How did Florida tax satellite programming and related dishes, equipment sales, rentals, and lease-purchase contracts for hotels?

Subject

Licensing of Satellite Television Transmission and Equipment Lease

Plain-English summary

The satellite programming supplied to hotels and motels was a taxable television system program service. The hotels were the consumers because they provided the programming to guests without a separate charge and included it in the room rate.

Equipment furnished without charge for use in Florida was subject to use tax on cost, subject to the ruling's credits and presumptions for qualifying prior out-of-state use or tax. Outright equipment sales were taxable, and monthly equipment rentals were taxable on gross proceeds. A lease-purchase transferring substantially all ownership benefits and risks, with title transfer or a nominal purchase option, was treated as a sale at inception; tax was due then on the full sale, rather than again on the equipment portion of later monthly charges.

The out-of-state vendor also had to collect the discretionary surtax on taxable property or services delivered into a Florida county imposing it.

What this means for you

Bundling programming and equipment into one per-room charge did not remove the tax consequences. The service, equipment use, true rental, and conditional-sale components each had their own treatment.

Common questions

Was satellite reception treated as a taxable service? Yes, because the signal was transmitted from the dish and related equipment to guest rooms.

Was free equipment really free of tax? No. The provider generally owed use tax on its cost.

Were outright sales and monthly rentals taxable? Yes.

When was a lease-purchase taxed? At inception when it met the conditional-sale criteria described in the ruling.

Did an out-of-state vendor collect county surtax? Yes, on taxable deliveries into surtax counties under the cited 1994 rule.

Citations and references

• Fla. Stat. §§ 212.05(1)(a)-(c), (e), 212.06(1)-(2), and 213.22
• Fla. Admin. Code rr. 12A-1.071(1)(d), 12A-1.091, and 12A-15.003

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94A-039

Original ruling text

Jul 01, 1994

Re: TAA 94A-039
Licensing of Satellite Television Transmission and
Equipment Lease
Sections 212.05 and 212.06, F.S.
Rules 12A-1.071; 12A-1.091; 12A-15.003, F.A.C.
Taxpayer: XXX

Dear:

Your letter of November 23, 1993, requested a Technical
Assistance Advisement, concerning the above referenced matter.
This response constitutes a Technical Assistance Advisement
under Chapter 12-11, Florida Administrative Code, and is issued
to you under the authority of s. 213.22, Florida Statutes.

DISCUSSION OF FACTS

Your letter provides the following significant facts:

"We are a XXX corporation which licenses satellite
programming to hotels and motels on a `free-to-the-guest'
basis. There is no cost to the hotel guest as the
programming is included in the cost of the room rental and
taxes are collected on the entire room rate. We license
both premium programming such as HBO, Showtime and Disney
as well as non-premium programming such as ESPN, CNN and
WTBS, for exhibition to their guests via a closed-circuit
television system.

"We are a licensing agent which arranges for the reception,
and not the transmission, of the satellite programming...."

You have enclosed a copy of your company's standard satellite
programming contract (entitled "Satellite Programming License
and Equipment Lease") for our review.

REQUESTED ADVISEMENT

You seek a binding statement on the following questions:

"1. Will the reception of the satellite programming which we
license to hotels or motels be considered a taxable service?

"2. If we furnish, at no cost to the hotel or motel, a satellite
dish and related electronics to receive signal, will the
equipment be subject to a sales or use tax? If so, upon what
basis would the tax be determined?

"3. If we sell outright to the hotel or motel, the equipment
necessary to receive the satellite programming, would this sale
be considered a taxable transaction?

"4. If we rent the necessary equipment to the hotel or motel for
a monthly fee, is the rental fee subject to sales tax?

"5. If we sell the equipment to the hotel or motel on a leasepurchase agreement with the charges integrally incorporated into
the contractual monthly charge per room for the satellite
programming (not separately stated on the invoice), would the
monthly payment made by the hotel or motel be subject to sales
tax?

"[6.] Would we, as an out-of-state vendor be required to collect
and remit the county surtaxes?"

