Midcontinent Broadcasting Co. of Wisconsin, Inc. v. Wisconsin Dept. of Revenue
| Decision Date | 28 August 1979 |
| Docket Number | No. 78-203,78-203 |
| Parties | MIDCONTINENT BROADCASTING COMPANY OF WISCONSIN, INC., Petitioner- Appellant, v. WISCONSIN DEPARTMENT OF REVENUE, Respondent. |
| Court | Wisconsin Court of Appeals |
Review Granted.
Jeremy C. Shea and Ross & Stevens, Madison, Allen I. Saeks, Edward M. Moersfelder, Minneapolis (of counsel), for petitioner-appellant.
Bronson C. La Follette, Atty. Gen., and John E. Armstrong, Asst. Atty. Gen., for respondent.
Before GARTZKE, P. J., BABLITCH and DYKMAN, JJ.
This case involves the construction of the statute defining "occasional sales," which are exempt from sales tax in Wisconsin. The statutory definition contained in sec. 77.51(10)(a), was created by sec. 48, ch. 620, Laws of 1961, to read:
A sale of property not held or used by a seller in the course of an activity for which he is required to hold a seller's permit, provided such sale is not one of a series of sales sufficient in number, scope and character to constitute an activity requiring the holding of a seller's permit.
This section was repealed and recreated by sec. 228, ch. 154, Laws of 1969, the budget bill, to define occasional sales as follows:
Isolated and sporadic sales of tangible personal property or taxable services where the infrequency, in relation to the other circumstances, including the sales price and the gross profit, support the inference that the seller is not pursuing a vocation, occupation or business or partial vocation or occupation or part-time business as a vendor of personal property or taxable services. No sale of any tangible personal property or taxable service may be deemed an occasional sale if at the time of such sale the seller holds or is required to hold a seller's permit. (Emphasis supplied.)
The Wisconsin Department of Revenue (department) seeks to impose a sales tax on the sale proceeds of all the tangible business assets of a television broadcasting station, normally exempt from such tax, for the sole reason that it possessed a seller's permit at the time of sale. It held the permit for the sale of phonograph records, from which it had derived a small portion of its revenues on a sporadic basis during nearly four years prior to the sale of its operating assets. These assets were sold for $776,524.63. 1 The sales tax sought to be imposed is $31,060.99. The gross receipts from the taxpayer's sale of records during the entire four-year period was $26,716.09, upon which a sales tax of $842.54 was due and paid. The taxpayer's gross receipts from the sale of broadcasting time during the same period, for which no seller's permit was then or is now required in Wisconsin, was $7,834,314. Thus, the department seeks to impose a sales tax which is more than $4,300 in excess of the total gross receipts from the record sales, which receipts equalled only three-tenths of one percent (.003) of the exempt revenues generated by the taxpayer's primary business.
The taxpayer contends on this appeal:
1. That the sale of its broadcasting assets is an exempt occasional sale within the meaning of the statute since the record sales for which it held a seller's permit were not made as a part of its main business.
2. That if the statute is not read as exempting such sale from taxation, its imposition of a sales tax on assets used in connection with the sale of television broadcast time is an unconstitutional burden on interstate commerce in violation of the United States Constitution.
3. That if the statute is not read as exempting such sale from taxation it constitutes an arbitrary and unreasonable imposition of tax on the taxpayer in violation of its rights under the equal protection and due process clauses of the United States and Wisconsin Constitutions.
The parties have entered into a written stipulation of all facts material to this appeal. Midcontinent Broadcasting Company of Wisconsin, Inc. (taxpayer) is a Wisconsin corporation which operated television station WKOW-TV in Madison from 1960 until October 28, 1970, and operated television station WAOW-TV in Wausau from 1965 until October 28, 1970. From 1960 to date, the taxpayer has also operated radio station WTSO, formerly WKOW, in Madison. Both TV stations were affiliates of the American Broadcasting Company; the radio station was not affiliated with any national network.
