American Television Co., Inc. v. Hervey

• Decision Date: 19 February 1973
• Docket Number: No. 5--6119,5--6119
• Citation: 253 Ark. 1010,490 S.W.2d 796
• Parties: , 26 Rad. Reg. 2d (P & F) 1439 AMERICAN TELEVISION COMPANY, INC., Appellant, v. A. B. HERVEY, Jr., Commissioner of Revenues for the State of Arkansas, Appellee.
• Court: Arkansas Supreme Court

Page 796

490 S.W.2d 796

253 Ark. 1010, 26 Rad. Reg. 2d (P & F) 1439

AMERICAN TELEVISION COMPANY, INC., Appellant, v. A. B. HERVEY, Jr., Commissioner of Revenues for the State of Arkansas, Appellee.

No. 5--6119.

Supreme Court of Arkansas.

Feb. 19, 1973.

Rehearing Denied March 19, 1973.

Bethell, Callaway & Robertson, Ft. Smith, Coleman, Gantt, Ramsey & Cox, Brief Amicus Curiae, Pine Bluff, for appellant.

R. David Lewis, Little Rock, for appellee.

HARRIS, Chief Justice.

Appellant, American Television Company, Inc., owns and operates KFSA-TV, a federally licensed television station in Fort Smith. The station enters into various license agreements with out-of-state concerns whereby it acquires the right to broadcast particular motion picture films, syndicated programs, and other artistic performances. The films covered in the agreements are then sent to KFSA from where the films are broadcast. After broadcasting as permitted under the license agreements, the films are returned to the sender. Appellee, the Commissioner of Revenues for the State of Arkansas, levied a use tax on the use by Appellant of the video tape material pursuant to Act 487 of 1949 (Ark.Stat.Ann. § 84--3101 et seq. (Repl. 1960)). Appellant paid the tax under protest and thereafter instituted suit in the Pulaski County Chancery Court contending that the tax was illegal, and praying that it recover from the commissioner the amount previously paid in, together with 6% interest from December 29, 1970. The cause was submitted on the pleadings and a complete stipulation of facts and the court found against appellant and dismissed its complaint. From the decree so entered, appellant brings this appeal. Fro reversal, three points are asserted which we proceed to discuss in the order listed.

I THERE IS NO PURCHASE OF TANGIBLE PERSONAL PROPERTY

A number of exhibits were attached to the stipulation, these exhibits being various agreements with out-of-state companies allowing certain broadcasting rights to the station. The provisions of the several exhibits are quite similar, though not identical. For instance, Exhibit B is with Bing Crosby Productions, Inc. of Chicago, in the form of a license, and provides inter alia 'that the licensor (Crosby) has hereby leased and licensed under copyright to the licensee for broadcasting for television purposes, and for broadcasting for such purposes only the tape hereinafter designated'. The tape designated is 'Paul Harvey Comments' and the agreement covers 260 programs of five minute length, providing that programming will commence on September 15, 1969 at a cost of $20.00 per program. The contract also provides that the agreement will be continued for 52 consecutive weeks from the date of the first telecast. Further, inter alia, the agreement provides that the tapes leased shall be televised only in accordance with the schedule; that the station will not permit the exhibition of any print at any other time or place, nor for exhibition in places of public assembly where an admission fee is charged the public; that the station will return promptly each print received to the Crosby office, or as otherwise directed, immediately after the televising of such print, in the same condition as when received, reasonable wear and tear excepted.

Exhibit C is an agreement between the station and Twentieth Century Fox Television of New York and lists two motion pictures for showing for which the company will pay a total 'license fee' of $600.00.

As previously stated, the agreements with various companies are very similar. Each provides a limited right to broadcast certain programming material; all provide for one or two broadcasts for gratuitous reception only; all require return of film or tape containing the material to the licensor within twenty-four to seventy-two hours of the time of broadcast. Appellant specifically mentions that the agreement with United Artists provides that the license fee specified constitutes payment solely for the station's right to broadcast the pictures.

