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