Were a nonlicensed company's real-time video transmissions for Texas television stations exempt as broadcasts by licensed stations?

Plain-English summary

B Company operated a statewide network of microwave transmitters, satellite facilities, and video-routing equipment. Television stations used the network to send real-time news and other programming between bureaus and studios or among stations.

The Comptroller agreed that B Company provided telecommunications services. The statutory exemption for broadcasts by commercial radio or television stations licensed or regulated by the Federal Communications Commission did not apply because B Company's own services were not otherwise exempt under that provision.

B Company therefore had to collect Texas sales tax on its telecommunications charges. The letter said telecommunications services had been taxable in Texas since October 1, 1985.

What this means for you

Supplying transmission infrastructure to licensed broadcasters did not give the infrastructure provider the broadcasters' exemption. The provider's own status and service controlled.

Common questions

Were the station-to-station transmissions telecommunications services? Yes.

Did the licensed stations' broadcast use make B Company's charges exempt? No.

Who had to collect the tax? B Company, the transmission-service provider.

When did the letter say telecommunications became taxable? October 1, 1985.

Citations and references

• Tex. Tax Code § 151.323(3) — exemption for broadcasts by licensed or regulated commercial radio or television stations
• Tex. Tax Code § 151.0103 — telecommunications-service definition applied by the letter
• 34 Tex. Admin. Code Rule 3.344 — telecommunications rule enclosed with the response

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9105L1115A07

Original ruling text

May 10, 1991

Dear **:

Thank you for your recent letter which is restated in part with
response below.

Facts: B Company operates a video transmission network. this
network is part of the day-to-day broadcast operation of various
television stations in Texas. Instead of installing and
operating their own statewide broadcast transmission networks, TV
stations contract with B Company to transmit the "real time"
broadcast of their news, public affairs and other programming.
As demonstrated below, B Company's transmission network is
integral to and a part of broadcasts by television stations.

B Company's transmission network consists of several components
located throughout the state: (1) microwave transmitters; (2)
satellite uplink and downlink facilities; and (3) video routing
switchers. Television stations rely upon this network to provide
the following categories of broadcasts:

1. Remote news coverage -- A television station in Dallas has a
   news bureau in Austin. As part of its regular newscast or as
   part of a special report, the TV station needs to cover an event
   in Austin for broadcast in Dallas. The TV station uses B
   Company's network to transmit, on a "real time" basis, the report
   from Austin to its studio i Dallas for broadcast to the public.

2. Distribution of programming to other TV stations -- A TV
   station in Dallas wants to broadcast a story of interest
   originated by a TV station in Houston. The TV station in Houston
   could be an affiliate of the Dallas TV station or it could have
   an agreement to provide certain programming on a barter or fee
   basis. This program would be broadcast from the Houston TV
   station to the Dallas TV station via B Company's network. This
   distribution of the broadcast also could occur between or among
   TV stations in different states via the satellite facilities on B
   Company's network.

The B Company network is essentially part of a television
station's basic operating facilities. Within their service area,
TV stations typically use their own facilities to transmit such
remotes and other programs to the studio for broadcast. The B
Company network serves the same function on a regional or
statewide basis for these TV stations. Absent B Company's
network, these TV stations would have to build and operate their
own inter-city transmission systems at great expense.

The programming transmitted over the B Company network is
broadcast to the public. These broadcasts are sold to various
advertisers for the right to promote their products or service.
The rates charged for such advertising are based upon the cost to
broadcast the programming, including costs for operation by the
station of its own transmission facilities or for payment by the
station to B Company for its transmission network Service.

Question: Are the services provided by B Company exempt from
Texas sales tax?

Response: Tax Code Sec. 151.323(3) exempts from sales tax receipts
"broadcasts.....by commercial radio or television stations
licensed or regulated by the Federal communications Commission."
Your client is clearly providing a telecommunications service as
defined in Tax Code Sec. 151.0103 and since their services are not
otherwise exempted under the statute, they are responsible for
collecting tax on their sale of telecommunications services.

I am enclosing a copy of rule 3.344 regarding Telecommunications
services along with a copy of "the Rules of Practice & Procedure"
for your reference. Telecommunications services have been
taxable in Texas since October 1, 1985.

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