Tad Screen Advertising v. Oklahoma Tax Com'n
| Decision Date | 14 April 1942 |
| Docket Number | No. 2401.,2401. |
| Citation | 126 F.2d 544 |
| Parties | TAD SCREEN ADVERTISING, Inc., v. OKLAHOMA TAX COMMISSION. |
| Court | U.S. Court of Appeals — Tenth Circuit |
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Roy C. Lytle, of Oklahoma City, Okl. (D. I. Johnston, Keaton, Wells & Johnston, and Henry S. Griffing, all of Oklahoma City, Okl., and Bennett & Wendelken, of Colorado Springs, Colo., on the briefs), for appellant.
C. D. Stinchecum, of Oklahoma City, Okl. (F. M. Dudley and A. L. Herr, both of Oklahoma City, Okl., on the brief), for appellee.
Before PHILLIPS, BRATTON, and MURRAH, Circuit Judges.
The question presented on this appeal is whether certain excise taxes laid on Tad Screen Advertising, Inc.,1 under the Oklahoma Consumers and Users Tax Act, 68 O.S.1941 § 1231 et seq., infringed the commerce clause of the Federal Constitution, art. 1, § 8, cl. 3.2
Tad is a corporation organized under the laws of Delaware and is duly authorized to transact business in the states of Oklahoma and Texas. Its home office and manufacturing plant are located in Dallas, Texas, and it does not maintain an office or place of business in Oklahoma.
Tad is engaged in the business of manufacturing advertising motion picture films and in selling and furnishing film advertising service. Tad manufactures and keeps on hand at Dallas advertising films suitable for almost every type of business.
Tad sends its agents to various cities and towns in Oklahoma who negotiate agreements with local exhibitors for the running of film advertisements. If a satisfactory agreement is reached with the local exhibitor, a contract is signed by Tad's agent and the exhibitor and mailed to Dallas for Tad's approval. The contract provides that the exhibitor shall run Tad advertising films in a designated theater once during each performance and at a time when the theater is dark and the audience is seated; that Tad will solicit contracts for the display of such films and will pay the exhibitor certain specified amounts for running such films; that the exhibitor will return to Tad promptly all films at the end of their screening period; and that the contract shall not be binding upon Tad until countersigned by a studio official. When approved and countersigned by Tad at Dallas, a signed copy of the contract is forwarded by mail to the exhibitor.
After contracts have been made with exhibitors for the running of advertising films, Tad's agents solicit advertising contracts from local advertisers in Oklahoma. If a satisfactory agreement is reached with a local advertiser, a contract is signed by Tad's agent and the advertiser and mailed to Dallas for Tad's approval. The contract provides in substance that the advertiser orders a Tad Planned Campaign, consisting of a series of advertising films featuring a designated type of business; that the advertiser authorizes Tad to have such campaign displayed at certain intervals, in designated theaters, and that the contract shall not be binding upon Tad until countersigned by a studio official. When approved and countersigned by Tad at Dallas, a signed copy of the contract is forwarded by mail to the local advertiser. Tad attaches a trailer, giving the advertiser's name, address, and telephone number, to the end of a standard advertising film suitable for the type of business in which the advertiser is engaged and ships the film with trailer attached by parcel post or express from Dallas to a local exhibitor under contract with Tad. When the film has been run for the required period of time, usually one week, it is returned to Tad by the exhibitor and Tad forwards another film of the same series with the same or a similar trailer attached. Tad is paid monthly by the local advertiser according to the contract and remits monthly by check to the exhibitor the amount it has contracted to pay the latter for the running of the film.
The service to national advertisers is handled in a somewhat different manner. The following instances are typical:
1. Tad has a contract with General Screen Advertising, Inc.,3 of Chicago, Illinois. The latter is authorized to enter into contracts for Tad with national advertisers. General enters into contracts with the advertising counsel for Chevrolet Motor Company4 for a specified number of weeks of display of Chevrolet advertising films in certain named theaters under contract with Tad. Jam Handy Corporation of Detroit, Michigan, makes Chevrolet advertising films and forwards those covered by the contract with Tad to the latter at Dallas. Tad, in turn, ships them in proper rotation to the local exhibitors under contract with Tad, designated by the advertising counsel. These films are the property of Chevrolet and are returned to the Jam Handy Corporation when they have been displayed by the local exhibitors. Chevrolet pays Tad through its advertising counsel for such display.
