Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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375.0000 MOTION PICTURES—Regulation 1529

Annotation 375.0992


(1) Generally

375.0992 Reconstruction, Restoration, and Presentation of Motion Picture Films. A company whose business is generally the reconstruction, restoration, and preservation of motion picture films requested an opinion to the following types of transactions:

(1) Creation of a duplicate negative of an intermediary product (e.g., fine grain, safety stock, or backup master).

The copy is generally made from a positive lab master of the original negative of the film. The services involve no or minimal repair work. The backup masters are not intended for exhibition but for preservation. The backup master is necessary since original negatives are nitrate originals which disintegrate and become dust over time.

The creation of safety stock or backup masters is the performance of qualified production services. The transfer of the safety stock or backup masters to the customer is not a sale for purposes of the sales tax.

(2) The repair and restoration of films in deteriorated condition.

The company works from a positive lab master made from the original negative of the film. Services may include physical repair of original material, eliminating scratches on the film, reconstruction of an earlier version from different source materials, replacing portions of the film that may have been removed prior or subsequent to its original release, and processing of related sound track materials to produce a new and improved sound track. Such services may also include correcting the lighting of the film, which requires creative judgments on the part of technicians regarding the correct lighting and shading.

Restoration may involve the reconstruction of missing film or missing sound tracks. The company may insert replacement material or edit the existing film to regain continuity. The company may manufacture check prints or new first trial prints for the client to review the film and make aesthetic and technical judgments regarding the look and the sound of the reconstructed film. The end products are generally duplicate negatives, fine grains (intermediate master materials), library prints not intended for distribution, and occasionally, video tape masters. The end products are not release prints or tapes for exhibit or broadcast.

The creation and transfer of the duplicate negatives, fine grains (intermediate master materials), library prints, and videotape masters are qualified production services when such products are not release prints or tape for exhibition or broadcast. If the prints or tapes are of a quality suitable for exhibition or broadcast, the company's invoice to its customer should contain a statement indicating the customer's intended use of the films or tapes. 3/15/89.