Are a public broadcasting station's charges for producing and broadcasting a corporate client's private television program subject to New York sales tax?

Plain-English summary

Michael A. Badeau, a CPA at Coopers & Lybrand, asked on behalf of an undisclosed client -- a public television and radio broadcasting station that's a tax-exempt organization under both federal and New York law. A corporation with locations across the country regularly hired the station to produce and broadcast internal television programs for its own employees: the customer's staff picks topics, writes the script, and selects on-air employees and receiving sites, while the station's own personnel handle preproduction help (billed by time), provide a program host (billed by time), run rehearsals, and on broadcast day, fully control the technical side -- cameras, equipment, and procedures -- while beaming the live program by wire to a satellite uplink and on to the selected sites, sometimes with call-in or fax interactivity from viewers. The station bills the customer separately for broadcasting, studio time (set-up, broadcast, breakdown), and employee time; a separate charge applies only if the customer wants a duplicate tape of the program afterward, which the station's own accountant already agreed is a taxable sale of tangible personal property. The question was whether the broadcasting, studio-time, and employee-time charges themselves are taxable.

The Department said no. Those charges aren't a sale of tangible personal property (nothing physical changes hands as part of the broadcast itself), aren't a telephone or telegraph service under the utility-tax provision, and aren't any of the other services New York's sales tax law specifically lists as taxable. Since the receipts don't fit into any taxable category, the station's charges for broadcasting, studio time, and employee time -- as long as they're separately stated from the duplicate-tape sale -- aren't subject to New York sales or use tax at all.

What this means for you

Broadcasting stations and production companies producing corporate or private broadcasts

Charges for the production and live transmission of a broadcast -- studio time, crew/employee time, and the satellite or wire transmission itself -- generally aren't taxable in New York, since they don't fall within any of the sales tax's enumerated categories. Keep any charge for a physical copy (videotape, DVD, or similar) separately stated, since that IS a taxable sale of tangible personal property.

Corporations hiring broadcasting facilities for internal communications or events

Expect your broadcast production and airtime charges to come without New York sales tax, but budget for tax on any physical recording or duplicate copy you separately purchase afterward.

Accountants and tax professionals

This ruling applies the long-standing position from TSB-M-80(18)S (Sales Tax Application to Airtape Transmissions) that broadcast transmission services fall outside both the tangible-personal-property and telephone/telegraph provisions of Tax Law § 1105, and outside the enumerated services of § 1105(c) -- a position that has apparently remained stable since 1980.

Common questions

Q: Is a broadcast production company's studio and crew time taxable in New York?
A: No, as long as those charges are for the production/broadcast service itself and are separately stated from any physical media (like a duplicate tape) that's sold along with it.

Q: Is satellite or wire transmission of a broadcast a taxable "telephone" service?
A: No -- broadcast transmission doesn't fall within the sales tax's telephony/telegraphy provision, per TSB-M-80(18)S.

Q: Is a copy of the broadcast on videotape taxable?
A: Yes -- a duplicate physical copy is a sale of tangible personal property and is taxable, separately from the nontaxable broadcast production and transmission charges.

Q: Does this ruling apply to my broadcasting or production business?
A: Not automatically. An Advisory Opinion binds the Department only for the taxpayer and facts it was issued to, and it can't be relied on by anyone else. Your own billing structure would need independent review.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1998.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a98_8s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-98(8)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S960620B

