Were charges for producing and taping a corporate satellite broadcast, editing a roll-in, and subcontracting a camera crew taxable, and what about duplicate tapes?

Plain-English summary

A redacted media producer directed a three-and-one-half-hour satellite broadcast announcing a computer manufacturer's new products to sales and support employees nationwide. The producer was responsible for content and live “on line” direction. The planned invoice separately stated labor, outside camera-crew services with the crew's own equipment, and a 15% markup on those vendor services.

California treated the broadcast tapes as qualified motion pictures. The producer's charge for the initial tape was nontaxable, while duplicate tapes made for exhibition or broadcast were taxable.

Editing the client's video roll-in was a nontaxable qualified production service. A vendor's charge for supplying a camera crew and camera to photograph the event also was nontaxable qualified production work.

The letter does not separately classify the 15% markup. It also explains that Regulation 1529 was being substantially revised after section 6010.6 took effect and provides only an absent proposed-regulation attachment.

Source and live-annotation limits

The letter does not reproduce the April 28, 1989 request or identify the producer or computer manufacturer. It supplies no broadcast or teleconference, new product, employee audience, initial or duplicate tape, video roll-in, writing, production, direction, editing, crew, camera or equipment, vendor agreement, invoice, markup calculation, exploitation rights, transfer or broadcast date, charge, tax record, completed transaction, audit, assessment, refund, or later outcome. The proposed Regulation 1529 attachment is absent.

The live annotation preserves the computer-manufacturer client, national employee broadcast, producer/director role, qualified initial tapes, nontaxable producer charge, and taxable exhibition-or-broadcast duplicates. It omits the April 28 request, planned invoice lines and 15% markup, writing and editing labor, outside crew and its equipment, video roll-in result, vendor-charge result, section 6010.6 transfer alternatives and full service definition, pending Regulation 1529 revision and missing attachment, absent records, and later-outcome gap.

What this means for you

Corporate-broadcast producers and tax professionals

Separate the initial tape from broadcast duplicates and document each editing and subcontracted production service, including what the outside crew supplies. Obtain a separate analysis for a vendor-service markup; this letter states one but never expressly classifies it.

Common questions

Q: Was the producer's initial broadcast tape taxable?

A: No.

Q: Were duplicate exhibition or broadcast tapes taxable?

A: Yes.

Q: Were editing and subcontracted camera-crew charges taxable?

A: No, as qualified production services.

Q: Did the letter separately classify the 15% markup?

A: No.

Q: Was Regulation 1529 final in the form discussed?

A: No. The letter says it was under substantial revision and attaches a proposed version that is absent from the PDF.

Citations and references

• California Revenue and Taxation Code § 6010.6(a)(1), (a)(2)(A), (a)(2)(B), (b)(4), and (c)(2)
• Proposed California Sales and Use Tax Regulation 1529 — attached copy absent
• April 28, 1989 request — described but not included
• Broadcast, tapes, editing, crew, equipment, vendor services, markup, invoices, and tax records — described or assumed but not documented

Verbatim support

From the official letter:

Therefore, although your charge for the initial tape you provide to A--- C--- is not subject to tax, if you provide A--- C--- with duplicate tapes for exhibition or broadcast, tax applies to your charge for such tapes.

If you perform editing on A--- C---’s videotape of the “video roll-in,” your charge is nontaxable as a charge for qualified production services.

Similarly, if you contract with another vendor to provide a camera crew with a camera to photograph the event, the charge to you by the vendor is nontaxable as a charge for qualified production services.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 375.0985
• Original supporting opinion: 375.0985 PDF

Original ruling text

375.0985

STATE OF CALIFORNIA

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

July 5, 1989

Mr. E--- E--E--- Media
XXX West --- Avenue, Suite XXX
--- ---, CA XXXXX-XXXX
A--- C--Dear Mr. E---:
This is in reply to your April 28, 1989 letter regarding the application of sales tax to your charges in connection with the production of a satellite broadcast or teleconference and the videotaping of that broadcast. You noted that A--- C--- has retained you to produce the broadcast which will be aired to A-- C--- employees nationwide. The three and one-half hour broadcast announces new products to A-- C--- sales and support staff. You noted that you are the producer and director of the broadcast, and, as such, you are ultimately responsible for the broadcast’s content and physically directing “online” during the airing. Your invoice will contain the following line items: “a.

Labor, including writing, producing, directing and editing.

“b.
Outside vendor services, including rental of a camera crew which will supply their own equipment. “c. A 15% markup that will apply only to the outside vendor services billed through A--- C---.” You note that, although you understand the provisions of Sales and Use Tax Regulation 1529, the regulation does not address the situation you present.

Mr. E--- E---

-2-

July 5, 1989
375.0985

As a result of the addition of section 6010.6 to the Revenue and Taxation Code effective September 22, 1988, the State Board of Equalization is in the process of substantially revising Regulation 1529. A copy of the proposed regulation is attached for your information. Under section 6010.6, subdivision (a)(2), tax does not apply to the transfer of a qualified motion picture when either: “(A) The transfer is made prior to the date that the qualified motion picture is exhibited or broadcast to its general audience. “(B) The transfer is made to any person or persons holding, either directly or indirectly, or by affiliation, any exploitation rights obtained prior to the date that the qualified motion picture is exhibited or broadcast to its general audience.” Also, under subdivision (a)(1) of section 6010.6, tax does not apply to charges for the performance of qualified production services in connection with the production of all or any part of any qualified motion picture. Subdivision (b)(4) of section 6010.6 defines “qualified production services”: “‘Qualified production services’ means any fabrication performed by any person in any capacity (whether as an employee, agent, independent contractor, or otherwise) on film, tape, or other audiovisual embodiment in connection with the production of all or any part of any qualified motion picture, including, but not limited to, photography, sound, music, special effects, animation, adaptation (language, media, electronic, or otherwise), technological modifications, computer graphics, dubbing, mixing, editing, or cutting services. ‘Qualified production services’ do not include services or other work to manufacture release prints or to duplicate tapes for exhibition or broadcast.” We first note that we believe the videotapes you prepare and transfer to A--- C--- which announce new products to A--- C---’s staff qualify as qualified motion pictures. Tax does not apply to your charge to A--- C--- for the qualified motion pictures. However, the exclusion from tax is not applicable to the sale or purchase of release prints or tapes for exhibition or broadcast. (§ 6010.6, subd. (c)(2).) Therefore, although your charge for the initial tape you provide to A--- C--- is not subject to tax, if you provide A--- C--- with duplicate tapes for exhibition or broadcast, tax applies to your charge for such tapes. If you perform editing on A--- C---’s videotape of the “video roll-in,” your charge is nontaxable as a charge for qualified production services. Similarly, if you contract with another vendor to provide a camera crew with a camera to photograph the event, the charge to you by the vendor is nontaxable as a charge for qualified production services.

Mr. E--- E---

-3-

July 5, 1989
375.0985

We hope this answers your question; however, if you need further information, feel free to write directly to me. Very truly yours,

Ronald L. Dick
Tax Counsel

RLD:sr
Attach.