The Louisiana Board of Tax Appeals granted summary judgment in favor of the taxpayer in an order dated March 14, 2024, in the case DirecTV LLC v. City of Baton Rouge, Docket No. L01329. The local parishes in this case argued that Video-on-Demand (VOD) and Pay-Per-View (PPV) programming should be taxed as and considered to be tangible property due to the fact the definition includes items that “can be seen, weighed, measured, felt, touched, or is in any other manner perceptible to the senses”, which would include streaming programs. DirecTV argued that what they were selling was not the streamed videos, but rather the access to the programming itself, which would be tax exempt under both the 1996 Federal Telecommunications act as well as under Louisiana Code La. R.S. 47:305. At issue was the audit of DirecTV’s sales and use tax returns for the periods December 2015 through June 2019 where the local parishes issued assessments for sales and use tax on the sale of VOD and PPV programming. DirecTV appealed for redetermination of these assessments to the Board of Tax Appeals.
In their consideration, the Board of Tax Appeals (Board) noted many times that what DirecTV’s customers were paying for was not the PPV or VOD content itself, but rather the right to access the content through exclusive broadcasts. Though content could be saved to a local device, the ability to view this was dependent on the continued subscription to the DirecTV services, highlighted by the fact that even if a customer had paid for a VOD or PPV program, if they lapsed in their subscription, viewing access could be stopped even if they were in the middle of the saved program. Further, the Board noted that if they were to interpret perceptibility as the criteria for taxation, then no exemption would exist for any form of broadcast, and the only portions of the exemption in La. R.S. 47:305 which would survive would be installation and maintenance work. The Board’s decision rejected the parishes’ argument in this case, noting that what DirecTV is actually selling is the subscription service and the temporary authorization to view programs. Finally, La. R.S. 47:301(x), excludes television AV programming as well as digital products delivered electronically from taxable telecommunication services, so even if they did find the VOD and PPV programs to be tangible personal property, they would be exempt from the tax the parishes were trying to assess.
Taxpayers need to be conscious of what they are actually selling and how that factors in to the tax code. DirecTV had a particularly strong argument on many fronts in this case due to their ability to successfully argue what they were selling was ongoing subscriptions to programming, and they were able to prove they should not be taxed on these sales for many reasons under both state and federal law. Clarity is key in making many decisions related to taxability of products, as highlighted in this case. (DirecTV LLC v. City of Baton Rouge, Docket No. L01329, Louisiana Board of Tax Appeals, Order dated 14 March 2024, signed by Local Tax Judge Cade R. Cole)