Detailed Colorado Development
The Colorado Department of Revenue recently issued a private letter ruling addressing whether a cable television provider’s services were subject to state and state-administered sales and use tax. In addition to its basic cable packages, the taxpayer’s subscribers could purchase various optional services, such as subscriptions to premium channels, sports packages, or pay-per-view events. Customers could also view videos on demand. The overwhelming majority of content delivered to customers was stored, if at all, on servers remote from subscribers, and was delivered to subscribers on a transient basis.
Applying the “true-object” test to the taxpayer’s services, the Department noted that the content delivered by the taxpayer, including movies, television shows, and pay-per-view, was considered tangible personal property. However, the provision of these items of tangible personal property to subscribers via fiber optic and coaxial cable included a service component. Thus, the sales were mixed transactions that included both a sale of tangible personal property and the provision of a service. In the Department’s view, taken as a whole, the transactions were more analogous to a service and because the services were not among Colorado’s explicitly enumerated taxable services, they were not subject to state and state-administered sales and use taxes. Please contact Steve Metz with questions on PLR 21-001.
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