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