RELEVANT AUTHORITY

The following passages quoted from the Florida Statutes and
the Florida Administrative Code are pertinent to your request:

Section 212.05, F.S., provides in part:

"Sales, storage, use tax.-- It is hereby declared to be the
legislative intent that every person is exercising a
taxable privilege who engages in the business of selling
tangible personal property at retail in this state,
including the business of making mail order sales, or who

rents or furnishes any of the things or services taxable
under this chapter, or who stores for use or consumption in
this state any item or article of tangible personal
property as defined herein and who leases or rents such
property within the state.
(1) For the exercise of such privilege, a tax is levied on
each taxable transaction or incident, which tax is due and
payable as follows:
"(a)1.a. At the rate of 6 percent of the sales price of
each item of tangible personal property when sold at retail
in this state, computed on each taxable sale for the
purpose of remitting the amount of tax due the state, and
including every retail sale.
...
"(b) At the rate of 6 percent of the cost price of each
item or article of tangible personal property when the same
is not sold but is used, consumed, distributed, or stored
for use or consumption in this state.
"(c) At the rate of 6 percent of the gross proceeds derived
from the lease or rental of tangible personal property, as
defined herein, except the lease or rental of a commercial
motor vehicle....
...
"(e)1. At the rate of 6 percent on charges for:
...
"b. Any television system program service.
"2. For purposes of this part, `television system program
service' means the transmitting, by any means, of any audio
or video signal to a subscriber for other than
retransmission, or the installing, connecting,
reconnecting, disconnecting, moving, or changing of any
equipment related to such service."

Section 212.06, F.S., provides in part:

"Sales, storage, use tax; collectible from dealers;
`dealer' defined; dealers to collect from purchasers;
legislative intent as to scope of tax.-"(1)(a) The aforesaid tax at the rate of 6 percent of the
retail sales price as of the moment of sale, 6 percent of
the cost price as of the moment of purchase, or 6 percent

of the cost price as of the moment of commingling with the
general mass of property in this state, as the case may be,
shall be collectible from all dealers as herein defined on
the sale at retail, the use, the consumption, the
distribution, and the storage for use or consumption in
this state of tangible personal property or services
taxable under this part. The full amount of the tax on a
credit sale, installment sale, or sale made on any kind of
deferred payment plan shall be due at the moment of the
transaction in the same manner as on a cash sale.
...
"(2)(b) The term dealer' is further defined to mean every person, as used in this chapter, who imports, or causes to be imported, tangible personal property from any state or foreign country for sale or retail; for use, consumption, or distribution; or for storage to be used or consumed in this state. "(c) The termdealer' is further defined to mean every
person, as used in this chapter, who sells at retail or who
offers for sale at retail, or who has in his possession for
sale at retail; or for use, consumption, or distribution;
or for storage to be used or consumed in this state,
tangible personal property as defined herein, including a
retailer who transacts a mail order sale.
...
"(e) The term dealer' is further defined to mean any person, as used in this chapter, who leases or rents tangible personal property, as defined in this chapter, for a consideration, permitting the use or possession of such property without transferring title thereto, except as expressly provided for to the contrary herein. ... "(k)Dealer' also means any person who sells, provides, or
performs a service taxable under this part."

Rule 12A-1.071(1)(d), F.A.C., provides:

"(d) Where a contract designated as a lease transfers
substantially all the benefits, including depreciation, and
risks inherent in the ownership of tangible personal
property to the lessee, and ownership of the property

transfers to the lessee at the end of the lease term, or
the contract contains a purchase option for a nominal
amount, the contract shall be regarded as a sale of
tangible personal property under a security agreement
(commonly referred to as a conditional-sale type lease)
from its inception. The purchase option shall be regarded
as a nominal amount if it does not exceed $100 or 1 percent
of the total contract price, whichever is the lesser
amount."

Rule 12A-1.091, F.A.C., provides in part:

"(1) The Florida Sales and Use Tax Act imposes a tax on the
use, consumption, distribution and storage for use or
consumption in this state of tangible personal property
purchased in such manner that the sales tax would not be
applicable at the time of purchase.
"(2)(a) The use tax applies to the use in this state of
tangible personal property purchased outside Florida which
would have been subject to the sales tax if purchased from
a Florida dealer; provided, however, that it shall be
presumed that tangible personal property used in another
state, territory of the United States, or the District of
Columbia for six (6) months or longer before being imported
into this state was not purchased for use in this state.
"(b) The rental or lease of tangible personal property
which is used or stored in this state shall be taxable
without regard to its prior use or tax paid on purchase
outside this state.
"(3) The provisions of the Florida Sales and Use Tax shall
not apply to the use or consumption, or distribution or
storage of tangible personal property for use or
consumption in this state upon which a like tax equal to or
greater than the amount due this state has been lawfully
imposed and paid in another state, territory of the United
States, or the District of Columbia before use tax payable
to this state would otherwise have become due...."

Rule 12A-15.003, F.A.C., provides:

"Imposition and Payment of Tax.

