Were separately stated electronic market-data services subject to Florida sales tax?

Subject

Electronically Displayed Information Services

Plain-English summary

The separately stated basic and optional financial-information services transmitted to Florida customers' video screens were not subject to sales tax. The Department treated the electronic images as a service rather than tangible personal property or a taxable information service.

Separately charged leases of computer terminals remained taxable. The provider also had to remit sales tax it had already collected on the electronic information services unless it first refunded that tax to customers; after a refund, the ruling allowed a refund application or credit within the stated 36-month period.

What this means for you

The ruling separated the electronic information charge from the equipment charge. Printed information, bundled pricing, or a transaction centered on leasing equipment could receive different treatment.

Common questions

Were real-time market quotations displayed on screen taxable? No, on the described separately stated service charges.

Were leased computer terminals taxable? Yes.

Could the provider keep tax it had collected by mistake? No. It had to remit the tax unless it first refunded the customer, after which the ruling described a refund or credit procedure.

Citations and references

• Fla. Admin. Code rr. 12A-1.014, 12A-1.062(1), (4), (5), and 12A-1.071
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94A-049

Original ruling text

Aug 23, 1994

Re: Technical Assistance Advisement (TAA) 94A-049 Sales and Use Tax - Electronically Displayed Information Services XXX (Herein "Taxpayer") Business Address: XXX

Dear :

In reply to your May 6, 1994, request for the Department's issuance of a Technical Assistance Advisement (TAA) pursuant to the provisions of Section 213.22, Florida Statutes (F.S.), and Chapter 12-11, Florida Administrative Code (F.A.C.), your request has been examined and the Department finds it to be in compliance with the requisite criteria set forth in Chapter 1211, F.A.C. Therefore, the Department is herewith granting your request for the issuance of a TAA.

DISCUSSION OF FACTS

Your letter discusses the services provided by Taxpayer, in pertinent part, as follows:

"[Taxpayer] domiciled in XXX, provides standard market quotations and data base information for the investment and brokerage community. Market data quotations are provided for stocks, options, bonds, commodities and other market data. The database system offers world-wide industry news, commentaries on all U.S. exchanges, market coverage on Ginnie Maes, T-Bills and commercial paper, federal funds rates, futures quotations, foreign exchange rates, etc. This common information can be accessed by any client. The information is neither personal nor individual in nature to any single client. Each client receives certain basic information services, the nature of which varies depending on the type of equipment that they use. The basic services are normally included in a base charge. In addition, numerous other optional information services are offered

which the client may select and for which there are additional separately stated charges.

"The information is furnished to clients on a real time basis, that is, it is distributed from the company's central processing facilities located in XXX via phone lines or satellite directly to a terminal located at the client's office location. The terminals can be either interactive microcomputer-based workstations (personal computers) or unintelligent terminals, both of which would be provided by the taxpayer. At the client's option, the information displayed on the video terminal can be printed. This is accomplished by using a printer leased from the taxpayer or by using a printer that the client purchased for itself for this purpose. The taxpayer is unable to track or otherwise determine whether and in what amount a client has activated its printer to make a printed copy of the financial information electronically displayed on video terminals. The taxpayer's service does not require the use of a printer and there are no charges to the client associated with printing of the information furnished.
...

"[Taxpayer] employs two primary billing formats in its monthly invoicing to clients....

"Under one billing format, Exhibit III-B, the client receives a separately itemized invoice. Separate charges are billed for (1) computer terminals (if leased from
[Taxpayer]), (2) the basic market quotation and data base information (provided to all clients) and (3) numerous other optional services (which must be selected by the client for which there are additional charges for each separate option service selected by the client). Currently,
[Taxpayer] is charging sales tax on each of these itemized charges...."

Based on a review of Exhibit III-B and our telephone conversations, optional services are distributed in the same manner as the basic services, electronically to the customer via phone lines or satellite directly to a terminal located at the

client's office location. Such optional services include the electronic transmission of financial information, such as market summaries, news/ticker service charges, S&P marketscope charges, XXX ticker services, snap quote services, and scrolling headline news. Optional services are electronically transferred to a display screen at the client's office location.

