Bellsouth Advertising and Publishing v. Commissioner of Revenue

In this use tax case, we address the issue of whether or not the plaintiff should receive a credit under Tennessee law for sales tax it paid to the State of Alabama on the purchase of photocompositions used in printing telephone directories that were later distributed in Tennessee. Under Tennessee Code Annotated section 67-6-203(a) (1998), a use tax is levied at the rate of six percent (6%) of the cost price of each item or article of tangible personal property when the same is not sold but is used, consumed, distributed, or stored for use or consumption in this state; provided, that there shall be no duplication of the tax. (Emphasis added). To avoid duplication of the tax, Tennessee Code Annotated section 67-6-507(a) (1998) provides a credit for like taxes paid to other states on tangible personal property. The trial court and the Court of Appeals both found that the plaintiff was not owed a credit for sales tax paid to Alabama for the photocompositions, since there was no "like tax" paid on the telephone directories. We conclude that the plaintiff is entitled to a credit because the cost of the photocompositions on which the Alabama sales tax was paid is included in the cost of the directories on which Tennessee is seeking to impose a use tax. Accordingly, we reverse the judgments of the trial court and the Court of Appeals and grant summary judgment to the plaintiff.