Are corporate-event production services and extra video copies taxable in Florida?

Subject

Motion Pictures Exemption

Plain-English summary

Corporate-meeting and event production services were not taxable when the client received no tangible personal property. The company nevertheless had to accrue and remit use tax on the amounts paid for the tangible elements of master tapes it produced and used in providing those services. Copyrightable, artistic, and other intangible contributions were excluded from that taxable value.

When the company sold additional copies of a master tape to a client, Florida required sales tax on the total charge for the copies unless they were purchased for resale.

What this means for you

The ruling separated the nontaxable creative service from the producer's own taxable use of a master tape and from a later retail sale of copies. Whether tangible property is transferred—and how it is used—can change the treatment.

Common questions

Q: Were the staged corporate-event production services taxable? No, on the stated facts where the client received no tangible property.

Q: Did the producer owe tax on a master tape it used? Yes, use tax applied to the amounts paid for its tangible elements.

Q: Were extra video copies taxable? Yes, on the total charge, unless purchased for resale.

Citations and references

• Fla. Stat. § 212.05(1)(a)-(b) — sales and use tax
• Fla. Stat. § 212.08(7)(v)1. — professional and personal services
• Fla. Stat. § 212.08(12) — master tapes, films, and video tapes
• Fla. Admin. Code r. 12A-1.085(1) — recording and motion-picture studios
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00A-078

Original ruling text

SUMMARY

QUESTION 1: Are production services (writing, design, and
production of corporate meetings and events) provided by
Company taxable, when Company does not supply or sell any
tangible personal property to its clients?

ANSWER 1 - Based on Facts Below: No, the production
services provided by Company to its clients are not taxable
when Company does not supply any tangible personal property
to its clients. However, when Company produces and uses a
master tape as part of providing production services to its
clients, Company should accrue and remit use tax based on
the amounts paid for the tangible elements of the master
tape.

QUESTION 2: Are additional copies of master tapes produced
for use by Company in providing its production services
taxable when sold to Company's clients?

ANSWER 2 - Based on Facts Below: Yes, when Company sells
additional copies of master tapes, tax should be collected
on the total charge collected for the copies.

Dec 05, 2000

Re: Technical Assistance Advisement 00A-078
Sales and Use Tax - Motion Pictures Exemption
Sections: 212.05(1)(a) and (b); 212.08(7)(v) 1., and (12),
F.S.
Rules: 12A-1.085(1)(a) and (b), F.A.C.
XXX ("Taxpayer")
F.E.I.# XX
XXX ("Client")

Dear :

This is in response to your letter dated September 15, 2000,

received September 20, 2000, which requests the Department to
issue a Technical Assistance Advisement ("TAA") concerning the
above referenced matter. Your letter has been carefully examined
and the Department finds it to be in compliance with the
requisite criteria set forth in Chapter 12-11, F.A.C. This
response to your request constitutes a TAA and is issued to you
under the authority of section 213.22, F.S.

Issues Presented

I. Whether corporate meetings and events designed, written, and
produced by Taxpayer are taxable, when Taxpayer does not supply
or sell any tangible personal property to its clients.

II. Whether additional copies of videotapes produced for use by
Taxpayer in providing its production services are taxable when
sold to Taxpayer's clients.

Discussion of Facts

Taxpayer is a creative services production company within the
scope of the motion picture or television production industry.
Taxpayer utilizes professional video recording, editing, and
sound recording equipment in-house to complete its productions.

Taxpayer designs, writes, and produces corporate meetings and
events which are "staged" in ballrooms at hotels for its
clients' audiences. The service is sold as a complete creative
package. The clients do not receive anything tangible.
Occasionally, after a conference, Taxpayer will make a copy of
one of the videos for the client.

Taxpayer enclosed an example of the services it provides a
typical client. The sample documents are a creative proposal to
Client dated April 14, 2000, and a copy of a first stage
invoice, dated May 2, 2000. Taxpayer produced an opening video
module for Client, as well as six video segments, design and
production of computer graphics (PowerPoint), management of the
event/show, and all the staging equipment and labor, including
lighting, audio, video, teleprompter, and computers.

Applicable Statutes and Rules

Section 212.05, F.S., provides in pertinent part:

It is hereby declared to be the legislative intent that
every person is exercising a taxable privilege who engages
in the business of selling tangible personal property at
retail in this state, including the business of making mail
order sales, or who rents or furnishes any of the things or
services taxable under this chapter, or who stores for use
or consumption in this state any item or article of
tangible personal property as defined herein and who leases
or rents such property within the state.