2. A Tad salesman calls upon a local Goodrich Tire & Rubber Company5 dealer and if the dealer wishes local advertising of Goodrich products, including the dealer's name and address on a trailer, the local dealer signs a contract form which is forwarded to Dallas. If approved by Tad, it is sent to the Alexander Film Company,6 Colorado Springs, Colorado, which, in turn, submits it to the Goodrich branch office in that territory. If approved by Alexander and the Goodrich branch, Tad is notified of such approval, the contract is signed, and a copy is forwarded to the local dealer. Alexander makes the films advertising the Goodrich products and ships such films to Tad. Tad ships the films with the trailer attached to the designated local exhibitor who runs the films. The local dealer pays Tad for exhibiting the film but is reimbursed for a portion of the cost by Goodrich.
3. A Tad salesman calls upon a local Sinclair agent. If the local agent desires film advertising, he signs a contract and the salesman forwards it to Tad at Dallas. Tad, in turn, submits the contract to United Film Advertising Service,7 Kansas City, Missouri. United submits the contract to the Sinclair branch in the territory in which the agent operates. If the Sinclair branch approves the contract, it returns it to United and the latter forwards it to Tad who formally accepts it and sends a copy to the agent. United provides the films and ships them to Tad at Dallas. Tad forwards the films to the local exhibitor designated in the contract, who runs the films. The agent pays half of the charge for the service and the other half is paid by Sinclair.
4. The Dr. Pepper Company8 has contracts with various local bottlers throughout the United States. It permits the bottler to use the trade name and sells him the ingredients from which the beverage is manufactured. Tad's agent enters into a contract with the local bottler for film advertising and forwards the contract to Tad at Dallas. Tad sends the contract to Dr. Pepper's advertising agents. If the contract is approved by Dr. Pepper and its advertising agents, Tad is notified of such approval, countersigns the contract, and notifies the local bottler. The films advertising the beverage are manufactured by Tad. Tad forwards them to the local exhibitor designated in the contract, who runs the films. Dr. Pepper pays for the advertising service and makes an adjustment with the local bottler.
In each instance, Tad pays the local exhibitor, in accordance with its contract with the exhibitor, for running the films.
Tad does not manufacture any of the films used in national advertising campaigns except those advertising the products of Dr. Pepper.
The films used for local advertising are furnished by Tad from a standard stock which embraces films suitable for virtually every type of business. A film is not manufactured for a particular advertiser and its use is not limited to one advertiser. On the contrary, a film is susceptible of use and is used to advertise many local advertisers falling within a group or class for which the film is suited.
While it does not definitely appear from the record, we think it reasonable to assume that films manufactured by Tad for Dr. Pepper are suited for advertising and are used to advertise more than one bottler.
In certain instances, Tad manufactures and furnishes trailers which are usable only for the particular dealer named therein.
The Oklahoma Tax Commission demanded from Tad an excise tax in the amount of $2,029.90 for the period from June 1, 1937, to December 31, 1938, and the sum of $1,016.22 for the period from January 1, 1939, to October 15, 1939. After exhausting its administrative remedies, Tad, on February 5, 1940, paid to the Commission the sum of $3,838.39, which included the tax and $792.27 penalty. It brought this suit against the Commission to recover the amount so paid. From an adverse judgment, Tad has appealed.
Tad contends that the service rendered by it is interstate in character and that the imposition of the tax directly burdens interstate commerce. It asserts that the local exhibitor, in running the films in a local theater, acts as an independent contractor and that Tad is not engaged in furnishing advertising service in Oklahoma.
It is well settled that a producer or manufacturer who ships motion picture films from one state to exhibitors in another state to be exhibited by the latter is engaged in interstate commerce.9 But when an article that has been...
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