Did Florida sales and gross receipts taxes apply to calls merely forwarded through Florida for customers outside the state?

Subject

Taxability of Telecommunication Forwarding Services

Plain-English summary

Florida did not impose sales tax or telecommunications gross receipts tax on the provider's customer charges when calls were merely bridged through Florida. The Department classified the forwarding arrangement as toll telephone service, but no call began or ended in Florida, no call charge was billed to a Florida number or device, and every customer was outside Florida.

The result was expressly limited to the provider acting as a Florida bridge for a call already in progress. The ruling warned that a call originating or terminating in Florida, or a charge to a Florida telecommunications number, device, telephone number, or customer, would be taxable under the cited chapter.

The provider also did not need to pay these taxes to its long-distance carriers for service actually purchased for resale. To do that, it had to register for the respective taxes and give the carrier separate valid resale certificates for sales tax and gross receipts tax.

What this means for you

For the law applied in this ruling, equipment or switching activity in Florida did not by itself decide taxability. Providers needed records identifying both call endpoints, the billed number or device, the customer location, and which carrier charges were genuinely resold.

Common questions

Q: Was the forwarding service still a telecommunications service? Yes. Florida classified it as toll telephone service but found the described customer charges outside the state's taxing conditions.

Q: Would one Florida endpoint change the result? Yes. The ruling expressly conditioned its answer on no call originating or terminating in Florida.

Q: Could the provider simply stop paying tax to its carriers? Only for service actually resold and only after proper registration and delivery of separate sales-tax and gross-receipts resale certificates.

Citations and references

• Fla. Stat. §§ 203.012(2), (5), (7)-(8), 203.013(1) — toll telephone and interstate telecommunications definitions
• Fla. Stat. §§ 203.60, 203.63 — interstate and international telecommunications gross receipts tax
• Fla. Stat. § 212.05(1)(e)1.a. — sales tax on telecommunications services
• Fla. Admin. Code rr. 12A-1.038, 12B-6.004(2)(e) — separate resale-certificate requirements
• Fla. Stat. § 213.22 — Technical Assistance Advisements

OCR citation check: the scanned ruling contains no case citations to verify in list mode. The operative taxability conditions and all four answers were reread against the official PDF images.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-058

Original ruling text

SUMMARY

A Taxpayer that provides a telecommunication service as
defined in s. 203.012(7), F.S., as a "toll telephone"
telecommunication number, device, telephone number, or
customer is not liable for gross receipts tax on
telecommunications, when none of the calls originate or

terminate in Florida.

Jul 24, 1998

Re: Technical Assistance Advisement 98A-058
XXX (Taxpayer)
Gross Receipts Tax, Sales and Use Tax - Taxability of
Telecommunication Forwarding Services.

Sections: ss. 203.01, 203.012 and 212.05(1)(e), F.S

Dear:

This is a response to your request dated XXX, received XXX, for
the issuance of a Technical Assistance Advisement ("TAA")
concerning the above referenced 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.

STATED FACTS

The pertinent facts of your request, as you provide them, are as

follows:

[Taxpayer] provides clients in XXX with XX quality
communications. They do this by having the clients
communicate with their [Taxpayer's] office in XXX via their
transponder on XXX. The call is then forwarded to its
ultimate recipient by [Taxpayer] over either the public

networks or dedicated lines. The same service is also

provided, in reverse, for calls originating in the XX and

terminating in XXX via closed end dedicated lines.

[Taxpayer] is billed by various long distance carriers for

the long distance service used. [Taxpayer] bundles these

charges along with their service and maintenance fees and

their markup and bills the client a monthly lump sum.

Historically, [Taxpayer] has not collected tax from its

clients but has paid sales tax and gross [receipts] tax to

the long distance carriers that handle the traffic. (E.S.)

You also indicate that none of the taxpayer's calls

originate and terminate in Florida, so that no intrastate

calls occur. None of the customers are billed in Florida.
Taxpayer imposes no charges on termination points within
the state. Taxpayer makes no channel mileage charge. Ina
telephone conference you indicated that Taxpayer's

customers are all located outside of Florida.

