Connecticut State Department of Revenue Services

Walk-in services at all DRS branch office locations remain suspended. Email DRS at drs@po.state.ct.us. Email the Priority One Taxpayer Assistance Program: DRSPriorityOne_CollectionsAssist@po.state.ct.us. Please check our Frequently Asked Questions page.

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