An exemption from Virginia sales and use taxes is applicable to a taxpayer’s sales of broadcasting equipment and accessories to the extent such equipment is used directly in disseminating a signal into the air. However, equipment and accessories used to create the material to be disseminated are taxable. The taxpayer offers broadcast quality video servers specifically designed to transmit data and content to on-air operations.
Although transmission is the primary function, the servers are also used to edit and store content. For this reason, a proration must be established and tax applied to the applicable portion of the sales price. In addition to the broadcast equipment, the taxpayer offers prewritten software, necessary for converting data and signals. Since the software is not used directly to disseminate signals over the airwaves, it is taxable when delivered in tangible form with or without the equipment. When the software is electronically delivered and no tangible medium is provided, no tax will apply provided the electronically delivered software is not sold in connection with the sale of tangible personal property. The taxpayer satisfies the requirements for nexus by soliciting business in Virginia by employees, and is subject to registration and collection of the Virginia retail sales and use tax. (Ruling of Commissioner, P.D. 08-167, Virginia Department of Taxation, September 11, 2008)