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Sales tax fix for Radio kicks in Sept. 1

Beginning Sept. 1, radio stations can purchase digital transmission equipment tax-free just as their television counterparts already can, thanks to legislation TAB successfully advanced in the Texas Legislature this year. For some stations, the savings could be as high as $10,000 and it comes at a time when a new vehicle with factory-installed HD Radio technology is sold every 3.5 seconds in Texas.

The exemption applies to stations replacing their existing digital transmission equipment, as well as to those installing it for the first time. The technology allows stations to provide consumers new sub-channels showcasing new formats and programming that otherwise might not be financially viable for a station.

Further, stations in small communities on the outer reaches of a major market will be able to compete on a level playing field from a sales tax perspective with their big city brethren who were able to adopt the technology when it was first introduced and the sales tax exemption was initially in place.

For nearly nine years beginning in 2001, the state comptroller’s office, which serves as the state’s tax collector, considered digital transmission equipment purchased by television and radio broadcasters exempt from sales tax. That changed in late 2009 under the leadership of then-Comptroller Susan Combs when an administrative ruling peeled back the application to radio stations because of what Combs’ staff asserted was a lack of clarity in the law that authorized the exemption.  The exemption for TV stations’ equipment was not affected.

Combs’ historic error in 2011 forecasting a $25 billion revenue shortfall – which would not have materialized even without the budget cuts lawmakers enacted in response – prevented state lawmakers from fixing the administrative ruling.

In the 2013 session, TAB focused its energies on securing a much needed clarification to an obscure state law regarding the public performance of songs recorded prior to 1972. The measure was adopted and signed into law by then-Gov. Rick Perry.

This year, TAB made the equipment sales tax issue its top priority and garnered the leadership of two powerful state lawmakers, Rep. Kyle Kacal, R-College Station, and Sen. Kel Seliger, R-Amarillo.  Both cited their appreciation for radio stations’ service to local communities, a commitment to ensuring rural communities could enjoy the same technology available in large cities and the importance of consistency in state tax policy.

Broadcasters especially key to securing lawmakers’ support included Kevin Anderson of KKHA Bay City, Ben Downs of Bryan Broadcasting, and John Moesch of Brazos Communications West in Odessa-Midland.

Kacal garnered support from all but 14 of the 150 members of the House, while Seliger won the votes of all but three of the 31 State Senators.  Gov. Greg Abbott signed the measure into law on June 10.

Rick Greenhut of iBiquity told broadcasters at TAB’s Annual Convention earlier this month that there are more than two million HD Radio-equipped vehicles registered in Texas.  More than 40 percent of new cars sold in Texas will come factory-installed with HD Radio technology, and more than 200 different vehicle models with the equipment are available today.

Questions?  Contact TAB's Oscar Rodriguez or call (512) 322-9944.

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