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Ezel / Tax Rulings / CT
CT Ruling 2007-1 Community Antenna Television / Satellite Gross Earnings Tax 2007-06-29

Does a company that arranges satellite TV for hotels, but doesn't transmit it, owe Connecticut's satellite gross earnings tax?

Short answer: No. A company that arranges and resells satellite television programming to hotels -- collecting payments and earning a commission, but not itself transmitting the signal -- is not subject to Connecticut's gross earnings tax under Conn. Gen. Stat. § 12-256 on businesses that provide one-way transmission of video programming by satellite. That tax falls on the satellite provider that actually transmits the programming to subscribers, not on the intermediary.

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This page answers the general question as of 2007. Ezel answers yours, under current Connecticut tax law, with citations.

Currency note: this ruling is from 2007
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Ruling of the Connecticut Department of Revenue Services (DRS), typically issued to a specific taxpayer in response to that taxpayer's request and based on the specific facts presented and the Connecticut tax law in effect when it was issued. DRS may later declare a Ruling obsolete or supersede it by a subsequent Ruling, Policy Statement, or Announcement, so a taxpayer with different facts should not assume it still applies. Taxpayer-identifying details are redacted. Connecticut imposes its sales and use tax solely at the state level: there are no local or municipal sales taxes. This summary is informational only and is not legal or tax advice. Consult a licensed Connecticut tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

A company arranges satellite TV programming for its hotel customers. It buys programming from a satellite TV provider (and, for some channels like HBO or Showtime, contracts directly with the programmers and pays the satellite provider a "transport fee" to deliver via satellite), earns a commission, and collects payments from the hotels on the provider's behalf. But the satellite provider — not this company — actually beams the programming to the hotels and controls what's shown, how it's packaged, and its price. DRS was asked whether the company owes Connecticut's satellite gross earnings tax.

DRS ruled it does not. Conn. Gen. Stat. § 12-256(b) imposes a quarterly gross earnings tax on "each person operating ... a business that provides one-way transmission to subscribers of video programming by satellite." The tax targets the entity that transmits the programming to subscribers. Here, that's the satellite provider — which is subject to the tax on its gross earnings from transmitting both its own and (when paid a transport fee) others' programming. The arranging company does not transmit programming, so it is not subject to the § 12-256 tax.

What this means for you

Programming aggregators, resellers, and intermediaries

Connecticut's satellite gross earnings tax follows the transmitter, not the middleman. If you buy, package, resell, or bill for satellite video programming but the actual one-way satellite transmission to subscribers is done by someone else, the § 12-256 tax is on that transmitter, not on you. Earning a commission or collecting subscriber payments on the provider's behalf doesn't make you the taxable transmitter.

Satellite and cable (CATV) operators

If you operate the system that transmits video programming to subscribers by satellite, the gross earnings tax applies to your gross earnings from that transmission — including programming you carry for others when you're paid a transport fee to deliver it.

Accountants and tax professionals

The dispositive question under § 12-256(b) is who "provides one-way transmission to subscribers of video programming by satellite." Follow the transmission, not the invoicing or the commissions. An intermediary that never transmits isn't a "person operating" a satellite-transmission business for this tax.

Common questions

Q: Who pays Connecticut's satellite video gross earnings tax?
A: The business that actually transmits video programming to subscribers by satellite. Under Conn. Gen. Stat. § 12-256(b), the tax is on gross earnings from that transmission.

Q: We resell satellite programming and bill the customers — are we the taxpayer?
A: Not under these facts. DRS held that a company arranging and billing for programming it doesn't transmit is not subject to § 12-256; the satellite provider that transmits is.

Q: The satellite provider also carries channels we buy directly and charges us a transport fee — who's taxed on those?
A: The satellite provider — it's transmitting that programming to subscribers, so it owes the gross earnings tax on those earnings too.

Q: Does this ruling apply to my business?
A: Not automatically. A Connecticut Ruling binds DRS only for the taxpayer and facts it addressed. A business that itself transmits programming by satellite would be analyzed differently.

Citations and references

Statutes:

  • Conn. Gen. Stat. § 12-256 (gross earnings tax on companies transmitting video programming; community antenna television and satellite businesses)
  • Conn. Gen. Stat. § 12-256(b) (quarterly gross earnings tax on each person operating a business that provides one-way transmission to subscribers of video programming by satellite)

Source

Original ruling text

Ruling 2007-1, Community Antenna Television Systems Companies Tax / Satellite Companies

FACTS:

A company (the “Company”) has arranged for the purchase of television programming on behalf of its customers, which are hotels throughout the United States, from a satellite television provider (the “SATV Provider”) to be delivered via the SATV Provider’s satellites to the hotels. The Company receives a single invoice from the SATV Provider and pays a single amount covering programming delivered to the hotels.

Under its agreement with the SATV Provider, the Company is to be paid a commission by the SATV Provider based on the receipts from the sale of the SATV Provider’s programming to the hotels.  The Company collects payments from the hotels on behalf of the SATV Provider.  The SATV Provider has the sole right to edit, select, schedule, package and price all of its programming.  The Company agrees that all the SATV Provider’s programming, including any commercials, shall be exhibited in its entirety and in its original form as provided by the SATV Provider.  If the Company and the SATV Provider terminate their agreement, the hotels may continue to receive the SATV Provider’s programming by subscribing directly with the SATV Provider.

The Company has some contracts directly with individual programming providers (e.g., HBO, Showtime, etc.) to purchase television programming for its customers, and pays the SATV Provider a “transport fee” for delivering the programming via its satellites to the hotels. The transport fee is calculated based on the number of guest rooms of each hotel.

ISSUE:

Whether the Company is subject to the gross earnings tax imposed by Conn. Gen. Stat. § 12-256 on each person operating a business that provides one-way transmission to subscribers of video programming by satellite.

RULING:

The Company is not subject to the gross earnings tax imposed by Conn. Gen. Stat. § 12-256 on each person operating a business that provides one-way transmission to subscribers of video programming by satellite.

DISCUSSION:

Conn. Gen. Stat. § 12-256(b) provides in pertinent part that “[e]ach person operating . . . a business that provides one-way transmission to subscribers of video programming by satellite shall pay a quarterly tax upon the gross earnings from . . . the transmission to subscribers in this state of video programming by satellite. . . .”

The gross earnings tax is imposed on companies that transmit programming to Connecticut subscribers by satellite.  In the facts described above, it is the SATV Provider that is transmitting both its own programming and, when it is paid a transport fee by the Company, the programming of other programming providers.  Therefore, the SATV provider is subject to the gross earnings tax imposed by Conn. Gen. Stat. § 12-256 upon its gross earnings from transmitting both its own programming and the programming of other providers. The Company is not transmitting programming and, therefore, is not subject to the gross earnings tax imposed by Conn. Gen. Stat. § 12-256.

LEGAL DIVISION

June 29, 2007

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