Were international calls routed through a Florida computer switch subject to Florida sales or gross receipts tax?

Subject

Tax on Computer Switching - Telecommunications

Plain-English summary

The charges to foreign customers were not subject to Florida gross receipts tax or sales tax. The provider's Florida computer handled call-back, toll-free, and private-line switching for calls between people in foreign countries, and the customers were billed in their countries rather than in Florida.

The Department still treated the provider as furnishing telecommunications service in Florida because the Florida computer originated or terminated call legs. But the cited tax rules also required the service to be billed to a Florida customer, telephone number, or device, and that condition was missing.

What this means for you

Locating switching equipment in Florida was important but not sufficient on these facts. The customer and billing requirements prevented tax even though every call connected through the Florida switch.

Common questions

Q: Did the Florida computer originate or terminate calls? Yes. The ruling described a Florida-originated call-back or outbound call for each service configuration.

Q: Why were the charges still outside the tax? No customer was in Florida and no customer or number in Florida was billed.

Q: Did the ruling cover Florida customers using the same system? No. Its conclusion depended expressly on the absence of Florida customers and Florida billing.

Citations and references

• Fla. Stat. §§ 203.01, 203.012, 203.013 — telecommunications gross receipts tax
• Fla. Stat. § 212.05(1)(e)1. — sales tax on telecommunications services
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93B6-001B

Original ruling text

Mar 23, 1993

Re: Technical Assistance Advisement No. 93(B)6-001B
Sales Tax/Gross Receipts Tax
Tax on Computer Switching - Telecommunications

Dear

XXX (herein taxpayer) has requested a Technical Assistance
Advisement pursuant to Section 213.22, Florida Statutes.

Issue

Whether the computer switching services that occur in
Florida are subject to Florida Sales Tax or Gross Receipts
Tax.

Background

Taxpayer has a place of business located in Florida, where
the computer and the computer switching services occur for the
following services:

1. Call Back. A caller in foreign country A wants to place
   a call to a callee in foreign country B and neither A nor B are
   in the United States. The caller calls a number in the United
   States and hangs up before the computer answers the call.
   Taxpayer's computer calls back the caller in country A and when
   the caller answers the call back, he has a United States
   telephone line to call the callee in country B.
2. Toll Free. A caller in foreign country A wants to call
   callee in foreign country B with neither A nor B located in the
   United States. The caller calls a number in the United States,
   answered by a computer in the United States, the caller then
   inputs his personal identification number and dials the callee's
   telephone number in country B using the United States line.
3. Private Line. Caller in country A wants to call callee
   in country B with neither A nor B located in the United States.
   The caller calls a number in the United States and hangs up

before the computer answers. Taxpayer's computer calls the
caller back in country A. When caller answers, the callee in
country B is on the line. The computer located in the United
States matches the number called with callee's number in country
B and calls that number. The computer also calls back the caller
and through a switch in the computer, the computer connects the
two calls. Each call connects through a computer switch in
Florida but does not originate or terminate in Florida and
neither caller nor the callee are located in Florida. Further,
each customer is billed in the country of origin for the call
and your client does not bill a customer or a number in Florida.

Discussion and Law
Sections 203.01(1)(a) and (b), Florida Statutes, provide
that every person that receives payment for any utility service
shall report to the Department the total amount of gross
receipts derived from business done within this state, or
between points within this state.

Section 203.012(9), F.S., defines utility service as
electricity or natural or manufactured gas for light, heat, or
power or telecommunications services. In addition, section
203.012 (5), F.S., defines telecommunication service as local or
toll telephone service, telegram or telegraph service,
teletypewriter or computer exchange service, or private
communication service. Further, Section 203.013, F.S., imposes
the tax on the charge for telecommunication services that
originate or terminate in this state and are billed or charged
to a Florida telephone number or device, or Florida customer,
except private line service. Private line service is taxed
based on the charge for each channel termination point in
Florida, the charge for the total channel mileage between each
termination point within Florida, and fifty percent of the
charge imposed for the total channel mileage between the first
channel termination point in Florida and the nearest channel
termination point outside of Florida.

As to the Florida Sales Tax, Section 212.05(1)(e)1., F.S.,
imposes the sales tax on telecommunication services as defined
in Chapter 203, F.S., on sales that occur in Florida in the same
manner as the gross receipts tax, except for interstate or

international private communication service. Private
communication service is taxable on a prorated basis for the
interstate interoffice mileage charge.

Department's Position

Based on the information provided, it is the Department's
position that you are providing a telecommunications service in
Florida. In the Call Back example, the computer, located in
Florida, originates the call back to the caller. In the Toll
Free example, the caller terminates the call at the computer and
the call to the callee originates at the computer in Florida.
As to the Private Line, the computer originates the call in
Florida to both the callee and caller.

However, both Chapters 203 and 212, F.S., require that the
call originate or terminate and be billed to a Florida customer,
number, or device in Florida.

You indicated in your request that you did not have any
Florida customers and that the customers were billed in their
country. You further provided that the only presence in Florida
was the computer being located here and that the switching
occurred in Florida.

Therefore, based on the facts as presented, it is the
position of the Department that the amounts billed to taxpayer's
customers located out of the State of Florida are not subject to
the Florida Gross Receipts Tax or the Florida Sales 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 nay subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the
request or the response.

Sincerely,

James E. Silvey
Tax Law Specialist
Technical Assistance

JES/jes