Under Florida's 1995 rules, how were tiered Internet access, startup charges, residential and business users, county reporting, and separately stated gross receipts tax treated?

Plain-English summary

Florida treated the company's tiered Internet access as telecommunications service under the 1995 tax rules. The provider owed 2.5% gross receipts tax on charges from all Florida subscribers.

Monthly charges to commercial subscribers and any subscriber using the service for business were subject to the stated 7% sales tax plus applicable county surtax, even if billed to a residence. Solely nonbusiness residential access was exempt from sales tax and surtax. One-time startup charges were exempt from gross receipts tax, sales tax, and surtax as connection or service-order charges.

The provider had to register where it had a physical business location, source subscribers by billing address, report collections by county, and request consolidated and county-reporting numbers for its multicounty commercial customer base.

Gross receipts tax was imposed on the provider, not the customer. The provider could separately state it on the bill, but remained liable. If separately stated, the amount became part of the charge subject to sales tax and surtax; the ruling illustrated that tax-on-tax calculation with billing examples.

What this means for you

This historical ruling separated recurring access from startup charges, residential from business use, provider liability from bill itemization, and physical-location registration from county-by-county reporting.

Common questions

Q: Was monthly Internet access subject to gross receipts tax?
A: Yes. The provider owed the stated 2.5% tax on all Florida subscriber charges.

Q: Which subscribers owed sales tax?
A: Commercial and business-use subscribers. Solely nonbusiness residential users were exempt.

Q: Were startup charges taxable?
A: No. The ruling exempted the stated one-time startup charges from gross receipts tax, sales tax, and surtax.

Q: Could the provider list gross receipts tax separately?
A: Yes, but it remained the provider's tax, and the separately stated amount was included in the sales-tax base.

Q: Could the provider report multiple counties with one payment?
A: Yes. The ruling directed it to use consolidated reporting while separately showing each county's collections.

Citations and references

• Fla. Stat. §§ 203.01(1), (5), (6), (7), 203.012(2)(b), (5), (6) — gross receipts tax and telecommunications
• Fla. Stat. §§ 212.05, 212.08(7)(j) — sales tax and residential exemption
• Fla. Stat. §§ 212.054(3)(c), 212.11(1)(d) — county surtax and consolidated reporting
• Fla. Admin. Code rr. 12A-1.046(1), 12B-6.001 — telecommunications and gross receipts tax
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95A-044

Original ruling text

Sep 22, 1995

Re: Technical Assistance Advisement 95A-044
Sales & Use Tax and Gross Receipts Tax - Internet Services
Sections 203.01(1),(5),(6),(7), 203.012(2)(b),(5),(6),
212.05, 212.054(3)(c), 212.08(7)(j), and 212.11(1)(d), F.S.
Rules 12A-1.046(1) and 12B-6.001, F.A.C.
Petitioner:

XXX (Herein "Taxpayer")

FEI: XXX

Dear :

This response is in reply to your petition dated August 1,
1995, for the Department's issuance of a Technical Assistance
Advisement concerning the above referenced party and matter.
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 August 1, 1995, provides the following
pertinent information on your company's services:

"Taxpayer is a Florida corporation with its offices in XXX.
We are a computer software and hardware provider and have
now begun providing Internet access and services. Our
company also does business under the name of XXX which was
registered as a fictitious name with the Department of
State on April 27, 1995. At this time we are providing
Internet access for XXX and XXX counties and all areas with
local phone access to those counties. We have plans to
expand to other Florida localities in the future."

"XXX", attached to your letter, provides a description of
Taxpayer's services which provide subscribers access to Internet
services in seven tiers of subscription levels. "TIER 1
subscription" provides the following example of Taxpayer's
services:

"TIER 1 subscription

"Up to 28.8 kbps Dialup SLIP/PPP or SHELL connection to the
Internet. Services to include WWW, gopher, ftp, usenet,
telnet, IRC & E-Mail. 50 Primetime hours per month and up
to 180 hours of Non-Primetime hours per month.

"Each additional Primetime hour, over 50 hours, will be
billed at $1.50 per hour in one hour increments. Each
additional Non-Primetime hour, over 180 hours, will be
billed at $1.00 per hour in one hour increments.

"Monthly $20.00

Startup $25.00"

The six additional subscription tier packages provide
subscribers features such as an increase in the number of
unlimited hours of usage per month, dedicated local dialup
access through private telephone number, no busy signal
guarantee, or dedicated digital access in exchange for an
increase in the monthly subscription fees and an increase in the
startup costs. All subscription tiers provide access to the
Internet services, including WWW, gopher, ftp, usenet, telnet,
IRC, and E-Mail.

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), (5), (6), and (7), F.S., provides, in
pertinent 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."

