Case Name: Beard, Collector v. Vinsonhaler
Court: Arkansas Supreme Court
Jurisdiction: Arkansas
Decision Date: 1949-05-23
Citations: 215 Ark. 389
Docket Number: 4-8881
Parties: Beard, Collector v. Vinsonhaler.
Judges: 
Reporter: Arkansas Reports
Volume: 215
Pages: 389–400

Head Matter:
Beard, Collector v. Vinsonhaler.
4-8881
221 S. W. 2d 3
Opinion delivered May 23, 1949.
Rehearing denied June 27, 1949.
T. J. Gentry, for appellant.
Bailey & Warren and Bruce T. Bullion, for appellees.

Opinion:
George Rose Smith, J.
This case involves the validity of occupation taxes levied hy Ordinance No. 7573 of the City of Little Rock. The appellees, a partnership owning radio station KGHI and a corporation owning station KARK, brought suit to enjoin the City Collector from enforcing the ordinance, upon the theory that the taxes are an unconstitutional burden on interstate commerce. The chancellor sustained this contention. A second contention, that the ordinance infringes the guaranty of free speech, has been abandoned.
The ordinance levies an annual occupation tax of $250 upon persons who either (a) cany on the business of producing or generating electro-magnetic waves for the purpose of broadcasting by radio transmission or (b) engage in the business of intrastate radio broadcasting. The law recites that it shall not apply to that portion of the business that may be in interstate or foreign commerce, or to business done for the government of the United States. There is levied also an annual tax of $50 upon the business of soliciting radio advertising within the city, with the same exemption of interstate, foreign and Government business.
The appellees' basic argument is that all radio broadcasting is essentially interstate commerce. The proof shows that radio, waves continue to travel indefinitely, that even a comparatively weak transmitter sends its signals far beyond the borders of, its ow-n State— though with a natural diminution in strength as the impulses are diffused over a widening circle. Station KARK has been heard in every State and in countries as-distant as Australia and New Zealand. Of course such facts as these underlie the various decisions holding that radio broadcasting is at least partly interstate commerce and that in its interstate aspects it may not be burdened by State privilege taxes. See, for example, Fisher's Blend Station, Inc., v. State Tax Com'n, 297 U. S. 650, 56 S. Ct. 608, 80 L. Ed. 956, in which the court struck down a privilege tax upon gross receipts from interstate broadcasting.
The question here, however, is whether radio broadcasting also involves intrastate activity which may be subjected to local taxation. It is shown that the appellees broadcast not only national network programs, originating elsewhere and relayed to Little Rock by telephone wire, but also local programs arising in the appellees' studios. About a fourth of the appellees' income is derived from local advertisers; the rest comes-from the sponsors of programs originating outside the State.
We think the appellees' business is intrastate as well as interstate. Suppose, for instance, that a candidate for mayor broadcasts an address to the city's electors or a small bakery advertises a sale of its bread. Not only do such programs originate in Little Rock, but both their intended appeal and actual effect are wholly local. Only citizens of Little Rock can vote in her elections; only neighborhood customers will act on the invitation to buy a loaf of bread. It is immaterial equally to the appellees and to their advertisers that a handful of nonresidents may listen momentarily to the broadcast before turning to a program of greater interest. Such transient eavesdropping is merely an adventitious consequence of the uncontrollable carrying power of radio waves. This, ordinance taxes only the local transaction, expressly exempting these fortuitous interstate aspects.
. In this respect the opinion in Postal Tel. Cable Co. v. Charleston, 153 U. S. 692, 14 S. Ct. 1094, 38 L. Ed. 871, is enlightening. The city levied an animal privilege tax of $500 upon telegraph companies "for business done exclusively within the city of Charleston, and not including any business done to or from points without the State." The company argued that the tax was really upon its entire business, but the court answered this contention by pointing to the language of the ordinance. It was also urged that great injury might result to the company if various cities were allowed to tax it, but the court replied: "But this'is a hardship, if such exists, that it is not within our province to redress. If business done wholly within a State is within the taxing power of the State, the courts of the United States cannot review or correct the action of the State in the exercise of that power."
