Ezel / Tax Rulings / CT
CT Ruling 95-6 Sales and Use Taxes 1995-04-25

Are in-room hotel pay-per-view movie charges taxed in Connecticut as sales tax, as room occupancy tax, or both — and who owes what?

Short answer: Both taxes apply, at two different links in the chain. The pay-per-view movie service a company provides to a hotel is a taxable 'community antenna television service' under Conn. Gen. Stat. § 12-407(2)(l) / § 12-407(27) — even though the company is not a franchised cable company — and the HOTEL is the consumer, so the hotel owes the 6% sales/use tax on the full amount passed through to guests (the cut the hotel keeps is NOT deductible, because that's a separate service the hotel performs). Separately, the movie charges the hotel bills its GUESTS are part of the taxable 'rent' for room occupancy under § 12-407(21), so they are also subject to the 12% room occupancy tax under § 12-408(1)(B) — whether or not separately stated and regardless of the company-hotel contract. So the same movie generates a sales-tax layer (company→hotel) and a room-occupancy-tax layer (hotel→guest).

Apply this to your situation

This page answers the general question as of 1995. Ezel answers yours, under current Connecticut tax law, with citations.

Currency note: this ruling is from 1995
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Ruling of the Connecticut Department of Revenue Services (DRS), typically issued to a specific taxpayer in response to that taxpayer's request and based on the specific facts presented and the Connecticut tax law in effect when it was issued. DRS may later declare a Ruling obsolete or supersede it by a subsequent Ruling, Policy Statement, or Announcement, so a taxpayer with different facts should not assume it still applies. Tax rates cited (6% sales/use, 12% room occupancy) are 1995-vintage and have since changed, so confirm current rates. Taxpayer-identifying details are redacted. Connecticut imposes its sales and use tax solely at the state level: there are no local or municipal sales taxes. This summary is informational only and is not legal or tax advice. Consult a licensed Connecticut tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

A company put master-antenna TV systems and in-room "programming boxes" into hotels so guests could order pay-per-view movies (not delivered over a cable franchise). The hotel billed each guest per movie on the room folio, kept a percentage as its cut, and remitted the rest to the company. There was no contract between the company and individual guests. The company asked: is this sales/use tax, room occupancy tax, or both?

DRS said both — but they hit different transactions and different taxpayers.

Layer 1 — sales/use tax on the company's service to the hotel. The movie service is a "community antenna television service" under Conn. Gen. Stat. § 12-407(27), which reaches non-cable communications service (§ 16-1(18), building on the telecommunications-service definition in § 16-247a(5)). It doesn't matter that the company isn't a franchised community-antenna-television company — the service still qualifies (following Ruling 91-25). And the hotel — not the guest — is the consumer: the hotel is the one that contracted with the company, is responsible for collecting and remitting the fees, and the service reaches guests only because they're paying hotel guests. So the hotel owes the 6% sales/use tax on the service (per Policy Statement 92(15.1)). Importantly, the entire amount passed through to guests is the taxable sales price — the percentage the hotel keeps is not deductible, because that cut is payment for a separate service (the hotel making the movies available in its rooms and handling billing).

Layer 2 — room occupancy tax on the hotel's charge to the guest. The movie charges a hotel bills its guests are "rent" for room occupancy. "Rent" (§ 12-407(21)) is broadly defined as consideration for occupancy including "services of any kind or nature." So those charges are additional services provided by the hotel to the guest and fall under the 12% room occupancy tax (§§ 12-407(2)(h), 12-408(1)(B)) — whether or not separately stated, and regardless of the contract between the company and the hotel.

Net effect: one in-room movie touches two Connecticut taxes — the company-to-hotel service is sales-taxed with the hotel as consumer, and the hotel-to-guest charge is folded into taxable room rent.

What this means for you

Hotels and lodging operators

In-room entertainment is a double-tax situation. You owe sales/use tax as the consumer of the provider's community-antenna-television service, and the amount you charge guests is rent subject to room occupancy tax. Budget and remit for both — and don't assume the guest "pays the tax" so you don't have to.

Your retained percentage doesn't shrink the sales-tax base

The cut you keep from the movie revenue is not deducted from the taxable service price the provider charges you. DRS treats that retained percentage as consideration for a separate service you perform, so the full pass-through amount is taxed.

In-room entertainment / PPV providers

Your service is a taxable community-antenna-television service even without a cable franchise. Because the hotel is your consumer, structure your invoicing and tax collection with the hotel — not the guest — as the taxable buyer.

"Rent" is broader than the nightly room charge

Room occupancy tax reaches "services of any kind or nature" that are consideration for occupancy. Add-on charges billed to guests can be swept into taxable rent even if separately itemized. Review your folio line items (movies, and similar in-room services) against the rent definition.

Common questions

Q: Is a hotel in-room movie charge subject to Connecticut sales tax or room occupancy tax?
A: Both, at different points. The provider's service to the hotel is a taxable community-antenna-television service (hotel owes 6% as consumer), and the movie charge the hotel bills the guest is part of taxable "rent" subject to the 12% room occupancy tax.

Q: Who owes the sales tax — the hotel or the guest?
A: The hotel. DRS treats the hotel as the consumer of the provider's service, because the hotel contracts with the provider and handles billing/remittance, and the service reaches guests only as hotel guests.

Q: Can the hotel deduct the percentage it keeps before calculating tax?
A: No. The full amount passed through to guests is the taxable service price; the hotel's retained percentage is payment for a separate service and isn't deductible.

Q: Does it matter that the provider isn't a cable company?
A: No. The service still qualifies as a "community antenna television service" (including non-cable communications service) under § 12-407(27), even though the provider isn't a franchised cable company.

