Tax Type
Retail Sales and Use Tax
Description
Publishing and broadcasting; Blank video tape
Topic
Taxability of Persons and Transactions
Date Issued
03-11-1994
March 11, 1994
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear**********
This is in response to correspondence submitted by ********** seeking correction of a sales and use tax assessment issued to *********("the Taxpayer"). I note that the entire assessment has been paid.
FACTS
The Taxpayer, a commercial television station, was audited for the period July 1989 through December 1991. The only issue under protest is the assessment of tax on blank video tape which was purchased by the Taxpayer.
Completed programs and commercials are transferred to the blank video tape, a process which converts the programming into a form suitable for broadcasting. Each tape may be replayed a number of times, but you maintain that no tape is used to record more than one program or commercial.
You contend that the Taxpayer's use of blank tape is exempt from the tax when used directly in disseminating a signal into the air. You further contend that the way in which the Taxpayer uses the blank tape constitutes broadcasting.
DETERMINATION
Va. Code §58.1-609.6(2) provides an exemption from the tax for "broadcasting equipment and parts and accessories thereto and towers used or to be used by commercial radio and television companies . . .
Further, the Virginia Supreme Court in WTAR Radio-TV v. Commonwealth, 217 Va. 877, 234 S.E.2d 245 (1977), provided that:
-
- We hold that the broadcasting exemption applies only to broadcasting equipment and accessories thereto used directly in the act of disseminating a signal into the air, not to the equipment and accessories used to create the material which may be disseminated.
In the instant case the Taxpayer purchased blank video tape. Through its recording process the Taxpayer subsequently converted the blank tape into a recorded tape which was capable of transmitting programs and commercials. The fact remains, however, that the blank tape was not used to disseminate a signal into the air. Rather, the blank tape was used by the Taxpayer to create material, in this case a recorded tape, which could then be broadcast.
This conclusion is entirely consistent with the Court's findings in WTAR. There, the department recognized, and the Court agreed, that certain equipment and accessories were exempt when used directly in broadcasting. No exemption, however, either in full or in part, was extended to raw film which was first used to gather news for subsequent reporting, an activity which the Court found to be a taxable production activity.
Furthermore, I cannot agree that the video tapes are subject to proration of the tax. Again, the source of the assessment is the purchase of blank tape, and the blank tape is not used in any exempt broadcasting activity. It is only after the blank tape is processed can broadcasting ensue.
Accordingly, I find that the liability in this case is correct as assessed.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
OTP/6761I
Rulings of the Tax Commissioner