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November 3, 2000

Record No. 992662

Present: All the Justices





Joanne F. Alper, Judge


Arlington County appeals the decision of the
trial court that Mutual Broadcasting System, Inc. (Mutual) is
entitled to an exemption from the business license tax pursuant
to Code ? 58.1-3703(C)(3) because it operates a radio
"broadcasting station or service."
[1] Because
the record supports the trial court’s findings that Mutual widely
disseminated and transmitted its radio signal for reception by
the general public, we will affirm the judgment of the trial


Mutual produces a variety of radio programs at
its studios in Arlington County, Virginia. The broadcast signal
for these programs is processed in a "master control room
area" at Mutual’s studios through complex equipment which
routes, monitors, and adjusts the signal for further
transmission. The refined signal is sent from the master control
room to a satellite "earth station" uplink facility by
one of two methods. It may be broadcast from a "KU"
satellite antenna located on the roof of the Arlington facility
or through a "T1" telephone line. Programming
transmitted through the "T1" telephone line is
converted to digital pulses for transmission over the line and
then converted back to a radio signal when it reaches the earth
station. Approximately seventy-five percent of Mutual’s
programming is transmitted over the "T1" line.

The earth station, located in Mount Vernon, New
Jersey, relays the radio signal to a communications satellite
located in space, which, in turn, relays the signal back to
earth. The signal is received by several thousand radio stations
affiliated with Mutual through contractual arrangements. The
affiliate radio stations then rebroadcast the radio signal to the
public. The radio signal is also received and rebroadcast by
non-affiliate stations such as college radio stations and the
United States Armed Forces Radio Network. Furthermore, the radio
signal can be received by members of the public directly, if they
have appropriate equipment.
[2] The radio signal is not encoded or encrypted and there
is no fee for receiving this signal. Mutual’s broadcasts are paid
for by advertising revenues.

Though Mutual owns the Arlington facilities,
its parent company, Westwood One, Inc. (Westwood), owns the
"KU" satellite and possesses the Federal Communications
Commission (FCC) license for these radio transmissions. The earth
station is owned by General Electric. Mutual does not own the
satellite, but has a "capital lease" for it which
covers over ninety percent of the estimated use of the life of
the satellite. Thus, for financial accounting purposes, Mutual
"owns" the satellite.

The County assessed business license taxes
against Mutual based on its gross receipts. Mutual filed two
applications challenging these assessments; the first application
covered the years 1990–1993, and the second addressed years
1994 and 1995. In both applications Mutual asserted that the
assessments were erroneous because it was exempt from the tax
pursuant to Code ? 58.1-3703(C)(3) and that the County’s
assessments were not fairly apportioned and, thus,
unconstitutional. The applications were consolidated. The trial
court granted the County’s motion for partial summary judgment
and dismissed Mutual’s constitutional claims. Following an ore
tenus hearing, the trial court determined that Mutual was
entitled to the exemption from taxation and ordered the County to
refund to Mutual $652,833.47 in taxes, penalties, and interest.
The County filed this appeal.

The County assigns five errors to the trial
court’s judgment which effectively raise two issues. First, the
County asserts that the trial court did not strictly construe the
broadcast exemption statute to give the statute the construction
which would deny the exemption and resolve any doubt in favor of
taxation. Second, the County asserts that the trial court erred
in finding that Mutual disseminates its programming to the public
and transmits radio signals for general reception, thereby
qualifying Mutual for an exemption under Code
? 58.1-3703(C)(3). We consider these issues in order.


The trial court, relying on Chesterfield
Cablevision, Inc. v. County of Chesterfield
, 241 Va. 252, 401
S.E.2d 678 (1991), concluded that Code ? 58.1-3703(C)(3)
provided an exemption from taxation and, as such, must be
strictly construed. That is to say, if the statute is subject to
more than one interpretation, the construction denying the
exemption must be adopted and any doubt must be resolved in favor
of taxation. WTAR Radio-TV Corp. v. Commonwealth, 217 Va.
877, 879, 234 S.E.2d 245, 247 (1977); Winchester TV Cable Co.
v. State Tax Comm’r
, 216 Va. 286, 290, 217 S.E.2d 885, 889
(1975). Nevertheless, the County asserts that the trial court did
not apply strict construction to this statute.

