Court Opinion

ID: 9684721
Source: CourtListenerOpinion
Date Created: 2023-08-24 14:09:34.378558+00
Date Added: 2024-06-11T18:17:59.033853
License: Public Domain

RENDLEN, Judge,
dissenting.
I respectfully dissent believing that the magnetic tapes in question are subject to Missouri’s Use Tax imposed on “the privilege of storing, using or consuming within this state any article of tangible personal property .... ” Section 144.610.1, RSMo 1978. The tapes were purchased from the vendor, a Texas-based corporation, for use by the Missouri vendee for a retail price of $135,000.00. The taxpayer-vendor TRES Computer Systems, Inc. (TRES) contended, and the majority adopts the view, that the retail value of blank-unrecorded-tapes was $50.00 and tax on that amount only was due. By so holding the majority provides an unwarranted exemption for $134,950.00 of the purchase price and, of course, voids the penalty and interest assessed by the Department of Revenue.
Under our statutes the tax is based on the sales price of the article, § 144.610.1, RSMo 1978,1 and “sales price” is defined in § 144.605(6) as
“the consideration including the charges for services, ... paid ... by the purchaser to the vendor for the tangible personal property, including any services that are a part of the sale, valued in money, whether paid in money or otherwise
The term “use” is defined in § 144.605(10) as
“the exercise of any right or power over tangible personal property incident to the ownership or control of that property .... ” (Emphasis supplied).
Most certainly the tapes were “used” by the vendee who, as stipulated by the parties either owned or had the exclusive right to perpetual control of the tapes and could use them for its purpose for all time.
In my view the majority mistakenly determines the statutory phrase “tangible personal property” does not include and make subject to tax the full value of the tapes purchased from respondent “TRES”. The bases for the majority’s conclusion that the recorded tapes were not tangible personal property are: (1) the tapes could be discarded after they were used and were not intended for “reuse”, (2) “information” was the object of the sale and the tangible tapes but a medium of conveyance from which the information was “separable”, and (3) the tangible tapes were not essential to transmittal of the desired information.
Addressing first the majority’s proposition that the tapes can be discarded and not reused, this fact is equally true of “wax records” used to make tapes or other records, magnetic tapes employed to record other tapes, and how-to books used to learn a skill. Once used, they too can be discarded and under the majority view this factor would provide a basis for their escape from sales/use tax.
Quite interestingly, respondent does not assert and the record does not indicate that the tapes are discarded and from this it may be assumed they are preserved for possible future use, as in the event of a computer memory malfunction. Further, the stipulation relating the parties’ agreement belies any inference that the tapes will be destroyed or discarded, for the vendee has purchased a “perpetual nonexclusive license” for the “software” (magnetic tapes) and the perpetual “use” of the tapes. Assuming, however, the tapes here can be discarded, the same can be said, as noted above, of phonograph records used to make tapes, recipe books used to program microwave ovens and how-to books used to learn a skill. Once used, they too can be discarded. Of prime importance here is the use, not the ultimate fate of tangible per*352sonal property purchased. Under § 144.-610.1, RSMo 1978, it is the privilege of storing, using or consuming tangible personal property within this state that is subjected to the use tax. I gather from the record that in this case the enhanced magnetic tapes, not blank tapes and not just information stored on the tapes, but the enhanced tapes themselves, were used to program TRES customer’s computer. Whether an article of tangible personal property is discarded or reused after it is used by the vendee is irrelevant to the use tax statute.
Regarding the second of the bases advanced for its holding, the majority relying on First National Bank of Springfield v. Department of Revenue, 85 Ill.2d 84, 51 Ill.Dec. 667, 421 N.E.2d 175 (1981), discussed how the bank in that case purchased magnetic tapes to program its computer, noting that the Illinois Court held that the “programs” contained in the tapes were not taxable because they were “separable from the tapes”. While in contrast, the majority opines, information contained in a “movie film” “phonograph record” or “book” is inseparable from the medium of transmittal.
This proposition too is flawed because the program (information) contained in a movie film, phonograph record, book or magnetic tape is not inseparable but rather may be readily separated or transferred to other media for subsequent use. With phonograph records (or pre-programmed magnetic tapes), a common practice is, by use of the “tape deck”, to record on magnetic tapes (cassette, reel-to-reel, etc.) the program from the “wax record” (or tape), thereby separating the artistic process, instructional material or other information from the record (or tape) and transferring it to another medium for storage and future use. Nevertheless the retail price of the wax record, movie film or programmed magnetic tape is the basis for the sales or use tax, not the price of unexposed film or a blank wax record or an unrecorded magnetic tape. How can the same not be said of the tapes here in question?
The third basis for the majority’s holding that the tapes enhanced with data and programming do not constitute tangible personal property is that a tangible medium was not necessary to convey the intangible object of the sale.
I find no justifiable basis (as done by the majority) for distinguishing these pre-re-corded magnetic tapes containing instructional programming from any other pre-re-corded magnetic tapes (cassette, reel-to-reel, etc.) bearing instructional programming or artistic offerings which are sold and which, under the sales or use tax statutes, are taxed at their transactional value. In each instance an intangible (the program) is the principal object of the sale. In each case a tangible medium is selected by the vendor and vendee to convey the intangible instruction or entertainment. In each case, the entertainment or instruction might be transmitted by other means, for example, music or motivational instruction may be transmitted over telephone wires or by radio wave; movie film may be transmitted by television employing cable, microwave, or other means. However, it was the choice of the parties here to employ magnetic tapes which were prepared by TRES for delivery and sale to its Missouri customer, and the parties’ selection of tapes as the medium does not somehow render that programmed tape 99.97% intangible. That the parties could have chosen to transmit the program by electronic telecommunication does not alter the fact that they chose to put it in tangible form. Under § 144.610.1, that which is tangible is subject to tax.
In Universal Images, Inc. v. Missouri Department of Revenue, 608 S.W.2d 417 (Mo.1980), it was held that 35 mm movie film produced to the customer’s specifications was tangible personal property, and the Director of Revenue properly assessed a use tax based on the cost of the film, including services. The majority would distinguish Universal Images on the ground the movie film there was purchased as a finished product to be “used and reused.” As far as I can tell, the magnetic tapes herein were purchased as a finished product with the idea that the tangible tapes themselves *353would be used to program customer’s computer, and though the customer may decline to reuse these tapes, I nowhere find reuse as a prerequisite under § 144.610.1 for tax liability.
I would follow the holding of Universal Images and treat the magnetic tapes in this case as we treat movie film, records or cassette tapes, and subject them to the use tax at their transaction value.
Finally it might be argued that a distinction is to be made between the customized magnetic tapes here and noncustomized tapes widely distributed for sale in Missouri. Such contention, however, runs afoul the statutory language which permits no such distinction and, if accepted, would judicially create a new exemption for any product bearing customized information such as magnetic sound recorded tapes, video tapes, movie film, etc. In this connection, the Court has steadfastly refrained from reading into the use tax act exemptions that do not clearly appear therein. State ex rel. Conservation Commission v. LePage, 566 S.W.2d 208, 211 (Mo.banc 1978); Farm and Home Savings Assn. v. Spradling, 538 S.W.2d 313, 319 (Mo.1976). Additionally, this argument (customization) has been effectively disposed of by this Court in Universal Images, Inc. v. Missouri Department of Revenue, 608 S.W.2d 417 (Mo.1980) where it was held that highly personalized and customized film strips bearing a mix of sound and visual images were subject to Missouri’s use tax.
For these reasons I would reverse the decision of the Administrative Hearing Commission.

. All statutory references are to RSMo 1978 unless otherwise noted.