Is a television station's doppler weather radar system exempt from Texas sales tax?

Plain-English summary

A television station e-mailed the Comptroller's tax-help address asking about the taxability of doppler weather systems (antenna, computer, and software) that it purchases.

The Comptroller's short answer: doppler weather systems that generate images for broadcast by television stations are exempt under Tex. Tax Code Sec. 151.318(p). But doppler weather systems used for weather forecasting or other non-broadcast purposes are taxable.

The letter then explains what happens with mixed or shifting use over time:

• Equipment bought on or after January 1, 1995 with the full sales tax exemption claimed becomes subject to tax (on either fair market rental value or the full purchase price) for any period it's used for something other than manufacturing/broadcast.
• Equipment bought on or before December 31, 1994 with the reduced tax rate paid must be used primarily or predominantly for manufacturing/broadcast. No additional tax is due if the non-qualifying ("divergent") use stays under 50% of total use — but full tax on the whole purchase price is due if the non-qualifying use becomes primary.

What this means for you

Television stations

If your doppler weather system is used to generate images that go out over the air, it's exempt under Sec. 151.318(p). If you also (or instead) use it for internal forecasting purposes unrelated to broadcast, that use is taxable, and depending on when you bought the equipment and how much divergent (non-broadcast) use occurs, you may owe tax on a rental-value basis, a full-purchase-price basis, or nothing extra at all.

Accountants and tax professionals

This letter is a compact example of the "divergent use" rules that apply broadly to Sec. 151.318 manufacturing/broadcast-equipment exemptions: the purchase-date cutoff of January 1, 1995 changes the exemption mechanics, and the 50%-of-use threshold determines whether any additional tax is owed on equipment with mixed qualifying/non-qualifying use.

Common questions

Q: Is a TV station's weather radar system always tax-exempt?
A: Not automatically — per this letter, it's exempt only when used to generate images for broadcast under Sec. 151.318(p); use for forecasting or other non-broadcast purposes is taxable.

Q: What if the system is used for both broadcast and forecasting?
A: Per this letter, whether extra tax applies depends on when the equipment was purchased and how much of its use is non-qualifying (divergent) — under 50% divergent use generally means no extra tax for equipment bought through 1994, while equipment bought from 1995 onward is taxed for any period of non-qualifying use.

Q: How is the tax calculated on non-qualifying use of exempt equipment bought after 1995?
A: Per this letter, on either the fair market rental value or the full purchase price for the period of non-qualifying use.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.318(p) (manufacturing exemption for equipment generating broadcast images; divergent-use rules)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9806552L

Original ruling text

Date: June 15, 1998
From: [email protected]
To: **
Subject: Re: research assistance

Dear Ms. **:

Thank you for your e-mail of June 5, 1998, concerning the taxability of doppler
weather systems purchased by television stations.

Doppler weather systems that generate images for broadcast by television
stations are exempt per Texas Tax Code 151.318(p).

Doppler weather systems used for weather forecasting or other uses other than
broadcast are used in a taxable manner.

Machinery and equipment purchased on or after January 1, 1995, and on which the
full sales tax exemption is claimed is subject to tax on either the fair market
rental value or on the full purchase price during any period of use for other
than manufacturing. Machinery and equipment purchased on or before December
31, 1994, and on which the reduced tax was paid must be used primarily or
predominantly in the manufacturing process. No additional tax is due on a
divergent use provided the divergent use is less than 50% of the overall use.
Tax is due on the full purchase price if the use is primarily for a use not
eligible for exemption.

This opinion is based on the facts presented. Different facts though similar,
may result in different answers. If you have any questions or need more
information, you may call me toll free at 1-800-531-5441, extension 5-0613.
You may also write to Tax Policy Division, Comptroller of Public Accounts, Post
Office Box 13528, Austin, Texas 78711.

Kevin Koller
Tax Policy Division