Mount Mansfield Television, Inc. v. Vermont Commissioner of Taxes, 124-74

Decision Date01 April 1975
Docket NumberNo. 124-74,124-74
Citation336 A.2d 193,133 Vt. 284
CourtVermont Supreme Court
PartiesMOUNT MANSFIELD TELEVISION, INC. v. VERMONT COMMISSIONER OF TAXES.

Paul D. Sheehey, Burlington, for plaintiff.

M. Jerome Diamond, Atty. Gen., Georgiana O. Miranda, Asst. Atty. Gen., Montpelier, for defendant.

Before BARNEY, C. J., and SMITH, KEYSER, DALEY and LARROW, JJ.

KEYSER, Justice.

This case raises for our determination the issue of whether the receiving and subsequent televising of films and video tapes supplied for a fee by out-of-state distributors constitutes a taxable use under the Vermont sales and use tax. Appellant, Mount Mansfield Television, Inc., was assessed on this premise by the Vermont Department of Taxes. The assessment was affirmed on appeal by the Commissioner of Taxes who, in turn, was upheld by the Chittenden Superior Court.

Taxpayer obtains films and video tapes from various out-of-state distributors and broadcasts them, pursuant to the terms of the agreements under which they are supplied, over its television station WCAX in Burlington. The fees paid vary depending, in part, on the advertising fees which are charged by taxpayer. Under 32 V.S.A. § 9774(c), the three per cent use tax is based upon the amount of the fee paid to the supplier.

The use tax in question is imposed under 32 V.S.A. § 9773(1) on any tangible personal property purchased at retail unless the property has been or will be subject to the sales tax or is otherwise exempted. The absence of such an exception is not challenged here; the question is simply whether the subject transactions fall within the ambit of the statutory classification.

Purchase is defined in 32 V.S.A. § 9701(6) as:

any transfer of title or possession or both, exchange or barter, rental, lease or license to use or consume, conditional or otherwise, in any manner or by any means whatsoever for a consideration, or any agreement therefor.

'Tangible personal property' is statutorily defined as 'personal property which may be seen, weighed, measured, felt, touched or in any other manner perceived by the senses.' 32 V.S.A. § 9701(7). This statutory definition provides the source of taxpayer's basic contention that the real subject of its transactions with the film and video tape distributors is an intangible right to broadcast which does not fall within the meaning of 'tangible personal property'.

Although the question presented is one of first impression in Vermont, there is no dearth of analogous case law in other jurisdictions on both sides of the issue. Without engaging in a protracted analysis of the subtle factual and statutory language distinctions which can be found in cases cited by both parties here, it is fair to say that the cases which taxpayer has cited in support of its position generally support the theory that transactions of the type here in question involve 'intangible' reproduction rights as opposed to 'tangible' property rights. These cases take the view that products such as television films are nothing without the attendant right to broadcast and that they thus cannot be classified as 'tangible personal property' for tax purposes. See Washington Times Herald v. District of Columbia, 94 U.S.App.D.C. 154, 213 F.2d 23 (1954); Watson Industries, Inc. v. Shaw, 235 N.C. 203, 69 S.E.2d 505 (1952); Burgess v. Ames, 359 Ill. 427, 194 N.E. 565 (1935).

Cases cited by the Department of Taxes, on the other hand, stand for the proposition that it is a finished product (video tape or film) which is the subject of the transaction and that a license to exhibit or broadcast without the tangible finished product itself would be valueless. See Boswell v. Paramount Television Sales, Inc., 291 Ala. 490, 282 So.2d 892 (1973); Florida Association of Broadcasters v. Kirk, 264 So.2d 437 (Fla.Dist.Ct.App.), cert. denied, ...

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