Did FCC satellite and two-way-radio licenses disqualify separate television-production companies from Florida's production-equipment sales-tax refund?

Plain-English summary

Florida concluded that two related television-production companies could claim the section 212.08(5)(f) refund for qualifying video and sound equipment even though both held Federal Communications Commission licenses.

The licenses did not authorize broadcasting. One company held C-band and KU-band satellite-transmission-facility licenses, while the parent also held a two-way-radio license for security communications. The programs were sent by satellite to cable television systems, broadcast stations, and satellite dish receivers, which the TAA identified as the actual broadcasters holding the required licenses.

That distinction mattered because the exemption excluded equipment purchased or leased by FCC-licensed television or radio broadcasters and cable companies. The Department treated the parent and subsidiary as producers rather than broadcasters because they had separate corporate status and no legal authority to broadcast the programs themselves.

The equipment also satisfied the production requirements: it met the referenced section 38 property definition, was used exclusively as an integral part of production, and supported commercially produced television specials and interactive retail programs.

The parent qualified as a co-producer because it contributed property, services, and financing, shared in receipts or profits, and had significant production responsibility. The subsidiary was in general charge of producing the programs. Related-entity sales were treated as arm's-length transactions.

The exemption was not a point-of-sale exemption. The statute provided the benefit through a refund of taxes previously paid.

What this means for you

Television and video producers

An FCC license does not automatically make the holder a broadcaster. Identify exactly what the license authorizes and whether the company itself can transmit programming to the public.

Media groups with separate subsidiaries

Separate corporate status and actual responsibilities mattered. A production affiliate was not collapsed into related broadcast-station subsidiaries merely because they shared a corporate family.

Equipment and tax teams

Document exclusive, integral production use and confirm the equipment falls within the qualifying property definition. Supplies, tape, film, vehicles, vessels, and general office equipment were excluded by the statute quoted in the TAA.

Refund teams

The TAA described a refund-only exemption and historical filing periods. Verify today's statute and deadlines rather than using the three- and five-year periods stated in the 1998 response.

Common questions

Q: What FCC licenses did the producers hold?
A: Satellite transmission facility licenses; the parent also held a two-way-radio license for security personnel.

Q: Could either company broadcast the programs?
A: No. The TAA says neither held an FCC broadcasting license and both were legally prohibited from broadcasting.

Q: Who actually broadcast the programs?
A: Cable television systems, broadcast television stations, and satellite dish receivers receiving the satellite feed.

Q: Why did the equipment qualify?
A: It was qualifying property used exclusively and integrally in commercial television production by entities meeting the producer definitions.

Q: Was the tax exemption taken at purchase?
A: No. Section 212.08(5)(f), as quoted in the TAA, made the benefit available through a refund of previously paid tax.

Q: Are all FCC-licensed production companies eligible?
A: No. The exact license authority matters, and the statutory exclusion applies to television or radio broadcasters and cable companies licensed by the FCC.

Citations and references

• Fla. Stat. § 212.08(5)(f) — qualifying production equipment, production activities, refund mechanism, and broadcaster/cable exclusion.
• Fla. Stat. § 212.095 — refund provision referenced in the quoted exemption language.
• I.R.C. § 48(a)(1)(A), (B)(i) — section 38 property definition referenced by Florida law.
• Fla. Admin. Code r. 12A-1.085(2)(b)-(d) — producer, sub-producer, co-producer, broadcaster exclusion, and qualifying equipment.
• Fla. Stat. § 213.22 — Technical Assistance Advisements.
• Fla. Stat. ch. 119 — public-record disclosure with identifying details deleted.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-079

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.

Oct 29, 1998

Re: Technical Assistance Advisement (98A-079)
Sales and Use Tax; Motion Picture Equipment
Section 212.08(5)(f), F.S.
Rule 12A-1.085, F.A.C.
XXX("Taxpayer")
XXX("Parent")
XXX("Subsidiary A")
XXX("Subsidiary B")

Dear :

This is in response to the letter dated XX, requesting an
advisement regarding video and sound recording equipment
purchase exemptions.

FACTS

The Taxpayer owned several companies located throughout the
United States, including several subsidiaries located in the
State of Florida. The organization recently went through a

restructuring. The Taxpayer seeks clarification of the sales tax
exemption as it pertained to the following transactions entered
into by its previously owned subsidiaries, Parent and Subsidiary
A.

Subsidiary A sold a variety of consumer goods and services by
means of live, customer-interactive electronic retail sales
programs, referred hereinafter as Programs. Both Parent and
Subsidiary A purchased video equipment and sound recording
equipment which was used for its television production
activities. The equipment purchased by Parent and Subsidiary
qualify as Section 38 property as provided in s.48(a)(1)(A) and
(B)(i) of the Internal Revenue Code. The equipment purchased
was used exclusively in the production of television specials.
The equipment was an integral part of production activities.

