Tax Type
Retail Sales and Use Tax
Description
Cable TV remote control units
Topic
Taxability of Persons and Transactions
Date Issued
07-29-1988
July 29, 1988
Re: §58.1-1821 Application/Sales and Use Tax
Dear*********************
This will reply to your letter of March 1, 1988, in which you submit an application for correction of sales and use tax assessed to ************** and related corporations as the result of a recent audit.
FACTS
The taxpayer contests the assessment of use tax on hand-held remote control units furnished or rented to subscribers in connection with its provision of cable television service. The hand-held units permit the taxpayer's cable subscribers to change channels on their televisions. The taxpayer contests the assessment on the grounds that the converters constitute exempt amplification, transmission, or distribution equipment for use by a cable television system.
DETERMINATION
§58.1-608.12 of the Code of Virginia provides an exemption from the sales and use tax for "amplification, transmission and distribution equipment used or to be used by cable television systems." Therefore, in order to determine the application of the tax to the instant units, we must determine whether they are in fact equipment used in amplifying, transmitting or distributing cable television programming.
Based upon the information before me, the units are clearly not used in the amplification or transmission of cable television signals. Further, it is not apparent that the units are used in the distribution of signals from the taxpayer to the television sets of its subscribers.
The term "distribute" in its ordinary sense means to "supply," Webster's New Collegiate Dictionary (1981); however, no evidence has been presented to show that these units play an active role in supplying cable signals to subscribers. In fact, the units are not necessary in order for subscribers to receive cable television programming.
The sole purpose of the hand-held remote control units is to permit subscribers to change channels. At this point, the cable signal has already been "distributed" by the taxpayer through the cable converter box and into the subscriber's television set.
Based upon the foregoing,, I find no basis for relief of the tax assessed on the taxpayer's purchases of hand-held remote control units. I do find basis, however, for the relief of penalty assessed with respect to these purchases.
A revised notice of assessment will be issued as soon as practicable. Please contact the department's Tax Policy Division within the next thirty days if you wish to schedule a meeting to discuss this determination. Pending your response, no collection action will be taken during this thirty day period.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner