Fox Film Corp. v. Doyal

Background

A New York corporation that licenses copyrighted motion pictures and does business in Georgia sued to stop a Georgia tax measured by the gross receipts of royalties. The company argued copyrights are instrumentalities of the United States and therefore immune from state taxation. The Georgia courts dismissed the suit and the state Supreme Court, equally divided, affirmed, and the case was brought to this Court for review.

Reasoning

The Court considered whether a copyright is a federal instrumentality immune from state tax. It explained that a copyright is a private right created by federal law, owned and exercised by the author or assignee for private profit, and that Congress did not keep any ownership interest or a tax exemption. Immunity from state tax protects government operations, not private property created by statute and used for private advantage. The Court held that a nondiscriminatory state tax on royalties does not impede governmental functions and is therefore permitted. The decision also treats copyright royalties like patent royalties and overrules Long v. Rockwood.

Real world impact

The ruling allows states to collect nondiscriminatory gross-receipts taxes on licensing income from copyrighted works. Companies and individuals who earn royalties from films or other copyrighted material are subject to state taxation on those receipts. The decision affirms the tax challenged in this case and resolves the immunity question against the taxpayer.