In the latter respect this case is even stronger, for the possibility of multiple taxes does not exist. Little Rock alone is in a position to exact a license fee for the intrastate business done by these radio stations. This consideration was stressed in Western Live Stock v. Bureau of Revenue, 303 U. S. 250, 58 S. Ct. 546, 82 L. Ed. 823, 115 A. L. R. 944, wherein the court sustained a tax upon gross receipts from a trade journal that carried out-of-state advertising and went to many nonresident subscribers. From the opinion: "But there is an added reason why we think the tax is not subject to the objection which has been leveled at taxes laid upon gross receipts derived from interstate communication or transportation of goods. So far as the value contributed to appellants' New Mexico business by circulation of the magazine interstate is taxed, it cannot again be taxed elsewhere any more than the value of railroad property taxed locally. The tax is not one which in form or substance can be repeated by other states in such manner as to lay an added burden on the interstate distribution of the magazine."
Nevertheless, appellees insist that the interstate and intrastate elements of broadcasting are inseparable, so that a tax upon one is inevitably a tax upon the other. As a physical matter it is true that the electric waves cannot be divided into separate classes, bnt that fact is not conclusive. In Pacific Tel. & Tel. Co. v. Tax Com'n of Washington, 297 U. S. 403, 56 S. Ct. 522, 80 L. Ed. 760, 105 A. L. R. 1, the court summarized its earlier cases by saying: "No decision of this Court lends support to the proposition that an occupation tax upon local business, otherwise valid, must be held void merely because the local and interstate branches are for some reason inseparable."
Furthermore, it is only the emanations of the radio waves that are inseparable. Those are not what this ordinance endeavors to tax; instead, the tax is laid upon a course of conduct that constitutes engaging in intrastate business. A substantial part of the appellees' programs originate locally and are of purely local interest. To that extent the appellees are engaged in a local enterprise readily separable from their interstate activity. Should they confine their broadcasts to programs brought in from other states there might be force to their suggestion that interstate commerce is being taxed. But as long as they conduct an essentially intrastate business as well, we see no reason why they should not bear their share of the cost of municipal advantages admittedly received. It is shown that daily newspapers pay an annual tax of $1,000, although some of their papers go beyond the State boundaries. The telephone company's tax is $45,000, though its business is interstate as well as intrastate. By comparison the appellees' tax is moderate in amount. It is not even suggested that the sum exceeds the profits derived from local business, so that interstate receipts are to some extent affected. Whether such a showing would invalidate the tax is at least doubtful, in view of the language in Postal Tel.-Cable Co. v. Richmond, 249 U. S. 252, 39 S. Ct. 265, 63 L. Ed. 590, and Pacific Tel. & Tel. Co. v. Tax Com'n, supra.
As an alternative the ordinance taxes the generation of electro-magnetic waves within the city. To the extent that this is a step in the process of broadcasting the same considerations that we have discussed are applicable. Moreover, the production of these waves is even more local in its nature. It is shown that broadcasting involves a number of distinct processes. Initially, the impact of sound waves upon magnets within' the microphone so affects an alternating electric current as to create electromagnetic waves. Those who are engaged in the production of such waves are subjected to the tax. The current is next amplified and sent by wire from the studio to the transmitting station. According to one of appellees' witnesses, at that point "it is not radio." At the transmission station the electric impulses are again amplified, modulated, and sent forth into the atmosphere, the process then becoming radio. When the impulses are picked ,up by a receiving set the process is reversed and they are changed back to sound waves.
The tax may be likened to that upheld in Utah Power & Light Co. v. Pfost, 286 U. S. 165, 52 S. Ct. 548, 76 L. Ed. 1038. There the excise was levied in Idaho upon the generation of electricity that was immediately transmitted to Utah. No energy was kept in storage, so that when a Utah consumer turned a switch to use electricity the effect was to set in operation the generators in Idaho, which at once transformed water power into the required electrical energy. Even though generation and transmission were elements of a continuous process, the court held that they were distinct operations. The tax upon the generation of the current was accordingly upheld, in spite of its instantaneous transmission into interstate commerce.
In the case of Fisher's Blend Station, Inc., v. State Tax Com'n, supra, strongly urged by the appellees, the court was careful not to say that a tax upon the generation of radio impulses would be invalid. This point was reserved by the following language in the opinion: "Whether the state could tax the generation of such energy, or other local activity of appellant, as distinguished from the gross income derived from its busi ness, it is unnecessary to decide." In this case the city is venturing only into the area kept open by that decision.
What we have said disposes also of the attack upon the tax levied upon the business of soliciting radio advertising. This activity is even more distantly removed from the interstate aspects of broadcasting, and thus its liability to local taxation is even more clearly apparent.
Reversed and dismissed.