Was a fee for electronically transmitted cable-subscriber lead information subject to Florida sales tax?

Plain-English summary

The fee for electronically transmitted cable-subscriber lead information was not subject to Florida sales tax. The company sent each cable operator a customized report by email or computerized facsimile, so no tangible personal property changed hands.

The free brochure mailed to each subscriber produced a different result. The company was the ultimate consumer of those physical brochures and had to pay tax to the printer when purchasing them.

Receipt method also mattered for faxing. Electronic receipt on a computer remained nontaxable, but if a commercial facsimile service printed the information on paper and charged the cable operator, that printed-copy fee was taxable tangible personal property.

What this means for you

This ruling distinguished the electronic information transaction from physical items used to support it. A nontaxable digital lead service can still involve taxable printing purchases or printed delivery charges.

Businesses also had to keep records adequate to establish which transactions were electronic and which involved tangible property.

Common questions

Q: Were per-name fees paid by cable operators taxable? No, when the reports were delivered electronically without tangible property.

Q: Did mailing a free brochure make the lead fee taxable? No, but the lead company owed tax as consumer when buying the brochures.

Q: Was an ordinary paper fax taxable? A commercial fax location's charge for producing a printed copy was taxable to the cable operator.

Q: Did email or computer-fax delivery remain nontaxable? Yes, so long as the compiled information stayed in electronic form.

Citations and references

• Fla. Stat. § 212.02(15), (16), and (19) — sale, sales price, and tangible personal property
• Fla. Stat. § 212.05 — tax on retail tangible personal property
• Fla. Stat. §§ 212.12(6), 212.13(2), and 213.35 — recordkeeping duties
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-045

Original ruling text

Jul 08, 1997

Re: Taxability of Cable Advertising Transaction
Technical Assistance Advisement 97(A)-045

Dear :

This is in response to your letter dated March 21, 1997,
received Mar 25, 1997, in which you request an advisement on
behalf of XXX, (Company), on the above referenced matter. This
reply constitutes a Technical Assistance Advisement (TAA)
pursuant to s. 213.22, F.S.

STATED FACTS

You provide the facts of your request, in part, as follows:

The Company contracts with cable TV operators to run an
informational advertisement on cable systems. The ad asks
viewers who may be interested in purchasing a satellite
entertainment system to call a toll-free telephone number
to obtain a free brochure entitled XXX (copy attached as
Exhibit A). An address and telephone number for the
Company's independent telemarketing center is provided.
The Company pays for production of the informational
advertisements and provides them to the CATV operator at no
charge which, in turn, runs the advertisements at no charge
to the Company.

The telemarketing center receives the phone calls and
requests each caller to answer eight (8) questions
(questionnaire attached as Exhibit B). The information
collected is compiled and transmitted via phone line from
telemarketing computer to Company's computer where it is
sorted and immediately transmitted by either e-mail or
facsimile directly from the Company's computer to the
respective cable TV system to which the caller subscribes
(report sample attached as Exhibit C). The Company then
mails the free brochure to the cable subscriber.

The cable TV operator at this point will pay a fee to the
Company of an established amount for each name submitted.

Relevant Facts

1) All transmission of Company reports is by e-mail or
computerized facsimile - there is no hard copy
production and mailing.
2) The Company sells only the compiled information - it
does not sell satellite dish equipment and is not
affiliated with any entity that does.
3) Each CATV operator receives an individual report.
Since CATV franchises are specifically licensed by
location to be served, the Company can tell by a
respondent's address which operator services his area.
Thus, a single report is not issued to multiple CATV
operators.

REQUESTED ADVISEMENT

You ask:

1) Is the electronic communication of the compiled
information coupled with the mailing of the free brochure
to the cable subscriber exempt from Florida sales tax?

2) Does it make a difference if information faxed to the
cable operator is received by the operator on a regular fax
machine (paper) as opposed to being received by e-mail or a
facsimile software program within the operator's computer?

LAW AND ANALYSIS

Unless specifically exempted, virtually all transactions which
involve the sale or use of tangible personal property for a
consideration, are subject to Sales Tax, computed on the sales
price of the transaction.(FN 1)

Section 212.05, F.S., provides for the taxation of tangible
personal property (TPP), based upon the sales price of that

property. That section 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 at
retail in this state,...

(1) ... 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. (E.S.)

The terms "Sale" "Sales Price" and "Tangible Personal Property"
are defined in section 212.02(15), (16) and (19), F.S., as:

(15) "Sale" means and includes:

(a) Any transfer of title or possession, or both, exchange,
barter, license, lease, or rental, conditional or
otherwise, in any manner or by any means whatsoever, of
tangible personal property for a consideration....

