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American Television Co., Inc. v. Hervey, 253 Ark. 1010, 490 S.W.2d 796, 26 Rad. Reg. 2d (P & F) 1439

Facts

Appellant, American Television Company, Inc., operates KFSA-TV in Fort Smith and enters into license agreements with out-of-state companies to broadcast films and programs. The films are sent to KFSA for broadcasting and must be returned shortly after airing. The Commissioner of Revenues for Arkansas imposed a use tax on the video tape material used by the station, which the appellant paid under protest, leading to the lawsuit claiming the tax was illegal.

Appellant, American Television Company, Inc., owns and operates KFSA-TV, a federally licensed television station in Fort Smith. The station enters into various license agreements with out-of-state concerns whereby it acquires the right to broadcast particular motion picture films, syndicated programs, and other artistic performances.

Issue

Whether the imposition of a use tax on video tape material used by a television station under license agreements is lawful, considering the nature of the agreements and the definition of tangible personal property.

Whether the imposition of a use tax on video tape material used by a television station under license agreements is lawful, considering the nature of the agreements and the definition of tangible personal property.

Rule

The use tax applies to the storage, use, or consumption of tangible personal property within the state, regardless of whether the property was purchased in-state or out-of-state, and includes the right to use such property.

The statute imposing the tax reads as follows: '84—3105. (a) There is hereby levied and there shall be collected from every person in this State a tax or excise for the privilege of storing, using or consuming, within (the State, any article of tangible personal property, after) the passage and approval of this Act (ss 84—3101—84—3128), purchased for storage, use or consumption in this State at the rate of three per centum (3%) of the sales price of such property.'

Analysis

The court determined that the agreements between the television station and the out-of-state licensors provided a limited right to broadcast, which was inseparable from the tangible property (the films and tapes) used to exercise that right. The court concluded that the use of the films and tapes for broadcasting constituted taxable use under the state's tax statute, as the property had come to rest in Arkansas for the purpose of broadcasting.

The court then additionally commented that there was no sale, only a rental, but the thrust of the opinion was directed to the word ‘possession’. The court concluded that the use of the films and tapes for broadcasting constituted taxable use under the state's tax statute, as the property had come to rest in Arkansas for the purpose of broadcasting.

Conclusion

The Supreme Court affirmed the lower court's decision, ruling that the use tax was validly imposed on the video tape material used by the television station.

It follows from what has been said that we find no error in the court's decree (judgment) and said decree is, in all respects, affirmed.

Who won?

The Commissioner of Revenues prevailed in the case, as the court upheld the imposition of the use tax, finding that the agreements involved the use of tangible personal property.

The Commissioner of Revenues for the State of Arkansas, levied a use tax on the use by Appellant of the video tape material pursuant to Act 487 of 1949 (Ark.Stat.Ann. s 84—3101 et seq. (Repl. 1960)).

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