Were videotape rentals to libraries, churches, schools, and businesses taxable when the license allowed exhibition without charging admission?

Plain-English summary

The represented business sold and rented educational films and videotapes. It rented to individuals for private viewing and to libraries, churches, schools and businesses for exhibition to patrons, congregations, students and customers. Its standard agreement granted a nonexclusive, limited license for non-commercial, private, nonpaying exhibitions at licensee premises. No agreement or transaction record is attached.

Audit staff had found rentals taxable under sections 6006(g)(7)/6010(e)(7), relying on same counsel's absent Jan. 31, 1986 memo because lessees charged no admission. Counsel reversed that test: a videotape lease qualified for exclusion from sale and purchase if contract allowed lessee to exhibit publicly. Admission charge did not control.

Quoted federal definition treated performance as public at place open to public or where substantial number outside normal family/social circle gathers. Quoted House commentary treated clubs, lodges, factories, summer camps and schools as public, but excluded routine business/government staff meetings. Columbia Pictures treated hotel customers' in-room videodisc use as private.

For institutions leasing specifically to exhibit to public, counsel found performance public, lease outside sale and purchase, lessor consumer, and sale of tapes to lessor taxable. Counsel reversed prior view only to extent it used admission fees or necessarily taxed club/church member exhibitions.

Live Annotation 330.3075 states same institutional result but cites section 6006(g)(1), calls section 6006(g)(7) an exception and omits supporting letter's section 6010(e)(7). It also omits license wording, audit posture, public/private analysis, authorities and partial reversal.

The official PDF visibly prints 866 f.2d 278, substantial number or persons, wold, and d.Md.1932; these are preserved rather than silently corrected. No 1986 memo, actual license, video, exhibition record, invoice, acquisition-tax proof, audit report, assessment, protest, appeal or later outcome appears.

What this means for you

Document exact licensed rights, exhibition location and audience, whether viewing is public or private, and tax paid on media acquisition. An institution name or free admission alone does not establish result under this letter.

Common questions

Did free showing make rental taxable?

No. The opinion said charging admission was not the test.

What mattered instead?

Contract had to allow public exhibition. Audience and location separated public performance from private viewing.

Were all institutional showings public?

No categorical rule appears. Counsel found public use when listed institutions leased specifically to exhibit to public; quoted commentary excluded routine business/government staff meetings, and hotel-room viewing was private.

Who was treated as consumer?

The video lessor, for leases qualifying for the public-exhibition exclusion.

What prior position was reversed?

Only use of admission fees as test and statement that club/church member rentals were necessarily taxable. The 1986 memo is absent.

What does live annotation change?

It adds section 6006(g)(1), calls section 6006(g)(7) an exception and omits section 6010(e)(7). It does not explain this changed authority framing.

Was audit finally resolved?

Not shown. Letter reports audit staff determination but includes no report, amount, assessment, protest, appeal or outcome.

Citations and references

• Sections 6006(g)(7)/6010(e)(7) — supporting letter's lease provisions
• 17 U.S.C. § 101 — quoted public-performance definition
• H.R. Rep. No. 1476 — quoted semi-public/routine-meeting distinctions
• Columbia Pictures, printed 866 f.2d 278 — hotel-room private use
• Metro-Goldwyn-Mayer, 21 C.O. Bull. 203 — quoted House discussion
• January 31, 1986 memo — prior admission-fee view; absent
• Live Annotation 330.3075 — different authority framing
• Every underlying transaction/audit/outcome record — absent

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 330.3075
• Original supporting opinion: 330.3075 PDF

Original ruling text

330.3075

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-6450

December 20, 1990

Mr. [M]
--- --[N]
--- --- ----- ---, Suite ----- ---, CA XXXXX
Re:

