Court Opinion

ID: 9519877
Source: CourtListenerOpinion
Date Created: 2023-08-07 01:26:37.589011+00
Date Added: 2024-06-11T12:45:12.218654
License: Public Domain

*344BANDY, Circuit Judge.
The Director of Taxation of the State of South Dakota determined that the Mitchell Publishing Company, a corporation engaged in business in the State of South Dakota, was liable for the payment of Use Tax upon a newspaper printing press which it purchased outside the state and had installed in its principal place of business in this state. From such determination the Mitchell Publishing Company appeal to the Circuit Court of Davison County, South Dakota, where the determination of the Director of Taxation was sustained.
From the undisputed facts, which were largely stipulated, it appears that the appellant publishes a daily newspaper with a circulation of about 16,000 copies, slightly in excess of two per cent of which circulation is mailed or otherwise delivered to subscribers outside this state. That substantially all of the supplies utilized, including ink, paper, mats, comics, supplements, and cartoons are purchased and obtained from outside this state. That approximately fourteen percent of the advertising appearing in the newspaper originates outside the state. That news service is obtained from the United Press and the Associated Press, of which news eighty-four per cent originates outside the state. That reporters, officers and agents of the appellant corporation are frequently required to go outside the state on business connected with the publication of the newspaper. That such printing press is only suitable for and is used exclusively in printing the daily newspaper.
The appellant contends that this printing press is used in interstate commerce or that, at least, it is used or to be used in operating or maintaining interstate commerce, and claims exemption from liability for the Use Tax under the language contained in subdivision (3) of Section 4 of Chapter 276, Laws of 1939, as amended by Chapter 301, Laws of 1943, which, insofar as is material to this action, provides exemption for “Tangible personal property, the storage, use or other consumption of which this State is prohibited from taxing under the Constitution or laws of the United States of America or under the Constitution of this State, or which is used or to be used in operating or maintaining interstate transportation or interstate commerce * *
*345Since, in their essence, all of the Assignments of Error present only the question of the exemption of the printing press from the Use Tax, they will be considered under the two main classifications of the statute itself, the first portion of which grants exemption to: “Tangible personal property, the storage, use or other consumption of which this State is prohibited from taxing under the Constitution or laws of the United States of America or under the Constitution of this State * * *.”
Interpretations of the Federal Constitution made by the United States Supreme Court being final, Dakota Photo Engraving Co. v. Woodland, 59 S. D. 523, 241 N.W. 510, we turn to those decisions to ascertain whether the State of South Dakota is prohibited by the United States Constitution from imposing the tax in question and find that in Southern Pacific Co. v. Gallagher, 306 U. S. 167, 59 S.Ct. 389, 83 L.Ed. 586, and in Pacific Telephone & Telegraph Co. v. Gallagher, 306 U. S. 182, 59 S.Ct. 398, 83 L.Ed. 595, the United States Supreme Court held that (as applied to the instant case) there was a “taxable moment” when the printing press had reached the end of its interstate transportation to the appellant and before it had been put to any use, regardless of the purpose for which it was ultimately to be used. It is accordingly clear that the Federal Constitution does not prohibit the imposition of the tax in question. At this point it should be remarked that the appellant does not contend that there is any Federal law nor any provision of the State Constitution which prohibts the State of South Dakota from imposing the tax in question. It follows that appellant is not entitled to exemption under that part of the statute herein referred to as the first portion.
The second portion of the statute grants exemption to: “Tangible personal property, * * * used or to be used in operating or maintaining interstate transportation or interstate commerce * * *.”
In referring to this same portion of this same statute, this court said in Scandrett v. Nord, 70 S. D. 527, 19 N.W. 2d 344, “Not only did the Legislature expressly exempt from the tax the use of property which the state is prevented from taxing, but it went further and specificially exempted *346property ‘used or to be used in operating or maintaining interstate transportation or interstate commerce.’ * * * Our concern, therefore, is not whether the state is prohibited from taxing the use made by plaintiffs of this distillate oil, but rather whether the oil was used or to be used in operating or maintaining interstate transportation or commerce.”
Our concern in the instant case is the same and to ascertain whether the printing press was used or to be used in operating or maintaining interstate transportation or commerce we must determine whether the news and advertising of out-of-state origin came to rest upon its receipt by the appellant publisher, whether the continuity of transit was then broken and the subsequent mechanical act of printing was therefore a local activity, similar to manufacturing, and not a part of interstate commerce; or whether such news and advertising of out-of-state origin retained its interstate character in the hands of the publisher and the flow of commerce continued through his hands and processing.
In the very recent decision of Lorain Journal Co. v. United States, 342 U. S. 143, 72 S.Ct. 181, 185, announced after this case had been argued and submitted on appeal, the Supreme Court of the United States said: “There can be little doubt today that the immediate dissemination of news gathered from throughout the nation or the world by agencies specially organized for that purpose is a part of interstate commerce. * * * The same is true of national advertising originating throughout the nation and offering products for sale on a national scale. * * * The distribution within Lorain of the news and advertisements transmitted to Lorain in interstate commerce for the sole purpose of immediate and profitable reproduction and distribution to the reading public is an inseparable part of the flow of the interstate commerce involved. * * * Unless protected by law, the consuming public is at the mercy of restraints and monopolizations of interstate commerce at whatever points they occur. Without the protection of competition at the outlets of the flow of interstate commerce, the protection of its earlier stages is of little worth.”
Applying the reasoning of the foregoing decision to the fact situation in this case it follows that the inter*347state flow of out-of-state news and advertising coming to the Mitchell Publishing Company continued through, unbroken, to the reading public, both within and outside the State of South Dakota and it necessarily follows that the printing press was but an instrumentality utilized in transmitting and carrying on this flow of commerce. Hence, the printing press was used and to be used in operating or maintaining interstate transportation or commerce and is exempted from the Use Tax sought to be imposed.
The decision of the Circuit Court is reversed with directions to enter judgment in favor of the appellant.
RUDOLPH and LEEDOM, JJ., concur.
SMITH, J., concurs in result.
BANDY, Circuit Judge, sitting for SICKEL, P. J., disqualified.
ROBERTS, J., dissents.