Were hotel free-to-guest and pay-per-view programs delivered by satellite taxed as direct-to-home satellite service?

Plain-English summary

The taxpayer provided hotels with free-to-guest subscription programming and guest-paid pay-per-view content. Satellite signals reached a receiver at the hotel and then traveled through taxpayer equipment and the hotel's coaxial cable to guest rooms.

Florida classified both services as direct-to-home satellite service. In 2010 the applicable combined rate was 13.17%—10.8% state communications services tax plus 2.37% gross receipts tax—and no local communications services tax applied.

The Department could not certify the taxpayer's address database through a TAA; certification required a separate application and accuracy process. Because direct-to-home satellite service used one statewide rate, the taxpayer could claim the 0.75% collection allowance if section 202.28(1) was satisfied.

What this means for you

Transmission method controlled the classification. Hotel distribution equipment and wiring did not prevent direct-to-home treatment when satellite programming was delivered to the consumer without other off-premises ground distribution.

Common questions

Were free-to-guest and pay-per-view taxed the same way? Yes.

Did a local CST rate apply? No, under the stated direct-to-home classification.

Did the TAA certify the database? No.

Citations and references

• Fla. Stat. §§ 202.11, 202.12, 202.16, 202.19, 202.22, 202.28, and 203.01 and Fla. Admin. Code r. 12A-19.072, as listed or discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 10A19-001

Original ruling text

SUMMARY
QUESTION:
(1) Are Taxpayer’s sales of its FTG and PPV services subject to the state, gross receipts,
and local CST rates or the DTHS rate?
(2) Will the Department “certify” the Taxpayer’s database entitling it to the .75%
collection allowance?
ANSWER:
(1) Taxpayer’s sales of FTG and PPV services meet the definition of “direct-to-home
satellite service.” Taxpayer should use the DTHS rates for collecting and remitting tax on
its retail sales of FTG and PPV services.
(2) The Department cannot certify Taxpayer’s database through this advisement,
however, provided that Taxpayer meets the provisions set forth in s. 202.28(1), F.S.,
Taxpayer may utilize the .75 collection allowance on its sales of DTHS services.
August 5, 2010
XXX
Re:

Technical Assistance Advisement TAA 10A19-001
Communications Services Tax – Direct-to-home Satellite
XXX (Taxpayer)
XXX
XXX (Taxpayer)
XXX
Sections 202.11, 202.12, 202.16, 202.19, 203.01, 213.22, Florida Statutes (F.S.)

Dear XXX:
This is a response to your letter dated February 9, 2010. You have requested a Technical
Assistance Advisement regarding the Department’s position on how Communications Services
Tax would apply to sales of pay-per-view or pay-per-use services. Information in your letters
and related during our telephone calls has established that you meet the requirements for a
Technical Assistance Advisement.
FACTS
XXX and its sister company, XXX, (together Taxpayer) provide movies, games, basic cable type
programming, and Internet access services to various lodging facilities throughout Florida.
Taxpayer provides satellite television programming both as “Free-to-Guest” (FTG), subscription
type service, and “Pay-per-view” or “Pay-per-use” (PPV) service to hotel guests.

