Washington Administrative Code
Title 458 - Revenue, Department of
Chapter 458-20 - Excise tax rules
Section 458-20-241 - Radio and television broadcasting
Universal Citation: WA Admin Code 458-20-241
Current through Register Vol. 24-06, March 15, 2024
(1) Introduction
(a) This section provides tax reporting
instructions for persons in the radio and television broadcasting industry. It
explains the application of business and occupation (B&O) tax, retail sales
tax, and use tax to the industry and provides an explanation of the various
deductions available.
(b) For a
discussion of the tax liabilities of subscriber television services, see WAC
458-20-227.
(c) For a discussion of the taxability of
digital products, see WAC
458-20-15503.
(2) Definitions. For the purpose of this rule:
(a) "Broadcast" or "broadcasting" includes
both radio and television commercial broadcasting stations unless it clearly
appears from the context to refer only to radio or television.
(b) "Local advertising" means all broadcast
advertising other than national, network, or regional advertising as herein
defined.
(c) "National advertising"
means broadcast advertising paid for by sponsors that supply goods or services
on a national or international basis.
(d) "Network advertising" means broadcast
advertising originated by national or regional broadcast networks from outside
the state of Washington, the broadcast advertising being supplied by national
or regional network broadcasting companies.
(e) "Regional advertising" means broadcast
advertising paid for by sponsors that supply goods or services on a regional
basis over two or more states.
(3) Business and occupation tax classifications. Persons in the radio and television broadcasting industry must report business and occupation (B&O) tax based on the B&O classification of their income, as follows:
(a)
Radio and television
broadcasting. Gross income from the sale of radio or television
advertising is taxable under the radio and television broadcasting
classification, subject to the deduction authorized under
RCW
82.04.280(1)(f)(i) or (ii).
(See subsection (4)(b) of this section for more information on the
deduction);
(b)
Service and
other activities. Gross income from personal or professional services
not taxed under a different classification, such as gross income from producing
and making custom commercials or special programs, fees for providing writers,
directors, artists, and technicians, and granting a license to use facilities
(as distinct from the leasing or renting of tangible personal property, see WAC
458-20-211
) is taxable under the service and other classification;
(c)
Royalties. Gross income from
charges to other broadcasters for granting the right to use intangible property
(e.g., the right to use broadcast material) is taxable under the royalties
classification;
(d)
Retailing
or wholesaling. Gross income from sales of tangible personal property to
consumers, including gross proceeds from sales of films and tape produced for
general distribution and from sales of copies of commercials, programs, films,
etc., is taxable under the retailing classification even though the original
was not subject to retail sales tax. Gross income from sales of tangible
personal property to persons other than consumers is taxable under the
wholesaling classification. Gross income from the sale of custom-made programs,
commercials, films, etc., is taxable under the service and other activities
classification; and
(e)
Manufacturing. The value of special programs, such as public
affairs, religious, travelogues, and other general programming, which are
distributed via tangible media to other broadcasters under a lease or contract
granting a mere license to use, is taxable under the manufacturing
classification. (For a discussion of the taxability of digital products
transferred electronically, see WAC
458-20-15503.)
Manufacturing B&O tax does not apply to a recording made for the
broadcaster's own use, including news, delayed programs, commercials and
promotions, special and syndicated programming, and "entire day"
programming.
(4) Deductions from gross income from advertising.
(a)
Agency fees. It is a general
trade practice in the broadcasting industry to make allowances to advertising
agencies in the form of the deduction or exclusion of a certain percentage of
the gross charge made for advertising ordered by the agency for the advertiser.
This allowance is deductible as a discount in the computation of the
broadcaster's tax liability in the event that the allowance is shown as a
discount or price reduction in the billing or that the billing is on a net
basis, i.e., less the discount.
(b)
Gross receipts from national, network, and regional advertising.
The broadcasting station may deduct actual gross receipts from national,
network, and regional advertising, as included in the gross amount reported
under radio and television broadcasting, either by using the "standard
deduction" or by itemization of the individual broadcasting station's actual
receipts.
