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D.C. TV Station Not Eligible for Sales Tax Exemption

 DC television station liable for sales tax assessment.

The D.C. Court of Appeals has issued a decision in a case regarding a broadcast television service that earned the bulk of its income from advertisements. The court determined the company does not qualify as a Qualified High Technology Company and is therefore not eligible for QHTC preferential tax treatment such as an exemption from sales and use tax. As a result, it is liable for a sales and use tax assessment.

The broadcast company, WRC-TV, sought the preferential tax treatment provided by QHTC status. To be eligible, it must derive at least 51% of its revenue from activities specified in the QHTC statute, such as information and communication technologies or human interface technologies. WRC argued that its use of such technologies in television programming qualified it.

The District of Columbia Office of Taxation and Revenue (OTR) disagreed, arguing that WRC’s revenue is primarily generated by the sale of advertising, not technology. Although WRC may use qualifying technologies, the technology does not generate the bulk of its revenue.

As OTR interprets the QHTC statute, preferential tax treatment applies “only to companies engaged in the development and marketing of high technology systems. In agreeing with the OTR, the Court too drew a distinction between companies who develop technology, and those who simply use technology” (OTR Notice 2015-09).

The Court of Appeals found in favor of OTR. “[T]he qualifying activities described in the QHTC statute had to have a closer connection to the QHTC’s revenues than the mere purchase and use of high technology equipment and systems.”

As a result of the ruling, WRC is liable for $78,784.84 in sales and use tax. Read more about Qualified High Technology Companies in the District of Columbia.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.