May Broadcasting Co. v. Boehm

• Decision Date: 09 October 1992
• Docket Number: Nos. S-89-502,S-89-503,s. S-89-502
• Citation: 241 Neb. 660,490 N.W.2d 203
• Parties: , 21 Media L. Rep. 1392 MAY BROADCASTING COMPANY, a Corporation, Appellee, v. John M. BOEHM, State Tax Commissioner, and the Nebraska Department of Revenue, Appellants.
• Court: Nebraska Supreme Court

Page 203

490 N.W.2d 203

241 Neb. 660, 21 Media L. Rep. 1392

MAY BROADCASTING COMPANY, a Corporation, Appellee, v. John M. BOEHM, State Tax Commissioner, and the Nebraska Department of Revenue, Appellants.

Nos. S-89-502, S-89-503.

Supreme Court of Nebraska.

Oct. 9, 1992.

Syllabus by the Court

1. Administrative Law: Appeal and Error. Proceedings for judicial review of an administrative ruling filed prior to July 1, 1989, are reviewed by an appellate court de novo on the record.

2. Statutes: Appeal and Error. Statutory interpretation is a matter of law in connection with which an appellate court has an obligation to reach an independent conclusion irrespective of the determination made by the court below.

3. Taxation: Property. Syndicated programming purchased by broadcasters is tangible property and taxable under the Nebraska sales tax, Neb.Rev.Stat. § 77-2703 (Reissue 1990).

4. Taxation: Property. Under Neb.Rev.Stat. § 77-2702 (Reissue 1990), the "sale for resale" exemption to Nebraska's use tax applies only to tangible property.

Robert M. Spire, Atty. Gen., and David Edward Cygan for appellants.

John C. Hewitt of Andersen, Berkshire, Lauritsen & Brower, for appellee.

Paul C. Jessen and M. Shaun McGaughey, of Koley, Jessen, Daubman & Rupiper, P.C., for amicus curiae Pappas Telecasting of the Midlands/KPTM.

Paul C. Jessen and M. Shaun McGaughey, of Koley, Jessen, Daubman & Rupiper, P.C., for amici curiae Busse Broadcasting, Inc./KOLN and KGIN, et al.

HASTINGS, C.J., and BOSLAUGH, WHITE, CAPORALE, SHANAHAN, GRANT, and FAHRNBRUCH, JJ.

GRANT, Justice.

Defendants-appellants, John M. Boehm, State Tax Commissioner, and the Nebraska Department of Revenue (hereinafter, collectively, Department) appeal orders of the Lancaster County District Court, which orders reversed the findings and orders of the Department. The Department had assessed a use tax on the gross payments of plaintiff-appellee, May Broadcasting Company (hereinafter May), for various syndicated programming agreements between May and distributors.

In case No. S-89-503, on March 31, 1986, the Department assessed May a consumer's use tax deficiency for the tax period from August 1982 through July 1985. May paid the assessed deficiency and filed a petition for redetermination, seeking a refund of that payment, with the Department. After a hearing ending in April 1987, by order dated May 6, 1988, the Department denied the petition for redetermination. May appealed to the district court for Lancaster County, where on April 25, 1989, after consideration of the record made in the Department's hearing, the district court reversed the Department's determination. The Department timely appealed to this court.

In case No. S-89-502, on December 2, 1987, May filed a use tax return for the period from August 1985 through December 1986 and paid, under protest, the total amount claimed by the Department to be due. On the same day, May filed a petition before the Department seeking a refund of the tax payment. The Department denied May's petition for refund, and May appealed to the district court for Lancaster County. There the matter was considered on the record made in the hearing before the Department, and on April 25, 1989, the district court reversed the determination of the Department and ordered the refund of the tax payment. The Department timely appealed to this court.

In this court, the cases were consolidated for briefing and argument. The Department has assigned three errors, contending that the district court erred (1) in "determining that the license of syndicated programing constitutes the transfer of intangible property rights and as such is not subject to Nebraska Consumer's Use Tax"; (2) in determining that the license of syndicated television programming "constitutes a 'sale for resale,' as contemplated by Neb.Rev.Stat. §§ 77-2701, et seq. and is, therefore, exempt from the Nebraska Consumer's Use Tax"; and (3) in making the previous two determinations because they are irreconcilable. There was no cross-appeal. The third assignment of error is without merit and will not be considered. In that regard, the district court made alternative findings disposing of the cases, in the event that this court determined that the district court had erred in its first disposition. Considering the two assignments of error submitted to us, we reverse the judgments of the district court.

