How did Illinois source broadcasting-service receipts, and did the general services throwout rule apply?

Plain-English summary

Broadcasting-service receipts followed their own sourcing rules and were expressly excluded from the general services throwout rule. IDOR gave four term-and-transaction mappings:

• When viewers or listeners paid for the broadcast, “recipients” meant those paying viewers or listeners; Illinois included fees from recipients located in Illinois.
• When a programming provider paid a station, network, or cable system to broadcast content, “recipients” meant all viewers or listeners used in the broadcast's audience factor; the fee was multiplied by the Illinois audience factor.
• When a network or station provided programming for a fee, “customer” meant the person paying for the programming; receipts were sourced to the customer's ordering office.
• When a taxpayer that was not a network or station provided programming to a broadcaster, “customer” and “person” both meant the paying broadcaster; receipts again followed the ordering office.

What this means for you

Classify the broadcasting arrangement by who provides programming, who broadcasts it, and who pays. Then retain audience, contract, billing, and ordering-office records supporting the applicable statutory rule.

Common questions

Q: Did the general services throwout rule apply to broadcasting receipts?
A: No. Section 304(a)(3)(C-5) expressly excluded transactions governed by the broadcasting provision.

Q: Who was the “customer” when programming was supplied for payment?
A: The broadcaster or other person paying the taxpayer for the programming.

Citations and references

• 35 ILCS 5/304(a)(3)(B-7)(ii)-(v)
• 35 ILCS 5/304(a)(3)(C-5)(iv)
• Public Act 96-0763

Subject

Apportionment – Sales Factor

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2010.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2010/ig100004.pdf

Original ruling text

IT 10-0004-GIL 02/16/2010 APPORTIONMENT – SALES FACTOR
General Information Letter: Various issues in the sales factor statute for broadcasting
income are addressed.
February 16, 2010
Dear:
This is in response to your letter dated August 28, 2009, in which you request a letter ruling. The
nature of your request and the information you have provided require that we respond with a General
Information Letter, which is designed to provide general information, is not a statement of Department
policy and is not binding on the Department. See 86 Ill. Adm. Code 1200.120(b) and (c), which may
be found on the Department's web site at www. tax.illinois.gov.
In your letter you have stated the following:
Pursuant to Section 1200.120 of the Department’s Public Information, Rulemaking and
Organization regulations [2 Ill. Admin. Code, Part 1200], the COMPANY (COMPANY)
hereby requests a General Information Letter (GIL) from the Department regarding the
interpretation and application of section 304(a)(3)(B-7) and section 304(a)(3)(C-5)(iv) of
the Illinois Income Tax Act (IITA) [35 ILCS 5/101 et seq.], which are amendatory
additions made by P.A. 096-0763, and are effective for tax years ending on or after
December 31, 2008.
P.A. 096-0763 makes it clear that the so-called “throw-out” rule embodied in section
304(a)(3)(C-5)(iv) – which excludes sales from the sales factor denominator of a
taxpayer if the taxpayer is not taxable on such sales in the state in which services are
received – does not apply to the apportionment of broadcast service income under
section 304(a)(3)(B-7). If that is not the Department’s understanding, please notify us
immediately so we can clarify the issue. However, since you have confirmed this in
discussions with Mr. Z, we do not anticipate any additional clarification will be required.
Additionally, in the interest of having a uniform and consistent application by our
member companies of IITA Section 304(a)(3)(B-7) and 304(a)(3)(C-5)(iv) in the Illinois
income tax returns they may file for tax years ending on or after December 31, 2008, we
ask that the GIL confirm the following:
A.

The term “recipient” appearing in IITA section 304(a)(3)(B-7)(ii) is meant to refer
only to a listener of a broadcast or a viewer of a broadcast.

B.

The term “recipients” appearing in IITA section 304(a)(3)(B-7)(iii) is meant to
refer to all viewers or listeners considered for purposes of an “audience factor” of
the programming that is broadcast.

C.

The term “customer” appearing in IITA section 304(a)(3)(B-7)(iv) refers to
another broadcaster who is paying the taxpayer for the programming.

