Tax Type
Retail Sales and Use Tax
Description
Advertising insertion equipment
Topic
Taxability of Persons and Transactions
Date Issued
07-14-1988
July 14, 1988
Re: §58.1-1821 Application/Sales and Use Tax
Dear*****************
This will reply to your letter of May 9, 1988, seeking the correction of an assessment issued in the above referenced case for the period January 1984, through October 1986.
FACTS
******* ("The Taxpayer") is an operator of a cable television system The Taxpayer contests the application of the tax to purchases of advertising (commercial) insertion equipment on the basis that such equipment is responsible for the distribution of the cable signal and should be exempted under Va. Code §58.1-6()8(12).
Advertising insertion equipment ("equipment") used by the Taxpayer is part of the system's head end (room which houses the signal generating equipment). The equipment monitors the program signal and maintains the video and audio power levels within preset limits so that when a commercial is airing, signal levels between the Taxpayer and the network (e.g. Central Broadcasting System) are identical. Fifteen seconds before the network goes to commercial break a signal is sent to the equipment. This signal keys off the equipment and the commercial automatically starts and stops. If this device shuts down, the network program cannot be broadcast since the equipment monitors input and output power of the broadcasting system. The system is fully automatic except that advertisements are loaded into the equipment periodically.
DETERMINATION
Va. Code §58.1-608(12), provides an exemption from the sales and use tax for "[b]roadcasting equipment and parts and accessories...used or to be used by...cable television systems, or concerns...under the regulation and supervision of the Federal Communications Commission...[which also includes] transmission and distribution equipment used or to be used by cable television systems."
§630-10-88 of the Virginia Retail Sales and Use Tax Regulations states that broadcasting equipment means "transmitting and not programming (program preparation). The exemption applies only to broadcasting equipment and accessories to such equipment used directly in disseminating a signal into the air. Equipment and accessories used to create the material to be disseminated are taxable."
Based upon the foregoing, it is my understanding that this equipment automatically disseminates commercial advertisements and monitors and adjusts program signals. Without the advertising insertion equipment, broadcasting would not be possible. Therefore, I find that the equipment is exempt from the tax under Va. Code §58.1-608(12), and we will issue a revised Notice of Assessment.
If you have any further questions, please do not hesitate to contact the Department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner