Title: Ex parte State of Alabama Department of Revenue.
Citation: N/A
Docket Number: 1151158
State: Alabama
Issuer: Alabama Supreme Court
Date: September 30, 2016

REL:  09/30/2016
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334)
229-0649), of any typographical or other errors, in order that corrections may be made
before the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
SPECIAL TERM, 2016
_________________________
1151158
_________________________
Ex parte State of Alabama Department of Revenue
PETITION FOR WRIT OF CERTIORARI
TO THE COURT OF CIVIL APPEALS
(In re:  State Department of Revenue
v.
Omni Studio, LLC)
(Jefferson Circuit Court, CV-14-901540;
Court of Civil Appeals, 2140889)
WISE, Justice.
WRIT DENIED.  NO OPINION.
Stuart, Bolin, Parker, Main, and Bryan, JJ., concur.
Murdock and Shaw, JJ., dissent.
1151158
MURDOCK, Justice (dissenting).
I respectfully dissent.  I refer the reader to Justice
Shaw's special writing for a brief explanation of the
procedural history and facts of this case.  
In short, I am inclined to the view that what the
customer is paying for is the photograph itself.  The services
rendered in taking and developing the photograph are but a
part of the process of producing the physical product
purchased by the customer.
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1151158
SHAW, Justice (dissenting).
I respectfully dissent from denying this petition for
certiorari review.  
The petitioner, the State of Alabama Department of
Revenue ("the Department"), issued a final assessment for
sales-tax liability against Omni Studio, LLC ("Omni"). 
Pursuant to Ala. Code 1975, § 40-2A-7(b)(5)b., Omni appealed
the Department's final assessment to the Jefferson Circuit
Court.  That court entered a summary judgment in favor of Omni
and set aside the Department's final assessment. The
Department appealed to the Court of Civil Appeals, which
affirmed the judgment of the trial court.  State Department of
Revenue v. Omni Studio, LLC, [Ms. 2140889, April 29, 2016] ___
So. 3d ___ (Ala. Civ. App. 2016).  The Department then
petitioned this Court for certiorari review of the Court of
Civil Appeals' decision, which this Court today denies.    
Stated generally, Ala. Code 1975, § 40–23–2(1), imposes 
a tax on the retail sale of "any tangible personal property
whatsoever, including merchandise and commodities of every
kind and character."  Tangible personal property has been
defined as something that can be seen, felt, and handled, sold
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commercially, and has physical substance.  Association of
Alabama Prof'l Numismatists, Inc. v. Eagerton, 455 So. 2d 867,
869 (Ala. Civ. App. 1984).  Additionally, the Department has
a regulation that deems the retail sale of photographs to be
subject to sales or use tax:
"(1) The gross proceeds accruing from retail
sales of photographs, blueprints and other similar
articles are subject to sales or use tax. ...
"(2) Any fee for sitting, consultation or any
other activity that is done in preparation of the
final product, even when separately stated, is a
part of the labor or service cost and cannot be
deducted from the gross proceeds accruing from
retail 
sales. 
Therefore, 
gross 
proceeds, 
as
referenced in paragraph (1) include, but are not
limited to consultation fees, sitting fees, and all
other fees when such fees are charged in conjunction
with the sale of photographs, blueprints, and other
items sold by the retailer as provided in paragraph
(1). Any reasonable and customary retainer fee
separately stated on the photographer's contract
that is both nonrefundable and may not be credited
toward any purchase of photographs is not taxable.
The separate fee is unrelated to the production of
the finished photographs." 
Ala. Admin. Code (Dep't of Revenue), Rule 810–6–1–.119
(Photographs, Photostats, Blueprints, Etc.).  
The Department contended on appeal in the Court of Civil
Appeals that Omni owed taxes on certain transactions that
involved the sale of photographs.  Omni argued, however, that
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1151158
the transfer of photographs to its clients was "incidental" to
the provision of certain services.  Specifically, some
transfers of tangible personal property are considered
"incidental" to the provision of services and are not taxed. 
Such "incidental transfers" occur when the transfer of
property is merely an incidental part of services provided by
a "learned professional," such as when a dentist makes
dentures for a patient or when an attorney drafts a will or
deed.   This "incidental-transfer" exception has been applied
1
in the realm of advertising and portrait painting.  State v.
Harrison, 386 So. 2d 460 (Ala. Civ. App. 1980) (holding that
the preparation of catalogs and brochures as part of an
advertising 
service 
was 
"incidental"), 
and 
State 
Department 
of
Revenue v. Kennington, 679 So. 2d 1059 (Ala. Civ. App. 1995)
(holding that the sale of a painted portrait was "incidental"
to the provision of an artist's creative services).  
On appeal, Omni argued that there was "no meaningful
distinction" between the services and the property transfer
deemed "incidental" in Harrison and Kennington and the
Omni Studio, ___ So. 3d at ___ (citing Crutcher Dental
1
Supply Co. v. Rabren, 286 Ala. 686, 691, 246 So. 2d 415, 419
(1971), and Haden v. McCarty, 275 Ala. 76, 78, 152 So. 2d 141,
142 (1963)).  