RULING REQUESTED

Your petition requests the following:

"... The taxpayer is applying sales tax in accordance with the letter ruling received from the Florida Department of Revenue, dated July 24, 1986 (Exhibit I). Note that this letter ruling was issued prior to the holdings in the Henley and Quotron cases and amended Rule 12A-1.062(4) referred to in section IV below.

In light of these court decisions and amendment to Rule 12A-1.062(4), the taxpayer is requesting a [T]echnical
[A]ssistance [A]dvisement concerning the taxability of its charges to clients for the separately itemized basic and optional financial services provided to its clients via electronic video display.
...
"The facts as stated herein have not materially changed from prior years. Therefore, the taxpayer requests retroactive effect of this ruling to years open under the Statute of Limitations."

APPLICABLE ADMINISTRATIVE CODE AND CASE LAW

In Department of Revenue, State of Florida vs. Quotron Systems, Inc., 615 So. 774 (Fla. 3rd DCA 1993) the Court determined that there was no indication supporting the Department's contention that the term "tangible personal property" includes the conveyance and display on customer terminals of commodity price quotations and other financial news. The court concluded that Quotron was engaged in a service transaction with the assistance of equipment, as opposed to being in the business of leasing the equipment for which the

service is only supplemental.

Similar decisions were also rendered in Henley Holdings Inc. v. Department of Revenue, No. 89-4381 (Fla. 2d Cir. Ct. July 22, 1991), aff'd 599 So.2d 1282 (Fla. 1st DCA 1992) and Attorney's Title Insurance Fund, Inc. v. Department of Revenue of the State of Florida, No. 91-1832 (Fla. 2d Cir. Ct. May 13, 1992).

Post resolution of the court cases discussed above, the Department's position is that the charge for furnishing information by way of electronic images which appear on the subscriber's video display screen does not constitute a sale of tangible personal property nor does it constitute the sale of a taxable information service.

The Department has promulgated revisions to Rule 12A-1.062, F.A.C., which governs the imposition of sales tax on information services. The promulgated changes to Rule 12A-1.062, F.A.C., effective September 14, 1993, in pertinent part, reflect the Department's current position as follows:

"(1) The sale of information services involving the furnishing of printed, mimeographed, multigraphed matter, or matter duplicating written or printed matter, other than professional services and services of employees, agents, or other persons acting in a representative or fiduciary capacity, are taxable.
...
"(4) The charge for furnishing information by way of electronic images which appear on the subscriber's video display screen does not constitute a sale of tangible personal property nor does it constitute the sale of a taxable information service. "(5)(a) Providers of information services are considered the ultimate consumers of tangible personal property, such as display terminals, central processing units, and other equipment that is used in providing information services and are required to pay tax on the acquisition of tangible personal property used in providing such service. "(b) When providers of information services make a separate

charge to subscribers for the use, rental, lease, or license to use tangible personal property the charge is subject to tax. For the purchase of tangible personal property for which a separate rental charge is made see Rule 12A-1.071, F.A.C."

DEPARTMENT'S DETERMINATION

The electronic transmission by Taxpayer of financial information distributed from the company's central processing facilities located in XXX via phone lines or satellite directly to a terminal located at the client's office in Florida does not constitute the sale of a taxable information service and is exempt pursuant to Rule 12A-1.062(4), F.A.C. Taxpayer should discontinue its collection of Florida sales tax on separately stated basic market quotation and data base information and optional financial information services that are electronically transmitted. Taxpayer should continue to collect and remit Florida sales tax on the lease of computer terminals.

Sales tax collected by Taxpayer from its customers for financial information services that are electronically displayed must be remitted to the Department, unless the sales tax collected from the customer and remitted to the state is first refunded to the customer. Rule 12A-1.014, F.A.C., provides that Taxpayer may apply for a refund or take a credit for refunded taxes on any subsequent sales tax return filed within 36 months of the date on which Taxpayer remitted the tax to the Department. A copy of Form DR-26, Application for Refund from the State of Florida Department of Revenue, is enclosed.

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 upon 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 from that which is 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 that 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 this response.

Sincerely,

Janet L. Young
Tax Law Specialist

JLY/pb
Control #15609