Washington Times-Herald v. District of Columbia

The Washington Times-Herald (the Times-Herald) (plaintiff) was a newspaper-publishing company. The Times-Herald contracted with companies that produced photoengraved mats that were printed with comic strips. The comic-strip companies sent the Times-Herald photoengraved mats, which the Times-Herald used to produce metal plates from which comic pages for newspapers were printed. The Times-Herald paid the comic-strip companies for the photoengraved mats, which cost substantially more than blank mats. For example, one photoengraved mat could cost $30, whereas the Times-Herald could purchase a blank mat for $0.22. The Times-Herald was taxed under the District of Columbia Use Tax Act for the full price of the photoengraved mats. The District of Columbia Tax Court held that this tax was appropriate because the Times-Herald’s purchase of the photoengraved mats was a retail purchase within the meaning of the Use Tax Act. The Times-Herald appealed the tax court’s decision, arguing that the photoengraved mats were exempt from sales and use taxes in the District of Columbia. The District of Columbia’s regulations related to the Use Tax Act exempted from sales and use taxes professional services involving sales of personal property that were inconsequential elements of the professional service purchased. The regulations explained that the sale of personal property was an inconsequential element if the price of the personal property was less than 10 percent of the price of the service rendered. Given the substantial price difference between a photoengraved mat and a blank mat, the Times-Herald reasoned that the purchase of the photoengraved mat was an exempt purchase of a professional service, namely, photoengraving.