95-076
Response
October 20, 1995
Request
XXXXX
Auditing
Division
Utah
State Tax Commission
210
North 1950 West
Salt
Lake City, Utah 84134
Re:
Request for an Advisory Opinion - Sales Tax on Wireless Cable Television
Service
Dear
XXXXX:
It
was nice talking with you last week and I appreciate the information you gave
me. Pursuant to that call I would like
to obtain an Advisory Opinion regarding the taxability of our services.
We
are a wireless cable television company.
We provide “cable” television to individuals, businesses and apartment
complexes. The local channels are
received directly from the local broadcasters, but we provide an antenna to
improve reception. In addition to the
“off the air” channels we provide the more popular sports and news channels as
part of our basic cable service.
Additionally, premium channels are available for an additional monthly
fee. These premium channels are Disney, HBO, etc. Finally, we also offer “pay-per-view” which could be either
movies or sporting events such as boxing and wrestling.
Are
these services subject to sales tax?
We
may lease the equipment needed to receive our services to our subscribers. If that is done, and we charge the
appropriate tax on the leased equipment, would we be allowed to buy that
equipment on a resale exemption certificate?
In
addition to answering the above questions, would you please put us on your
mailing list for all sales tax or other related bulletins.
I
appreciate your help in this matter.
Sincerely,
XXXXX
XXXXX
RE: Advisory Opinion Application of sales tax to sales
of wireless cable services and rentals of cable equipment.
Dear XXXXX,
We have received your request for an advisory
opinion as to whether your company's sales of wireless cable television
services are taxable. You may be
interested to know that the Utah State Legislature has hired a consultant to
conduct an extensive study of tax issues relating to the telecommunications
fields. The outcome of the study may
result in changes to the tax code that will impact your company's sales in the
future. In the meantime, we find as
follows:
1. If your
company purchases equipment for the purpose of renting it to your customers,
your company's purchase is a tax exempt purchase for resale.
2. If your
company rents or leases equipment to your customers as part of the cable
services, sales tax must be collected on those charges.
3. Section
59-12-103(1)(b)(ii) imposes sales tax on intrastate telephone service. Telephone service is defined by Utah
Administrative Rule R865-19S-103 to include various types of transmissions by
wire, light waves or other electromagnetic means. Although the language of the rule seems to encompass wireless
cable transmissions, we have interpreted the rule narrowly to include only
telephone, not television, service. On
that basis, we have advised satellite and cable companies that transmissions to
their customers are not taxable transactions so long as they are stated
separately from taxable services on the customer's bill or invoice.
Please call on us again if you have additional questions.
For the Commission,
Alice Shearer
Commissioner