D.

The term “customer appearing in IITA section 304(a)(3)(B-7)(v) is
interchangeable with the word “person” appearing in the same paragraph and
each term, “person” and “customer,” refers to a broadcaster who pays the
taxpayer for programming.

IT 10-0004-GIL
February 16, 2010
Page 2

Response
Section 304(a)(3)(C-5) of the Illinois Income Tax Act (35 ILCS 5/304) expressly states that its
provisions do not apply to transactions governed by Section 304(a)(3)(B-7), which applies to “receipts
from the sale of broadcasting services.” Accordingly, the so-called throwout rule in Section
304(a)(3)(C-5)(iv) (which excludes from the numerator and denominator of the sales factor the gross
receipts of any sale sourced under Section 304(a)(3)(C-5) to a state in which the taxpayer is not
subject to tax) cannot apply to receipts from the sale of broadcasting services.
Section 304(a)(3)(B-7)(ii) provides:
In the case where film or radio programming is broadcast by a station, a network, or a
cable system for a fee or other remuneration received from the recipient of the
broadcast, the portion of the service that is received in this State is measured by the
portion of the recipients of the broadcast located in this State. Accordingly, the fee or
other remuneration for such service that is included in the Illinois numerator of the sales
factor is the total of those fees or other remuneration received from recipients in Illinois.
For purposes of this paragraph, a taxpayer may determine the location of the recipients
of its broadcast using the address of the recipient shown in its contracts with the
recipient or using the billing address of the recipient in the taxpayer's records.
In this provision, the term “recipients” refers to the viewers or listeners of the broadcast, from whom
the taxpayer is receiving the fees or other remuneration for the broadcast.
Section 304(a)(3)(B-7)(iii) provides:
In the case where film or radio programming is broadcast by a station, a network, or a
cable system for a fee or other remuneration from the person providing the
programming, the portion of the broadcast service that is received by such station,
network, or cable system in this State is measured by the portion of recipients of the
broadcast located in this State. Accordingly, the amount of revenue related to such an
arrangement that is included in the Illinois numerator of the sales factor is the total fee
or other total remuneration from the person providing the programming related to that
broadcast multiplied by the Illinois audience factor for that broadcast.
In this provision, the term “recipients” refers to the viewers or listeners of the broadcast, who are
taken into account in computing the audience factor.
Section 304(a)(3)(B-7)(iv) provides:
In the case where film or radio programming is provided by a taxpayer that is a network
or station to a customer for broadcast in exchange for a fee or other remuneration from
that customer the broadcasting service is received at the location of the office of the
customer from which the services were ordered in the regular course of the customer's
trade or business. Accordingly, in such a case the revenue derived by the taxpayer that
is included in the taxpayer's Illinois numerator of the sales factor is the revenue from
such customers who receive the broadcasting service in Illinois.

IT 10-0004-GIL
February 16, 2010
Page 3

In this provision, the term “customer” refers to the person who is paying the taxpayer for the
programming.
Section 304(a)(3)(B-7)(v) provides:
In the case where film or radio programming is provided by a taxpayer that is not a
network or station to another person for broadcasting in exchange for a fee or other
remuneration from that person, the broadcasting service is received at the location of
the office of the customer from which the services were ordered in the regular course of
the customer's trade or business. Accordingly, in such a case the revenue derived by
the taxpayer that is included in the taxpayer's Illinois numerator of the sales factor is the
revenue from such customers who receive the broadcasting service in Illinois.
In this provision, the terms “customer” and “person” both refer to the broadcaster to whom the
taxpayer is providing the programming and from whom the taxpayer is receiving payment.
As stated above, this is a general information letter which does not constitute a statement of policy
that applies, interprets or prescribes the tax laws, and it is not binding on the Department. If you are
not under audit and you wish to obtain a binding Private Letter Ruling regarding your factual situation,
please submit all of the information set out in items 1 through 8 of Section 1200.110(b). If you have
any further questions, you may contact me at (217) 782-7055.
Sincerely,

Paul S. Caselton
Deputy General Counsel – Income Tax