Code ? 58.1-3703(C)(3) provides:

C. No county, city, or town shall
impose a license fee or levy any license tax
. . . for the privilege or right of operating
or conducting any radio or television broadcasting
station or service[.]

In Chesterfield Cablevision, a cable
television company sought an exemption from taxation under this
statute. In resolving the issue, we applied the definition of
"broadcasting" previously adopted in Winchester TV.
Winchester TV involved Code ? 58-441.6(j), an
exemption from sales and use taxes. We concluded that
"broadcasting" as used in that statute means

"to make widely known: to
disseminate or distribute widely or at random
. . . to send out from a transmitting station
(a radio or television program) for an unlimited
number of receivers, . . ."

. . . .

. . . transmitted into space
for anyone, who has the equipment and is within range of
the signal, to receive.

Winchester TV, 216 Va. at 290-91, 217
S.E.2d at 889. In applying this definition, we have concluded
that programming which was delivered only to paid subscribers was
not "broadcasting" because such programming was not
disseminated or transmitted to the general public, Chesterfield
, 241 Va. at 254, 401 S.E.2d at 679-80; Winchester
, 216 Va. at 291, 217 S.E.2d at 889, and that equipment
used in the production of programs was not "broadcasting
equipment" unless it was used directly in "the act of
disseminating a signal into the air," WTAR Radio-TV,
217 Va. at 882, 234 S.E.2d at 248.

The trial court, again relying on Chesterfield
, applied the construction of
"broadcasting" set out above and held that Mutual was
performing a broadcasting service because its activities were
directly involved in transmitting and disseminating its radio
signal to the general public.

The County does not suggest that a different
definition of "broadcasting" was required to satisfy a
strict construction of the statute. In fact, in its briefs before
this Court and the trial court, the County applies the trial
court’s construction of the term. The County’s real disagreement
is not with the trial court’s interpretation of the statute, but
with the trial court’s determination that the evidence presented
showed that Mutual’s activities met the definition of
"broadcasting." Thus, we will turn to the County’s
remaining issue, that is, whether Mutual engages in activities
which constitute the direct transmission and dissemination of its
radio signal to the general public.


The trial court found that Mutual’s signal
"is transmitted from the satellite into space and is picked
up by both Mutual’s affiliates, other entities . . .
who are not affiliates, i.e., the Armed Forces Radio Network, and
individuals with the proper equipment" and "received by
millions of listeners who are members of the general
public." The County asserts that this finding is erroneous
because although Mutual produces programs which are
"eventually widely disseminated to the public," the
transmission or dissemination of the programs is performed by
independently owned and operated radio stations and, thus, Mutual
does not itself transmit the radio signal in all directions to
the public. Mutual, the County asserts, possesses no FCC license
to broadcast. The broadcasters, according to the County, are the
affiliate stations; Mutual is only a producer or distributor of
the programs.

The County argues that the portion of Mutual’s
programming that is sent to the earth station via the
"T1" line from the Arlington facilities is not the
transmission of a radio signal and is not available to the
public. With regard to the remaining programming transmitted to
the earth station via the "KU-band" satellite, the
County argues that Westwood, Mutual’s parent company, transmits
this signal and holds the license from the FCC to do so.
Continuing, the County argues that because Mutual owns neither
the earth station nor the satellite and does not possess an FCC
license to transmit signals from the satellite, Mutual does not
transmit its radio signal at all.

The County’s position challenges findings of
fact made by the trial court.
[3] The standard of review we apply
to such challenges requires that we accept the trial court’s
findings of fact as true, unless they are without support in the
record. Quantum Dev. Co. v. Luckett, 242 Va. 159, 161, 409
S.E.2d 121, 122 (1991).

First, we reject the County’s argument that
Mutual’s activities are not "broadcasting" because
Mutual does not possess an FCC broadcasting license. The
definition of "broadcasting" which we have adopted does
not include a requirement that a broadcaster have an FCC
broadcasting license, and the failure to have such a license,
while a factor to consider, is not dispositive in determining
whether Mutual is disseminating its radio signal to the public. See
WTAR Radio-TV, 217 Va. at 880, 234 S.E.2d at 247 (FCC
regulations do not control meaning of broadcasting).

