What did Florida's original 1995 ruling say about dial-up Internet access, setup charges, residential use, business use, and homepage advertising before it was amended?

Plain-English summary

This original ruling was amended and replaced by TAA 95A-025R on October 3, 1995.

The original tax treatment classified the provider's monthly dial-up Internet and email access as telecommunications service. The provider owed the stated 2.5% gross receipts tax on recurring charges from all Florida subscribers.

Business users owed the stated 7% sales tax plus applicable county surtax. Residential subscribers using the service only for nonbusiness purposes were exempt from sales tax and surtax if the provider retained their electronic use declarations.

The one-time setup charge was exempt from both gross receipts tax and sales tax. Homepage advertising charges were also exempt from both taxes.

The later TAA 95A-025R replaced this ruling to revise the registration guidance. It should be used instead of this original response.

What this means for you

This page is historical. The original charge-by-charge holdings explain the Department's 1995 analysis, but the Department formally replaced the ruling with TAA 95A-025R.

Common questions

Q: Is this the final Department response?
A: No. TAA 95A-025R amended and replaced it.

Q: What recurring charges did the original ruling subject to gross receipts tax?
A: Monthly access charges from all Florida subscribers.

Q: When did the original ruling impose sales tax?
A: On business use, including business use from a residence, plus applicable county surtax.

Q: What did it exempt?
A: Documented nonbusiness residential access, the required one-time setup charge, and homepage advertising charges.

Citations and references

• Fla. Stat. §§ 203.01(1), 203.012(2)(b), (5), and (6) — gross receipts tax and telecommunications
• Fla. Stat. § 212.05 — sales tax on telecommunications
• Fla. Stat. § 212.08(7)(j) — residential household utility exemption
• Fla. Admin. Code r. 12A-15.003 — county surtax rule cited in the original ruling
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95A-025

Original ruling text

Status: Amended by TAA 95A-025R, dated October 3, 1995

Jun 28, 1995

Re: Technical Assistance Advisement 95A-025
Sales and Use Tax and Gross Receipts Tax - Internet
Services
Sections 203.01(1), 203.012(2)(b), (5), (6), 212.05, and
212.08(7)(j), F.S.
Petitioner: XXX (Herein "Taxpayer")
FEI: XXX

Dear

This response is in reply to your petition dated April 6,
1995, for the Department's issuance of a Technical Assistance
Advisement concerning the above referenced party and matter.
Your letter dated January 20, 1995, providing information and
documentation regarding the above referenced matter, has also
been carefully examined. The Department finds your latest
request to be in compliance with the requisite criteria set
forth in Chapter 12-11, F.A.C. This response constitutes a
Technical Assistance Advisement under Chapter 12-11, Florida
Administrative Code, and is issued to you under the authority of
s. 213.22, F.S.

Your letter dated January 20, 1995, provides the following
pertinent information on your company's services:

"[Taxpayer] is a new company formed in the fourth quarter
of 1994. [Taxpayer] is a dial-up service which provides
its customers access to the XXX via the customer's own
computer and modem. Customers will be billed on a monthly
basis beginning this month. In addition, certain
commercial interests, such as XXX, local realtors,
restaurants, etc., have purchased ad space on the `home
page' of the service, accessible only by customers'
computers. These commercial customers are charged, in
addition, for access by customers based upon the megabyte

utilization of their space and by the customers'
inquiry..."

The copy of the advertisement placed in the XXX describes
Taxpayer's "E-Mail" and "XXX" services as follows:

"E-Mail:
*

Personal mailbox

*

Simple e-mail address: `XXX'

*

Send e-mail worldwide

...
"XXX:
*

Full access to all sites

*

Local business services: real estate, restaurants,
movies & many more coming soon...

*

Personalized user home pages

*

Image & sound archives

*

Online help & hypertext manuals"

The brochure supplied with your letter, dated April 6,
1995, provides that Taxpayer offers "Personal Terminal Accounts"
with unlimited usage for XXX per month; "XXX" with unlimited
usage at a price of XXX per month plus a XXX one-time setup
charge; and "Dedicated Line Accounts and Groups Accounts" at
customized prices.

The brochure also provides the following concerning the
charge for ad space on the "home page" of the service:

"... If you are a business or a user with a large amount of
information you would like to advertise locally to all
computer users, and in fact, to the world, we can handle as
much information as you can give us for a very reasonable
production cost, and a low monthly fee based on the size
and Internet usage of your document...."

Your letter, dated April 6, 1995, provides the following
response as to whether each subscriber is purchasing the network
access at a residence solely for non-business use:

"We are including a `check-box' on our dial-up electronic

subscription form to allow users to indicate the type of
use. We have no independent knowledge of this."

STATUTORY AND ADMINISTRATIVE AUTHORITY

A review of pertinent statutory and administrative
authority would be helpful in our discussion of the taxability
of the services provided by Taxpayer. Chapter 203, Florida
Statutes (F.S.), imposes the Florida gross receipts tax and
Chapter 212, F.S., imposes the Florida sales and use tax.

Gross Receipts Tax

Section 203.01(1), F.S., provides in part:

"(1)(a) Every person that receives payment for any utility
service shall report by the last day of each month to the
Department of Revenue, under oath of the secretary or some
other officer of such person, the total amount of gross
receipts derived from business done within this state, or
between points within this state, for the preceding month
and, at the same time, shall pay into the State Treasury an
amount equal to a percentage of such gross receipts at the
rate set forth in paragraph (b)....
"(b) ... [B]eginning July 1, 1992, and thereafter, the rate
shall be 2.5 percent."

Section 203.012(2)(b), F.S., provides in part:
"(b) Gross receipts for telecommunication services do not
include:
...
"4. Connection and disconnection charges; move or change
charges; suspension of service charges; and service order,
number change, and restoration charges; or..."