The Programs were transmitted via satellite to cable television
systems, broadcast television stations, and satellite dish
receivers. When transmitted via satellite, the Progams were
uplinked to the satellite and then downlinked to cable
television systems, broadcast television stations, and satellite
dish receivers. The cable television systems, broadcast
television stations and satellite dish receivers were the actual
broadcasters and hold broadcasting licenses as required by the
Federal Communications Commission.

Some of the broadcast television stations to which the programs
were transmitted were related companies. The broadcast
television stations were first and second tier wholly-owned
subsidiaries of Subsidiary B, which was a first tier whollyowned subsidiary of Parent. Attached to your request is an
organizational chart showing the relevant subsidiaries and their
placement within the organization.

Subsidiary A had the following licenses as required by the
Federal Communications Commission (FCC): (1)C-Band License for
satellite transmission facilities, and (2)KU-Band License for
satellite transmission facilities. The difference between these
two licenses is the frequency at which the signals are
transmitted. Parent was also required to be licensed by the FCC
and held the same licenses and a FCC license for the use of two

way radios that were used for communications by security
personnel. Neither Parent nor Subsidiary A held an FCC
broadcasting license, and they were therefore prohibited from
broadcasting the Programs. Copies of the referenced licenses
for each corporation are enclosed with your request for our
review.

REQUESTED ADVICE

Based on the facts and circumstances, do Parent and Subsidiary A
qualify for the exemption from sales and use tax on purchases of
qualified motion picture or video equipment that was used in
television production activites, as provided in section
212.08(5)(f), F.S.?

RELEVANT AUTHORITY

Section 212.08(5)(f), F.S., provides:

(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.

Rule 12A-1.085(2)(b) and (c), F.A.C., provide:

(b) For purposes of this subsection, a "producer" is any
purchaser or lessee who is responsible for and in general
charge of the production activities of a motion picture
production or television production commercially produced
for sale or for showing on screens or television for
theatrical, commercial, advertising or educational
purposes, or a sound recording production. As used in this
subsection, the term "producer" also includes "sub-producer
and co-producer."

1. A "Sub-Producer" is any purchaser or lessee who
contracts to make a production for a producer who holds or
subsequently acquires a prime contract to make a
production.

2. A "Co-Producer" is any purchaser or lessee who, in
   respect to the making of a production, contributes
   property, literary material, personal services or
   financing, has a right to share in the receipts of profits
   of the production, and shares significantly in the
   responsibility of producing a production.

(c) The purchase, lease, or use of motion picture
equipment, video equipment, or sound recording equipment by
television, radio broadcasting, or cable companies licensed
by the Federal Communications Commission is subject to tax.

DETERMINATION

As provided in the applicable law, there are certain conditions
that must be met in order to qualify for the exemption from
sales and 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
section 212.08(5)(f)2.a., F.S., and Rule 12A-1.085(2)(d), F.A.C.
Here, the equipment was 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 was used by Subsidiary A in the
preparation of customer-interactive electronic retail sales
programs that were commercially produced for broadcasting on
television. Both Parent and Subsidiary A meet the definition of
a producer as defined in Rule 12A-1.085(2)(b), F.A.C. Parent
contributed property, personal services and financing to the
production activities. Subsidiary A was in general charge of
the production of customer-interactive electronic retail sales
programs commercially produced for television. Parent, by
nature of its relationship to Subsidiary A, had a right to share
in the receipts of profits of the production and shared
significantly in the responsibility of producing the programs.
Any sales to related entities were treated as "arm's-length"

transactions.

As provided in Rule 12A-1.085(2)(c), F.A.C., television, radio
broadcasting, and cable companies licensed by the FCC are
subject to tax on their purchases of qualifying production
equipment and do not qualify for the exemption. Subsidiary A
was licensed by the FCC for the operation of satellite
uplink/downlink facilities. Parent was also licensed for the
operation of two-way radio communications equipment. Neither
corporation had been licensed by the FCC to broadcast television
productions, and they were therefore legally prohibited from
broadcasting their programs.

Since Parent and Subsidiary A do not have the authority to
broadcast and each of the entities has separate corporate
status, the facts clearly support the conclusion that Parent and
Subsidiary were television production companies as opposed to
television broadcasting companies. There is no information that
would preclude them from being eligible to apply for the
exemption as provided in section 212.08(5)(f), F.S. Therefore,
the purchases qualify for the exemption.

Your request 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 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 advise 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 advise 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 Section 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 the
confidentiality of such information, we request you notify the
undersigned in writing within 15 days of any deletions you wish
made to the request or response.

Sincerely,

Charles Wallace
Senior Tax Specialist
Technical Assistance and Dispute Resolution
(850) 922-4734

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