This Ruling has been superseded in part by PS 94(3)
Utility Exemption - Manufacturing
You have requested a ruling on the applicability of the Connecticut sales tax on various services offered by cable television operators. These services include installation of cable television service and cable FM service.
Further, you have asked for a ruling as to whether and under what circumstances cable television systems may purchase electricity exempt from sales and use tax.
Cable television companies charge customers for installing cable television service. The installation charge is normally separately identified on the customer's first bill.
As you are aware, effective January 1, 1990, the rendering of community antenna television service is subject to sales and use tax. The gross receipts of community antenna television service include those services which allow the subscriber to view video programming. As part of providing that service the cable operators must make an initial installation or hookup charge.
Section § 12-407(9) of the Connecticut General Statutes provides for an exclusion from gross receipts for sales tax for labor rendered on installing the property sold. Since this is an exclusion from tax, it must be narrowly construed. Accordingly, it is the conclusion of the Department of Revenue Services that the separately stated installation charge relates solely to sales of tangible property and not to services. Where installation is part of the services rendered it is properly part of the taxable gross receipts for taxable services.
Therefore, it is hereby ruled that the gross receipts for rendering community antenna television service includes installation of community antenna television service and thus these activities are subject to the sales tax.
Cable F.M. Service
Cable FM service provides audio broadcasts to certain cable television subscribers for a separate charge.
As defined by P.A. 89-251, community antenna television service means "the one-way transmission to subscribers of video programming." It is clear from this definition that the tax on community antenna television service relates to video programming.
Accordingly, where Cable FM service is provided to subscribers for a separately stated charge, and where those services relate solely to audio transmission and are not connected in any manner to video programming, those services are not subject to sales and use tax.
Sales Tax Exemption For Electricity
You have requested that Commissioner Bannon's October 25, 1989 ruling to the Connecticut Broadcasters Association be extended to electricity used by cable television operators to transit or produce video programming.
To the extent that local cable television operators originate local broadcasts and generally transmit video programming in a manner similar to broadcasters, the electricity used and consumed in said transmission or local broadcast origination is exempt from sales and use tax pursuant to § 12-412(3) as modified by P.A. 89-251. This exemption is conditioned upon the limitation to transmission and broadcast origination and not for business or other uses. This will require the cable television operators to separately meter those functions, or have a clear allocation of the electricity utilized for transmission which must be not less than 75% of the total used.
This ruling relates solely to the exemption for electricity and has no force and effect relating to other sales and use tax liability for cable operators pursuant to other exemptions.
The rulings relating to Cable FM service and electricity used by cable operators are prospective only.
James F. Meehan
June 6, 1990