Rev. Rul. 56-90

Advice has been requested whether a closed-circuit television transmission of events or activities to limited outlets and audiences, and not to the general public, constitutes the conduct of the business of a `broadcasting station or network' within the meaning of section 4253(f) of the Internal Revenue Code of 1954, so as to exempt from the tax on communications the amounts paid to a telephone company for the lease of wires and equipment utilized in connection with such transmission.

Through the use of closed-circuit television transmission facilities, a company provides for the private screening for limited audiences of special events or activities, such as business conferences, speeches, lectures, etc. This service is adaptable for use by private businesses, industrial organizations, professional associations and similar groups. The lines used for the transmission of these programs are leased from a telephone company.

Section 4251 of the Code imposes a tax on the amount paid for certain communication services or facilities, including the type utilized here.

Section 4253(f) of the Code provides that no tax shall be imposed on the amount paid for so much of leased wire, teletypewriter or talking circuit special service, or wire and equipment service, as is utilized in the conduct, by a common carrier or a telephone or telegraph company or a radio broadcasting station or network, of its business as such.

Although that section does not specifically mention a `television' broadcasting station or network among those public service activities which may qualify for exemption, the term `radio broadcasting station or network' is construed to include a company engaged in the transmission of video as well as audio signals. However, in limiting the exemption to amounts paid for service utilized by a broadcasting station or network in the conduct of its business as such , it is considered that Congress intended to exempt only amounts paid for the designated taxable communications services utilized in the business of furnishing programs to the general public.

Accordingly, it is held that, since closed-circuit television transmission is not intended to be received by the general public but is directed through controlled outlets to limited audiences, it does not come within the scope of the business of a `broadcasting station or network' within the intent and meaning of section 4253(f) of the Code. Therefore, amounts paid to a telephone company for the lease of wires and equipment utilized in connection with such transmission are not exempt by that section from the tax on communications imposed by section 4251 of the Code.