Citations and references

Statutes:

  • Conn. Gen. Stat. § 12-407(2)(l) (community antenna television services enumerated as a taxable sale)
  • Conn. Gen. Stat. § 12-407(27) (definition of "community antenna television services," incorporating non-cable communications service)
  • Conn. Gen. Stat. § 12-408(1)(B) (room occupancy tax, 12%, on rent for each transfer of occupancy); § 12-407(2)(h) (transfer of occupancy as a taxable sale)
  • Conn. Gen. Stat. § 12-407(21) (definition of "rent" — consideration for occupancy including services of any kind or nature)
  • Conn. Gen. Stat. § 16-1(18) (non-cable communications service); § 16-247a(5) (telecommunications service)
  • Cable Communications Policy Act of 1984, Pub. L. 98-549 (referenced in the non-cable definition)

Guidance and related ruling (described in prose, not linked):

  • Policy Statement 92(15.1) (consumer liability for community-antenna-television services)
  • Ruling No. 91-25 (a non-franchised provider can still render taxable community-antenna-television services)

Source

Original ruling text

Ruling 95-6, Sales and Use Taxes / Room Occupancy Tax / Community Antenna Television Services

FACTS:

A company (hereinafter the "Company") contracts with hotels to offer non-cable movie services. The Company installs and maintains master antenna television systems and all other necessary transmission equipment at hotels. Hotels contracting for the Company's services place the Company's movie programming boxes in the hotels' guest rooms. If hotel guests desire, they may view the movies which the Company offers by programming the programming box accordingly. A hotel guest is then charged an amount per movie by the hotel, which is added to the hotel guest's bill from the hotel. Under the terms of the contract between the Company and a hotel, the hotel is responsible for charging the guests for the movies and for remitting to the Company the amounts charged, minus a percentage of the charges, which the hotel retains as its payment for making the service available in its guest rooms, and for collecting the fees from the guests. The Company has no written contracts with individual hotel guests.

ISSUE:

Whether the provision of non-cable movie services at hotels is subject to sales and use taxes under Conn. Gen. Sat. §12-407(2)(l)), or the room occupancy tax under Conn. Gen. Stat. §12-408(1)(B), or both.

DISCUSSION:

Conn. Gen. Stat. §12-408(1)(B) imposes the room occupancy tax on retail sales as defined in §12-407

at a rate of twelve percent with respect to each transfer of occupancy from the total amount of rent received for such occupancy of any room or rooms in a hotel ... [Emphasis added.]

Conn. Gen. Stat. §12-407(21) defines "rent" as

the consideration received for occupancy valued in money, whether received in money or otherwise, including all receipts, cash, credits and property or services of any kind or nature, and also any amount for which credit is allowed by the operator to the occupant, without any deduction therefrom whatsoever. [Emphasis added.]

The Department considers the in-room "pay per view"-type movie services which the Company offers to fall within the category of "services of any kind or nature," charges for which are subject to the room occupancy tax. Specifically, the Company's services are "community antenna television services" for purposes of the Sales and Use Taxes Act. Conn. Gen. Stat. §12-407(27) defines community antenna television services as

(1) the one-way transmission to subscribers of video programming or information that a community antenna television company makes available to all subscribers generally, and subscriber interaction, if any, which is required for the selection of such video programming or information and (2) non-cable communications service, as defined in section 16-1. [Emphasis added.]

Conn. Gen. Stat. 16-1(18) defines "non-cable communications service"

as any telecommunications service, as defined in section 16-247a, and which is not included in the definition of "cable service" in the Cable Communications Policy Act of 1984, P.L. 98-549. [Emphasis added.]

Conn. Gen. Stat. §16-247a(5) defines "telecommunications service"

as any transmission (A) between or among points specified by the user, (B) of information of the user's choosing, (C) without change in the form or content of the information as sent and received, (D) by means of electromagnetic transmission, including but not limited to, fiber optics, microwave and satellite, (E) with or without benefit of any closed transmission medium and (F) including all instrumentalities, facilities, apparatus and services, except customer premises equipment, which are used for the collection, storage, forwarding, switching and delivery of such information and are essential to the transmission.

Therefore, the services which the Company offers are "community antenna television services" under Conn. Gen. Stat. §12-407(27), notwithstanding the fact that the Company is not a franchised community antenna television company. See also Ruling No. 91-25.

The hotels are the consumers of the community antenna television services, since the hotels, and not the hotels' guests, have contracted with the Company, and since the hotels are responsible to the Company for the collection and remittance of all fees for the services, and since the Company's services are available to hotel guests only by virtue of their being paying guests of the hotel. Under these circumstances, the Company is actually providing its services to the hotels, and not directly to the guests. The hotels are thus liable for the six percent sales and use taxes on such services. See Policy Statement 92(15.1), page 2. The entire amount passed through to the guests for the services is subject to such tax, and the percentage of the fees retained by the hotels is not deductible from the taxable sales price, since that percentage represents a fee for a separate service, that of the hotels' making the movies available in their guest rooms, and collecting and remitting the fees to the Company.

In addition, the charges made for the movies by the hotels to their guests are subject to the room occupancy tax under Conn. Gen. Stat. §§12-407(2)(h) and 12-408(1)(B), because they constitute consideration for additional services provided by the hotels to the guests, whether or not the charges for such services are separately stated and regardless of the contractual arrangements between the Company and the hotels.

RULING:

The provision of non-cable movie services to hotels is subject to sales and use taxes under Conn. Gen. Stat. §12-407(2)(l), and the hotels are the consumers of such services. For purposes of the room occupancy tax, amounts received by the hotels from their guests for the movie services are also part of the "rent" for room occupancy, under Conn. Gen. Stat. 12-407(21).

LEGAL DIVISION

April 25, 1995

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