Opinion ID: 1700951
Heading Depth: 1
Heading Rank: 5

Heading: Whether the payments for syndicated programming are wholesale, rather than retail transactions.

Text: Midcontinent argues that the gathering of information, which provides the content of broadcast programming, is a wholesale transaction because that information is then later transmitted to the public via broadcast in a retail fashion. Midcontinent argues that the ultimate product of broadcasters is the sale of broadcast time and a component of that broadcast time is often the syndicated programming. Department, on the other hand, argues that the syndicated materials are the finished product which are used and consumed only by Midcontinent. Department argues that Midcontinent sells advertising, not syndicated programming. [2] These same basic arguments were made in Sioux Falls Newspapers, supra. We noted there that the syndicated materials therein were purchased by the Argus Leader with the intent to reproduce them in the newspaper to sell to readers. We held that the syndicated materials were purchased for resale in the ordinary course of the Argus Leader's business, and that this was a nontaxable resale use under SDCL 10-46-1(2). [3] Although there may be some dissimilarities between the newspaper and the broadcasting business, we believe that, in both cases, syndicated materials are an integral part of the final product (here, broadcast time). Broadcast time is made up of news, information, entertainment and advertising. Syndicated programming is an integral component of radio and television stations. We conclude that the purchase of the syndicated material by Midcontinent was a nontaxable resale use under SDCL 10-46-1(2). [4] Such materials are an essential part of broadcasting and are purchased for resale in the ordinary course of business. This is the second case in recent months in which Department, through their audit and legal departments, has attempted to stretch and strain the tax statutes in order to attempt to tax various media entities. At oral argument, their counsel agreed that these statutes are neither sufficiently clear nor specific as to their specific intent to tax these entities in the requested manner. Would it not be more appropriate for Department to seek their remedy in the legislature, which creates the tax and its exemptions, rather than attempt to obtain their revenue through resort to judicial fiat? We believe so. Reversed.