Lowell Sun Pub. Co. v. Commissioner of Revenue

• Decision Date: 27 May 1986
• Citation: 493 N.E.2d 192,397 Mass. 650
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: LOWELL SUN PUBLISHING COMPANY et al. 1 v. COMMISSIONER OF REVENUE.

Page 192

493 N.E.2d 192

397 Mass. 650

LOWELL SUN PUBLISHING COMPANY et al. ¹ v. COMMISSIONER OF REVENUE.

Supreme Judicial Court of Massachusetts Suffolk.

Argued March 6, 1986.

Decided May 27, 1986.

James C. Heigham (Harry S. Dannenberg, Boston, with him) for plaintiffs.

Joan C. Stoddard, Asst. Atty. Gen., for the Com'r of Revenue.

John S. Brown, George P. Mair, Wilmot R. Hastings and David L. Engel, Boston, for Globe Newspaper Co., amicus curiae, submitted a brief.

Before HENNESSEY, C.J., WILKINS, NOLAN, LYNCH and O'CONNOR, JJ.

WILKINS, Justice.

A judge of the Superior Court has reported questions in this action, brought under G.L. c. 30A, § 7 (1984 ed.), and G.L. c. 231A (1984 ed.), challenging the validity of the Commissioner of Revenue's (commissioner's) sales and use tax regulations. 830 Code Mass.Regs. § 64H.07 (1982). The newspapers contend that the regulations concerning the taxability for sales and use tax purposes of certain materials and machinery used in the publishing of newspapers do not properly reflect the scope of the exemptions from sales and use taxes set forth in G.L. c. 64H, § 6(r ) (1984 ed.), ² and G.L. c. 64H, § 6(§ ) (1984 ed.). ³ See G.L. c. 64I, § 7(b ) (1984 ed.), incorporating exemptions from G.L. c. 64H for similar transactions that would otherwise be subject to the use tax.

The newspapers read the exemptions for sales of materials (§ 6[r ] ) and machinery (§ 6[§ ] ) used in "the publishing of a newspaper" more broadly than has the commissioner. If the newspapers are correct, and we think in large measure they are, the regulations are invalid in certain respects because they seek to impose sales and use taxes beyond the authorization of the statute.

The case is here on a report based on an agreement "on all material facts necessary to the adjudication of the legal questions presented by this case." Of the questions, which are set forth in the margin, ⁴ we need only answer the second, which focuses exclusively on the validity of the regulations as applied to steps in the newspaper production process that are the subject of this controversy. ⁵

The newspapers and the commissioner agree that sales of materials and machinery used in the printing of a newspaper are exempt from tax under § 6(r ) and (§ ). They disagree, however, over whether the exemption applies to materials and machinery used in earlier stages in the process of the production of a newspaper, such as in the typing and editing of a story and in the preparation of classified and display advertising. As the reported questions indicate, these preprinting processes are set forth in detail in paragraphs 7A to 7J of the statement of agreed facts. ⁶

The challenged regulations, which became effective in October, 1982, represented a sharp change in the commissioner's treatment of the exemptions applicable to sales of materials and machinery used in the publishing of a newspaper. In Courier Citizen Co. v. Commissioner of Corps. & Taxation, 358 Mass. 563, 266 N.E.2d 284 (1971), we construed G.L. c. 64H, § 6(r ) and (§ ), inserted by St.1967, c. 757, § 1, to provide exemptions for materials and machinery used in a fully integrated printing business. Shortly after that opinion was issued, the Legislature substantially amended § 6(r ) and (§ ) to read, in pertinent part, as they now do. St.1971, c. 555, § 45. The State Tax Commission concluded subsequently that the 1971 amendments had overruled the expansive interpretation of § 6(r ) and (§ ) stated in the Courier Citizen opinion, and it sought to impose taxes on materials and machinery used in preprinting processes in the publication of a newspaper. The Appellate Tax Board disagreed with the commission, concluding that the 1971 amendments to § 6(r ) and (§ ) did not affect the continuing validity of the Courier Citizen opinion, at least as applied to newspapers. Attleboro Sun Publishing Corp. v. State Tax Comm'n, [1967-1984 Transfer Binder] Mass.Tax Rep. (CCH) p 200-444 (A.T.B. Nov. 10, 1975). In 1976, the Commissioner of the Department of Corporations and Taxation issued Technical Information Release 76-3, in effect acquiescing in the Attleboro Sun decision but only as applied to "the publishing of newspapers." 4A A. Bailey & W. VanDorn, Taxation 811 (1986). ⁷

In view of this background, the 1982 regulations are hardly entitled to the deference we may grant an agency's interpretations of its own enabling statutes, particularly to interpretations made substantially contemporaneously with the enactment of a statute to which the agency consistently has adhered. See Polaroid Corp. v. Commissioner of Revenue, 393 Mass. 490, 497, 472 N.E.2d 259 (1984). We add that the exemption provisions of § 6(r ) and (§ ) place no special burden on a taxpayer seeking to bring itself within their scope. DiStefano v. Commissioner of Revenue, 394 Mass. 315, 325, 476 N.E.2d 161 (1985).

