Rev. Rul. 56-490

Advice has been requested whether amounts paid by a newspaper company to a telegraph company for leased wires which are used exclusively for the dissemination of news through electric signs are exempt from the communications tax.

Section 4251 of the Internal Revenue Code of 1954 imposes a tax upon amounts paid for various communication services or facilities, including leased wire service. However, under the provisions of section 4253(b) of the Code, the tax on leased wire service does not apply to any payment received from any person for services or facilities utilized in the dissemination of news through the public press, or a news ticker service furnishing a general news service similar to that of the public press, or by means of radio broadcasting, if the charge for such services or facilities is billed in writing to such person.

It appears that the intent of the Congress was to relieve all general news disseminating media from the burden of the tax, whether the means employed be newspaper, broadcasting, ticker service or, as in the case here, an electric sign. The prime factor in determining the applicability of the exemption is whether the wire facility involved is utilized exclusively in collecting or disseminating news for the general public.

Accordingly, it is held that amounts paid by a newspaper company to a telegraph company for leased wires which are utilized exclusively for the dissemination of news through electric signs are exempt from the communications tax imposed by section 4251 of the Code. However, this conclusion should not be construed as granting an exemption merely because general news is disseminated. For example, if the news items were interspersed with advertising material, the exemption would not apply. On the other hand, the exemption would not be defeated by the proximity to the news sign of an electric advertising sign or legend, if the latter is activated otherwise than by the leased wire current.