"(5) The tax imposed pursuant to this part relating to the
provision of any utility services at the option of the
person supplying the taxable services may be separately
stated as Florida gross receipts tax on the total amount of
any bill, invoice, or other tangible evidence of the
provision of such taxable services and may be added as a
component part of the total charge. Whenever a provider of
taxable services elects to separately state such tax as a
component of the charge for the provision of such taxable
services, every person, including all governmental units,
shall remit the tax to the person who provides such taxable
services as a part of the total bill, and the tax is a
component part of the debt of the purchaser to the person
who provides such taxable services until paid and, if
unpaid, is recoverable at law in the same manner as any
other part of the charge for such taxable services....

"(6) The tax is imposed upon every person for the privilege
of conducting a utility business, and each provider of the
taxable services remains fully and completely liable for
the tax, even if the tax is separately stated as a line
item or component of the total bill.
"(7) Any person who provides such services and who fails,
neglects, or refuses to remit the tax imposed in this part,
either by himself or through his agents or employees, is
liable for the tax and is guilty of a misdemeanor of the
first degree, punishable as provided in s. 775.082 or s.
775.083...."

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)

Rule 12B-6.001, F.A.C., provides in part:

"(2) Liability for Tax. The tax is levied upon the person
selling or providing the taxable item or service as
enumerated in subsection (1) and may not be passed on to
the consumer as a direct consumer's tax provided, however,
in the case of telecommunications service the tax may be
wholly or partially separately stated at the option of the
vendor. When separately stated, every person, including
but not limited to all governmental units, charitable, and
religious organizations, is liable for payment of the tax

to the vendor. The gross receipts tax is a tax on the
privilege of doing business and is an item of cost to the
seller or vendor. The vendor remains fully and completely
liable for the tax even though the tax is separately
stated." (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
Supplied)

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,..."

Section 212.11(1)(d), F.S., provides in part:

"(d) ... Any dealer who operates two or more places of
business for which returns are required to be filed with
the department and maintains records for such places of
business in a central office or place shall have the
privilege on each reporting date of filing a consolidated
return for all such places of business in lieu of separate
returns for each such place of business; however, such
consolidated returns must clearly indicate the amounts
collected within each county of the state." (Emphasis
Supplied)

Rule 12A-1.046(1), F.A.C., provides in part:

"(1)(a) Charges for all telecommunication services, as
defined in s. 203.012, F.S., and for those services
described in s. 203.012(2)(a), F.S., are taxable unless
expressly exempt.

"(b) The term telecommunication service as used in s.
203.012, F.S., includes, but is not limited to, services
described or defined therein as local telephone service,
toll telephone service, telegram or telegraph service,
teletypewriter or computer exchange service, private
communication service, cellular mobile telephone,
specialized mobile radio, and paging services.

"(c) The word `charges' in this rule does not include any
excise or similar taxes levied by the Federal Government,
any political subdivision of the state, or any municipality
upon the purchase or sale of telecommunication service or
on cable television service, which are collected by the
seller from the purchaser. The gross receipts tax (under
Chapter 203, F.S.) and any fees imposed by a political
subdivision are part of the charges subject to sales tax."
(Emphasis Supplied)

Discretionary Sales Surtax

Section 212.054(3)(c), F.S., provides:

"(3) For the purpose of this section, a transaction shall
be deemed to have occurred in a county imposing the surtax
when:

"(c) The consumer of utility, or wired or cable television
system program services is located in a county imposing the
surtax, or the telecommunication services are provided to a
location within a county imposing the surtax."

DETERMINATION

Recurring and Startup Charges

Taxpayer provides its subscribers the ability to
intercommunicate with other subscribers by access to Internet
services in exchange for a monthly fee. Under the provisions of
s. 203.012, F.S., Taxpayer is providing a telecommunication
service to its customers. 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 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 one-time startup charge, $25 or $100, for each
subscription tier is exempt from gross receipts tax under the
provisions of s. 203.012(2)(b)4., F.S., as a connection or
service order charge, and is exempt from sales tax. Taxpayer is
not required to remit gross receipts tax and is not required to
collect sales tax or discretionary sales surtax from its
subscribers on such startup charges.

Taxpayer is required to collect sales tax at the rate of 7
percent, plus any applicable discretionary sales surtax, on
monthly charges for its services to commercial subscribers which
are billed to a customer, telephone number, or device located in
Florida. Taxpayer is also required to collect the discretionary
sales surtax levied by the county where commercial subscribers
are located.

Taxpayer is not required to collect sales tax nor
discretionary sales surtax from residential subscribers who
purchase the service only for non-business purposes. Taxpayer
must collect the 7 percent sales tax, plus any applicable
discretionary sales surtax, from subscribers who purchase the
service for business purposes, even if billed to a residential
address. Taxpayer is required to remit the gross receipts tax
whether the subscribers are commercial or are residential
customers purchasing the service only for non-business purposes.