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The “Free-to-Guest” (FTG) services are similar to a basic cable programming subscription, but
delivered via satellite transmission. Taxpayer charges the hotel a specific monthly rate per room
with no additional charge to the guest for these services. Taxpayer has charged and remitted CST
for these services at the direct-to-home satellite (DTHS) rates of 10.8% for the state component
and 2.37% for the gross receipts component.
Taxpayer also provides “Pay-per-view” or “Pay-per-use” (PPV) services to hotel guests.
Taxpayer’s letter provides the following to explain the PPV services:
The pay-per-view services are provided by means of a head-end based system in the
hotel, consisting of a central control unit linked by coaxial cable to the television set in
the hotel room … The head-end system contains a cabinet of computers and other
electronic equipment, which is typically owned, installed and maintained by [Taxpayer].
It was unclear from the Taxpayer’s original letter how PPV services were transmitted to the
hotel. Per Taxpayer’s response to this question, the PPV content is transmitted via satellite to the
Taxpayer’s central control unit where the content is stored temporarily. Content is replaced when
new transmissions are sent. The Taxpayer provided the following explanation:
The taxable transaction in question begins when the hotel guest selects a [pay-per view]
service from a menu of available options, which are displayed on the guest room
television, receiver or monitor. The guest makes his or her selection by using the
television remote control, which is part of the [Taxpayer]-owned equipment. The [payper-view] service is delivered to the appropriate guest room television via the coaxial
cable owned by the hotel.
The taxable transaction is completed at the time the hotel guest checks out of the hotel
room and satisfies the bill for the use of the hotel room and any [pay-per-view] service
utilized during that guest’s stay at the hotel. [Taxpayer] then bills the hotel on a monthly
basis for the services accessed by its guests during the previous month.
Currently, Taxpayer charges, collects, and remits CST on the PPV services at the state rate of
6.8%, the gross receipts rate of 2.37%, and the applicable local rate. In addition to the letter
requesting this advisement, Taxpayer provided a current 2010 copy of its Agreement (contract)
with the hotels for review.
ISSUE
1.
2.

Are Taxpayer’s sales of its FTG and PPV services subject to the state, gross receipts, and
local CST rates or the DTHS rate?
Will the Department “certify” the Taxpayer’s database entitling it to the .75% collection
allowance?
TAXPAYER’S POSITION

Taxpayer believes the PPV services are being appropriately taxed at the state rate of 6.8%, the

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gross receipts rate of 2.37%, and the applicable local rate.
APPLICABLE AUTHORITY
Section 202.11, F.S., provides, in part:
(2) "Communications services" means the transmission, conveyance, or routing of
voice, data, audio, video, or any other information or signals, including cable
services, to a point, or between or among points, by or through any electronic,
radio, satellite, cable, optical, microwave, or other medium or method now in
existence or hereafter devised, regardless of the protocol used for such
transmission or conveyance….

(5) "Direct-to-home satellite service" has the meaning ascribed in the
Communications Act of 1934, 47 U.S.C. s. 303(v).
Title 47, U.S.C. s. 303(v), provides this definition:
… As used in this subsection, the term “direct-to-home satellite services” means
the distribution or broadcasting of programming or services by satellite directly to
the subscriber’s premises without the use of ground receiving or distribution
equipment, except at the subscriber’s premises or in the uplink process to the
satellite. (Emphasis added)
Section 202.12(1)(b), F.S. provides:
For the exercise of such privilege, a tax is levied on each taxable transaction, and
the tax is due and payable as follows:
(b) At the rate of 10.8 percent on the retail sales price of any direct-to-home
satellite service received in this state. The proceeds of the tax imposed under this
paragraph shall be accounted for and distributed in accordance with s. 202.18(2).
The gross receipts tax imposed by chapter 203 shall be collected on the same
taxable transactions and remitted with the tax imposed by this paragraph.
Section 202.22(3)(a), F.S., provides for certification of a database:
For purposes of this section, a database must be certified by the department
pursuant to rules that implement the following criteria and procedures:
(a) The database must assign street addresses, address ranges, post office boxes,
or post office box ranges to the proper jurisdiction with an overall accuracy rate
of 95 percent at a 95 percent level of confidence, as determined through a

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statistically reliable sample. The accuracy must be measured based on the entire
geographic area within the state covered by such database.

