How did Connecticut Ruling 89-111 tax video-production equipment leases and an advertising agency's purchase of television video productions?

Plain-English summary

Video production did not meet the cited definition of a manufacturing production process, so purchases or leases of machinery used in video production did not qualify for the manufacturer's exemption.

An equipment lease to a video-production business was taxable when the equipment was used to produce corporate and industrial programs, television commercials, informational and training products, and similar work for businesses, independent producers, advertising agencies, and institutions.

The ruling also said that although an advertising agency's fee for television advertising was not taxable, the agency's purchase of video productions for that television advertising was taxable.

The official page says PS 92(13) superseded the ruling.

What this means for you

The historical ruling denied manufacturing treatment to video production and separately taxed the identified equipment leases and agency purchases. Because it was superseded, current video-production and advertising transactions require current guidance.

Common questions

Did video production qualify as manufacturing? No under the regulation applied in the ruling.

Was leased video-production equipment taxable? Yes in the described business use.

Was an advertising agency's television-advertising fee taxable? No according to the ruling.

Was the agency's purchase of the underlying video production taxable? Yes.

Citations and references

• Reg. Conn. State Agencies §§ 12-426-11b and 12-426-25, as cited in the ruling.
• Conn. Gen. Stat. § 12-407(2)(i)(W), as amended by Public Act No. 89-251, as cited in the ruling.
• PS 92(13), identified by the official page as superseding this ruling.

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 89-111

Original ruling text

Ruling 89-111, Leasing

This information is not current and is being provided for reference purposes only

This Ruling has been superseded by PS 92(13)

The production of videos does not meet the definition of manufacturing production process pursuant to section 12-426-11b of the Regulations of Connecticut State Agencies and does not qualify for the manufacturer's exemption from sales and use tax for purchases or leases of machinery.

The lease of equipment by a video production business that uses the equipment to produce corporate/industrial programs, television commercials, informational and training products, etc., for businesses, independent producers, advertising agencies and institutions is subject to the sales and use tax pursuant to section 12-426-25 of the Regulations of Connecticut State Agencies (copy enclosed).

Section 12-407(2)(i)(W) of the Connecticut General Statutes, as amended by Public Act No. 89-251 imposes a sales and use tax on advertising services except as related to the development of media advertising. Since an advertising agency's fee for television advertising is not taxable, the purchase of video productions by an advertising agency for television advertising is subject to the sales and use tax.

LEGAL DIVISION

September 26, 1989