Were sales of an emergency-information service, annual renewals, and the Florida dealer's commissions subject to Florida sales tax?

Plain-English summary

The Florida Department of Revenue concluded that neither the provider's emergency-information service nor the authorized dealer's commission was subject to sales tax. The service stored a customer's medical and other emergency data in New Mexico and made it available through a toll-free number shown on a small card.

The Department said the service was not one of the services made taxable under Chapter 212. The emergency-information card also was not taxable tangible personal property because it had no intrinsic value; its value came only from the service access it evidenced.

The same result applied to the initial $19.95 customer payment and the annual $9.95 renewal. The dealer retained $14 from the initial transaction and $5 from a renewal, but those commissions arose from nontaxable service sales. The dealer still owed sales or use tax on the cost of materials and supplies used to market and sell the service.

What this means for you

Information-service dealers

A physical access or identification card did not turn this service into a sale of property because the card had no standalone value. The ruling treated the customer as buying the information service.

Service providers

The tax result depended on the service being outside the categories Chapter 212 taxed and on the card merely evidencing service access.

Accountants and tax professionals

Separate the tax treatment of customer receipts and commissions from the dealer's own purchases. The service receipts were nontaxable here, while materials and supplies consumed in making sales remained subject to sales or use tax.

Common questions

Q: Was the emergency-information card taxable property?
A: No. The ruling said it had no intrinsic value and derived its value solely from the services it evidenced.

Q: Were annual renewal fees taxable?
A: No. The advisement applied the same nontaxable treatment to initial service purchases and renewals.

Q: Was the dealer's retained commission taxable?
A: No. The dealer was selling neither tangible personal property nor a taxable service.

Q: Did the dealer owe any sales or use tax?
A: Yes. It owed tax on the cost price of materials and supplies used to sell the service to the public.

Citations and references

• Fla. Stat. §§ 212.02(19), 212.05(1)(a)1.a. and (b), and 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-005

Original ruling text

SUMMARY

The sales of emergency services by the provider of such
services, and the commissions received by an authorized
representative of the provider, are not sales of tangible
personal property nor sales of taxable services and are
therefore not subject to tax.

Jan 23, 1997

Re: TAA 97A-005
Taxability of Commissions Received From Sales of Emergency
Information Services
Sections 212.05(1)(a)1.a., and (b), 212.02(19), F.S.

Dear :

This is in response to your letter of September 12, 1996,
in which you requested the issuance of a technical assistance
advisement regarding the taxability of the commissions received
by your company from its sales of the emergency information
services provided by XXX ("Provider"), to individuals in this
State. When a customer purchases the services, the customer is
issued a small card ("emergency information card") indicating
the type of emergency data on the customer that is kept by
Provider and setting forth a toll-free number which will allow
medical personnel and others to access such data. You provided
us with a copy of the emergency information services application
and your dealer agreement with Provider.

FACTS

You have signed a dealership agreement with Provider, of
Albuquerque, New Mexico, for the purpose of acting as Provider's
authorized representative, in selling Provider's emergency
information services to the public. Provider charges each
dealer $3995.00 for the complete business program package which
entitles the dealer to function as an independent contractor in

selling Provider's services. Upon payment of the dealership
fee, each dealer is provided with items such as an initial
supply of 250 emergency information cards, and certain marketing
aids (such as display stands, brochures, mail order advertising
and a set of training materials) to assist the dealer in selling
Provider's emergency information services.

To generate the sales of the emergency information services
offered by Provider, your company distributes application forms
via display racks, direct mail, etc., in your area. Should an
individual wish to enjoy the services offered by Provider and
obtain an emergency information card, he or she must fill out an
emergency information application form in which certain
information about the applicant is to be set forth as well as an
authorization for the release of such information. The
applicant must attach,to the application, a check made payable
to your company for $19.95, and then must mail or deliver both
to your company. Your company keeps a copy of the completed
application form, and mails the original and a check for $5.95
to Provider. The $14.00 difference represents your company's
commission from the transaction.

A completed emergency information application form covers
medical information, last will and testament contracts, missing
person information, and identification numbers of personal
property of the card holder which can be faxed to the
appropriate person or authority by Provider located in New
Mexico. This information is accessed by calling a toll-free
number set forth on the emergency information card.

The services can be renewed each year by a cardholder. The
dealer receives $5.00 of each $9.95 renewal fee.

APPLICABLE AUTHORITY

Section 212.05(1)(a)1.a., and (b), F.S., provides in part:

212.05 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 in this state..., or who rents

or furnishes any of the things or 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:

(a)1.a. At the rate of 6 percent of the sales price of each
item or article of tangible personal property when sold at
retail in this state, computed on each taxable sale for the
purpose of remitting the amount of tax due the state, and
including each and every retail sale....

(b) At the rate of 6 percent of the cost price of each item
or article of tangible personal property when the same is
not sold but is used, consumed, distributed, or stored for
use or consumption in this state.

With respect to the definition of tangible personal property,
Section 212.02(19), F.S. provides in pertinent part as follows:

"Tangible personal property" means and includes personal
property which may be seen, weighed, measured, or touched
or is in any manner perceptible to the senses.... The term
"tangible personal property" does not include stocks,
bonds, notes, insurance, or other obligations or
securities; intangibles as defined by the intangible tax
law of the state....

The service provided by Provider is not the type of service
which is per se made subject to sales tax under Chapter 212.

The emergency information card does not constitute tangible
personal property. It has no intrinsic value in and of itself.
Its value is derived solely from the available services that the
card evidences.

Therefore, since the dealer is selling neither tangible
personal property nor a taxable service, the amount paid by
individuals to either initially secure an emergency information
card and the attendant services, or to renew such card, is not

subject to tax.

However, you would owe sales or use tax on the cost price
of any materials and supplies used to sell the service to the
public.

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 on 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 than
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 which 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 the response.

Sincerely,

Richard S. Harrod
Senior Tax Specialist
Tax policy and Dispute Resolution

RSH/h
Control No. 26534