"(1) All transactions occurring in a county imposing the
surtax which are subject to the state tax imposed by Part I
of Chapter 212, F.S., are subject to the surtax.
"(2) For purposes of the surtax, a transaction, except for
a transaction involving any motor vehicle or mobile home of
a class or type which is required to be registered on this
state or in any other state, shall be deemed to have
occurred in a county imposing a surtax when:...
"(a) 3. Effective January 1, 1994, if the selling dealer is
not located in a county imposing the surtax, including outof-state dealers, and delivery of tangible personal
property, a taxable service, or tangible personal property
representing a taxable service is made to a location within
a county imposing the surtax, the selling dealer is
required to collect the surtax at the rate imposed in the
county where the tangible personal property or services are
delivered..."

DISCUSSION/RESPONSE

Your questions will be restated in the order presented, with our
responses following.

Question #1.

"Will the reception of the satellite programming which we
license to hotels or motels be considered a taxable service?"

Department's Response:

As provided in Section 212.05(1)(e)1.b., F.S., cited above,
sales tax is imposed at the rate of 6 percent for any television
system program service. "Television program system service" is
defined in Section 212.05(1)(e)2., F.S. as "...Transmitting, by
any means, of any audio or video signal to a subscriber for
other than retransmission, or the installing, connecting,
reconnecting, disconnecting, moving, or changing of any
equipment related to such service." Satellite programming would
be a taxable television program system service pursuant to
Section 212.05(1)(e)2., F.S., since the reception of the

satellite signal requires transmitting from the satellite dish
and related equipment to the rooms. Hotels and motels which
provide such services to their guests at no extra cost, are the
consumers of the television system program services and should
pay the tax to their providers.

Question #2.

"If we furnish, at no cost to the hotel or motel, a satellite
dish and related electronics to receive signal, will the
equipment be subject to a sales or use tax? If so, upon what
basis would the tax be determined?"

Department's Response:

Pursuant to Section 212.05(1)(b), F.S., tax would be due on the
cost price of any satellite dish or related equipment or any
other tangible personal property purchased for use in providing
a service in Florida. However, Rule 12A-1.091, F.A.C., provides
that if tangible personal property is used in another state,
territory of the United States, or the District of Columbia for
six months or longer prior to its being imported into this
state, then it is presumed that such tangible personal property
was not purchased for use in this state. Also exempt would be
any equipment upon which a tax equal to or greater than
Florida's rate of tax has been lawfully imposed by another
state, territory, or the District of Columbia, prior to its use
in Florida, and such property was not purchased with the intent
to use it in Florida.

Question #3.

"If we sell outright to the hotel or motel, the equipment
necessary to receive the satellite programming, would this sale
be considered a taxable transaction?"

Department's Response:

Any equipment sold to the hotel or motel would be considered a
sale of tangible personal property, subject to the tax imposed
under Section 212.05, F.S.

Question #4.

"If we rent the necessary equipment to the hotel or motel for a
monthly fee, is the rental fee subject to sales tax?"

Department's Response:

Pursuant to Section 212.05(1)(c), F.S., tax would be due on the
gross proceeds derived from the lease or rental of any equipment
to the hotel or motel.

Question #5.

"If we sell the equipment to the hotel or motel on a leasepurchase agreement with the charges integrally incorporated into
the contractual monthly charge per room for the satellite
programming (not separately stated on the invoice), would the
monthly payment made by the hotel or motel be subject to sales
tax?"

Department's Response:

Equipment sold to the hotel or motel under a lease agreement
which transfers substantially all the benefits and risks of
ownership to the lessee and transfers ownership of the leased
equipment to the lessee at the end of the lease term or which
contains a purchase option for an amount which does not exceed
the lower of $100 or 1 percent of the total contract price, is
regarded as a sale of tangible personal property at inception of
the lease agreement. As provided under Section 212.06(1)(a),
F.S., the full amount of tax is due at the moment of transaction
in the same manner as on a cash sale. In such lease agreements,
no tax would be due on the portion of the contractual monthly
charge which represents an amount paid for the equipment and
upon which sales tax was paid at the time of inception of the
lease agreement.

Question #6.

"Would we, as an out-of-state vendor be required to collect and

remit the county surtaxes?"

Department's Response:

Pursuant to Rule 12A-15.003, F.A.C., effective January 1, 1994,
out-of-state vendors are required to collect the applicable
surtax on all taxable sales, at the rate imposed in the county
in which the tangible personal property or services are
delivered.

This response constitutes a Technical Assistance Advisement
under s. 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 s. 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 and your request are
public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect confidential
information, we request you notify the undersigned in writing
within 15 days of any deletions you wish made to the request or
this response.

Sincerely,

Delores Overcash
Technical Assistant

/DO
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