Tax Type
Retail Sales and Use Tax
Description
Internet service
Topic
Exemptions
Date Issued
03-29-2001
March 29, 2001
Re: Request for Ruling: Retail Sales and Use Tax
Dear ****
This is in response to your letter of November 28, 2000, in which you request a ruling on the application of the retail sales and use tax to **** (the "Taxpayer").
FACTS
The Taxpayer is an Internet service provider based in Virginia. In addition to Internet access, the Taxpayer provides to its customers a package of services that includes information, electronic mail, personal home pages, and proprietary content. These multiple services are provided for a fixed monthly fee to the general public in about 50 geographical markets throughout the United States.
The Taxpayer offers a variety of proprietary products to its subscribers. These products include entertainment resources and resource tools for sports, political content, outdoor activities and other special interests including specialized local content designed for specific geographical markets. In some cases, this proprietary content is entirely designed and produced in-house by the Taxpayer. In other cases, the content may be designed in-house by the Taxpayer but produced by a third-party production company, or designed in-house and co-branded between the Taxpayer and a third party.
The Taxpayer asks if it qualifies for the sales and use tax exemption for amplification, transmission and distribution equipment set out in Code of Virginia § 58.1-609.6(2).
DETERMINATION
Code of Virginia § 58.1-609.6(2) provides a sales and use tax exemption for:
Broadcasting equipment and parts and accessories thereto and towers used or to be used by commercial radio and television companies ... or video programmers using an open video system or other video platform provided by telephone common carriers, ... and amplification, transmission and distribution equipment used or to be used by wired or land based wireless cable television systems, or open video systems or other video systems provided by telephone common carriers.
Code of Virginia § 58.1-602 was amended effective July 1, 1999, to define many words and phrases applicable to the above exemption, as follows:
> "video programmer" is defined to mean "a person or entity that provides video programming to end-user subscribers;"
> "video programming" is defined to mean "video and/or information programming provided by or generally considered comparable to programming provided by a cable operator including, but not limited to, Internet service;"
> "open video system" is defined to mean "an open video system authorized pursuant to 47 U.S.C. ' 573 and, for purposes of this chapter only, shall also include Internet service ...;"
> "amplification, transmission and distribution equipment" is defined to mean "production, distribution, and other equipment used to provide Internet-access services, such as computer and communications equipment, and software used for storing, processing and retrieving end-user subscribers' requests;" and
> "Internet service" is defined to mean "a service that enables users to access proprietary and other content, information electronic mail, and the Internet as part of a package of services sold to end-user subscribers."
Based on the information provided in your correspondence, the Taxpayer meets the definition of an "Internet service." The Taxpayer provides all of the required services to end-user subscribers. Accordingly, I agree that equipment (including computer servers, routers and other tangible personal property) used for storing, processing and retrieving end-user subscriber requests may be purchased or leased exempt of the tax to the extent that such equipment is purchased or leased after June 30, 1999.
Please note that the exemption does not extend to equipment used by the Taxpayer to design, create or produce content. Such equipment does not qualify for the exemption because it is not used to provide Internet access services.
I trust this information addresses your inquiry. Please contact **** in the Department's Office of Tax Policy at **** if you have any questions regarding this letter.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/31911I
Re: Request for Ruling: Retail Sales and Use Tax
Dear ****
This is in response to your letter of November 28, 2000, in which you request a ruling on the application of the retail sales and use tax to **** (the "Taxpayer").
FACTS
The Taxpayer is an Internet service provider based in Virginia. In addition to Internet access, the Taxpayer provides to its customers a package of services that includes information, electronic mail, personal home pages, and proprietary content. These multiple services are provided for a fixed monthly fee to the general public in about 50 geographical markets throughout the United States.
The Taxpayer offers a variety of proprietary products to its subscribers. These products include entertainment resources and resource tools for sports, political content, outdoor activities and other special interests including specialized local content designed for specific geographical markets. In some cases, this proprietary content is entirely designed and produced in-house by the Taxpayer. In other cases, the content may be designed in-house by the Taxpayer but produced by a third-party production company, or designed in-house and co-branded between the Taxpayer and a third party.
The Taxpayer asks if it qualifies for the sales and use tax exemption for amplification, transmission and distribution equipment set out in Code of Virginia § 58.1-609.6(2).
DETERMINATION
Code of Virginia § 58.1-609.6(2) provides a sales and use tax exemption for:
Broadcasting equipment and parts and accessories thereto and towers used or to be used by commercial radio and television companies ... or video programmers using an open video system or other video platform provided by telephone common carriers, ... and amplification, transmission and distribution equipment used or to be used by wired or land based wireless cable television systems, or open video systems or other video systems provided by telephone common carriers.
Code of Virginia § 58.1-602 was amended effective July 1, 1999, to define many words and phrases applicable to the above exemption, as follows:
> "video programmer" is defined to mean "a person or entity that provides video programming to end-user subscribers;"
> "video programming" is defined to mean "video and/or information programming provided by or generally considered comparable to programming provided by a cable operator including, but not limited to, Internet service;"
> "open video system" is defined to mean "an open video system authorized pursuant to 47 U.S.C. ' 573 and, for purposes of this chapter only, shall also include Internet service ...;"
> "amplification, transmission and distribution equipment" is defined to mean "production, distribution, and other equipment used to provide Internet-access services, such as computer and communications equipment, and software used for storing, processing and retrieving end-user subscribers' requests;" and
> "Internet service" is defined to mean "a service that enables users to access proprietary and other content, information electronic mail, and the Internet as part of a package of services sold to end-user subscribers."
Based on the information provided in your correspondence, the Taxpayer meets the definition of an "Internet service." The Taxpayer provides all of the required services to end-user subscribers. Accordingly, I agree that equipment (including computer servers, routers and other tangible personal property) used for storing, processing and retrieving end-user subscriber requests may be purchased or leased exempt of the tax to the extent that such equipment is purchased or leased after June 30, 1999.
Please note that the exemption does not extend to equipment used by the Taxpayer to design, create or produce content. Such equipment does not qualify for the exemption because it is not used to provide Internet access services.
I trust this information addresses your inquiry. Please contact **** in the Department's Office of Tax Policy at **** if you have any questions regarding this letter.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/31911I
Rulings of the Tax Commissioner