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1151158
services and property Omni provided to its own clients. 
Specifically, Omni's evidence tended to show that it is a
commercial-photography 
business 
serving 
mostly 
advertising 
and
marketing clients.  It appears that much of its advertising
and consulting work goes beyond merely providing photographs
and includes hiring and managing assistants, models, and
stylists; 
choosing 
photography 
locations; 
setting 
up 
lighting;
reviewing and processing images and videos; and editing copy. 
Further, it charges clients based on time and resources
expended rather than on the number, size, or type of
photographs produced.  On the other hand, the Department
determined 
that 
Omni 
owed 
sales 
tax 
for 
specific
"transactions" such as, among other things, headshots,
flat-rate photography sessions, digital-studio photography,
portraits, and wedding photography.  According to the
Department's petition, the Department did not deem as taxable
any transactions that consisted solely of services provided. 
Nevertheless, the Court of Civil Appeals concluded: "Like the
trial court, we see no meaningful difference between the
services that Omni provides and the services that were at
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issue in [Harrison and Kennington]...."  Omni Studio, ___ So.
3d at ___.
In its certiorari petition to this Court, the Department
argues that the Court of Civil Appeals' decision conflicts
with Alabama Board of Optometry v. Eagerton, 393 So. 2d 1373,
1377 (Ala. 1981).  See Rule 39(a)(1)(D), Ala. R. App. P.
(providing that "petitions for writs of certiorari will be
considered ... [f]rom decisions in conflict with prior
decisions of the Supreme Court of the United States, the
Supreme Court of Alabama, the Alabama Court of Criminal
Appeals, or the Alabama Court of Civil Appeals").  In
Eagerton, this Court discussed the application of the
"learned-professional" doctrine as follows:
"In [State Tax Commission v. Hopkins, 234 Ala. 556,
560, 176 So. 210, 213 (1937),] this Court recognized
the distinction implicit in the exercise of
professional skill, on the one hand, and the sale of
tangible property on the other:
"'It is apparent from what we have said
that [§ 40-23-2] should not be extended so
as to tax one's income from personal skill
in the exercise of a profession.'" 
Eagerton, 393 So. 2d at 1375.  See also Haden v. McCarty, 275
Ala. 76, 78, 152 So. 2d 141, 142 (1963) ("[T]he transfer of
dentures and other prosthetic devices from a dentist to his
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1151158
patient is not a sale within the meaning of the Act. It is, as
appellees contend, a mere incident to the professional
treatment rendered by dentists.").  The Court in Eagerton then
held that the sale of eyeglasses by an optometrist was not an
"incidental transfer" because an optometrist was not a
"learned professional."  In doing so, it described when one is
deemed a "learned professional" in terms of the relationship
created between the vendor and the consumer: 
"'Nor do we consider that the relationship
existing between an optometrist and patient rises to
the degree of confidential relationship existing
between doctor and patient or attorney and client.
A person seeking the services of a physician or
lawyer must reveal to such professional adviser the
most intimate secrets of physical or mental
disability, or of his business or conduct. As stated
in Silver v. Lansburgh & Bro., 72 App. D.C. 77, 111
F.2d 518 [(D.C. Cir. 1940)], such relationship by
its very nature creates a relationship of trust and
confidence, and the physician's or attorney's
allegiance must be wholeheartedly to the patient or
client, and not to another, and "nothing of this
nature applies to the practice of optometry."'"
Eagerton, 393 So. 2d at 1377 (quoting Lee Optical Co. of
Alabama v. State Bd. of Optometry, 288 Ala. 338, 347, 261 So.
2d 17, 25 (1972)).
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1151158
I believe that there is probability of merit  in the
2
argument that the transactions at issue in the instant case --
the sale of certain photographs -- were not part of a
"confidential relationship" in the nature of that described in
Eagerton.  If so, then the Court of Civil Appeals' decision
would conflict with Eagerton.  See Rule 39(a)(1)(D), Ala. R.
App. P.
The decisions in Harrison and Kennington appear to expand
the "learned-professional" doctrine beyond the types of
"confidential relationships" described in Eagerton and Lee. 
However, it does not appear that the Department challenged
those decisions before the Court of Civil Appeals or in its
petition to this Court.  Omni Studios, ___ So. 3d at ___
("[W]e have not been asked to revisit their holdings."). 
Further, the doctrine of stare decisis would counsel that
those decisions be applied as precedent.  Nevertheless, stare
decisis would not require that the "learned-professional"
doctrine be further expanded to business relationships not
originally contemplated in the doctrine.  
See Rule 39(f), Ala. R. App. P. ("If the Supreme Court,
2
upon preliminary consideration, concludes that there is a
probability of merit in the petition and that the writ should
issue, the Court shall so order ....")
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1151158
I would grant the petition to review whether the
"incidental-transfer" exception subsumed within the "learned-
professional" doctrine could apply to the transfers found in
this case.  I thus respectfully dissent from denying the
petition.  
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