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