(i) The "standard deduction" for
gross receipts from national, network, and regional advertising as provided by
RCW
82.04.280, is a percentage based on the
national average of national, network, and regional advertising as reported by
the United States Census Bureau's economic census. The standard deduction
percentage must be published by the department by rule by September 30, 2020,
and by September 30th of every fifth year thereafter. The standard deduction
percentage as of September 30, 2020, is sixty-two percent.
(ii) As an alternative to using the standard
deduction in (b)(i) of this subsection, a broadcasting station may opt to
deduct gross receipts from national, network, and regional advertising by
itemizing the actual receipts therefrom.
(c)
Allocation of local advertising
revenues. Revenues from local advertising may be allocated to remove
from the tax base the gross income from advertising that is intended to reach
potential customers of the advertiser who are located outside the state of
Washington.
(i)
Presumption. It
will be presumed that the entire gross income of radio and television stations
located within the state of Washington from local advertising is subject to tax
unless the taxpayer submits proof to the department that some portion of such
income is exempt according to the principles set forth herein and until a
specific allocation formula has been approved by the department.
(ii)
Method of allocation.
(A) When the total daytime listening area of
a radio or television station extends beyond the boundaries of the state of
Washington, the allowable deduction is that portion of revenue represented by
the out-of-state audience computed as a ratio to the broadcasting station's
total audience as measured by the .5 millivolt/meter signal strength contour
for AM radio, the one millivolt/meter or sixty dBu signal strength contour for
FM radio, the twenty-eight dBu signal strength contour for television channels
two through six, the thirty-six dBu signal strength contour for television
channels seven through thirteen, and the forty-one dBu signal strength contour
for television channels fourteen through sixty-nine with delivery by wire,
satellite, or any other means, if any. The out-of-state audience may therefore
be determined by delivery "over the air" and by community antenna television
systems. However, community antenna television audiences may not be claimed by
a station in the same area in which it claims an audience served over the air,
thus eliminating a claim for double exemption.
(B) The most current United States and
Canadian census figures must be used to determine the in-state and out-of-state
audience.
(C) In the event that
community antenna television subscribers are claimed as part of the
out-of-state audience, the name of the systems, the location, and the number of
subscribers must be provided to the department upon request. The number of
subscribers will be multiplied by a factor of 2.5, representing the average
size household.
(D) Upon request by
the department, the broadcasting station must submit documentation
substantiating the computation of the out-of-state exclusion to the department,
as directed.
(5) Retail sales tax.
(a) Purchases by broadcasters of equipment,
supplies and materials for the broadcaster's own use and not for resale are
subject to the retail sales tax. This includes purchases of raw or unprocessed
film, magnetic tape, DVDs, and other transcription material.
(b) If the tapes, films, etc., upon which the
sales tax has been paid are later sold by the broadcaster in the regular course
of business, the provisions of WAC
458-20-102
concerning purchases for dual purposes will apply.
(c) The broadcaster must collect retail sales
tax on sales to consumers of packaged films, programs, etc., produced for
general distribution, including training and industrial films, and also on
sales of copies of films, commercials, programs, etc., even though the original
was not subjected to retail sales tax.
(6) Use tax.
(a) Acquisition or exercise of the right to
broadcast material under a right or license granted by lease or contract is not
the use of tangible personal property by the broadcaster and the use tax is not
applicable.
(b) Broadcasters of
radio and television programs are subject to use tax on the value of articles
manufactured or produced by them for their own use (excluding custom produced
commercials or special programs which include, but is not necessarily limited
to, recordings of news, delayed programs, commercials and promotions, special
and syndicated programming, and "entire day" programming) and on the use of
tangible personal property purchased or acquired under conditions whereby the
retail sales tax has not been paid. The broadcaster is liable for use tax on
the value (cost of production) of programming when the broadcaster sells merely
the right to broadcast such material under a right or license granted by lease
or contract.
Statutory Authority: RCW 82.32.300. 83-08-026 (Order ET 83-1), § 458-20-241, filed 3/30/83; Order ET 70-3, § 458-20-241 (Rule 241), filed 5/29/70, effective 7/1/70.
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