To answer the second question we must determine the scope of the exemptions provided in § 6(r ) and (§ ) for materials and machinery used "directly and exclusively ... in an industrial plant in ... the publishing of a newspaper." ⁸ We need not consider the consequences to nonnewspaper entities of the 1971 amendments to G.L. c. 64H, § 6(r ) and (§ ). See Commissioner of Revenue v. Fashion Affiliates, Inc., 387 Mass. 543, 545-546, 441 N.E.2d 520 (1982); Houghton Mifflin Co. v. State Tax Comm'n, 373 Mass. 772, 776 n. 5, 370 N.E.2d 441 (1977).

We reject the commissioner's assumption that the exemption for items used in publishing a newspaper is no different from the exemption for items used in manufacturing and commercial printing. We also reject the corollary premise that the exemption for newspaper publishing extends only to items used in "the actual manufacture" or printing of a newspaper. A broad exemption for sales of certain property used in the "publication," and not just in the printing, of a newspaper is consistent with the intent of other provisions in G.L. c. 64H (see, e.g., §§ 1[f ], 6[m ], 6[r ], 6[§ ] [1984 ed.] ) "to free newspapers of a large part of the burden of sales and use taxes." Sears, Roebuck & Co. v. State Tax Comm'n, 370 Mass. 127, 131, 345 N.E.2d 893 (1976). See Greenfield Town Crier, Inc. v. Commissioner of Revenue, 385 Mass. 692, 696, 433 N.E.2d 898 (1982).

The question, then, is whether the various processes set forth in paragraphs 7A to 7J of the statement of agreed facts (see the appendix) involve the direct and exclusive use, in an industrial plant, of tangible personal property in the publication of a newspaper. To the extent that the regulations indicate that the sale of tangible personal property used directly and exclusively in the publication of a newspaper is subject to tax, the regulations are invalid.

The parties have not argued whether specific materials and machinery used in the various production processes fall within the exemption we have just defined. Materials used in the processes described in paragraph 7A (recording events in notebooks and by camera) may not generally be employed in an industrial plant, as defined in § 6(r ) and (§ ), and, if so, would not be exempt. Materials and machinery used to provide information for billing and other business purposes and materials and machinery used to process bills (see paragraph 7F and ) are not used directly and exclusively in the publishing of a newspaper, as opposed to the operation of a newspaper business, and would not be exempt. Sales of all other material and machinery used in the processes described in paragraphs 7B to 7J of the statement of agreed facts appear to be exempt under either § 6(r ) or (§ ).

With the exceptions just stated, we answer the second question in the negative. As we have indicated above, there is no need to answer the first question or to discuss the constitutional issues raised in the third question.

APPENDIX

PARAGRAPHS 7A TO 7J OF THE STATEMENT OF AGREED FACTS.

"7. The newspaper production process as employed by the Lowell Sun follows the sequence set forth below:

A. It begins with the recording of newsworthy events in a reporter's notebook or by a photographer's camera.

B. The reporter can then either (1) input the story into a computer directly through a video display terminal, or (2) type the story using a typewriter with an optical scanner typeface and using special scanner ready paper and then inputting the story into a computer via an optical scanner.

C. The photographer develops his or her film in a darkroom and the selected pictures are sent to the composition room for inclusion into the newspaper.

D. Using video display terminals, editors select, edit and alter typed stories, write headlines, assign typefaces and sizes, set column width and route materials to phototypesetters via the production computer.

E. Wire service material is simultaneously being received in a number of ways. They are by (1) direct input into computer memory via satellite or telephone lines; (2) by paper tape via telephone lines; (3) by paper printout over telephone lines, and (4) by photo fascimile over telephone lines. This material is also selected, altered and edited by editors using video display terminals.

F. At the same time, classified line advertising is being created and ad layouts produced. The following procedure is followed:

1. The terminal operator in the advertising department takes information by phone directly from customer and while customer is on the phone the information is entered on a terminal (xeontron AT 11). There are two categories of information obtained from the customer at this point and entered on the terminal.

(a) Header Information This is information about the customer such as name and address. This information will not appear in the advertisement.

(b) Advertisement Data This is data for the advertisement that will appear in the paper.

2. The information obtained in 1(a) and 1(b) above is transmitted to the production computer, the production computer then...