Was a mandatory $125 initiation fee for access to a computerized real-estate multiple-listing database subject to Florida sales tax?

Subject

Initiation Fee for Multiple Listing Service

Plain-English summary

The Department concluded that the one-time $125 initiation fee was not subject to Florida sales tax. The company provided real estate professionals with monthly access to a computerized multiple-listing-service database and charged the initiation fee before activating each terminal.

The fee covered customer setup tasks such as entering billing information, completing a customer profile, verifying addresses, and establishing credit for future billing. But the Department focused on the fee's required connection to database access: a customer could not use the database without paying it.

Florida's cited rule distinguished taxable printed or duplicated information products from information furnished as electronic images on a subscriber's display screen. Electronic-screen delivery was neither a sale of tangible personal property nor a taxable information service. Because the monthly database access was nontaxable and the initiation fee bought the right to obtain that access, the initiation fee was nontaxable too.

What this means for you

Under the rule applied in this 1997 ruling, a mandatory setup fee followed the tax treatment of the electronic service it unlocked. Describing the fee as data entry, account setup, or credit verification did not separate it from the right of access.

The ruling also distinguished equipment charges. Customers could use their own terminals or lease equipment from the provider, and the provider collected sales tax on separately stated equipment-lease fees.

Common questions

Q: Was the initiation fee optional? No. Every new customer had to pay it before service was activated.

Q: Was the fee charged once per customer? The ruling described it as a one-time charge of $125 per terminal.

Q: Why was database access nontaxable? The information appeared electronically on the subscriber's display screen rather than being furnished as taxable printed or duplicated material.

Q: Were leased computer terminals also nontaxable? No. The provider stated that it charged sales tax on the separately stated equipment-lease fee.

Citations and references

• Fla. Stat. § 212.08 — cited in the advisement heading
• Fla. Admin. Code R. 12A-1.062(1), (3), and (4) — printed information services, definition of information services, and electronic-screen delivery
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-029

Original ruling text

May 01, 1997

Re: Technical Assistance Advisement 97A-029 Sales and Use Tax - Initiation Fee for Multiple Listing Service Section: 212.08, F.S. Rule: 12A-1.062, F.A.C. Petitioner: XXX (herein "Taxpayer") FEI: XX

Dear :

This is a response to your petition received January 9, 1997, for the Department's issuance of a Technical Assistance Advisement ("TAA") concerning the above referenced party and matter. Your petition has been carefully examined and the Department finds it to be in compliance with the requisite criteria set forth in Chapter 12-11, F.A.C. This response to your request constitutes a TAA and is issued to you under the authority of s. 213.22, F.S.

Discussion of Information

The following information was provided either in your letter or in the attachments which accompanied your letter:

Taxpayer offers a computerized multiple listing service data base for real estate professionals. Each new customer is required to pay a $125 initiation fee upfront, prior to service being activated. This initiation fee is charged only once. The initiation fee is used to cover expenses associated with: 1) data entry of customer information into the billing system, 2) completion of a customer profile, 3) verification of billing and mailing addresses, and 4) verification of credit setup for future billing.

The Subscriber Agreement (hereafter Agreement) provides that the customer must pay for the information services described in the Agreement at the current per terminal rates stated in the attached Price Schedule. The Agreement further states that one copy of the Agreement and one copy

of the Price Schedule should be signed and returned to Taxpayer with a check for the appropriate Initiation Fee and first and last month's service charges. The Price Schedule lists the following in relation to the initiation fees:

"ONE-TIME CHARGES PER TERMINAL

$125.00 Initiation of Service"

You stated that the initiation fee is separately stated on the invoice presented by the Taxpayer and is charged per terminal, regardless whether the customer owns the terminal or leases it from Taxpayer.

You stated that the initiation fee is a prelude to subsequent services provided by the Taxpayer to its customers. Taxpayer charges a monthly services fee to its customers for monthly access to the data base which contains the real estate multiple listings. You asserted that the Taxpayer does not charge sales tax on this monthly service fee because it is a nontaxable service fee and that this item has been audited by the Florida Department of Revenue, Pittsburgh Office.

You stated that the Taxpayer offers its customers the option to use their own equipment or to lease equipment from the Taxpayer. You stated that sales tax is charged on the separately stated equipment lease fee.

REQUESTED ADVISEMENT

Is the above described initiation fee subject to tax?

DISCUSSION, ANALYSIS AND CONCLUSION OF LAW

Rule 12A-1.062, F.A.C., provides in part:

(1) The sale of information services involving the furnishing of printed, mimeographed, multigraphed matter, or matter duplicating written or printed matter... are

taxable....

(3) "Information Services" means and includes the services of collecting, compiling, or analyzing information of any kind or nature, or furnishing reports thereof to other persons. The charge for furnishing information services, such as newsletters, tax guides, research publications, and other written reports of compiled information, which are not produced for and provided exclusively to a single customer, is 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....

Based on the facts presented, the initiation fee must be paid before the customer is allowed access to the database, and the customer is not allowed access to the database unless such fee is paid. Therefore, the initiation fee is not optional and is considered to be for the right to access the database.

Pursuant to the above regulatory cite, the charge for furnishing information by way of electronic images is not subject to tax. From the information provided, it appears that the Taxpayer's charge for accessing its database is for furnishing information by way of electronic images. Therefore, it is not subject to tax. Since the initiation fee is tied to the charge for accessing the database, the initiation fee is also not taxable.

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,

Leigh L. Ceci
Tax Law Specialist

Enclosure
Control #27517