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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