(1) For the exercise of such privilege, a tax is levied on
each taxable transaction or incident, which tax is due and
payable as follows:

(a)1.a. At the rate of 6 percent of the sales price of each
item or article of tangible personal property when sold at
retail in this state, computed on each taxable sale for the
purpose of remitting the amount of tax due the state, and
including each and every retail sale.

(b) At the rate of 6 percent of the cost price of each item
or article of tangible personal property when the same is
not sold but is used, consumed, distributed, or stored for
use or consumption in this state; however, for tangible
property originally purchased exempt from tax for use
exclusively for lease and which is converted to the owner's
own use, tax may be paid on the fair market value of the
property at the time of conversion. If the fair market
value of the property cannot be determined, use tax at the
time of conversion shall be based on the owner's
acquisition cost....

Section 212.08(7)(v) 1., F.S., provides:

1. Also exempted are professional, insurance, or personal
   service transactions that involve sales as inconsequential
   elements for which no separate charges are made.

Section 212.08(12), F.S., provides:

(a) There are exempt from the taxes imposed by this chapter
the gross receipts from the sale or lease of, and the
storage, use, or other consumption in this state of, master
tapes or master records embodying sound, or master films or
master video tapes; except that amounts paid to recording
studios or motion picture or television studios for the
tangible elements of such master tapes, records, films, or
video tapes are taxable as otherwise provided in this
chapter. This exemption will inure to the taxpayer upon
presentation of the certificate of exemption issued to the
taxpayer under the provisions of s. 288.1258.

(b) For the purposes of this subsection, the term:

1. "Amounts paid for the tangible elements" does not
   include any amounts paid for the copyrightable, artistic,
   or other intangible elements of such master tapes, records,
   films, or video tapes, whether designated as royalties or
   otherwise, including, but not limited to, services rendered
   in producing, fabricating, processing, or imprinting
   tangible personal property or any other services or
   production expenses in connection therewith which may
   otherwise be construed as constituting a "sale" under s.
   212.02.

2. "Master films or master video tapes" means films or
   videotapes utilized by the motion picture and television
   production industries in making visual images for
   reproduction.

3. "Master tapes or master records embodying sound" means
   tapes, records, and other devices utilized by the recording
   industry in making recordings embodying sound.

4. "Motion picture or television studio" means a facility
   in which film or video tape productions or parts of
   productions are made and which contains the necessary
   equipment and personnel for this purpose and includes a

mobile unit or vehicle that is equipped in much the same
manner as a stationary studio and used in the making of
film or video tape productions.

5. "Recording studio" means a place where, by means of
   mechanical or electronic devices, voices, music, or other
   sounds are transmitted to tapes, records, or other devices
   capable of reproducing sound.

6. "Recording industry" means any person engaged in an
   occupation or business of making recordings embodying sound
   for a livelihood or for a profit.

7. "Motion picture or television production industry" means
   any person engaged in an occupation or business for a
   livelihood or for profit of making visual motion picture or
   television visual images for showing on screen or
   television for theatrical, commercial, advertising, or
   educational purposes. (Emphasis Supplied)

Rule 12A-1.085(1)(a) and (b), F.A.C., provides in pertinent
part:

(a) The producing, fabricating, or processing of a master
tape, demo tape, or any kind of tape or record for a
consideration for consumers who furnish, either directly or
indirectly, the tape, record, or materials used in the
producing, fabricating, or processing is taxable. The
dealer should collect the tax from his customer based upon
the total amount charged by him for producing, fabricating,
or processing his customer's tangible personal property,
including any charge which he makes for musicians, use of
the recording studio, musical instruments, services of an
engineer and any other services, whether the services are
actually performed by the dealer or others.

(b) However, effective July 1, 1984, the measure of tax
with respect to the sale or lease of master tapes or master
records embodying sound by a recording studio to the
recording industry, which are utilized by the recording
industry in making reproductions of recordings embodying

sound; or the sale or lease of master films or master video
tapes by motio n picture or television studios to the
motion picture or television production industry which are
utilized by the motion picture or the television production
industry in making reproductions of visual images for
showing on screens or television, is limited to the
tangible elements. The measure of tax with respect to sale
or lease of such master tapes or master records embodying
sound, or master films or master video tapes by recording
studios or motion picture or television studio to the
recording industries or motion picture or television
production industry does not include amounts paid for
copyrightable, artistic, other intangible elements, whether
designated as royalties or otherwise, including, but not
limited to, services rendered in producing, fabricating,
processing, or any other services or production expenses
whatever.

