Did non-broadcast FCC licenses prevent television-production subsidiaries from seeking Florida's production-equipment tax refund?

Subject

Motion Picture Exemption

Plain-English summary

Two television-production subsidiaries were not disqualified from Florida's production-equipment sales-tax refund merely because they held FCC licenses that did not authorize broadcasting. Their proposed Industrial/Business radio licenses covered transmission facilities and two-way security radios, while a separate affiliated television station held the license to broadcast programs to the public.

Florida's exemption applied through a refund of previously paid tax on qualifying motion-picture, video, and sound-recording equipment used exclusively as an integral part of production. The statute excluded equipment bought or leased by television or radio broadcasters or cable companies licensed by the FCC. The Department read that exclusion in light of the federal definition of broadcasting: public dissemination of radio communications.

Because the production subsidiaries' licenses did not confer authority to broadcast—and federal rules prohibited their Industrial/Business stations from transmitting program material for broadcasting—the licenses did not put them inside the broadcaster exclusion. Their separate corporate status also mattered; the affiliated broadcaster's license was not treated as their own.

What this means for you

Holding an FCC license is not necessarily the same as being an FCC-licensed broadcaster for this 1998 exemption. The license's actual authority and the purchaser's corporate identity were central. A production company with only operational or point-to-point transmission authority could remain eligible even when an affiliate ultimately broadcast the finished programs.

The ruling did not independently decide every eligibility requirement. At the requester's direction, it assumed the equipment was qualifying section 38 property, integral to production, used exclusively in production activities, and used for commercially produced television news and specials.

Common questions

Q: Did any FCC license trigger the broadcaster exclusion? No. The Department focused on whether the license authorized broadcasting to the public.

Q: Did the related television station's broadcast license disqualify the production subsidiaries? No on the stated facts. Each subsidiary had separate corporate status, and the broadcast license belonged to the separate station.

Q: Was the exemption received at the time of purchase? The statute described in the ruling provided the exemption through a refund of previously paid sales or use tax.

Q: Did the ruling guarantee a refund for every item the subsidiaries bought? No. It addressed the FCC-license exclusion while assuming that the equipment and exclusive production use satisfied the other statutory conditions.

Citations and references

• Fla. Stat. § 212.08(5)(f) — refund-based exemption for qualifying motion-picture, video, and sound-recording equipment
• Fla. Admin. Code r. 12A-1.085(2) — producer, production activity, equipment, and broadcaster rules
• I.R.C. § 48(a)(1)(A), (B)(i) — section 38 property referenced by the Florida exemption
• 47 U.S.C. § 153(6) — federal definition of broadcasting quoted in the advisement
• 47 C.F.R. § 90.415(a) — Industrial/Business stations may not transmit program material for broadcasting
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-047

Original ruling text

SUMMARY

Section 212.08(5)(f), F.S., provides an exemption through a refund for certain motion picture, video, or sound recording equipment used exclusively as an integral part of specified production activities. This statute includes an exclusion from this refund for "television or radio broadcasting or cable companies licensed by the Federal Communications Commission (FCC)". Based upon the definition of broadcasting contained in the Federal Communications Act, subsidiaries of a broadcast company which have separate corporate status, which are producers under s. 212.08(5)(f), F.S., but licensed by the FCC, may be eligible for the exemption as long as the FCC license does not confer the authority to broadcast.

Jun 30, 1998

Re: Technical Assistance Advisement 98A-047 Sales Tax - Motion Picture Exemption 47 U.S.C. s. 153(h) and (o); 47 C.F.R. s. 90.415(a) Section 212.08(5)(f), F.S.; and Rule 12A-1.085(2), Florida Administrative Code (F.A.C.) Taxpayer: XXX ("Parent") Subsidiaries: XXX ("Subsidiary A") XXX ("Subsidiary B") XXX ("Subsidiary C")

Dear :

Thank you for your letter of XXX, requesting a Technical Assistance Advisement (TAA). This request follows the issuance of a Letter of Technical Advice on the same fact pattern. After reviewing the documentation accompanying your letter and additional documents received under a cover letter dated XXX, we find that your request meets the requisites provided for in s. 213.22, F.S. and Rule 12-11, F.A.C., for issuance of a TAA. You inquire about the applicability of the motion picture equipment

exemption found in s. 212.08(5)(f), F.S., to your client. Specifically, you seek clarification on the provisions related to the exclusion from the exemption for purchases made by television or radio broadcasters or cable companies licensed by the Federal Communications Commission. Pertinent portions of your letter provide the following:

Factual Background

PARENT is incorporated and domiciled outside the [S]tate of Florida. PARENT owns several companies located throughout the United States, including several subsidiaries located in the [S]tate of Florida. PARENT is considering the following transaction in Florida.