On
June 20, 1996, a Petition for Advisory Opinion was received from
Michael A. Badeau, CPA, Coopers & Lybrand L.L.P., One Lincoln Center, Syracuse,
New York 13202, on behalf of an undisclosed client.
Petitioner submitted
additional information pertaining to this petition on October 25, 1996.
The issue raised by Petitioner, Michael A. Badeau, CPA, Coopers & Lybrand
L.L.P., is whether charges by the Petitioner's client to its customer for
broadcasting, studio time (set-up, broadcast, breakdown) and employee time, are
subject to state and local sales and compensating use taxes.
Petitioner presents the following facts. Petitioner's client is a public
broadcasting station of both television and radio. Petitioner's client is an
exempt organization under Internal Revenue Code Section 501(c)(3), and under New
York State Tax Law section 1116(a)(4).
A local corporation (hereafter referred to as "customer"), with multiple
locations throughout the U.S., requests Petitioner's client to assist in
producing and broadcasting a television program designed solely for the benefit
and use of the customer's employees. The live TV program is broadcast by wire
transmission to satellite uplink equipment, which beams a scrambled signal to a
satellite, which in turn, beams the signal to the selected sites.
Periodically, a customer's representative will arrange with Petitioner's
client for dates and times to broadcast a television program. The customer's
staff will select the topics, the program content (generally the customer's
internal business news, technical product news, or similar news), prepare a
script, select customer employees to be included on the program, and select the
various receiving sites. Petitioner's client's personnel may assist the customer
in any, or all, steps of the preproduction planning and execution, for which
Petitioner's client is paid a fee (generally based upon time spent by
Petitioner's client's employees).
Petitioner's client generally provides a
program host to work with, interview, or moderate the customer's program, and
again charges a fee (time-use based).
Rehearsals, if needed, are held in
Petitioner's client's facility and a charge to the customer is made.
On the day of the television broadcast, Petitioner's client's employees set
up their broadcast facility (studio) taking some general guidance and suggestions
from the customer but determining all of the technical and procedural aspects for
the program. Petitioner's client broadcasts the live program to the selected
sites. Currently, there can be an interactive response from the receiving sites
via telephone or fax. After the broadcast, the studio is returned to normal.
Throughout this process, Petitioner's client's employees retain control
over all technical aspects of the program. All broadcast equipment is used and
controlled by Petitioner's client's employees. During the broadcast, the

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Sales Tax

customer will have an employee making requests of Petitioner's client's
employees. Generally, requests are centered upon which cameras are being used,
the camera angles, etc., and the customer requests are generally granted.
Petitioner's client charges fees for the broadcast, studio time (set-up,
broadcast, breakdown) and employee time. In addition, if the customer wants a
tape of the program, a copy is made from the client prepared master tape, and an
additional, separate charge is made for this tape. (We note that Petitioner
concedes that its client’s sale of duplicate copies of the program tape would be
subject to sales tax as the sale of tangible personal property and does not raise
this as an issue.)
The contract for this service is by customer purchase order, setting forth
the scope of the services requested but it is not specific (i.e., the customer
will use the terminology of "all arrangement for performance"). This purchase
order is apparently intended to cover all of Petitioner's client's charges to the
customer during a period of time (say, one year), and setting a maximum amount
that may be spent by the customer within that period.
Due to the lack of
specific steps, fees, etc., Petitioner's client looks upon the purchase order as
a control for the customer (i.e., the budget of customer's department requesting
this service).
Petitioner's client's billing will show the date of a
transaction, a brief description, show number, charge (debit), and will keep a
running balance owed by the customer.
Each charge is separately stated in
Petitioner's client's invoice or statement.
Applicable Law and Regulations
Section 1105 of the Tax Law imposes sales tax upon, among other things:
(a) The receipts from every retail sale of tangible
personal property, except as otherwise provided in this
article.
(b) The receipts from every sale, other than sales for
resale, of gas, electricity, refrigeration and steam,
and gas, electric, refrigeration and steam service of
whatever nature, and from every sale, other than sales
for resale, of telephony and telegraphy and telephone
and telegraph service of whatever nature except
interstate and international telephony and telegraphy
and telephone and telegraph service and from every sale,
other than sales for resale, of a telephone answering
service.
Section 1105(c) of the Tax Law imposes sales tax on receipts from certain
listed services.
Opinion
The receipts for Petitioner's client’s services in connection with the
production and broadcasting of the television program, which are separately
stated from the sales of the duplicate copies of the tape and which include

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Sales Tax

charges for broadcasting, studio time (set-up, broadcast, breakdown), employee
time and transmission to a satellite for broadcast purposes, are not receipts
from the sale of tangible personal property under section 1105(a) or from the
sale of a telephone or telegraph service under section 1105(b) of the Tax Law.
See Technical Services Bureau Memorandum, Sales Tax Application to Airtape
Transmissions, TSB-M-80(18)S.
Furthermore, the services are not enumerated
services under section 1105(c) of the Tax Law. Therefore, Petitioner’s client’s
receipts from sales of these services are not subject to sales and compensating
use taxes.

DATED: February 25, 1998

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.