The taxpayer in question operated a television news station and had been paying sales tax on its purchase of electricity and natural gas used to operate the station. The electricity was used by the taxpayer to operate broadcast transmitters, in addition to running cameras, lights, and control room equipment. The natural gas purchased was used for heating and to power a generator.
In the state of Colorado, sales tax applies to sales of electricity and natural gas used for commercial consumption. Sales of electricity and natural gas used in “radio communication” and all “industrial uses,” however, are exempt. The Department determined that the exemption was limited in application to energy used in communication. Furthermore, it concluded that the taxpayer’s use of the energy was not industrial because broadcasting is considered a service, rather than the creation of a new product. As a result, the Department held that the energy purchased by the taxpayer to power the television transmitter was exempt, but energy used for lighting, running computers, heating, and other similar noncommunication purposes would be subject to tax.
This is an excellent example of identifying a rather obscure exemption that was available, which would likely not have been readily thought of for this service industry. The Department’s full analysis can be found in Colorado Department of Revenue, GIL-16-014.
