Hotels Statler Co. v. District of Columbia, 11188

• Decision Date: 03 July 1952
• Docket Number: 11189,No. 11188,No. 11190.,11188,11190.
• Citation: 91 US App. DC 122,199 F.2d 172
• Parties: HOTELS STATLER CO., Inc. et al. v. DISTRICT OF COLUMBIA.
• Court: U.S. Court of Appeals — District of Columbia Circuit

91 US App. DC 122, 199 F.2d 172 (1952)

HOTELS STATLER CO., Inc. et al. v. DISTRICT OF COLUMBIA.

Nos. 11188, 11189, No. 11190.

United States Court of Appeals District of Columbia Circuit.

Argued March 19, 1952.

Decided July 3, 1952.

C. Roger Nelson, Washington, D. C., with whom Ganson Purcell and Courts Oulahan, Washington, D. C., were on the brief, for petitioner.

Harry L. Walker, Assistant Corporation Counsel for the District of Columbia, Washington, D. C., with whom Vernon E. West, Corporation Counsel, and Chester H. Gray, Principal Asst. Corporation Counsel, Washington, D. C., were on the brief, for respondent.

Before CLARK, PRETTYMAN and and FAHY, Circuit Judges.

PRETTYMAN, Circuit Judge.

These are three petitions to review decisions of the Board of Tax Appeals for the District of Columbia. They concern sales taxes and use taxes under a local statute.¹

The petitioner operates a hotel in the District of Columbia. It furnishes transient guests with rooms and meals. It also supplies glassware, chinaware, silverware, table linen, room service tables, upholstery leather, stationery, pen points, toothpicks, soap, toilet tissue, bed linen, towels, glass tumblers, clothes hangers, dresser trays, ashtrays, lamps and lamp shades, light bulbs, window draperies, and carpeting.

The statute imposes an excise tax upon the privilege of selling at retail certain tangible personal property and certain selected services.² It enumerates a series of transactions to be included in the terms "retail sale" and "sale at retail". Among those enumerated are:

"(1) The sale for consumption of any meals, food or drink, or other tangible personal property for a consideration, at any restaurant, hotel, drug store, club, resort, or other place at which meals, food, drink, or other tangible personal property are sold.

* * * * * * "(3) The sale or charges for any room or rooms, lodgings, or accommodations furnished to transients by any hotel, inn, tourist camp, tourist cabin, or any other place in which rooms, lodgings, or accommodations are regularly furnished to transients for a consideration."³

The statute defines "sale" and "selling" to include not only transactions whereby title is transferred but also transactions by which possession of tangible personal property is transferred for a compensation, and transactions whereby certain services are rendered for a consideration.⁴ So the sale of meals and the charges for rooms are subject to the tax.

The statute exempts from the tax sales "in which the purpose of the purchaser is to resell the property so transferred in the form in which the same is, or is to be, received by him, or to use or incorporate the property so transferred as a material or part of other tangible personal property to be produced for sale by manufacturing, assembling, processing, or refining."⁵

The sales tax applies to sales within the District of Columbia. The statute also imposes a "Compensating-Use Tax"⁶ upon the use of tangible personal property and services sold or purchased at retail sale, excepting sales subject to or exempt from the sales tax.⁷ These sections contain the same definitions and the same exceptions as do the sections relating to the sales tax. The scheme of the statute is thus the familiar one of a retail sales tax upon sales within the jurisdiction and a corresponding use tax upon property purchased outside but used within the jurisdiction. The general object of the limitations in the statute is that only the "end" transaction and not the "intermediate" transactions shall be taxed; i. e., that taxes on transactions involving a given article, without change in form, or service shall not be pyramided.

Petitioner purchases the goods listed above either within or without the District but uses them in connection with its sales of meals and rooms within the District. It pays a sales tax on these latter sales. The question is whether the use of the listed property in these taxable transactions is such as to make the transactions whereby the hotel acquired these goods exempt from tax. Perhaps an illustration will clarify the question. Suppose the hotel buys sheets, towels, soap, etc., in Baltimore. It puts these goods in rooms and charges transient guests for the rooms thus furnished. Must it pay a use tax upon the prices it paid for these goods?

Petitioner says that its purpose in purchasing these listed goods is to resell them — that is, to transfer possession of them — in the same form in which they are received, or that these goods are incorporated as a part of other property, to wit, a room or a meal, produced for sale by assembling. Concretely, its contention is that it sells an assembled package consisting of room, linen, towels, soap, etc., or of food, china, glass, toothpicks, etc. It says that the listed goods were acquired by it for this assembly and resale. Hence it says, under the exemption quoted above from Section 114(a) of the statute, its purchases are not subject to either sales or use taxes.

Petitioner's position should be clearly understood. The hotel does not say — indeed it denies that it contends — that the several items of listed property are, separately, accommodations regularly furnished to transients within the meaning of the tax statute. It denies, for example, that to furnish a towel to a transient for a price is within the taxing terms of the statute. It does...