Sales Tax/Discretionary Sales Surtax Registration Requirements

Your letter, dated August 1, 1995, also requests specific
answers to additional questions. The first two questions relate
to the registration, collection, and remittance of sales tax,
stated as follows:

"1) In what counties are we required to register for sales
tax collection? If we are required to register in
multiple counties, how shall we determine in which
counties we must register?

"2) If we are required to register in counties other than
XXX where we are already registered, can we submit our
taxes under one registration number with one check or
must we submit a monthly Sales & Use Tax Return for
each county with a separate check for each county's
tax payment?"

Taxpayer is required to register with the Department as a
sales tax dealer in each county where it has a physical business
location. As stated in your letter, Taxpayer's only physical
location is in XXX and that location is currently registered
with the Department.

Taxpayer provides access to Internet services to its
subscribers in more than one Florida county. Section
212.054(3)(c), F.S., treats the transaction as occurring in
those other counties, and the dealer is therefore required to
clearly indicate the amounts collected within each county of the
State. Taxpayer should use the billing address of each

subscriber to determine the county in which its subscribers are
located and the applicable rate of sales tax to be collected.

To facilitate reporting sales tax and surtax, Taxpayer
should write a letter to the Department to request a
consolidated sales tax registration number and to request a
reporting sales tax number for all counties, other than XXX, in
which its commercial subscribers are located. The letter should
include Taxpayer's Federal Identification Number, XXX, and its
XXX location's Sales Tax Registration Number, XXX. This written
request should be mailed to:

David Young, Tax Specialist
General Registration
Florida Department of Revenue
5050 West Tennessee, Building F-4
Tallahassee, Florida 32399-0100

If Taxpayer provides access to Internet services for
commercial subscribers located in counties other than those
originally reported to the Department, Taxpayer will be required
to write an additional letter to inform the Department that it
will be collecting sales tax and any applicable surtax in the
county in which its new commercial subscribers are located. The
additional letter(s) should include Taxpayer's Federal
Identification Number, XXX, its XXX location's Sales Tax
Registration Number, XXX, and a list of additional counties in
which its new commercial subscribers are located. The letter
should be mailed to the address indicated above.

Each month, the Department will mail the consolidated sales
tax return packet to Taxpayer. If Taxpayer does not receive
such a packet on a timely basis, sales and surtax returns may be
secured from the Department through its automated forms request
line (1-800-352-3671) or through any local area service center.
Taxpayer will use the consolidated sales tax return packet to
report sales tax and discretionary sales surtax collected in
each county in which its commercial subscribers are located.
Taxpayer may remit the sales tax and discretionary sales surtax
due to the Department for all counties on a single check, even
though its sales tax collections are separately reported on the

completed consolidated sales tax return packet.

Gross Receipts Tax

The final question in your request relates to the
collection and payment of the gross receipt tax, as follows:

"3) Are we allowed to collect Gross Receipt taxes from our
customers? If so, must it be a separate line item,
like sales taxes, on our invoices?

Gross receipts tax is imposed on the seller, rather than
the customer. Gross receipts taxes in Florida are imposed on
the service provider's gross receipts for its services, even
though Chapter 203, F.S., allows the separate itemization of the
tax as a component of the total charge for the services.

As provided in s. 203.01(5), F.S., Taxpayer is allowed, but
not required, to separately state the Florida gross receipts tax
on the bill, invoice, or other tangible evidence of the
provision of telecommunication services. The amount separately
stated as Florida gross receipts tax is subject to sales tax,
plus any applicable discretionary sales surtax, as part of the
sales price. (Rule 12A-1.046(1), F.A.C.)

The following are examples of the different methods a
utility service provider may use in billing for utility
services, Florida gross receipts tax, and any applicable sales
tax and discretionary sales surtax.

EXAMPLE #1:

Telecommunication services:

$100.00

(No separate itemization of
gross receipts tax)
Florida sales tax
(Non-discretionary sales surtax county)
Total Amount Due From Customer

7.00
$107.00

GROSS RECEIPTS TAX DUE ON THIS METHOD OF BILLING:
$2.50 ($100 X .025)

FLORIDA SALES TAX DUE TO THE DEPARTMENT: $7.00

EXAMPLE #2:

Telecommunication services:

$100.00

Florida gross receipts tax
(separately stated)

2.50

Florida sales tax

($100 X .025)

(Non-discretionary sales surtax county)

7.18

Total Amount Due From Customer

$109.68

GROSS RECEIPTS TAX DUE ON THIS METHOD OF BILLING:
$2.56 ($102.50 X .025)
FLORIDA SALES TAX DUE TO THE DEPARTMENT: $7.18

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
Tax Policy and Dispute Resolution

JLY/pb
Control #23235