Tax Type
Retail Sales and Use Tax
Description
Broadcasting equipment and parts and accessories
Topic
Exemptions
Date Issued
05-06-2005
May 6, 2005
Re: Ruling Request: Retail Sales and Use Tax
Dear ********:
This is in response to your letter in which you request a ruling as to the application of the retail sales and use tax to certain purchases by ***** (the "Taxpayer"). I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is a cable television network that offers a variety of television programming for worldwide distribution via a scrambled "satellite uplink, with satellites then beaming the programming to [the Taxpayer's] cable affiliates, which in turn distribute the programming to cable subscribers." The Taxpayer has traditionally used a third-party satellite uplink provider but now has decided to perform the satellite transmission itself. You ask whether the exemption for cable television amplification, transmission, and distribution equipment would apply to the Taxpayer's technical equipment to be purchased for use in the distribution of cable and satellite television programming ultimately to cable subscribers.
RULING
Virginia Code § 58.1-609.6 2 provides an exemption from the retail sales and use tax for:
-
- Broadcasting equipment and parts and accessories thereto and towers used or to be used by commercial radio and television companies, wired or land based wireless cable television systems, common carriers or video programmers using an open video system or other video platform provided by telephone common carriers, or concerns which are under the regulation and supervision of the Federal Communications Commission 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. [Emphasis added.]
The above exemption has historically been applied to broadcasters and cable television companies that beam or send their programming directly to the public consumer or subscriber. The exemption, therefore, is not available to television or cable networks that produce the programming and transmit their programming to affiliated stations for airing to the consumer, unless the network also transmits an unscrambled broadcast signal to the consumer or a signal directly to a cable subscriber. In those instances when a network broadcasts an unscrambled signal simultaneously to both an affiliated station and the consumer, the tax may be prorated in the manner described by Public Document (P.D.) 93-229 (12/15/93).
In regard to cable television systems, the Department has previously determined that the exemption "is limited to providers of cable television service to subscribers - those which receive and transmit signals." [Emphasis added.] See P.D. 95-193 (7/31/95). Because the Taxpayer does not transmit a signal directly to a cable subscriber, it is not a cable television system as envisioned by the exemption. Nor does the Taxpayer broadcast an unscrambled signal directly to the consumer. Furthermore, while the Taxpayer's satellite uplink equipment for which it is seeking exemption is land based, the system the Taxpayer proposes to use is not land based. The exemption for land-based wireless cable television systems was never intended by the General Assembly to include satellite-based systems. Accordingly, the Taxpayer's satellite uplink equipment is not entitled to the above-cited exemption.
Under principles established by the courts, taxation is the rule and exemption is the exception. As set out in Title 23 of the Virginia Administrative Code 10-210-540, exemptions from the retail sales and use tax are strictly construed. This regulation specifies that "when exemption language is susceptible of two constructions, one granting the exemption and the other not granting it, the construction denying the exemption will be followed." Based on the information presented, and the doctrine of strict construction, I rule that the technical equipment used in the Taxpayer's satellite uplink activities is not exempt under Va. Code § 58.1-609.6 2.
The Code of Virginia section, regulation and public documents cited are available on-line in the Tax Policy Library section of the Department of Taxation's web site, located at www.policylibrary.tax.virginia.gov. If you have any questions about this ruling, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at ********.
-
-
-
-
-
-
-
- Sincerely,
-
-
-
-
-
-
-
-
-
-
-
-
-
- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
-
-
-
-
-
-
AR/47094R
Rulings of the Tax Commissioner