Internal Revenue Service
Revenue Ruling
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smRev. Rul. 62-11
1962-1 C.B. 224
Caution: Obsoleted by Rev. Rul. 69-227
IRS Headnote
In view of the decision of the United States Court of Claims in the case of Hampton Roads Industrial Electronics Corporation v. United States , amounts paid for musical program services which are transmitted by means of radio circuits rather than wire lines will no longer be considered as being subject to the communications tax on `wire and equipment service.' However, under the provisions of section 4252(e) of the Internal Revenue Code of 1954 as amended by the Excise Tax Technical Changes Act of 1958, the tax on `wire mileage service' applies to amounts paid for such musical program services on or after January 1, 1959, subject to the exemption provided by section 4253(h) of the Code relating to station terminal equipment.
Revenue Ruling 56-527, C.B. 1956-2, 839, revoked.
Full Text
Rev. Rul. 62-11
Reconsideration has been given by the Internal Revenue Service to the position stated in Revenue Ruling 56-527, C.B. 1956-2, 839, in view of (1) the decision of the United States Court of Claims in the case of Hampton Roads Industrial Electronics Corporation v. United States , 178 Fed.Supp. 474, and (2) certain provisions of the Excise Tax Technical Changes Act of 1958, Public Law 85-859, C.B. 1958-3, 92.
Revenue Ruling 56-527 holds that the communications tax on `wire and equipment service' applies to amounts paid by subscribers for a musical program service where radio channels are used for transmission of the programs. That Revenue Ruling was issued under the provisions of sections 4251 and 4252 of the Internal Revenue Code of 1954 prior to the amendments made by the Excise Tax Technical Changes Act of 1958.
Prior to January 1, 1959, the effective date of those amendments, section 4252(e) of the Code provided, in pertinent part, that the term `wire and equipment service' shall include stock quotation and information services, burglar alarm or fire alarm service, and all other similar services.
It has been held that the definition provided by section 4252(e) of the Code includes all services of the type mentioned in that section, irrespective of the fact that technological advances permit variations in the method of transmission from the point of origin to the subscriber's premises. That position was the basis for the conclusion set forth in Revenue Ruling 56-527.
However, in the Hampton Roads Industrial Electronics Corporation decision, the court held that amounts paid by commercial subscribers for a background music program service furnished by means of an FM radio transmission system known as `multiplex' were not subject to the tax on `wire and equipment service,' because that system does not utilize `wire' in the transmission of the musical programs.
In view of that decision, musical program services which are furnished by means of radio circuits rather than wire lines will no longer be considered as coming within the scope of the term `wire and equipment service.' Consequently, amounts paid before January 1, 1959, for such services are not subject to the tax imposed on `wire and equipment service' in effect prior to that date.
However, the taxability of amounts paid for such services on or after January 1, 1959, must be determined under the provisions of the statute as amended by the Excise Tax Technical Changes Act of 1958.
Section 4251 of the Code, as amended, imposes a tax upon enumerated communication services, including `wire mileage service' and `wire and equipment service.' Those terms are defined by subsections (e) and (f) of section 4252 of the Code as follows:
(e) WIRE MILEAGE SERVICE.-For purposes of this subchapter, the term `wire mileage service' means-
(1) any telephone or radio telephone service, and
(2) any other wire or radio circuit service, not included in any other subsection of this section; except that such term does not include service used exclusively in furnishing wire and equipment service.
(f) WIRE AND EQUIPMENT SERVICE.-For purposes of this subchapter, the term `wire and equipment service' includes stock quotation and information services, burglar alarm or fire alarm service, and all other similar services (whether or not oral transmission is involved). Such term does not include teletypewriter exchange service.
Since the musical program service described above is a radio circuit service which does not come within the scope of any other subsection of section 4252, it is held that it comes within the definition of `wire mileage service' provided in subsection (e). Accordingly, amounts paid on or after January 1, 1959, for such musical program services are subject to the tax on `wire mileage service.'
It should be noted, however, that section 4253(h) of the Code, as amended, provides that no tax shall be imposed under section 4251 on so much of any amount paid for `wire mileage service' as is paid for, and properly attributable to, the use of any sending or receiving set or device which is station terminal equipment.
The portion of an amount paid for `wire mileage service' which is properly attributable to the station terminal equipment depends upon all of the pertinent facts relating to each case. However, under all of the circumstances relating to musical program services furnished by means of radio transmission, it will be deemed that 20 percent of the total amount paid for the service is properly attributable to the station terminal equipment. Therefore, the tax may be applied to only 80 percent of the total amount paid for the service. Any claimed allocation of more than 20 percent to the station terminal equipment must be properly supported by adequate evidence.
Revenue Ruling 56-527 is hereby revoked.