[D]
S- -- XX-XXXXXX

Dear [M]:
As you know, your October 5, 1990 letter to Assistant Chief Counsel Gary J. Jugum regarding the application of use tax to leases of videotapes has been referred to me for reply. We understand that you represent [D], which is in the business of selling and renting educational films and videotapes. The Board’s audit staff recently determined that rentals of videotapes by [D] are subject to use tax pursuant to Revenue and Taxation Code sections 6006 and 6010 which respectively include within the meanings of “sales” and “purchase,” rentals or leases of videocassettes, videotapes, and videodiscs for private use under which the lessee or renter does not obtain or acquire the right to license, broadcast, exhibit, or reproduce the videocassette, videotape, or video disc. (Rev. & Tax. Code §§ 6006, subd. (g)(7) and 6010, subd. (e)(7).) We understand that [D] leases videotapes to individuals for private viewing and to libraries, churches, schools and businesses to exhibit to their respective patrons, congregations, students and customers. [D]’s standard licensing agreement grants a “non-exclusive, limited license to exhibit the motion pictures…for non-commercial, private, nonpaying exhibitions at the premises of the licensee.” The Board’s audit staff, relying on a January 31, 1986 memorandum I wrote, concluded that tax applies to [D]’s leases of the videotapes, because no admission fee was charged by the lessees to the persons to whom the videotapes were exhibited.

Mr. [M]

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December 20, 1990
330.3075

You do not believe that the Legislature intended to make the charging of admission the test for imposition of the use tax. You believe the legislative intent would be accomplished by determining taxability based on whether a license for a public performance of the work were part of the lease agreement. We agree that the charging of admission should not be the test for determining the application of use tax to the rentals. The lease of a videotape should qualify for exclusion from “sale” and “purchase” if the lease contract allows the lessee to publicly exhibit the videotape. A performance may be characterized as public under the Copyright Act, 17 United States Code sections 101-702, through application of two clauses which define the term “perform or display a work ‘publicly’.” (Columbia Pictures v. Professional Real Estate Inv., 866 f.2d 278.) Under clause (1), the applicable one here, a performance is public if it occurs “at a place open to the public or at any place where a substantial number or persons outside of a normal circle of family and its social acquaintances is gathered.” (17 U.S.C. § 101.) The House Commentary on the 1976 version of the Copyright Act attempted to clarify the meaning of “perform the copyrighted work publicly”: “…One of the principal purposes of the definition was to make clear that, contrary to the decision in Metro-Goldwyn-Mayer Dist. Corp v. Wyatt, 21 C.O. Bull. 203 (d.Md.1932), performances in ‘semi-public’ places such as clubs, lodges, factories, summer camps and schools are ‘public performances’ subject to copyright control. The term ‘a family’ in this context wold include an individual living alone, so that a gathering confined to the individual’s social acquaintances would normally be regarded as private. Routine meetings of businesses and governmental personnel would be excluded because they do not represent the gathering of a ‘substantial number of persons.’” (H.R.Rep. No. 1476, 64, 94th Cong., 2d Sess., reprinted in 1976 U.S. Code Cong. & Admin.News 5659, 5677-78.) Following that interpretation of the definition, the court in the Columbia Pictures case (supra) held that a hotel’s providing in-room videodisc players and renting videodiscs to its customers did not result in a public performance. On the other hand, we believe that, when a business such as [D] leases videotapes to libraries, churches, schools, and businesses which lease the videotapes specifically to exhibit to the public, the performance is necessarily “public” under 17 U.S.C. § 101, and the lease qualifies for exclusion from the definitions of “sale” and “purchase”. In such case, the lessor is the consumer of, and tax applies to the sale of the videotapes to, the lessor. By this letter, I am reversing my previous opinion to the extent that it can be construed that the taxability of leases of videotapes is based on whether or not the lessee of the videotape charges an admission fee to the persons to whom the motion picture is exhibited, and I am reversing the opinion specifically where it states that tax necessarily applies to leases of videotapes to clubs, churches, etc., which rent the videotape to show to members of the organization.

Mr. [M]

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December 20, 1990
330.3075

If you have any further questions regarding this, feel free to contact me directly Very truly yours,

Ronald L. Dick
Senior Tax Counsel
RLD:sr