[Subsidiary A] is to start up television production operations within the [S]tate of Florida. [Subsidiary A] will be purchasing video equipment and sound recording equipment to be used for its television production activities. The equipment purchased by [Subsidiary A] falls within the definition of "Section 38 property" as provided in s. 48(a)(1)(A) and (B)(i) of the Internal Revenue Code. The equipment purchased is to be used exclusively in the production of television specials.

The television specials are transmitted to a related company, [Subsidiary C], via fiberoptic cable, microwave or satellite. When transmitted via fiberoptic cable, the television special is sent via electronic impulse. When transmitted via microwave, the television special is sent via a direct beam signal. When transmitted via satellite, the television special is uplinked to the satellite and then downlinked to [Subsidiary C]. Upon receipt of the television special, [Subsidiary C] broadcasts the show. The Federal Communications Commission (FCC) requires
[Subsidiary A] to obtain fiberoptic cable, microwave and uplink/downlink licenses in order to transmit television specials to [Subsidiary C].

[Subsidiary A] is also required to obtain and hold an FCC license for the use of two-way radios that are used by

security personnel. [Subsidiary A] does not hold an FCC broadcasting license and is therefore prohibited from broadcasting television shows.

[Subsidiary B] is also to start up television production operations in Florida. [Subsidiary B] will be purchasing video equipment and sound recording equipment to be used for its television production activities. The equipment purchased by [Subsidiary B] falls within the definition of "Section 38 property" as provided in s. 48(a)(1)(A) and (B)(i) of the Internal Revenue Code. The equipment purchased is to be used exclusively in the production of news shows.

The news shows produced by [Subsidiary B] are transmitted to [Subsidiary C] in the same manner as the special shows produced by [Subsidiary A]. [Subsidiary C] is a television station located within the [S]tate of Florida. [Subsidiary C] is properly licensed by the Federal Communications Commission to transmit television broadcasts as required by the Communications Act of 1934.

Your correspondence included copies of sample licenses which you anticipate will be issued by the Federal Communications Commission (FCC) for Subsidiaries A and B. The Radio Station License is for an "IB Business" (Industrial Business)radio service.

According to the organizational chart you provided, each of the subsidiaries has individual corporate status under the Parent corporation.

Requested Advice

Based on the facts and circumstances, do [Subsidiary A] and
[Subsidiary B] qualify for the exemption[] from sales and use tax on purchases of qualified motion picture or video equipment used in television production activities, as provided in Florida Statutes s. 212.08(5)(f)?

Taxpayer's Positions

Based on the facts and circumstances and the following discussion, both [Subsidiary A] and [Subsidiary B] should qualify for the exemption provided in Florida Statutes s. 212.08(5)(f) and should be eligible for a refund of any sales or use tax paid on purchases of video equipment and sound recording equipment purchased or leased for use in this state in [their] television production activities....

Discussion

As provided in the applicable law, there are certain conditions that must be met in order to qualify for the exemption from sales [and/or] use tax on the purchase of motion picture equipment, video equipment, and sound recording equipment.

*

The equipment must meet the definition of qualifying equipment as provided in s. 212.08(5)(f)2.a., Florida Statutes[,] and s. 12A1.085(2)(d), Florida Administrative Code.

For purposes of this advisement, we ask the Department to assume that all video equipment to be purchased is s. 38 property, the equipment will be an integral part of production activities, and the equipment will be used exclusively for production activities.

*

The equipment must be used exclusively by the producer as part of production activities directed toward the preparation of television productions commercially produced for broadcasting on television.

The equipment will be used by [Subsidiaries A and B] toward the preparation of television productions (news and specials) commercially produced for broadcasting on television.

*

The purchaser meets the definition of a producer as defined in s. 12A-1.085(2)(b), Florida

Administrative Code.

[Subsidiaries A and B] fall within the definition of producer as defined in s. 12A-1.085(2)(b), Florida Administrative Code. They will be in general charge of the production of news and television specials commercially produced for television. Sales to related entities will be treated as "arm['s]-length" transactions.

