District of Columbia v. Acme Reporting Co., 85-941.

• Decision Date: 31 August 1987
• Docket Number: No. 85-941.,85-941.
• Citation: 530 A.2d 708
• Parties: DISTRICT OF COLUMBIA, Appellant, v. ACME REPORTING COMPANY, Appellee.
• Court: D.C. Court of Appeals

530 A.2d 708

DISTRICT OF COLUMBIA, Appellant, v. ACME REPORTING COMPANY, Appellee.

No. 85-941.

District of Columbia Court of Appeals.

Argued June 3, 1987.

Decided August 31, 1987.

Richard G. Amato, Asst. Corp. Counsel, with whom Frederick D. Cooke, Jr., Acting Corp. Counsel, James R. Murphy, Acting Corp. Counsel at the time the brief was filed, Charles L. Reischel, Deputy Corp. Counsel, Richard L. Aguglia, Acting Deputy Counsel, and Julia L. Sayles, Asst. Corp. Counsel, Washington, D.C., were on the brief, for appellant.

William L. Neff, Washington, D.C., for appellee.

Before NEBEKER and NEWMAN, Associate Judges, and PAIR, Senior Judge.

PAIR, Senior Judge:

This appeal is from an order of the Tax Division of the Superior Court which held that the court reporting services of appellee, Acme Reporting Company (Acme), were improperly taxed by appellant, the District of Columbia (the District).¹ The court ordered the refund to Acme of $45,692.47 plus interest, which amount the court found had been improperly assessed and collected by the District. We affirm.

I.

The pertinent facts which, for the most part are undisputed, may be summarized as follows. After an audit of Acme and other companies providing court reporting services, the District, on July 1, 1983, assessed Acme for sales and use tax deficiencies in the amount of $47,454.60. The tax authorities determined that the monies received by Acme for its court reporting services were subject to District sales and use taxes.² Acme paid the taxes assessed and filed a timely petition in the Tax Division seeking cancellation of the assessment and a refund of the amount paid plus interest.³

The matter came before the Tax Division on cross-motions for summary judgment, which were denied. After a trial on March 25, 1985, the court ruled that court reporting services are not "public stenographic" services for purposes of D.C. Code §§ 47-2001 (n)(1)(H) and 47-2201(a)(1)(G) (1981). The court then ordered that the District modify its records to reflect a tax exempt status; that the tax assessment be cancelled and that the taxes paid, including any penalties and interest, be refunded to Acme.⁴

Acme, presently a Delaware corporation, was, during the tax periods in question, a Maryland Corporation engaged in the business of providing court reporting services in Maryland and the District of Columbia. Acme is, or has been, the official court reporter for the Civil Aeronautics Board, the National Labor Relations Board, the Securities and Exchange Commission, the Department of Defense, the Department of Labor, the U.S. House of Representatives, the U.S. Senate, the U.S. Claims Court and the U.S. Tax Court. The majority of its court reporting services are provided pursuant to contracts with the federal government. Acme does no court reporting for either the Superior Court of the District of Columbia or this court.

The services provided by Acme's court reporters include attendance at and the recording and transcription of legal proceedings such as judicial trials and hearings before administrative agencies. Each reporter is responsible for producing an accurate and full recording of the legal proceeding attended so as to protect the tribunal and parties by a complete record. Acting as an official of the court or administrative tribunal, the reporters administer oaths to witnesses, bear responsibility for all exhibits, and testify as to the accuracy of the record.

The final product of Acme's court reporting services is a verbatim transcript of the proceeding Acme was engaged to report. All prepared transcripts are furnished to either the court or government agency holding the proceeding or to the parties to the proceeding. A certain amount of tangible personal property, such as paper binding and covers, is used by Acme to produce transcripts of the reported proceedings. The cost of these items constitutes less than four percent of the amount Acme charges its customers for court reporting services and no separate charge is made to customers for such materials.

When Acme commenced business operations in the District of Columbia, it sought tax advice from its accounting firm respecting the applicability of the District's sales and use taxes to its court reporting services. The accounting firm advised, by letter, that the services involved in recording testimony and printing it for customers were not subject to the District's sales and use taxes and that additional sales of copies of resulting documents to an "interested party" to the proceeding were not subject to the taxes.

