Avco Broadcasting Corp. v. Lindley, 77-169

• Decision Date: 08 February 1978
• Docket Number: No. 77-169,77-169
• Citation: 372 N.E.2d 350,53 Ohio St.2d 64
• Parties: , 7 O.O.3d 145 AVCO BROADCASTING CORPORATION, Appellant, v. LINDLEY, Tax Commr., Appellee.
• Court: Ohio Supreme Court

Page 64

53 Ohio St.2d 64

372 N.E.2d 350, 7 O.O.3d 145

AVCO BROADCASTING CORPORATION, Appellant, v. LINDLEY, Tax Commr., Appellee.

No. 77-169.

Supreme Court of Ohio.

Feb. 8, 1978.

The Tax Commissioner of Ohio levied a sales and use tax assessment against appellant, Avco Broadcasting Corporation, on its purchase of certain news and wirephoto services and radio and television rating services during the period October 1, 1967, through September 30, 1970.

In the operation of its television and radio broadcasting stations in Ohio, appellant contracted with Associated Press for its news service, and with A. C. Nielson Co., the American Research Bureau, C. E. Hooper, Inc., Pulse, Inc., and Broadcast Advertisers Reports, Inc., for reports concerning its viewing audience and concerning expenditures made by radio and television advertisers.

The order of the Tax Commissioner was appealed to the Board of Tax Appeals by Avco Broadcasting. The board affirmed the order of the commissioner.

The board, with respect to the taxability of the rating services, and after citing R.C. 5739.01(B), stated the following in its entry:

"This Board's review of the record renders to us the conclusion that Avco sought, as the real object of the transactions, the reports produced by the service. It sought information concerning the size and type of the audiences drawn by its programs in contrast with those audiences drawn by the programs of its competitors. Its client advertisers were also interested in the ratings so that each could best divide its advertising funds among the time positions available. It was not so much interested in the personal effort of the ratings companies as it was in the reports prepared by such companies. The reports provided information concerning the market area. There was no analysis by Nielson or A. R. B., or by any of the rating companies, or, in addition, by Broadcast Advertisers Reports, of Avco's programming, simply a ranking of the programs. No ratings company was commissioned to interpret the results of the data, merely to explain if asked. No ratings company, at all, provided a staff person to assist the management of Avco in making marketing decisions based on this data. The ratings companies did not, as did CDS and the Nielson Co. in Accountant's Computer Services v. Kosydar, supra ((1973), 35 Ohio St.2d 120, 298 N.E.2d 519), obtain and compile information to analyze business problems and to apply thinking to the problems of Avco, and to present answers to the problems of Avco as Avco charted its course in the business world. Avco simply received the statistics in printed form with which it could make its own decisions. The property was valuable only because it existed, not because it existed as the result of efforts by these particular rating companies.

"Since we determined that the real objects sought in the subject transactions by Avco were the reports, then we must conclude that the personal service of the ratings companies were inconsequential; the exception is not available; and the entire transaction is taxable. The Commissioner is affirmed with respect to these transactions."

In affirming the assessment made in connection with the news services, the board stated:

"Secondly, this Board is asked to consider the taxability of fees paid by Avco to the Associated Press for Avco's receipt of news stories from A. P. This assessment is challenged by Avco upon the basis that the transactions were personal services, as ante, and also that such were sales within interstate commerce and not within the power of the State to tax.

"For a weekly fee paid monthly, Associated Press placed a teleprinting machine and a photofax (photograph receptor) upon the premises of Avco's various facilities in Ohio. These machines were connected by leased telephone lines to A. P.'s transmitting units located at various sites within and without Ohio.

"When A. P. chose to transmit a news story, one of its newsmen wrote it, gave it to an operator who caused the story to be transmitted through the transmitter over the leased telephone lines to the receiving units located at the various locations of its members. The story was printed upon paper (Ex. 19 through 23) at the receptor, and, then, the story was in the possession of the subscriber for his use. Avco usually rewrote any story that it used; it did not use all the stories it received. The paper upon which the story was printed was discarded at Avco's discretion.

"We conclude that Avco sought possession of the receiving units, the means to receive this story, and the printed story, the product of the service. After receipt of the printed story, it was able to use the story as it desired. It was interested distinctly with the printed story, for it received possession of the printed story from A. P., which was the end product of the effort of A. P., and this possession was acquired through utilization of the receiving units. Regardless of the testimony of its witnesses, we doubt seriously that employees of Avco could justify to its shareholders the payment of a fee to A. P. if it did not receive the printed stories for use in its news casts. This case is closely akin to Bunker-Ramo Corp v. Porterfield (1970), 21 Ohio St.2d 231, 257 N.E.2d 365, where the court held that a corporation, which secures stock exchange data, organizes and stores such, and then transmits the data over leased wires to terminals upon the premises of subscribers-users, was not engaged in a personal service transaction.

"Again,...