Rule 12A-19.072, F.A.C., addresses certification of CST databases subsection (1) provides:
A communications services dealer that develops and maintains its own database
for assigning service addresses to local taxing jurisdictions or a third-party vendor
that provides a database for sale to communications services dealers or uses such
a database in providing billing or other services to communications services
dealers may apply to the Department for certification of the database. A database
will be certified if it assigns street addresses, address ranges, post office boxes,
and post office box ranges to the proper local taxing jurisdictions with an overall
accuracy rate of 95 percent with a 95 percent level of confidence, based on a
statistically reliable sample. Accuracy must be measured based on the entire
geographic area within the state of Florida covered by the database for which
certification is sought.
DISCUSSION
In general, Florida law imposes communications services tax on the retail sale of
communications services. See section 202.12, F.S. Taxpayer’s sales of FTG and PPV
services are communications services. At issue is whether Taxpayer’s sales are
considered “direct-to-home satellite services” for purposes of CST.
For both services, the Taxpayer’s satellite transmission is received by an outdoor
receiver, generally mounted on the roof at the hotel site. The transmission content is
routed through the Taxpayer’s equipment in the hotel and delivered to the appropriate
guest room television or computer via the coaxial cables that are part of the real property
of the hotel. Both services are delivered directly to the consumer and not resold. The
hotel is the consumer of the FTG services, providing these to the hotel guests free of
charge. The hotel guest is the consumer of the PPV services, remitting payment for the
services to the hotel at the time of checkout. The hotel holds such funds in “trust” or
“escrow” until billed by the Taxpayer at the end of the month. The hotel then forwards
the held funds to the Taxpayer, minus any commission. The proprietary content remains
the Taxpayer’s for both services and is not resold by the hotel. Both the FTG and the
PPV sales are delivered to Taxpayer’s customers in the same way – via satellite
transmission, through the Taxpayer’s on-site equipment, and then through the hotel’s
coaxial cables to the guest room. Therefore the CST rate that applies to one service
would also apply to the other.
In the instant case, it is the method of transmission of the communications service that
determines whether Taxpayer’s sales are DTHS service which would be subject to the
DTHS rate in Florida. As explained above, Taxpayer’s sales are distributed or broadcast

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by satellite transmission directly to the outdoor receiver located at the hotel. The only
routing or distribution of the service is through the Taxpayer’s equipment in the hotel and
the hotel’s coaxial cable. As such, Taxpayer’s sales meet the definition of DTHS service
and are subject to the DTHS rates. The state rate for DTHS is 10.8%, and the gross
receipts tax rate is 2.37%, for a combined total of 13.17%. No local rate is imposed on
DTHS services.
As to certification of the Taxpayer’s database, Taxpayer must apply for certification
pursuant to Rule 12A-19.072, F.A.C. As the certification process is governed by statute
and ratified by Rule, the Department cannot “certify” any database other than through the
process established by the statute and Rule.
While Taxpayer’s database may not be determined certified through this advisement,
DTHS sales are taxed at a single rate throughout the state of Florida. Therefore, provided
that Taxpayer meets the provisions set forth in s. 202.28(1), F.S., Taxpayer may utilize
the .75 percent collection allowance on it sales of DTHS service. Please note that if the
Taxpayer’s return includes communications services sales other than those for DTHS
service, situsing of other sales must meet the provisions of s. 202.22(1) and (4), F.S., in
order to utilize the .75 percent collection allowance.
CONCLUSION
Taxpayer’s sales of FTG and PPV services meet the definition of “direct-to-home satellite
service.” Taxpayer should use the DTHS rates for collecting and remitting tax on its retail sales
of FTG and PPV services.
The Department cannot certify Taxpayer’s database through this advisement, however,
provided that Taxpayer meets the provisions set forth in s. 202.28(1), F.S., Taxpayer may
utilize the .75 collection allowance on its sales of DTHS services.
This response constitutes a Technical Assistance Advisement under Section 213.22, F.S., which
is binding on the Department only under the facts and circumstances described in the request for
this advice as specified in Section 213.22, F.S. Our response is predicated on those facts and the
specific situation summarized above. You are advised that subsequent statutory or
administrative rule changes, or judicial interpretations of the statutes or rules, upon which this
advice is based, may subject similar future transactions to a different treatment than expressed in
this response.
You are further advised that this response, your request and related backup documents are public
records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions
of Section 213.22, F.S. Confidential information must be deleted before public disclosure. In an
effort to protect confidentiality, we request you provide the undersigned with an edited copy of
your request for Technical Assistance Advisement, the backup material and this response,
deleting names, addresses and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department within 15 days of the date of this

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letter.
Should you have any questions, please feel free to contact me at 850-922-4839.
Sincerely,

Carla M. Bruce
Tax Law Specialist, Technical Assistance and Dispute Resolution
Record ID: 78875