*

The purchaser does not fall within the exclusion provided in s. 12A-1.085(2)(c), Florida Administrative Code.

Pursuant to s. 12A-1.085(2)(c), Florida Administrative Code[,] television, radio broadcasting, and cable companies licensed by the Federal Communications Commission are subject to tax on their purchases of qualifying production equipment and would not qualify for the exemption.
[Subsidiaries A and B] are licensed by the Federal Communications Commission for the operation of fiber optic cable, microwave, satellite uplink/downlink facilities and are also licensed for the operation of two-way radio communications equipment (walkie talkies). However, they have not been licensed by the FCC to broadcast television productions and are therefore legally prohibited from broadcasting their shows. The broadcasting license has been issued and is in the name of [Subsidiary C], the broadcasting company. Therefore, the facts clearly support that Subsidiaries A and B are television production companies as opposed to television broadcasting companies.

RELEVANT AUTHORITY

Section 212.08(5)(f), F.S., provides the statutory authority for the exemption of specified motion picture, video, or sound recording equipment as follows:

The sale at retail, the rental, the use, the consumption, the distribution, and the storage to be used or consumed in this state of the following are hereby specifically exempt from the tax imposed by this chapter....

(5)(f) Motion picture or video equipment used in motion picture or television production activities and sound recording equipment used in the production of master tapes and master records.

1. Motion picture or video equipment and sound recording
   equipment purchased or leased for use in this state in production activities is exempt from the tax imposed by this chapter upon an affirmative showing by the purchaser or lessee to the satisfaction of the department that the equipment will be used for production activities. The exemption provided by this paragraph shall inure to the taxpayer only through a refund of previously paid taxes. Notwithstanding the provisions of s. 212.095, such refund shall be made within 30 days of formal application, which application may be made after the completion of production activities or on a quarterly basis. Notwithstanding the provisions of chapter 213, the department shall provide the Department of Commerce with a copy of each refund application and the amount of such refund, if any.
2. For the purpose of the exemption provided in
   subparagraph 1.:
   a. "Motion picture or video equipment" and "sound recording equipment" includes only equipment meeting the definition of "section 38 property" as defined in s. 48(a)(1)(A) and (B)(i) of the Internal Revenue Code that is used by the lessee or purchaser exclusively as an integral part of production activities; however, motion picture or video equipment and sound recording equipment does not include supplies, tape, records, film, or video tape used in productions or other similar items; vehicles or vessels; or general office equipment not specifically suited to production activities. In addition, the term does not include equipment purchased or leased by television or radio broadcasting or cable companies licensed by the Federal Communications Commission. b. "Production activities" means activities directed toward the preparation of a: (I) Master tape or master record embodying sound; or (II) Motion picture or television production which is produced for theatrical, commercial, advertising, or educational purposes and utilizes live or animated actions

or a combination of live and animated actions. The motion picture or television production shall be commercially produced for sale or for showing on screens or broadcasting on television and may be on film or video tape. (Emphasis Supplied)

47 C.F.R. s. 90.415, includes the federal regulatory provisions for Industrial Business Radio stations. Subsection (a) of this regulation provides:

Stations licensed under this part shall not: (a) Transmit program material of any kind for use in connection with broadcasting;

The Federal Communications Act (the "Act") of 1934, as amended, defines the term "broadcasting" as follows:

... the dissemination of radio communications intended to be received by the public, directly or by the intermediary of relay stations.[47 U.S.C. s. 153(6)]

RESPONSE

Based upon the above-mentioned provisions of the United States Code and the Code of Federal Regulations, it appears clear that the "IB Business" radio station license proposed for both Subsidiaries A and B does not confer authority to broadcast. Therefore, if Subsidiaries A and B obtain such a radio station license issued by the Federal Communications Commission, they would not have the authority to broadcast, and consequently would not fall within the exception to the sales tax exemption specified in s. 212.08(5)(f)2.a., F.S.

Since each of the subsidiaries has separate corporate status, and in light of the conclusion reached in the above paragraph, you have not provided any information that would preclude Subsidiaries A and B from being eligible to apply for the exemption for the sale or lease of motion picture equipment provided in s. 212.08(5)(f), F.S.

Requests for refunds may be made up to three years after

the date the tax was paid, and within five years for taxes paid after September 30, 1994. For voluminous requests, a quarterly submission is recommended.

This response constitutes a revised 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,

Carol Schwarz
Senior Tax Specialist

/crs
Enclosures
Control No. 34184