(16) "Sales price" means the total amount paid for tangible
personal property, including any services that are a part
of the sale, valued in money, whether paid in money or
otherwise, and includes any amount for which credit is
given to the purchaser by the seller, without any deduction
therefrom on account of the cost of the property sold, the
cost of materials used, labor or service cost, interest
charged, losses, or any other expense whatsoever....

(19) "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...
(E.S.)

CONCLUSION

In response to your questions, based upon the law provided
above:

1) Is the electronic communication of the compiled
information coupled with the mailing of the free brochure
to the cable subscriber exempt from Florida sales tax?

Because no tangible personal property is transferred when
the compiled information is sent to the cable company, for
a fee, the transaction is not taxable for Sales tax.
However, when the company sends the brochure, which is
tangible personal property, to the cable subscriber at no
cost, the company is the ultimate consumer of those
brochures and must pay tax to the printer when it purchases
them.

2) Does it make a difference if information faxed to the
cable operator is received by the operator on a regular fax
machine (paper) as opposed to being received by e-mail or a
facsimile software program within the operator's computer?

So long as the compiled information is sent electronically,
not in a tangible personal property form, no tax is due on
the fee paid to the company. However, if the cable
operator pays for receipt of the faxed compiled
information, in a tangible personal property form (i.e.,
printed on paper), at a commercial facsimile location, the
fee charged by that location for the printed copy is a
charge for tangible personal property. The cable operator
must pay tax to the commercial facsimile operator.

RECORD KEEPING

According to Florida law, every taxpayer has the legal
obligation to maintain adequate books and records.

Section 212.13(2), F.S., provides in part:

(2) Each dealer, as defined in this chapter, shall secure,
maintain, and keep as long as required by s. 213.35 a

complete record of tangible personal property or services
received, used, sold at retail, distributed or stored,
leased or rented by said dealer, together with invoices,
bills of lading, gross receipts from such sales, and other
pertinent records and papers as may be required by the
department for the reasonable administration of this
chapter; all such records which are located or maintained
in this state shall be open for inspection by the
department at all reasonable hours at such dealer's store,
sales office, general office, warehouse, or place of
business located in this state.... Any dealer subject to
the provisions of this chapter who violates these
provisions is guilty of a misdemeanor of the first degree,
punishable as provided in s. 775.082 or s. 775.083. (E.S.)

Section 213.35, F.S., provides, in part:

Each person required by law to perform any act in the
administration of any tax enumerated in s. 72.011 shall
keep suitable books and records relating to that tax, such
as invoices, bills of lading, and other pertinent records
and papers, and shall preserve such books and records until
expiration of the time within which the department may make
an assessment with respect to that tax pursuant to s.
95.091(3). (E.S.)

Section 212.12(6), F.S., expressly provides, in part:

(6)(a) ... It shall be the duty of every person required to
make a report and pay any tax under this chapter,... to
keep and preserve suitable records of the sales, leases,
rentals, license fees, admissions, or purchases, as the
case may be, taxable under this chapter; such other books
of account as may be necessary to determine the amount of
the tax due hereunder; and other information as may be
required by the department.... (E.S.)

As clearly provided by the above law, a taxpayer has the duty to
maintain records adequate to establish the taxable or nontaxable
status of its transactions.

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 confidential
information, we request you notify the undersigned in writing
within 15 days of any deletions you wish made to the request or
this response.

Should you have any further questions concerning this matter,
please do not hesitate to contact me.

Sincerely,

Eric A. de Moya, Esq.
Tax Law Specialist
Technical Assistance and Dispute Resolution
(904) 922-4714

NOTICE UNDER THE AMERICANS WITH DISABILITIES ACT

Persons needing an accommodation to participate in any
proceeding before the Department of Revenue, should contact the
Department at (904)488-0717 (voice), or 1-800-DOR-8331 (TDD), at
least five working days before such proceeding. You may also
call via the Florida Relay System at 1-800-955-8770.

FOOTNOTE 1 Sales tax is also imposed at the rate of 6 percent of

the total sales price or cost price of certain service
transactions in Florida such as: nonresidential pest control
services described in Rule 12A-1.009, F.A.C., nonresidential
cleaning services described in Rule 12A-1.0091, F.A.C.; and
detective, burglar protection, and other protection services
described in Rule 12A-1.0092, F.A.C.