Sears, Roebuck & Co. v. State Tax Commission

• Decision Date: 09 April 1976
• Citation: 370 Mass. 127,345 N.E.2d 893
• Parties: SEARS, ROEBUCK AND CO. v. STATE TAX COMMISSION (and a companion case 1 ).
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 893

345 N.E.2d 893

370 Mass. 127

SEARS, ROEBUCK AND CO.

v. STATE TAX COMMISSION (and a companion case ¹).

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Feb. 5, 1976.

Decided April 9, 1976.

Mark A. Michelson, Boston (Andrew J. Newman, Boston, with him), for the taxpayers.

Margot Gardner Botsford, Asst. Atty. Gen. (Howard Whitehead, Asst. Atty. Gen., with her), for the State Tax Commission.

James C. Heigham, Boston, for Massachusetts Newspaper Publishers Association, amicus curiae, submitted a brief.

Before HENNESSEY, C. J., and REARDON, QUIRICO, BRAUCHER and WILKINS, JJ.

BRAUCHER, Justice.

The Appellate Tax Board (board) has upheld the imposition of use taxes on advertising supplements inserted into Massachusetts newspapers and distributed with them. The taxpayers operate retail stores in Massachusetts; they arranged for the printing of the supplements by printers outside Massachusetts and for the shipment of the supplements to the newspapers. We hold that the advertising supplements were parts of 'newspapers,' not subject to sales or use taxes under G.L. c. 64H, § 6(m), and c. 64I § 7(b). We therefore reverse the decision of the board.

The parties to the case of Raymond's, Inc., stipulated that the board's decision in the Sears, Roebuck and Co. (Sears) appeal would apply. We summarize the facts of the Sears case as shown in the board's findings and the agreed facts and exhibits. The Commissioner of Corporations and Taxation gave Sears notices of intention dated February 2, 1972, to assess a deficiency of sales or use taxes for thirty-seven months--the month of November, 1968, and the thirty-six month period of January, 1969, through December, 1971. Notices of assessment dated April 27, 1972, followed, for a total of some $38,000 plus about $4,000 interest. On August 2, 1972, Sears filed a timely application for abatement for November, 1968, which was denied by the State Tax Commission (commission) by notice dated December 4, 1972. Sears filed its appeal petition with the board on January 4, 1973. On October 10, 1973, Sears filed with the commission applications for abatement for the other thirty-six months, which were denied by notice dated October 12, 1973. On February 11, 1974, Sears filed with the board a motion to amend its original appeal petition to include appeals from the denials for all thirty-seven months; that motion was allowed on April 9, 1974.

The assessment was on the price paid by Sears to commercial printers within and without Massachusetts for advertising supplements and circulars. The circulars were procured for distribution to Sears stores in Massachusetts, and Sears admits their taxability. The supplements, pursuant to separate contracts between Sears and the printer and between Sears and the newspaper, bore the newspaper's logo and the date of the newspaper edition, and were shipped by the printer to the newspaper by common carrier. The newspaper inserted the supplements into the designated edition and distributed them with the newspapers.

The board ruled that it lacked jurisdiction over Sears' appeal with respect to January, 1969, through December, 1971. With respect to November, 1968, the board ruled that the advertising supplements were not 'newspapers' within the exemption from sales tax in G.L. c. 64H, § 6(m), for sales of newspapers. Most of the supplements, over ninety-eight per cent, were printed outside Massachusetts, but were ruled to be subject to use tax under the definitions of 'purchaser' and 'use' in G.L. c. 64I, § 1(2), (3), (5).

1. Jurisdiction. A preliminary question is presented as to the board's jurisdiction over Sears' appeal with respect to January, 1969, through December, 1971, since no appeal to the board was taken within ninety days after notice of the commission's decisions with respect to those months, as required by G.L. c. 64H, § 22, and c. 64I, § 23.

Sears' appeal petition with respect to November, 1968, was timely filed. Sears could, as it did, seek abatement of its tax with respect to only one month. See G.L. c. 64H, §§ 9, 15(b), 19(a), 20, 22, and c. 64I, §§ 11, 16(b), 20(a), 21, 23. The appellants argue that the board had discretion, under Rule 14 of its Rules of Practice and Procedure, ² to allow Sears' motion to amend the petition to include January, 1969, through December, 1971. Cf. Walsh v. Curcio, 358 Mass. 819, 266 N.E.2d 895 (1971). Neither the board nor this court, however, can create an exception to the time limit specified by the statutes. William Rodman & Sons, Inc. v. State Tax Comm'n, 364 Mass. 557, 559, 306 N.E.2d 820 (1974). See DaLomba v. Director of the Div. of Employment Security, --- Mass. ---, 337 N.E.2d 687 (1975). ^a The attempted institution of an appeal after the statutory period has expired is 'so repugnant to the procedural scheme, so destructive of its purposes, as to call for dismissal on the appeal.' Shulte v. Director of the Div. of Employment Security, --- Mass. ---, 337 N.E.2d 677 (1975), ^b and cases cited. The board's ruling that it lacked jurisdiction over Sears' appeal with respect to January, 1969, through December, 1971, was correct.

2. 'Newspapers.' Under G.L. c. 64H, § 6(m), sales of 'newspapers' are exempt from sales tax, and under G.L. c. 64I, § 7(b), use of property by the purchaser is exempt from use tax if the sale is exempt from sales tax. The board said that if the advertising material of Sears had been 'printed directly by the newspapers involved and sold to the public as part of the melange of news accounts, editorial opinion, sports stories, advice and gossip columns, advertising, comics etc., commonly understood in modern times by the generic term 'newspaper,' there is little doubt that the transaction would have escaped taxation,' citing Friedman's Express, Inc. v. Mirror Transp. Co., 71 F.Supp. 991 (D.N.J.1947), aff'd, 169 F.2d 504 (3d Cir. 1948). We agree, and we think the fact that the advertising supplements were not printed directly by the newspapers does not change the result.

The Friedman's Express case involved an exemption from the Interstate Commerce Act for motor vehicles used exclusively 'in the distribution of newspapers.' Vehicles carrying comic sections of newspapers were held to be within the exemption, even though the comic sections were printed in a separate plant and transported from the printer to the newspaper and its wholesale outlets in delivering them to retailers who assembled the comic sections with other portions of the newspapers. The District Court judge said, 'There is no warrantable limitation on a newspaper publisher as to where the parts of his paper may be composed and reduced to visual condition or who shall do it for him.' 71 F.Supp. at 992. The appellate court said, 'We think that Congress did not intend to make a fine-spun distinction between the distribution of newspapers and parts or sections of newspapers.' 169 F.2d at 507. Cf. R. C. Motor Lines, Inc. v. Herndon, 63 M.C.C. 417, 419 (1955) (magazine supplements for newspapers).

The sales in question in the present cases are claimed to be sales of the advertising supplements by the printers to the...