An online provider of television and movie content is not responsible for collecting 5-percent Virginia communications tax imposed on communications services. The Code of Virginia defines communications services, in pertinent part, as “… the electronic transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals, including cable services, to a point or between or among points, by or through any electronic, radio, satellite, cable, optical, microwave, or other medium…” However, the Virginia Code states that the communications tax should not be imposed on digital products delivered electronically (i.e. software, music, ring tones). A prior ruling distinguished which type of electronic delivery is subject to the tax. It ruled that the exemption applying to “digital products delivered electronically” does not include products requiring continued payments from the purchaser, like a subscription, or products without a permanent right of use.
In the recent P.D. 13-17, the commissioner ruled that the sale of television and movie content is a digital product delivered electronically and is therefore not taxable under the communications tax. He further stated that there is no distinction between digital products downloaded electronically charged to customers on a monthly recurring basis and digital products incurring a one-time fee. This overturned the distinction in the prior ruling. Taxpayers providing services that could fall under the communications services definition should closely analyze the Virginia Code sections and other authority relating to this tax.
If you have any questions regarding this ruling or any other issues, please contact Javier Siervo at JSiervo@brg-expert.com or 202.480.2735.
Berkeley Research Group, LLC is not a CPA firm and does not provide audit, attest, or public accounting services. BRG is not a law firm and does not provide legal advice.
The views expressed in this article are those of the authors and do not necessarily reflect the position or policy of Berkeley Research Group, LLC.
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 See “Rulings of the Tax Commissioner,” P.D. 13-17, Virginia Department of Taxation (February 5, 2013)
 Va. Code Ann. §58.1-647.
 Va. Code Ann. §58.1-648.C.
 See “Rulings of the Tax Commissioner,” P.D. 08-64, Virginia Department of Taxation (May 19, 2008).