KTVO, Inc. v. Bair
| Decision Date | 29 June 1977 |
| Docket Number | No. 2-58653,2-58653 |
| Citation | 255 N.W.2d 111 |
| Parties | KTVO, INC., a Nevada Corporation, and KBIZ, Inc., an Iowa Corporation, Appellees, v. G. D. BAIR, Director, Iowa Department of Revenue, Appellant. |
| Court | Iowa Supreme Court |
Richard C. Turner, Atty. Gen., George W. Murray, Special Asst. Atty. Gen., and Harry M. Griger, Asst. Atty. Gen., for appellant.
James W. Hall and Robert O. Daniel, of Shuttleworth & Ingersoll, Cedar Rapids, for appellees.
Heard by MOORE, C. J., and RAWLINGS, LeGRAND, REYNOLDSON and McCORMICK, JJ.
The question here is whether payments made by Iowa broadcasters to television and radio syndicators for limited use of recorded programs are subject to Iowa use tax. The trial court held they are not. We affirm.
Plaintiff KTVO, Inc. is an Ottumwa (and Kirksville, Missouri) television station, affiliated with the ABC network. Plaintiff KBIZ, Inc. is an Ottumwa radio station, affiliated with CBS. These stations carry network programs, live and recorded local programs and syndicated programs. This case concerns the taxability of payments made by the stations for syndicated programs furnished to them in Iowa on videotapes, films or records. Defendant G. D. Bair, director of the Iowa department of revenue, held, after hearing pursuant to Code § 422.54(2), that these payments were subject to use tax under Code § 422.43 as "equipment rental". Taxes and penalties were assessed against the stations for the period January 1, 1967 through September 30, 1971. The stations appealed to district court, and the trial court reversed the director. This appeal by the director followed.
Under Code § 422.43, a three percent use tax is imposed on a number of specific enumerated services including "equipment rental". The term is not defined in the statute.
The manner in which the stations acquire the right to air syndicated programs is not disputed. The stations enter license agreements with the syndicators. Factors which affect the amount charged the stations for the right to broadcast a particular program include the popularity of the program, the population of the market area, and the number of times the program is to be broadcast. License agreements usually regulate when and how often the program may be used, prohibit stations from making duplicates, proscribe assignment of the agreement, allow the syndicator to cancel a broadcast, make the fee payable whether the broadcast rights are exercised or not, and require return of the program to the syndicator or its designee.
The medium by which the program is transferred to a station for its use is incidental to the agreement. Usually the program is furnished on videotape, film or record. Sometimes the program is transmitted by microwave in the same manner as network programs. Occasionally the syndicator will tape the program on the station's own videotape. The director contends only that the first kind of transfer is taxable, that is, the transaction in which the syndicator furnishes the program on videotape, film or record.
In holding the payment in that transaction is not taxable as equipment rental, the trial court found the payment to be essentially a license fee rather than a rental of tangible personal property and also found videotapes, films and records are not transferred as "equipment" within the meaning of the statute.
Familiar principles of statutory construction are involved. They are collected in Iowa National Industrial Loan Company v. Iowa State Department of Revenue, 224 N.W.2d 437, 439-440 (Iowa 1974). We search for legislative intent. In construing tax statutes doubt is resolved in favor of the taxpayer.
Courts in other jurisdictions are divided on whether a license agreement in which payment is made for the right to use a syndicator's tapes, films or records is a rental of tangible personal property within the meaning of statutes taxing such rentals. Most courts which have decided the issue have held the transactions are taxable. See Boswell v. Paramount Television Sales, Inc., 291 Ala. 490, 282 So.2d 892 (1973); American Television Company, Inc. v. Hervey, 253 Ark. 1010, 490 S.W.2d 796 (1973); Florida Association of Broadcasters v. Kirk, 264 So.2d 437 (Fla.App.1972); Mount Mansfield Television, Inc. v. Vermont Commissioner of Taxes, 133 Vt. 284, 336 A.2d 193 (1975). At least one court has held license agreements are not taxable as a transfer of tangible personal property. See Watson Industries v. Shaw, 235 N.C. 203, 69 S.E.2d 505 (1952). This view is inferentially supported in analogous cases. See District of Columbia v. Universal Computer Associates, Inc., 151 U.S.App.D.C. 30, 465 F.2d 615 (1972), and citations; Burgess v. Ames, 359 Ill. 427, 194 N.E. 565 (1935). Compare Crescent Amusement Co. v. Carson, 187...
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...Olsen, 698 S.W.2d 60 (Tenn. 1985) to include "equipment with all associated parts, appurtenances, and accessories"); KTVO, Inc. v. Bair, 255 N.W.2d 111, 113 (Iowa 1977) (holding payments for the right to use a television syndicator's tapes, films and records pursuant to a license agreement ......
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