Howitt v. Street & Smith Publications, Inc.

Hubbs, J. Respondent is an illustrator and artist, and appellant is a publisher of magizines and periodicals. Between May 16, 1935, and April 22, 1937, the appellant paid the respondent $1,410 for the right to reproduce sixteen of his paintings. No right to exhibit publicly the paintings was given, nor were the paintings sold. It was expressly understood that there would be no use, consumption, alteration or defacement of the paintings, and respondent reserved the right to and did in fact sell the paintings. Although delivery of the paintings into the possession of the appellant was not necessary in order that it reproduce them, nevertheless they were given into appellant’s possession, and it sent them to a photoengraving company which prepared blueprints and made final comparisons with the original either in the engraver’s plant or in appellant’s place of business. All this could just as conveniently have been done in the respondent’s studio. The agreed statement of facts stated: *348 “11. The only steps * * * in which the original paintings played any part were the photographing thereof for the preparation of the blueprints and the visual comparison of the paintings with the plates and proofs during the touching up and finishing process, and these two steps could just as conveniently have been performed by the photo-engraver at plaintiff’s studio without any delivery of the paintings into the custody of defendant, or the photo-engraver. ’ ’ On December 28,1934, Local Law No. 24 (published as No. 25, Local Laws, 1934, p. 164) was adopted and became law for the city of New York. That law provided for a tax on sales in the city of New York and the following provisions are in question in this case: “ Section 1. * * * (e) The word ‘ sale ’ or ‘ selling ’ means any transfer of title or possession or both, exchange or barter, license to use or consume, conditional or otherwise, in any manner or by any means whatsoever for a consideration, or any agreement therefor, and may include the rendering of any service specified in section two of this local law.” On February 11, 1935, the Comptroller of the city of New York promulgated official Rules and Regulations. Article 53 thereof reads: “ The right to reproduce a painting, cover drawing, illustration or cartoon is not a sale and the amount received by the owner is not a receipt from the sale of tangible personal property, and is not taxable.” Despite this rule, the Comptroller has assessed the respondent $28.20 on the transactions above described, and he seeks to recover the tax under the authority conferred by section 2 of said law: “ The vendor shall have the same right in respect to collecting the tax from the purchaser, or in respect to non-payment of the tax by the purchaser, as if the tax were a part of the purchase price of the property or service and payable at the time of the sale.” *349 I Payment is resisted, relying on the interpretation given to the local law in the Comptroller’s rule above quoted. Respondent contends that the transaction involved was a “ license to use]” as contemplated in the definition of a sale, above quoted. The question for determination is whether the transaction constituted a “ sale ” taxable under the local law. The tax law was adopted to enable the city to defray the cost of granting unemployment work and home relief by imposing a tax upon the “ receipts from sales of certain properties and services in the city of New York.” The tax is imposed upon certain sales of tangible personal property, gas, electricity, telephone and other services, food, drink and entertainment in restaurants and other establishments, wines, liquors and other alcoholic beverages. The purpose of the law is to tax “ sales ” where specific goods are transferred, and certain services rendered. Thus we have recently held that one engaged in the business of dyeing and processing fur skins is not making a sale of tangible personal property but is rendering a service and thus the sale of the dye stuffs is not taxable to the ultimate consumer but to the dyer; that a person is not selling the dye merely because it can be distinguished on the finished products. (Matter of Mendoza Fur Dyeing Works, Inc., v. Taylor, 272 N. Y. 275.) In People ex rel. Walker Engraving Corp. v. Graves (268 N. Y. 648) the question involved was whether the sale of engraved plates constituted a sale of tangible personal property or a contract for services, and we decided that there was a sale of the engraved metal plates. As the purpose of the local law was to tax sales, it seems clear that the purpose of the definition that a sale meant also a “ transfer of title or possession or both, exchange or barter, license to use or consume,” was to cover a situation where the parties might attempt to call the sale by some other name. The local law was not intended to tax all transactions, but rather to cover only sales of tangible personal property and certain services. *350 In the light of such intent of the local law it seems to us that the transactions here involved are not such a “ license to use ” as make these transactions taxable. Here there was no such use permitted as contemplated by the local law. The “ use ” was reserved to the artist. There was no transfer of possession for which a consideration was paid. The consideration was paid for the right merely to reproduce, which could as well be done while still in the possession of the artist as elsewhere. The transaction here involved was similar to the payment of consideration for copyright purposes. For the consideration paid, an owner promises not to assert his ownership of a copyright. There is a distinction between the right to reproduce which is protected by the copyright law, and the production itself. (American Tobacco Co. v. Werckmeister, 207 U. S. 284.) The only right given appellant was the right to reproduce paintings. Possession of the paintings was transferred temporarily but not for the purpose of sale, or exhibition, but merely to permit them to be photographed so that a copy of each could be reproduced on plates. There was no wearing out of the object, no consumption, no possessory interest for even a limited time. Respondent reserved the right to take them at any time. It was only by the artist’s permission that the paintings were taken out of his studio. The possession was merely incidental. There was no more a license to use these paintings than there is a license to use a picture in a museum when one is granted a license to come into a museum and photograph a picture. There was no transfer of a,tangible piece of property for which a consideration was paid as contemplated by the local law. The right to use and sell and exhibit was retained by the artist. In the agreed statement of facts it is stated that “ the original paintings executed by plaintiff * * * were not used or consumed by defendant, * * * that it was expressly understood and agreed that there would *351 be no use, consumption, alteration or defacement of the paintings.” Such statement, in connection with the rule adopted by the Comptroller which excludes this transaction from a tax, tends to confirm our conclusion that a tax is not collectible in the case at bar. We are referred to the case of People ex rel. Foremost Studio, Inc., v. Graves (246 App. Div. 130). But in that case there was a sale and transfer of the designs and the purchaser had exclusive right to them. In Matter of United Artists Corp. v. Taylor (273 N. Y. 334) there was a transfer by the distributor to the exhibitor of the possession of the positive and negative prints of photo-plays with the license to use or exhibit them for a certain time. The case of Dun & Bradstreet, Inc., v. City of New York (276 N. Y. 198) is similar to the present case. In that case the local law was held not to apply to the transactions in which the customers of Dun & Bradstreet paid a consideration for the financial services rendered though it was contended that there was at least a license to use the reference books furnished in connection with the services. A tax law should be interpreted as the ordinary person reading it would interpret it. Referring to this local law, we have said: “ A taxing statute must be given a practical construction.” (Matter of Mendoza Fur Dyeing Works, Inc., v. Taylor, supra, p. 281.) And if there is ambiguity it should be interpreted in favor of the taxpayer. We believe that the ordinary interpretation of the word “ use ” is to assert possessory interest in the article for some length of time; in this case to hold the right to exhibit the picture or sell it or tamper with it in some manner to be decided upon by the purchaser. Anything less than this, as merely the right to reproduce, is not such a use as should make this transaction taxable as a sale of tangible personal property. The judgment should be reversed and judgment directed in favor of the defendant, with costs.