Retail Sales and Use Tax
Satellite communication service does not qualify for broadcasting exemption
Taxability of Persons and Transactions
October 31, 1988
Re: Request for Ruling/Sales and Use Tax
This will reply to your letter dated September 8, 1988 in which you seek a ruling on the applicability of the sales and use tax to equipment used in telecommunications transmission.
************* (taxpayer) is in the business of providing satellite communication services to subscribing customers. The taxpayer contends that transmission, telemetry, tracking and control equipment utilized in providing communication services are exempt from the sales and use tax as equipment used in broadcasting.
The taxpayer's conclusion is based on the following: (1) the taxpayer is regulated by the FCC; (2) the satellite transmissions are broadcast into the air over a wide geographic area; (3) a large number of locations could receive the transmission simultaneously; and (4) the telemetry, tracking, control and monitoring equipment is integrally related to the broadcasting of telecommunications transmissions.
§58.1-608(12) of the Code of Virginia exempts from the sales and use tax:
- Broadcasting equipment and parts and accessories thereto and towers used or to be used by commercial radio and television companies, cable television systems, 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 cable television systems.
The term broadcasting is not defined in the Retail Sales and Use Tax Act or regulations. However, in interpreting the above statute, the Virginia Supreme Court in Winchester TV Cable Co. v. State Tax Commissioner, 216 Va. 286, 217 S.E.2d 619 (1973), defined "broadcasting" as "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." The court further defined "broadcast" as "made public by means of radio or television."
In addition, the court in WTAR Radio-TV Corporation v. Commonwealth of Virginia, et al., 217 Va. 877, 234 S.E.2d 245 (1977) defined "broadcast" as "the act of sending out sound or images by radio or television transmission. ... for general reception." Additionally, the Federal Communications Act defines "broadcasting" as "the dissemination of radio communication intended to be received by the public, directly or by the intermediary of relay stations." 47 U.S.C.A. 153(o) (1970).
In the present case, the taxpayer distributes telecommunications services to a limited number of subscribing customers. Therefore, the taxpayer is not disseminating signals directly to the general public but only to those customers who have contracted to receive its communication services. As such, the broadcasting exemption does not apply and the taxpayer is liable for the sales and use tax on its transmission, telemetry, tracking, control and monitoring equipment.
I have enclosed copies of the court cases cited above, as well as other documents addressing the inapplicability of the broadcasting exemption to businesses similar to that of the taxpayer.
W. H. Forst