The statute imposing the tax reads as follows:

'84--3105. (a) There is hereby levied and there shall be collected from every person in this State a tax or excise for the privilege of storing, using or consuming, within (the State, any article of tangible personal property, after) the passage and approval of this Act (§§ 84--3101--84--3128), purchased for storage, use or consumption in this State at the rate of three per centum (3%) of the sales price of such property. This tax will not apply with respect to the storage, use or consumption of any article of tangible personal property purchased, produced or manufactured outside this State until the transportation of such article has finally come to rest within this State or until such article has become commingled with the general mass of property of this State. This tax shall apply to the use, storage or consumption of every article of tangible personal property, except as hereinafter provided, irrespective of whether the article or similar articles are manufactured within the State of Arkansas or are available for purchase within the State of Arkansas, and irrespective of any other condition.'

Definitions of words pertinent to this litigation are found in Ark.Stat.Ann. § 84--3104, as follows:

'(b) The term 'storage' means and includes any keeping or retention in this State of tangible personal property purchased from a vendor for any purpose, except sale or subsequent use solely outside this State.

(c) The term 'use' means and includes the exercise of any right or power over tangible personal property incident to the ownership or control of that property, except that it shall not include the sale of that property in the regular course of business.

(e) The term 'purchase' means the sale of tangible personal property by a 'vendor' to a person for the purpose of storage, use or consumption in this State.

(f) The term 'sale' means any transfer, barter or exchange of the title or ownership of tangible personal property; or the right to use, store or consume the same for a consideration paid or to be paid, in instalments or otherwise, and includes any transaction whether called leases, rentals, bailments, loans, conditional sales, or otherwise, and notwithstanding that the title or possession of said property, or both, is retained for security. For the purpose of this Act (§§ 84--3101--84--3128) the place of delivery of tangible personal property to the purchaser, user, storer or consumer shall be deemed to be the place of sale, whether such delivery be by the vendor or by common carriers, private contractors, mails Express, agents, salesmen, solicitors, hawkers, representatives, consignees, peddlers, canvassers, or otherwise.'

Succinctly stated, appellant contends that the tax is only imposed on tangible personal property which it says is not here involved; that the purchase by KFSA is a limited, exclusive license to reproduce the performances of personalities and artists by broadcasting on the station, and that this license, or right to broadcast, is intangible. Appellant says that the film or video tape furnished it is only sent in order that the right mentioned may be exercised, and that the fact that the performance is imprinted on the film or tape does not change the character of the transaction. Appellant constantly refers to these agreements as licenses while the commissioner refers to them as leases, but whatever the name applied, there is no dispute but that companies outside this state agree that certain tapes or films are to be sent to appellant within this state, and it is undisputed that the film is loaded on a projector or the video tape on a video tape machine, run through the machine and the program broadcast from Fort Smith. Appellee asserts that when the television station takes possession in Arkansas, loads the film or tape into a projector and activates the machine so as to broadcast images over the state, it has used that tangible personal property so as to make that use taxable under our statute. Important is the definition of sale which, as previously noted, is defined as any transfer of the title or ownership, or the right to use, store or consume the same . . . and includes any transaction whether called leases, rentals, bailments, loans, etc.

Of course, there was no purchase or sale, as we normally use the word, but here we are dealing with a statutory definition. We agree with the state that the right to use property cannot be separated from the property itself and the 'right' spoken of by appellant would have no value except for the use of the tape or film--the two cannot be separated.

An Amicus Curiae Brief has been filed by counsel for Leake TV, Inc. In that brief, it is pointed out that Arkansas has had a sales tax since 1935 and the present 3% levy was imposed in 1941. This 1941 Act (Ark.Stat.Ann. § 84--1902 (Repl. 1960)) defines sale as follows:

'The term 'sale' is hereby declared to mean the transfer of either the title or possession for a valuable consideration of tangible personal property, regardless of the manner, method, instrumentality, or device by which such transfer is accomplished. The term 'sale' is also declared to include the exchange, barter, lease or rental of tangible personal property where such exchange, barter, lease or rental results or may result in either the transfer of the title or the possession.'

In 1943, this court in the case of U-Drive-'Em Service Co., Inc. v. Hardin, Commissioner of Revenues, 205 Ark. 501, 169 S.W.2d 584, construed this statute and stated:

'We think both the commissioner and the trial court fell into error in so holding and in so applying this provision of the statute to the facts in this case. A lease or rental of tangible personal property is not taxable under the express provision of the Act, unless the result is or may be either the transfer of the title to such property or the transfer of the...