The County’s basic contention is that because
Mutual does not own the equipment utilized in the process of
transmitting its radio signal to the public, it does not
broadcast its radio signal and, therefore, does not qualify as
operating or conducting a broadcasting service pursuant to Code
? 58.1-3703(C)(3). We reject this contention.

In determining whether an entity is operating
or conducting a broadcasting service, we examine the entity’s
activities up to the point at which the entity releases control
of the transmission or dissemination of its programming or
signal. Ownership of the equipment used in the process of
transmission is not determinative of the scope of an entity’s
activities. As noted above, Mutual has a "capital
lease" for the satellite covering approximately ninety
percent of the estimated use of the life of the satellite. The
use of the satellite, therefore, is controlled by Mutual through
this contract. The fact that Mutual chooses to lease rather than
own the equipment used in the dissemination or transmission of
its radio signal does not alone defeat a finding that Mutual
engages in a "broadcasting service."

The record does not show the contractual
relationship between the owner of the earth station and Mutual;
however, it is fair to infer that Mutual retains control during
transmission of the signal to the satellite because of Mutual’s
continuing control of the use of the satellite through its lease.
Similarly, the record does not show the relationship, contractual
or otherwise, between Mutual and Westwood, the owner of the
satellite transmitting Mutual’s radio signal to the earth
station. Nevertheless, for the same reason, it is fair to infer
that Mutual retains control over its signal while the signal is
transmitted by Westwood to the earth station because Mutual has
control over the satellite transmission of the signal.

The record supports the conclusion that Mutual
retains control of the transmission or dissemination of its radio
signal through the point at which the signal is transmitted by
the satellite. The record also shows that at that point Mutual’s
radio signal can be captured by not only affiliate radio
stations, but also by non-affiliate radio stations such as
colleges and other institutions of learning as well as the Armed
Forces Radio Network. Additionally, any member of the listening
public who has a specific type of receiver can receive Mutual’s
broadcast signal as it is transmitted from the satellite. Neither
these listeners nor the non-affiliate radio stations pay any fee
to Mutual for this programming. This arrangement is not analogous
to cases in which transmission was made only to paying
subscribers. See WTAR Radio-TV, 217 Va. at 881, 234
S.E.2d at 247; Winchester TV, 216 Va. at 291, 217 S.E.2d
at 889. The record supports the trial court’s finding that Mutual
created, transmitted, and disseminated radio signals to the
public and, therefore, was engaged in broadcasting.

Finally, the trial court also noted in its
opinion letter that according to a deputy commissioner of
revenue, the "import" of the broadcast exemption
statute "goes to functions that enhance, sustain, process,
refine or directly produce the transmission or
dissemination." This definition as well as the statute
itself recognizes that an entity need not be a radio or
television "station" to qualify for the exemption. As
we stated in WTAR Radio-TV, equipment which is used
directly in disseminating or transmitting the signal into the air
is considered "broadcasting equipment" for purposes of
the sales and use tax statute. 217 Va. at 882, 234 S.E.2d at 248.
Similarly, activities which are directly related to the
dissemination and transmission of the radio signal are
broadcasting services for purposes of Code
? 58.1-3703(C)(3). The trial court determined that Mutual’s
activities were a "radio broadcasting service" under
this definition and we conclude that the record supports that

For the reasons stated, we will affirm the
trial court’s judgment that Mutual carried its burden of proof
that it is a "radio broadcasting service" and qualifies
for the exemption from a business license tax under Code
? 53.1-3703(C)(3).



[1] During the years in question, the same language was in
former Code ? 58.1-3703(B)(3).

[2] Members of the public with
appropriate equipment may also receive the radio signal directly
from the "KU" satellite transmission of the signal from
Mutual’s Arlington facilities to the earth station.

[3] The County variously states that
the facts are "essentially undisputed" and that the
"legal conclusions to be drawn from the undisputed facts are
at issue . . . ." The County also asserts
that it assigned error to the trial court’s factual finding
"that the broadcast signal received by the public is
Mutual’s and not that of others, i.e., General Electric and the
independent radio stations." We consider these assignments
of error as challenges to the factual findings of the trial court
and review them accordingly.

[4] In light of our holding, we do not address Mutual’s
assignments of cross-error regarding whether the apportionment of
the taxes was unconstitutional and whether the trial court
properly characterized Code ? 58.1-3703(C)(3) as a tax
exemption statute.