist when the legislature enacted the statutes at issue.  The Supreme Court concluded that in this case, it would apply the language of the property tax statute in a “common-sense manner” rather than assume the legislature intended to capture only technologies that existed when the law was enacted.  The Court also analogized to the landmark case Mayor of Baltimore v. Vonage Am. Inc., where the United States District Court for the District of Maryland concluded that Vonage’s VoIP service was subject to the City of Baltimore’s telecommunications tax.  Relying on that decision for support, the Supreme Court concluded that the statutes in both the Vonage and Cable One cases focus on the service provided rather than the technology being used.  Based on the Supreme Court’s reliance on the Vonage decision, which did not involve a cable provider, and the Court’s broad interpretation of the property tax statute at issue, it is likely that the state will seek to apply the Supreme Court’s ruling to all providers of facilities-based Interconnected VoIP Services.

If you are a provider of facilities-based VoIP services and would like more information on the decision and whether you are subject to Iowa or other state property taxes, please contact Allison Rule at or 703-714-1312.

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