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Washington Times-Herald v. District of Columbia, 213 F.2d 23, 94 U.S.App.D.C. 154

Facts

The petitioner, a newspaper publishing company, contracted with syndicates for comic strips, receiving fiber matrices (mats) that bore impressions of the strips. These mats were produced through a photo-engraving process and were used to create metal plates for printing. The newspaper paid significantly more for the mats than for blank ones, indicating that the payment was primarily for the right to reproduce the comic strips rather than for the mats themselves.

Petitioner, a newspaper publishing company, contracted with several syndicates for its supply of comic strips. The syndicates carry out these contracts by sending the petitioner, at intervals, fiber matrices (mats) bearing impressions of the current sequence of strips.

Issue

Whether the transactions involving the purchase of comic strip mats by the newspaper constituted sales at retail subject to taxation under the District of Columbia Use Tax Act.

We are asked to review a decision of the District of Columbia Tax Court under the District of Columbia Use Tax Act.

Rule

Sales and use taxes do not apply to professional, insurance, or personal service transactions where the sale of tangible personal property is an inconsequential element and no separate charges are made for it.

Section 47-2701, subd. 1(b)(3) of the Code exempts from sales and use taxes ‘Professional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made.’

Analysis

The court analyzed the nature of the transactions and determined that the primary purpose was the acquisition of the right to reproduce the artists' work, rather than the purchase of the mats themselves. The court noted that the value of the mats was less than ten percent of the total amount charged for the services, which supported the conclusion that the transactions fell under the exemption from sales tax.

The syndicates sold to the Times-Herald the right to reproduce one time the work of artists who make the drawings. They simply sold the professional and personal services of the artists whom they had under contract and in so doing transferred title to the mats, of inconsequential value, from which the drawings could be reproduced.

Conclusion

The Court of Appeals reversed the Tax Court's decision, holding that the transactions were exempt from sales tax as they primarily involved professional services.

The transactions in question are clearly exempt under Sec. 47-2701, subd. 1(b) (3).

Who won?

The Times-Herald Publishing Co. prevailed in the case because the court found that the transactions were primarily for professional services rather than retail sales, thus exempt from taxation.

The Court of Appeals, Wilbur K. Miller, Circuit Judge, on rehearing en banc, held that sales to newspaper of mats bearing impressions of current sequence of comic strips, with right to reproduce one time the work of artists who made the drawings, were sales of professional and personal services of the artists which involved transfer of title to the mats, of inconsequential value.

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