98-023
Response
March 31, 1998
REQUEST
LETTER
3/3/98
Dear
Irene:
We
need an official statement about the taxability of certain types of
transactions.
Are
the following taxable events under UTAH sales tax code, and if they are how are
they taxable.
Sales
of Satellite Programming Service: a monthly payment that a customer makes to us
for us to provide them with a package of television channels that they can view
in their home with the aid a of satellite dish that the customer owns
themselves.
Sales
of Satellite Pay Per View Movies and Events
Sales
of a small magazine/programming guide that lists channels and what programming
is scheduled to be on those channels, similar to a small TV Guide.
On
3-3-98, I spoke with Steve Anderson at the Utah Sales Tax division who
consulted with an auditor. Their phone
opinion was that the programming and pay per view were not taxable, I hope that
your response to this letter will confirm that.
Sincerely,
NAME
3/3/98
Irene
Reese
Utah
State Sales Tax
210
North 1950 West
Salt
Lake City, Utah 84134
Dear
Irene:
This
is a more detailed request, following an original request dated 3/3/98.
We
need an official statement about the taxability of certain types of
transactions.
Are
the following taxable events under UTAH sales tax code, and if they are how are
they taxable.
Programming-Charges
to customers for satellite programming
Pay
Per View-Charges to customers for pay per view satellite programming
Leases-Equipment
on loan to a subscriber for a monthly fee,
similar to fee charged for cable converter boxes. Ownership of the equipment would remain with
us.
Purchases-Installment
payment program for subscribers to purchase the equipment over time.
Late
Fees-fees charged to customers when payments are late/over due
XXXXX
Magazine-charge for a small paper magazine that lists satellite channels and programming
Returned
Check fee-charge for returned checks
Overnight
Delivery-charge to overnight an activation card
Fees: New Service Activation-Typically this is a one time charge to a new subscriber's account for activating
service.
Order Assistance-Nominal fee charged to a subs account
when they call in to order a
pay-per-view movie.
Change of Service-Usually this fee is applied to an
account when the sub down grades their programming package.
Additional DSS Receiver-Monthly fee charged to an account
to have a mirrored unit.
Duplicate Billing Statement-Fee charged to subs account
for requesting a reprint of the last bill cycle.
Reactivation/Seasonal-Fee charged to a subs account to
"unsuspend" services. Used
for "seasonal subscribers" who have a vacation home used only part of
the year.
Reactivation/Collections-Fee charged to subs account to
reactivate out of a nonpay situation, typically a sub that has gone into WTOE.
Access Card Replacement-Fee charged for replacement
access card.
On
3-3-98, I spoke with Steve Anderson at the Utah Sales Tax division who
consulted with an auditor. Their phone
opinion was that the programming and pay per view were not taxable, I hope that
your response to this letter will confirm that.
Sincerely,
NAME
March
31, 1998
NAME
ADDRESS
CITY
STATE ZIP
Re: Request for an Advisory Opinion - Taxability of Certain Types
of Transactions Involving Satellite Programing
Dear
NAME:
We have received your request for an
advisory opinion as to whether your company’s sales of wireless cable
television services and the other transactions you listed are taxable under
Utah law. You may be interested to know
that the Utah State Legislature recently hired a consultant to conduct an
extensive study of tax issues relating to the telecommunications fields. As of yet, the outcome of the study has not
resulted in changes in the tax code that will impact your company’s sales in
the future. In the meantime, we find as
follows:
1.
Sales of Satellite Programming Service.
Section 59-12-103(1)(b)(ii) imposes sales tax on interstate 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.
2.
Pay Per View. For the same
reasons stated in number one above, at this time, this is not a taxable
transaction, so long as the pay per view charges are stated separately from
taxable services on the customer’s bill or invoice.
3.
Leases. If your company rents or
leases equipment to your customers as part of the cable services, sales tax
must be collected on those charges.
4.
Purchases. If your company sells
equipment to your customers as part of the cable services, sales tax must be
collected on those charges.
5.
Late Fees. This is not a taxable
transaction, so long as the late fees are stated separately from taxable
services on the customer’s bill or invoice.
6.
XXXXX Magazine. Sales tax must
be collected on the charge for a small paper magazine that lists satellite
channels and programming.
7.
Returned Check. A charge for a
returned check is not a taxable transaction, so long as the returned check fee
is stated separately from taxable services on the customer’s bill or invoice.
8.
Overnight Delivery. An overnight
delivery charge is not a taxable transaction so long as it is stated separately
from taxable services or purchases on the customer’s bill or invoice.
9.
Fees. Of the fees you list, we
segregate them for discussion purposes into those which are not taxable and
those that may be taxable depending upon the circumstances. Let us begin with the nontaxable ones. The fees charged for new service activation,
order assistance, change of service, reactivation/seasonal, and
reactivation/collections appear to be charges for services that do not include
tangible property. If this is the case,
such charges will not be subject to tax if they are separately stated on the
bill or invoice.
Each of the remaining three charges
concern tangible personal property. For
each, more information is needed to clearly determine whether the charges are
for nontaxable services or for taxable purchases or leases of tangible personal
property. Based on the information
provided, we offer the following:
a. For the additional DSS receiver, the
fee is taxable if it is essentially for another purchase or lease of equipment
as described in numbers three and four above.
However, if this is some minimal charge for receiving your signal in
multiple locations, the fee will not be a taxable transaction, so long as it is
stated separately from any taxable transaction on the customer’s bill or
invoice.
b. For the duplicate billing statement and
the access card replacement, these fees are not taxable if the facts show that
the purpose of the fees is to cover service costs associated with supplying the
customer the statement or the access card.
However, if the facts show that the purpose of the fee is to sell or
lease tangible personal property, the fee is taxable.
Please contact us if you have any
other questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner
^^