Tax Type
Retail Sales and Use Tax
Description
Publishing and broadcasting; Cable television
Topic
Taxability of Persons and Transactions
Date Issued
10-25-1996
October 25, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear*************
In your letter, you request a ruling concerning the application of the retail sales and use tax to various video entertainment services sold by*************(the Taxpayer). I apologize for the delay in responding to your letter.
FACTS
The Taxpayer provides hotel guests with pay-per-view video entertainment services via a central control unit installed at the hotel and linked by wire to television sets in hotel rooms. The control unit contains a rack of video cassette players, a computer and other electronic equipment. All of the equipment is owned, installed and maintained by, and under the control of, the Taxpayer.
The hotel guest selects a movie from a menu of available titles displayed on the television screen. After a selection is made, a video cassette player in the control unit runs the tape of the movie. The signal is carried to the television set by wire. In some smaller hotels, selections are made via the telephone through a PBX system.
The agreement between the Taxpayer and the operator of the hotel requires the hotel, on behalf of the Taxpayer, to make a specific charge on the guest's hotel bill for each movie viewed by the hotel's guest. The hotel retains a specified percentage of each charge collected and remits the remainder to the Taxpayer.
For a specific Monthly rate per room, the Taxpayer also provides television programming to the hotel via satellite or cable. No additional fee is charged the hotel guest.
In addition, the Taxpayer may provide a selection of video games for hotel guests. Games are accessed via a game controller in the hotel room and provided in a manner similar to the pay-per-view service discussed above, except that CD-ROM players are used.
RULING
Pay-Per-View Video, Entertainment Services
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- Virginia Regulation 630-10-48(C) provides, in part, the following:
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- Any additional charges made in connection with the rental of a room or other lodging or accommodations are deemed to be a part of the charge for the room and are subject to the tax. For example, additional charges for movies, local telephone calls and similar services are subject to the tax. [Emphasis added.]
The provision of pay-per-view video entertainment services to hotel guests in this instance is a part of overall compensation the hotel receives from the rental of rooms. Based on the facts presented and the above cited regulation, these movie fees represent additional charges made in connection with the rental of hotel rooms and are therefore subject to the sales tax. Accordingly, the hotel is responsible for charging and collecting the sales tax on the entire amount of these additional charges.
The Taxpayer is directly liable for the retail sales and use tax on the cost price of all of the equipment, wiring and other tangible personal property which it installs and maintains at each hotel location in Virginia for pay-for-view services, provided the Taxpayer retains exclusive control and ownership of such property.
Television Programming Services
The provision of television programming by satellite or cable to hotels represents the provision of a nontaxable service. As a service provider, the Taxpayer is liable for the tax on any property used in Virginia in the provision of such services.
Video Game Services
The application of the retail sales and use tax to the video game services provided by the Taxpayer is the same as for pay-for-view entertainment services discussed above.
I trust that the foregoing has answered your questions. If you have any questions about this ruling, please contact****** at *********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10709R
Rulings of the Tax Commissioner