The Department states that "[t]his is an appeal ... from two Findings and Orders entered by defendant John M. Boehm, State Tax Commissioner, denying a use tax refund claim" and that since the appeals were filed prior to July 1, 1989, the court is required "to affirm the Commissioner's decision if the record demonstrates that it is supported by substantial evidence, is not arbitrary or capricious, and is not affected by error of law...." Brief for appellant at 2. That statement does not reflect the fact or the law. The cases before us are appeals from the district court for Lancaster County. Since proceedings for judicial review in case No. S-89-503 were filed in the district court on May 23, 1988, and in case No. S-89-502 on June 8, 1988, our review is de novo on the records. See Department of Health v. Manor Care, Inc., 237 Neb. 269, 465 N.W.2d 764 (1991).

The Department hearings resulted in a "Findings And Order" of 67 pages in case No. S-89-503 and of 9 pages, incorporating the findings in case No. S-89-503, in case No. S-89-502. The review hearings in the district court resulted in a 22-page "Findings of Fact and Conclusions of Law" in case No. S-89-503 and a similar 6-page document, incorporating the 22-page document, in case No. S-89-502.

The records before the Department and before this court show the following facts. At all times relevant to these two cases, May operated in Omaha, under the call letters KMTV, as a television network affiliate. During certain periods of the broadcast day, May received and broadcast programming produced by the national network. May also obtained syndicated programming from independent distributors for those periods of its broadcast day during which it did not receive network programming. This type of syndicated programming is always stored by May for use by it at its convenience during the contract term.

During the period of time involved in case No. S-89-503, almost all syndicated programming was delivered to May on film or videotape by physical transfer of the film or videotape from the distributor to May. One program in particular, "The All New Let's Make a Deal," was delivered by satellite transmission from the distributor's transmitter to May's receiver, where the transmission was put on videotape and stored. During the second period, the time involved in No. S-89-502, 42 percent of the programming was delivered by satellite, and the remainder was delivered on film or videotape.

Generally, syndicated programming is copyrighted news and entertainment features sold to the highest bidder in a given television market. Agreements between distributors and television stations grant broadcast rights for a specific television series or a group of movies and guarantee delivery of the agreed-upon programs, either by videotape or by satellite transmission, on or before certain dates. According to the terms of these agreements, licensees are prohibited from making copies of the programs, unless otherwise agreed to, and in such cases are usually required to destroy the copies. The television stations are also prohibited from exhibiting the programs at any time or place not provided for in the agreements. These agreements also provide that the broadcasts are to be made available to nonpaying audiences only.

Typical of the programs licensed to May in the audit periods are "Wheel of Fortune," "M*A*S*H," "Star Trek," and "Oprah Winfrey." Factors which determine how much a station pays for the syndicated programming include the demand in the market among the stations, the demand in the market among viewers, and when the station will be allowed to air the given program.

In its review of case No. S-89-503, the district court determined, as a matter of law, that "[t]he license of syndicated programming constitutes a transfer or use of intangible property rights and as such is not subject to Consumer's Use tax" and that "satellite transmissions of syndicated programming are clearly transfers of intangible property." The court also stated that since it had found the license of syndicated programming to be intangible, the court did not have to determine whether the provisions of the sale for resale definition within the tax code apply to May's situation. The district court, however, went on to determine that in the event that syndicated programming was determined to be a transfer of tangible property, the transfer of programming would be exempt from consumer's use taxation as a sale for resale.

These cases involve no actual dispute as to facts, but rather turn on interpretation of Nebraska's tax code and the application of that code to the undisputed facts. Statutory interpretation is a matter of law in connection with which an appellate court has an obligation to reach an independent conclusion irrespective of the determination made by the court below. Weimer v. Amen, 235 Neb. 287, 455 N.W.2d 145 (1990).

Appellant's first assignment of error asserts, "The District Court erred in determining that the license of syndicated programing constitutes the transfer of intangible property rights and as such is not subject to Nebraska Consumer's Use Tax."

During the period of time from August 1, 1982, through August 25, 1983, the Nebraska use tax provision, Neb.Rev.Stat. § 77-2703(2) (Reissue 1981), provided: "A use tax is hereby imposed on the storage, use, or other consumption in this state of tangible personal property...." The section was amended in 1983, and for the time from August 26, 1983, through September 30, 1985, the statute provi...