Subsequently, Acme received from its accounting firm a copy of a memorandum prepared by Mr. Arnold M. Malech, then the Executive Officer of the District of Columbia courts, addressed to court reporters employed by the District of Columbia courts. This memorandum provided guidance concerning the applicability of the District's sales and use taxes to the sales of transcripts prepared by court reporters employed by the District of Columbia courts. The memorandum concluded that the District's sales and use taxes did not apply to sales of transcripts by court reporters of the District of Columbia courts except when purchased by a non-party to the proceeding being recorded, such as a newspaper reporter. The memorandum directed questions to James Andy, an employee of the Department of Finance and Revenue (the Department). Relying on the opinion of its accounting firm and the memorandum from Mr. Malech, Acme determined that the District's sales and use taxes did not, apply to monies received for its court reporting services.

In November of 1969, the Department sent a notice to all registered sales and use taxpayers concerning the 1969 amendments imposing sales and use taxes on public stenographic services. This notice, however, did not define the term "public stenographic services." When the Department promulgated a regulation to define the term "public stenographic services," the regulation simply stated that "the term public stenographic services includes typing services." 9 DCMR § 468.3 (1986).

However, Mr. Edward M. Many, Manager of the Tax Audit and Liability Division of the District of Columbia Department of Finance and Revenue, testified at trial that the Department has always taken the position that the term "public stenographic services" includes court reporting services, but did not specifically refer to any written or oral interpretation by the Department which included court reporters within the term "public stenographics services."

In 1981, when the Department initiated sales and use tax audits of law firms, it observed that the firms were not being charged sales or use tax on amounts paid for court reporting services. The Department then conducted audits of several companies engaged in the business of providing court reporting services.⁵

Acme first learned that the Department interpreted the term "public stenographic services" to include court reporting services during the Department's sales and use tax audit of Acme in 1982. Acme immediately began collecting sales and use taxes on receipts from its court reporting services, including the sales of transcripts. As a result of the audit, the District sent the notice dated July 1, 1983, which assessed the tax deficiencies contested in this appeal.

II.

Initially, a brief review of the tax scheme in effect throughout the period of the deficiency assessment (December 1, 1979 through November 30, 1982) is necessary. The Gross Sales Tax and the Compensating-Use. Tax laws of the District are substantially similar in relation to the issues we address today. Under D.C. Code § 47-2002 (1981), a sales tax is imposed on the retail sale of "certain selected services (defined as `retail sale' and `sale at retail' in this chapter)." See also D.C. Code § 47-2202 (1981) (similar use tax provision on "service sold or purchased at retail sale"). D.C. Code § 47-2001(n)(1)(H) (1981) includes within the definition of "retail sale" and "sale at retail"

the sale . . . of any tangible personal property or service taxable under the terms of this chapter. . . . For the purpose of the tax imposed by this chapter, these terms shall include but shall not be limited to . . . the sale of or charges for . . . public stenographic services[.]

See also D.C. Code § 47-2201(a)(1)(G) (1981) (identical use tax provision). Thus, it is clear that "public stenographic services" are taxable under the Code.

However, exempt from the definition of "retail sale" or "sale at retail," and therefore not taxable under § 47-2001(n)(2)(B) or § 47-2201(a)(2)(B) are professional or personal service transactions which involve sales as inconsequential elements for which no separate charges are made. Acme argues that its court reporting services are exempt from sales and use taxation pursuant to § 47-2001(n)(2)(B) and § 47-2201(a)(2)(B) as "personal services transactions." The District counters that since Acme provides "public stenographic services," its sales are taxable under § 47-2001(n)(1)(H) and § 47-2201(a)(1)(G).

III

The District's principal argument on appeal is that the tax court erred in ruling that Acme's court reporting services do not fall within the meaning attributed to "public stenographic services" in D.C. Code §§ 47-2001 and 47-2201. The District maintains that the term is not ambiguous and that Acme's activities clearly fall within the plain meaning of the statutory provisions in dispute. Moreover, the District argues that its interpretation of the phrase is a long-standing one to which substantial deference must be paid.

Acme, however, counters that its court reporting services cannot be equated with "public stenographic services" within the meaning of the statutes. An application of the rules of statutory construction, Acme contends, compels the conclusion that the term does not encompass court reporting services. Moreover, Acme complains that it has never been put on...