Sales, Use and International Tax Activity Update - January 2010

Sputnik Television Promotion Sputters and Stalls over Use Tax

A direct broadcast satellite programming company's provision of free equipment and installation services to its customers was subject to Washington use tax because the company was the consumer of the equipment and services.

The taxpayer provided equipment and installation free of charge in order to attract new subscribers. The donor of property and services used in Washington on which no sales tax has been paid remains liable for use tax. Further, Washington law requires that subscriber television businesses remit sales or use tax on purchases of tangible personal property used in providing services to subscribers.

The provision of free equipment and installation services did not qualify as exempt premiums because they accompanied the sale of a service as opposed to the sale of tangible personal property. The free equipment and installation services were also subject to local use tax because the federal preemption statute only prohibits the imposition of local taxes on the provision of direct-to-home satellite service.

The full tax determination can be viewed on the Washington State Department of Revenue Web site.

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