(c) The total charge that a recording studio or motion
picture studio or television studio makes to its customer
for the sale of additional copies of tapes, records, films
or video tapes, including any charge for handling and
mailing, is taxable, unless purchased for resale. (e.s.)

Discussion and Analysis of Law

Taxpayer indicates that it does not provide its clients with any
tangible personal property as a part of its services.
Professional services that involve either no transfer of
tangible personal property or an inconsequential transfer of
tangible personal property are exempt from tax pursuant to s.
212.08(7)(v)1., F.S. To the extent the services provided by
Taxpayer comply with the exemption under s. 212.08(7)(v)1.,
F.S., they are not taxable. However, special consideration must
be given to the use of master tapes by Taxpayer in providing
production services to its clients. Such use is governed by s.
212.08(12), F.S.

A videotape is a master if it is used by the motion picture or
television production industry to make reproductions for showing
on screens or television. See s. 212.08 (12)(b)2., F.S. The

term "motion picture or television production industry" includes
any person engaged in the occupation or business of making
visual images for showing on screen or television for
theatrical, commercial, advertising, or educational purposes.
See s. 212.08(12)(b)7., F.S. Taxpayer indicates that it
utilizes video recording, editing, and sound recording equipment
as part of its business of producing corporate meetings and
events for its clients. Sample documents indicate that Taxpayer
is providing its Client with an opening video module and six
video segments to be shown at a corporate event. Therefore,
Taxpayer is in the motion picture or television production
industry, and the videotape (or videotapes) produced to make
reproductions for showing at the event is a master tape.

Section 212.08(12), F.S., specifically addresses the tax
treatment of tangible personal property and services associated
with the production of master tapes. The rule of construction
that specific provisions control general provisions dictates
that s. 212.08 (12), F.S., controls the nature of the exempt
status of master tapes. See Bryan v. Landis, 106 Fla. 19, 24
(Fla. 1932), Kiesel v. Graham, 388 So.2d 594, 595 (Fla. 1st DCA
1980). If the provisions in s. 212.08(7)(v), F.S., were equally
applicable, the specific exemptions in s. 212.08(12), F.S.,
would effectively have no meaning. This result must be avoided
if possible. Snively Groves, Inc. v. Mayo, 135 Fla. 300, 303
(Fla. 1938). Therefore, the specific language of s. 212.08(12),
F.S., controls the treatment of tangible personal property and
services associated with the production of master tapes.

Section 212.05(1)(b), F.S., provides that tax is due at the rate
of 6 percent of the "cost price" of each item or article of
tangible personal property when used in this state. Therefore,
absent an exemption, use tax is due on the "cost price" of
master tapes used by Taxpayer in providing production services
to its clients. However, s. 212.08(12)(a), F.S., provides that
use tax is imposed only on the "amounts paid for the tangible
elements" of the master tapes. For reasons discussed in the
preceding paragraph, the more specific provision of s.
212.08(12), F.S., controls over the more general provision of s.
212.05(1)(b), F.S. Section 212.08(12)(b)1., F.S., excludes from
the definition of "amounts paid for the tangible elements" any

amounts paid for intangible elements of master tapes, designated
as royalties or otherwise, including services rendered in
fabricating the tangible personal property or any other
associated services or production expenses. Therefore, Taxpayer
must accrue and remit use tax based on the "amounts paid for the
tangible elements" of any master tape that it produces and uses
itself as part of providing its production services.

Taxpayer indicates that it may sometimes sell additional copies
of the master tapes to its clients. Pursuant to Rule 12A1.085(1)(c), F.A.C., the total charge a motion picture,
television, or recording studio makes to its customers for the
sale of additional copies of master tapes is taxable unless
purchased for resale. Taxpayer should collect sales tax on the
total charge made to its clients for the sale of additional
copies of master tapes, unless those copies are purchased for
resale in compliance with Rule 12A-1.038, F.A.C.

Conclusion

I. Production services provided by Taxpayer to its clients are
not taxable. However, when Taxpayer produces and uses a master
tape as a part of providing production services to its clients,
Taxpayer should accrue and remit use tax based on "the amounts
paid for the tangible elements" of the master tape. Intangible
elements, such as copyrightable and artistic contributions,
should not be included in the taxable value of master tapes used
by the Taxpayer.

II. When Taxpayer sells additional copies of a master tape, tax
should be collected on the total charge collected for the
copies.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject

similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response, your request and
related backup documents are public records under Chapter 119,
F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

Case A. Bodiford
Attorney

Control # 42495