Which charges on a satellite/wireless cable TV bill -- programming, pay-per-view, equipment rental, fees, and a program guide -- are subject to Utah sales tax?

Plain-English summary

A satellite/wireless cable television provider asked the Commission to sort out the sales tax treatment of a long list of charges on its customer bills. Before its written request, the company's staff had gotten an informal phone opinion from a Utah Sales Tax Division auditor that programming and pay-per-view charges were not taxable, and asked the Commission to confirm that in writing -- which it did.

The Commission's core reasoning: Utah Code Ann. § 59-12-103(1)(b)(ii) taxes interstate telephone service, and Utah Admin. Rule R865-19S-103 defines "telephone service" broadly enough that its language could be read to cover wireless cable transmissions -- but the Commission chose to interpret the rule narrowly to cover only telephone, not television, service. That single interpretive choice drives most of the answer below. The Commission also noted the Utah Legislature had recently hired a consultant to study telecommunications tax issues broadly, but that study hadn't yet changed the tax code.

Applying that framework, item by item:

• Satellite programming (monthly fee) -- not taxable, as long as stated separately from taxable charges on the bill.
• Pay-per-view movies/events -- not taxable, same reasoning, same separate-statement requirement.
• Equipment leases (e.g., a receiver rented for a monthly fee) -- taxable; sales tax must be collected.
• Equipment purchases (e.g., an installment purchase plan) -- taxable; sales tax must be collected.
• Late fees -- not taxable, if separately stated.
• Program guide magazine (a small printed listing of channels/schedules) -- taxable, because it's tangible personal property, unlike the programming service itself.
• Returned check fee -- not taxable, if separately stated.
• Overnight delivery charge (for shipping an activation card) -- not taxable, if separately stated.
• Pure service fees -- new service activation, order assistance, change of service, seasonal reactivation, and collections reactivation -- not taxable, as charges for services with no tangible property involved, if separately stated.
• Three fact-dependent fees:
  • Additional DSS receiver fee -- taxable if it's really another equipment lease/purchase; not taxable if it's a minimal charge just for receiving the signal in multiple locations (again, if separately stated).
  • Duplicate billing statement fee and access card replacement fee -- not taxable if they cover the service cost of supplying the statement/card; taxable if their real purpose is to sell or lease tangible personal property.

What this means for you

Satellite, wireless cable, and cable TV providers

The line between taxable and non-taxable on your bill often comes down to two things: (1) is the charge for content/service delivery (generally non-taxable here) or for tangible equipment/property (generally taxable), and (2) is every non-taxable charge separately stated from taxable ones on the invoice. Bundle them together without itemizing, and you risk the whole charge becoming taxable.

Businesses relying on an informal phone opinion from an auditor

This ruling shows a phone opinion can hold up when confirmed in writing -- but get it in writing regardless. Don't treat an auditor's informal phone answer as the final word until the Commission puts it in a written advisory opinion.

Accountants and tax professionals

This ruling predates Utah's later, more specific Multi-Channel Video/Audio Service Tax regime for cable/satellite billing -- the narrow-interpretation-of-"telephone service" reasoning here was a stopgap before dedicated legislation existed. Confirm current law (including the specific multi-channel service tax) before relying on this 1998 framework for a modern billing structure.

Common questions

Q: Is my satellite TV programming subscription taxable in Utah?
A: Under this 1998 ruling, no -- as long as it's stated separately from any taxable charges on the bill. Confirm this against Utah's current, more specific cable/satellite tax rules before relying on it today.

Q: Is a rented satellite receiver taxable?
A: Yes -- equipment leases and purchases are taxable, according to this ruling.

Q: Is a printed TV-guide-style magazine listing my channels taxable?
A: Yes -- it's tangible personal property, unlike the programming service itself.

Q: Does this ruling apply to my company's billing?
A: No. It binds the Commission only for the requesting company and the facts described. Another taxpayer can't rely on it as binding, though it may carry some persuasive weight in a dispute with closely similar facts.

Citations and references

Statutes and rules:

• § 59-12-103(1)(b)(ii) (sales tax on interstate telephone service)
• Utah Admin. Rule R865-19S-103 (definition of "telephone service," interpreted narrowly)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original page: https://files.tax.utah.gov/tax/commission/ruling/98-023.htm

Original ruling text

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

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