Rev. Rul. 56-320

Advice has been requested concerning the basis for computing the tax on wire and equipment service, imposed by section 4251 of the Internal Revenue Code of 1954, in respect of charges made by a company to subscribers of its central television antenna service for the installation of wires from the central antenna to the subscribers' premises.

In the area covered by the company's central antenna system, some television set owners have their individual antennas. The company has offered to connect to its central antenna system, under the arrangements indicated below, the sets of those owners who subscribe to its service.

If the subscriber takes down his individual antenna and turns it over to the company, no charge is made to him for connecting his premises with the central antenna system. However, if the subscriber takes down his antenna but does not turn it over to the company, a charge of $30 is made to the subscriber for making the necessary installation or connection on his premises.

In the event the subscriber desires the company to take down his individual antenna, a nominal charge is made by the company regardless of whether the antenna is turned over to the company or retained by the subscriber. This nominal charge is in addition to the charge of $30 made for connecting his premises with the central antenna system where the subscriber does not turn over his individual antenna to the company.

Revenue Ruling 88, C.B. 1953-1, 467, holds that a television program service furnished over wires leading from a central receiving antenna to premises of subscribers constitutes a wire and equipment service within the meaning of the statute and that charges made in connection with the furnishing of such service, including installation charges, are subject to tax.

The communication taxes imposed under section 4251 of the Code apply to the amount paid for services and facilities whether payment therefor is made in money or money's worth. The tax applies equally whether charges for services or facilities furnished are paid or satisfied in money, merchandise, personal services, or other valuable consideration. Where an article is accepted in trade as a partial or full payment of a taxable charge, the amount so allowed on such trade-in is to be included in determining the tax due.

It is held that since, under the arrangements described above, an installation charge of $30 is made in cases where the subscriber does not turn in his antenna to the company, and no installation charge is made if an antenna is turned in, the amount of $30 is regarded as the amount allowed the subscriber by the company on the trade-in of his antenna. Accordingly, whether a cash payment of $30 is made by a subscriber or an antenna is turned in, the tax should be computed and collected by the company on the basis of that amount. However, under the circumstance described, the charge made by the company for the removal of a subscriber's individual antenna from his premises is not subject to tax if billed separately from the taxable installation and wire service charges. Compare with Rev. Rul. 56-319, page 835.