Section 203.012(5) and (6), F.S., provides in part:

"(5) The term `telecommunication service' means:
"(a) Local telephone service, toll telephone service,
telegram or telegraph service, teletypewriter or computer
exchange service, or private communication service,...

***
"(6) The term teletypewriter or computer exchange service' means the access from a teletypewriter, telephone, computer or other data station of which such station is a part, and the privilege of intercommunication by such station and with substantially all persons having teletypewriter, telephone, computer, or other data stations constituting a part of the same teletypewriter or computer exchange system, to which the subscriber or user is entitled upon payment of a charge or charges, whether such charge or charges are determined as a flat periodic amount, on the basis of distance and elapsed transmission time, or some other method. The termteletypewriter or computer
exchange service' does not include local telephone service
or toll telephone service." (Emphasis Supplied)

Sales and Use Tax

Section 212.05, F.S., provides in part:

"Sales, storage, use tax. - 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... services taxable under this chapter....
"(1) For the exercise of such privilege, a tax is levied on
each taxable transaction or incident, which tax is due and
payable as follows:...
"(e)1. At the rate of 6 percent on charges for:
"a. All... telecommunication service[s] as defined in s.
203.012... except that the tax rate for telecommunication
service is 7 percent....
"3. Telegraph messages and telecommunication services which
originate or terminate in this state, other than interstate
private communication services, and are billed to a
customer, telephone number, or device located within this
state are taxable under this paragraph...." (Emphasis
added)

Section 212.08(7)(j), F.S., provides in part:

"(j) Household fuels. - Also exempt from payment of the tax
imposed by this chapter are sales of utilities to
residential households or owners of residential models in
this state by utility companies who pay the gross receipts
tax imposed under s. 203.01,..."

Discretionary Sales Surtax

Rule 12A-15.003, F.A.C., provides in part:

"(1) All transactions occurring in a county imposing the
surtax which are subject to the state tax imposed on sales,
use, rentals, admissions, and other transactions by Part I
of Chapter 212, F.S., are subject to the surtax....
"(2) For purposes of the surtax, a transaction, except for
a transaction involving any motor vehicle or mobile home of
a class or type which is required to be registered in this
state or in any other state, shall be deemed to have
occurred in a county imposing the surtax when:...
"(f)1. The consumer of utility, or wired or cable
television services is located in a county imposing the
surtax, or the telecommunication services are provided to a
location within a county imposing the surtax.
"2. Each dealer that provides utility services, wired or
cable television, or telecommunication services in a county
that imposes the surtax, shall register for sales tax
purposes in the county in which the consumer of the
utility, wired television, or telecommunication services is
located...."

DETERMINATION

Recurring and Set-up Charges

Taxpayer's services provide subscribers the ability to
intercommunicate with other users, through "E-Mail" and "XXX,"
in exchange for a monthly fee. Under the provisions of s.
203.012, F.S., Taxpayer is providing a telecommunication service
to its subscribers. Taxpayer, as a telecommunication service
provider, is required to pay to the Department a gross receipts
tax at the rate of 2.5 percent of the total receipts received

from recurring charges to all its Florida subscribers and is
required to collect sales tax from its Florida subscribers,
unless the charges are specifically exempt, as discussed below.

The required XXX one-time setup charge for "XXX" is exempt
from gross receipts tax under the provisions of s.
203.012(2)(b)4., F.S., as a connection charge, and is exempt
from sales tax. Taxpayer is not required to remit gross receipts
tax and is not required to collect sales tax from its
subscribers on such setup charges.

Taxpayer is required to collect sales tax from its Florida
subscribers who purchase access for business use at the rate of
7 percent, plus any applicable discretionary sales surtax, on
the stated monthly recurring charges for "Personal Terminal
Accounts" (XXX per month) and "XXX" (XXX per month), and any
agreed monthly recurring charges for "Dedicated Line Accounts
and Groups Accounts." Taxpayer is also required to collect the
discretionary sales surtax at the county's rate from subscribers
located in a county imposing a surtax.

Taxpayer is not required to collect sales tax or
discretionary sales surtax from residential subscribers who
purchase access only for non-business purposes. Taxpayer must
collect the 7 percent sales tax, plus any applicable
discretionary sales surtax, from residential subscribers which
purchase the access for business purposes. Taxpayer is required
to remit the gross receipts tax on the monthly recurring charges
whether the subscribers are businesses or are residential
subscribers purchasing the service only for non-business
purposes.

Taxpayer is currently requiring subscribers to indicate the
type of use, business versus non-business use, on its electronic
subscription form. Taxpayer must maintain the electronic
subscription forms to document that the subscriber has indicated
to Taxpayer that the network access is being subscribed to for
either business or non-business use, even when network access is
initiated from a residence.

Charges for Ad Space

Taxpayer also sells certain commercial interests ad space
on the "home page" of the service. Taxpayer bases the charge
for the ad space upon the megabyte utilization of their space
and the number of customers' inquiries. Such charges are for
advertising services which are not subject to sales tax.
Taxpayer is not required to collect tax on charges to certain
commercial interests for the purchase of ad space on the "home
page" of the service. Gross receipts tax does not apply to these
charges for ad space.

Registration

Taxpayer is required to register with the Department to
remit the gross receipts tax. Taxpayer is also required to
register with the Department as a sales tax dealer in each
county in which subscribers using the network access for
business purposes are located. Copies of the completed
Application for Sales and Use Tax Registration (Form DR-1) and
the completed Application for Certificate of Registration Gross
Receipts Tax (Form DR-1GR) were received by this office on March
25, 1995. These completed applications were previously
submitted to Application Acceptance for processing.

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 #20745