Rev. Rul. 56-424

Advice has been requested concerning the application of the tax on wire and equipment service, imposed by section 4251 of the Internal Revenue Code of 1954, to payments to a company, by subscribers to a television antenna service, as contributions in aid of construction of facilities necessary to the furnishing of such service.

In the instant case, a company proposes to construct a central television receiving antenna system in an area where direct reception is obstructed and to furnish antenna service over wires leading from the central antenna to premises of subscribers to this service. Under the terms of an agreement with the company, each subscriber pays a specified sum of money as a contribution in aid of construction of the television signal distribution system which is necessary in order to connect the subscriber's residence or place of business with the company's transmission system. The subscriber agrees that, if the installation requires more than a stated number of feet of cable from the main line to the terminal point on his premises, he will make an additional contribution to the company of a specified amount per foot of the additional cable required. Upon installation of the antenna service on his premises, the subscriber pays the company an annual charge for the service.

Section 4251 of the Code imposes a tax upon amounts paid for wire and equipment service. The tax imposed by this section is payable by the person paying for such service.

Section 130.38(c) of Regulations 42, applicable under the 1954 Code by virtue of Treasury Decision 6091, C.B. 1954-2, 47, provides that in determining the amount of tax due there shall be included all charges made in connection with the furnishing of the service, such as charges for equipment, instruments, and other apparatus, and installation charges.

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 wire and equipment service and all charges made in connection with the furnishing of such service are subject to tax.

It is held that amounts paid to the company by subscribers, under the circumstances described, in aid of construction of the signal distribution system necessary in order to connect their residences or places of business with such transmission system, constitute payments made by the subscribers of installation charges in connection with the furnishing to them of a television antenna service as contemplated by Revenue Ruling 88. Accordingly, such payments, as well as all other payments, made to the company by subscribers in connection with the television antenna service furnished are subject to the tax on wire and equipment service, imposed by section 4251 of the Code.