Was software sold and delivered only through an internet download subject to Florida sales tax?

Plain-English summary

Florida found no sales or use tax on software sold and delivered entirely through the internet when no physical product was transferred. The seller had no retail location, did not sell the product in stores, emailed customers an unlock code, and delivered the software by download from a web server.

The ruling's reasoning was narrow: Florida's retail-sales tax applied to tangible personal property, and the documented electronic-only transaction transferred none. The Department expressly conditioned its answer on no tangible personal property being included in the transaction.

The ruling separately warned that equipment the seller purchased or brought into Florida for its own business could be subject to sales or use tax.

What this means for you

For this historical ruling, delivery method and transaction contents controlled. Businesses should document whether customers receive only an electronic download or also receive media, devices, printed materials, or other property, and should separately review tax on their own operating equipment.

Common questions

Q: Was the emailed unlock code taxable?
A: Not on the documented transaction; it enabled an electronic download without a physical product.

Q: Did the ruling cover software delivered on a disk or device?
A: No. The conclusion depended on no tangible personal property being transferred.

Q: Did the ruling exempt the seller's business equipment?
A: No. Florida warned that equipment bought or imported for Florida use could be taxable.

Citations and references

• Fla. Stat. § 212.02(15)(a) — definition of sale
• Fla. Stat. § 212.02(19) — definition of tangible personal property
• Fla. Stat. § 212.05 — taxable retail sales and use
• Fla. Admin. Code r. 12A-1.032 — software rule cited in the ruling
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 03A-020

Original ruling text

SUMMARY

QUESTION: Is software marketed via the Internet subject to
Florida sales tax?

ANSWER - Based on Facts Below: Based on the information
provided, the software sold and delivered via the Internet
is not considered "tangible personal property" pursuant to
s. 212.02(19), F.S., and, therefore, is not subject to
Florida sales tax.

Apr 30, 2003

Re: Technical Assistance Advisement 03A-020
XXX ("Taxpayer")
FEI # XX
Sales Tax - Software Sold via Internet
Sections 212.02, 212.05, F.S.
Rule 12A-1.032, F.A.C.

Dear :

This is a response to your letter dated March 7, 2003, in which
you requested the issuance of a Technical Assistance Advisement
(TAA) concerning the above referenced matter. Your letter and
the supporting documents have been carefully reviewed, and the
Department finds your request to be in compliance with the
criteria set forth in Chapter 12-11, F.A.C. This response to
your request constitutes a TAA, and is issued under the
authority of section 213.22, F.S.

Background

Taxpayer sells a software product called XXX ("Product") over
the Internet. Taxpayer does not have a retail location, nor can
the software be purchased in any retail store. The software is
only sold via electronic download through the Internet. When a
customer purchases the software, a code is e-mailed that allows

the customer to unlock and download the software from a web
server located in XX. Taxpayer does not deliver any physical
product to the customer.

You have provided copies of the following relevant documents:

Copy of your letter requesting technical advice.

Copy of Letter of Technical Assistance received from the
Department of Revenue.

Example of sales receipts.

Copy of email sent with unlock code and instructions for
opening.

Copy of the software licensing agreement.

Requested Advisement and Taxpayer's Position

Your letter requests a binding opinion on the taxability of
software sales that are delivered to Florida customers
electronically. It is your opinion, after several telephone
calls to the Florida Department of Revenue sales tax office and
after receiving the Letter of Technical Advice, that the sales
being transacted in Florida are not subject to sales tax.

Applicable Authority and Discussion

Section 212.05, F.S., provides:

It is hereby declared to be the legislative intent that
every person is exercising a taxable privilege who engages
in the business of selling tangible personal property at
retail in this state, including the business of making mail
order sales, or who rents or furnishes any of the things or
services taxable under this chapter, or who stores for use
or consumption in this state any item or article of
tangible personal property as defined herein and who leases
or rents such property within the state.

Section 212.02, F.S., provides in pertinent parts:

(15) "Sale" means and includes:

(a) Any transfer of title or possession, or both, exchange,
barter, license, lease, or rental, conditional or
otherwise, in any manner or by any means whatsoever, of
tangible personal property for a consideration.

(19) "Tangible personal property" means and includes
personal property which may be seen, weighed, measured, or
touched or is in any manner perceptible to the senses ....

Section 212.05(1)(a)1.a., F.S., imposes a tax on the "... sales
price of each item or article of tangible personal property when
sold at retail in this state...." Section 212.02(15)(a), F.S.,
defines the term "sale" to mean and include "Any transfer of
title or possession, or both, exchange, barter, license, lease
or rental, conditional or otherwise, of tangible personal
property for a consideration." Further, "tangible personal
property" is defined under s. 212.02(19), F.S., to mean and
include "... personal property which may be seen, weighed,
measured, or touched or is in any manner perceptible to the
senses."

The transactions, for which you have provided documentation,
would not be subject to Florida sales or use tax, so long as no
tangible personal property is transferred as a part of the
transaction.

In your letter of March 7, 2003, you stated that you had moved
your company from Missouri to Florida effective January 1, 2003.
Please be advised that any purchases or importation of equipment
used to conduct business in Florida may be subject to sales or
use tax.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized

above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response, your request and
related backup documents are public records under Chapter 119,
F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

If you have any further questions with regard to this matter and
wish to discuss them, you may contact me directly at (850) 9224839.

Sincerely,

Jean Davis
Senior Tax Specialist
Technical Assistance & Dispute Resolution

JD\
Control No: 54355