Tax Type
Retail Sales and Use Tax
Description
Leases and rentals; Satellite television equipment rental
Topic
Taxability of Persons and Transactions
Date Issued
02-07-1997
February 7, 1997
Re: Request for Ruling: Retail Sales and Use Tax
Dear********************
This is in response to your letter of December 3, 1996, written on behalf of ****************(the "Taxpayer").
FACTS
The taxpayer provides satellite television services to customers within Virginia. As part of this activity, the Taxpayer leases to its customers the equipment necessary to facilitate the delivery of television programming. This equipment includes the signal receiver (satellite dish), converter box, and remote control units. The Taxpayer separately states on its invoices to customers: (1 ) charges for television programming, and (2) charges for equipment rental. Furthermore, the Taxpayer has been charging Virginia sales tax on the equipment rental charges.
You suggest that the charges to customers for the equipment are not taxable regardless that such charges are separately stated, and you request a ruling on this issue.
RULING
Rental of Equipment to Customers: Public Document 87-208 (9/15/87) addresses the rentals of equipment to subscribers by a provider of cable television services. The department determined that the true object of the customer was to obtain the television programming service provided by the seller rather than the tangible personal property accompanying that service. It was further determined that the rental of the equipment was an inconsequential element of the provider's television service.
A similar issue was addressed in Public Document 88-299 (10/31/88). In that case a separate charge was made for equipment rented to customers in connection with the provision of database services. Again, the department determined that the provider was not required to add the tax to the lease or rental charges made in connection with the provision of services.
Accordingly, the Taxpayer in the instant case is not required to add the tax to its separately stated charges for satellite television equipment. However, if equipment is leased or rented without the provision of television services, the Taxpayer is required to add and collect the tax on the lease or rental charges. Further, the Taxpayer is required to add and collect the tax on any sales of equipment or other tangible personal property.
Taxpayer's Purchase of Equipment: As the provider of a nontaxable service, the Taxpayer is subject to the tax on tangible personal property used or consumed in providing its service. This would apply to the satellite dishes, converter boxes, and remote control units provided to Virginia customers, and to any other tangible personal property used or consumed in Virginia by the Taxpayer.
Taxes Erroneously Collected: It appears that the Taxpayer has erroneously collected tax from its customers on the rental of equipment used by the Taxpayer to provide television services. Pursuant to Virginia Regulation 630-10-24(C), such erroneously collected taxes must be remitted to the department unless the Taxpayer can show that the tax was refunded or credited to the customers. Further, the Taxpayer may request from the department a refund of the taxes erroneously collected. The Taxpayer will need to show, however, that the tax was refunded to customers.
I trust that this information addresses your concerns. Please contact ********in my Office of Tax Policy at ********, if you have additional questions.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11928I
Rulings of the Tax Commissioner