The vast majority of the taxpayer's operating revenues were derived from charges for broadcast time paid for by advertisers sponsoring network, national and local programming, none of which revenues were subject to sales tax or required the holding of a seller's permit under the applicable statutes. The combined gross operating revenues from the TV and radio stations during the years 1967 through 1970, are as follows:
WKOW-TV
Calendar and WTSO
Year WAOW-TV k Radio = Total
------------- ---------- ---------- ----------
1967 $1,370,200 $ 535,890 $1,906,090
1968 1,414,039 544,023 1,958,062
1969 1,503,893 584,964 2,088,857
1970 1,277,310 603,995 1,881,305
(to 10/28/70)
---------- ---------- ----------
Total $5,565,442 $2,268,872 $7,834,314
During the three-month period ending February 28, 1967, the taxpayer began selling phonograph records to viewers of its television stations on behalf of certain of its sponsors, as special sales items. Making such phonograph records available was contemplated as a service to viewers of the stations in conjunction with certain television programming. In some cases the record buyers sent their payments directly to the sponsors, and in some cases payments were sent to the television stations. In the latter cases, the taxpayer paid the sales tax to the department on all sales where payment was sent to and received by it. The parties have stipulated that the record sales "were not made as a part of petitioners' main business, which was broadcasting."
Being "under the impression" that the Wisconsin Statutes required it to hold a seller's permit in connection with the sale of the records, the taxpayer applied for such a permit on or about February 28, 1967. It indicated on the application that the "Kind of Taxable Merchandise" on which it intended to pay sales tax was "Record Sales." The permit was issued on March 9, 1967. Thereafter, it filed sales tax returns each quarter until the TV stations were sold, showing gross taxable receipts and net sales tax owing as follows:
Gross
Quarter Ending Taxable Receipts Net Sales Tax
----------------- ---------------- -------------
February 28, 1967 $ 8,069.50 $237.25
May 31, 1967 1,465.67 43.09
August 31, 1967 -0- -0-
November 30, 1967 639.32 18.80
February 29, 1968 8,672.33 254.97
May 31, 1968 1,159.22 34.08
August 31, 1968 602.91 17.73
November 30, 1968 -0- -0-
February 28, 1969 283.98 8.35
May 31, 1969 -0- -0-
August 31, 1969 -0- -0-
November 30, 1969 1,199.62 47.02
February 28, 1970 1,890.54 74.11
May 31, 1970 625.00 24.50
August 31, 1970 477.00 18.70
November 30, 1970 1,631.00 63.94
---------------- -------------
TOTAL $26,716.09 $842.54
On September 30, 1969, the taxpayer entered into a formal sales agreement with Horizons Communications Corporation of Wisconsin, a Delaware corporation, pursuant to which taxpayer agreed to sell to that corporation the tangible and intangible assets used in the operations of its television stations, subject to approval by the Federal Communications Commission of the transfer of the broadcasting licenses to Horizons. At that time, the taxpayer had no actual knowledge that the legislature had amended the statute defining "occasional sale," effective September 1, 1969, in the manner indicated at the outset of this opinion. Consequently, the taxpayer made no effort to negotiate the collection of any sales tax from the purchaser, as authorized by sec. 77.52(3).
The transaction was closed on October 28, 1970. The parties have stipulated that the value of the tangible assets located in Wisconsin which were conveyed pursuant to the transaction was $776,524.63. Following the transaction, the taxpayer continued to operate radio station WTSO, which was at no time engaged in the sale of records or of any activity requiring a seller's permit. 2 The taxpayer continued to hold the seller's permit issued on March 9, 1967, despite this fact. The department issued its notice assessing the sales tax complained of in this action on November 18, 1971. The Tax Appeals Commission denied the taxpayer's petition for a redetermination, and affirmed the assessment.
The taxpayer commenced this action for review pursuant to ch. 227, Stats. The circuit court affirmed the action of the department, rejecting all three contentions asserted by the taxpayer. In its memorandum decision, the trial court said:
Under the holding of the Wisconsin Supreme Court in Three Lions Supper Club, Ltd. (v. Wisconsin Department of Revenue), 72 Wis.2d 546, 241 N.W.2d 190 (1976), there is no question but that the instant sale of tangible personal property would have been an exempt "occasional sale" within the meaning of sec. 77.54(7), Stats., if petitioner had not held a seller's permit.
A literal reading of sec. 77.54(7) leads to the inescapable conclusion that because of the express provision of the last sentence of sec. 77.51(10)(a) the instant sale was not exempt from tax...
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