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.