Were Texas-origin audio and video line-feed services sold to commercial broadcast stations taxable telecommunications services?

Plain-English summary

A provider used terrestrial microwave and satellite facilities to transmit broadcast-quality audio and video between commercial broadcast stations for a fee. All of its line feeds originated in Texas, and it was not licensed by the FCC as a broadcast station. Texas said the service was subject to sales tax.

The letter added two resale points: the same service sold to a cable television company could be purchased tax-free on a resale certificate, and the provider could give a resale certificate when buying tangible property transferred to its customers as part of the telecommunications service.

What this means for you

The ruling distinguished the taxable line-feed service sold to broadcast stations from purchases that were themselves for resale. Resale treatment depended on the customer or property being within the specific arrangements described in the letter.

Common questions

Were the commercial broadcast-station line feeds taxable? Yes.

Did the provider's use of interstate and intrastate facilities change the answer? The letter still answered yes where all line feeds were transmitted from Texas.

Could the same service be sold to a cable television company for resale? Yes. The letter said the cable television company could purchase it tax-free on a resale certificate.

Could the provider buy any inputs for resale? It could give a resale certificate for tangible property transferred to customers as part of the telecommunications service.

Citations and references

The letter did not cite a statute or rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9103L1095D08

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

JOHN SHARP
Comptroller March 27, 1991

Dear **:

Thank you for your recent letter regarding telecommunication service
provided by your client to commercial broadcast stations.

Situation: Your client owns facilities and transmits broadcast quality
audio and video data between broadcast stations for a fee. The recipient
station then broadcasts the line feed to the public. The client provides the
service both interstate and intrastate using terrestrial microwave and
satellite facilities but, all the client's line feeds are transmitted from
Texas. Your client is not licensed by the FCC as a broadcast station.

Question: Are the services provided by the client company subject to
sales tax?

Response: Yes. The same services provided to a cable television company
could be purchased tax free on a resale certificate.

Question: Are any of the exemptions from the sales tax available to the
client?

Response: Your client may give a resale certificate in lieu of tax an
their purchases of tangible property transferred to their customers as part of
the telecommunications service they are providing.

This opinion is based on the facts you presented. Other facts, though
similar, may yield different results.

If you have questions or need more information, please call our toll-free
number
1-800-531-5441. My direct line number is 512-463-4680 [FAX (512)
475-0900]. You may write to me in care of Tax Administration Division

Sincerely,
Al Van Allen
Tax Administration Division