REQUESTED ADVISEMENT

You ask:

|. Should [Taxpayer] charge their clients sales tax for the

amounts billed by them?

Il. Should [Taxpayer] pay sales tax to the long distance

carriers for the amounts billed to them?

Ill. Should [Taxpayer] charge their clients gross

[receipts] tax for the amounts billed by them?

IV. Should [Taxpayer] pay gross [receipts] tax to the long

distance carriers for the amounts billed to them?

LAW AND ANALYSIS

Section 212.05(1)(e)1.a., F.S. which imposes sales tax on

telecommunication services, provides:

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,

including the business of making mail order sales, or who
rents or furnishes any of the things or services taxable
under this chapter, or who stores for use or consumption in
this state any item or article of tangible personal

property as defined herein and who leases or rents such
property within the state.

(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 telegraph messages and long-distance telephone calls

beginning and terminating in this state, telecommunication

service as defined in s. 203.012, and those services

described in s. 203.012(2)(a), except that the tax rate for

charges for telecommunication service is 7 percent. (E.S.)
Before that section can apply, it must first be determined if a
“telecommunication service," as defined in s. 203.012(5), F.S.,
applies. That section provides:

203.012 Definitions.--As used in this chapter:

(2)(a) Gross receipts from telecommunication services

include the gross receipts for all telecommunication

services of whatever nature...

(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; or

(b) Cellular mobile telephone or telecommunication service;
or specialized mobile radio, and pagers and paging,
service, including but not limited to "beepers" and any
other form of mobile and portable one-way or two-way
communication; but does not include services or equipment
incidental to telecommunication services enumerated in this

paragraph such as maintenance of customer premises

equipment, whether owned by the customer or not, or
equipment sales or rental for which charges are separately
stated, itemized, or described on the bill, invoice, or

other tangible evidence of the provision of such service.

(7) The term "toll telephone service" means:

(a) A telephonic-quality communication for which there is a
toll charge which varies in amount with the distance and
elapsed transmission time of each individual communication;

or

(b) A service which entitles the subscriber or user, upon
the payment of a periodic charge which is determined as a
flat amount or upon the basis of total elapsed transmission
time, to the privilege of an unlimited number of telephonic
communications to or from all or a substantial portion of
the persons having telephone or radio telephone stations in
a specified area which is outside the local telephone
system area in which the station provided with this service

is located.

The term "toll telephone service" includes interstate and

intrastate wide-area telephone service charges.

(8) The term "interstate," as applied to telecommunication
services, means originating in this state but not
terminating in this state, or terminating in this state but

not originating in this state. (E.S.)

From the description of Taxpayer's services, the Department

believes Taxpayer provides a "toll telephone service" under s.
203.012(7)(b), F.S., above.

Because you have indicated that all the transactions Taxpayer

provides are interstate or international transactions, the

manner in which the transaction is being conducted must be

examined. Section 203.013(1), F.S., provides:

203.013 Interstate telecommunication services; assessment;
apportionment of business done within this state.--

(1) The tax on gross receipts from the provision of

interstate telecommunication services, other than
interstate private communication services, the charge for
which is billed or charged to a Florida telecommunication

number or device, Florida telephone number or telephone, or

Florida customer shall be reported and paid in the manner

as provided in part Il. (E.S.)

Part Il of Chapter 203, under ss. 203.60, and 203.63, F.S.,

provide, in part:

GROSS RECEIPTS TAX; INTERSTATE AND INTERNATIONAL
TELECOMMUNICATIONS SERVICES

203.60 Intent.--
(1) It is the intent of the Legislature that interstate
telecommunication services, other than interstate private

communication services, the charge for which is billed or

charged to a Florida telecommunication number or device,

Florida telephone or number, or Florida customer, shall be

subject to the tax imposed by this part.

(2) The Legislature hereby finds and declares that, as a
matter of necessity, and truth in pricing related to

average toll rates, the gross receipts tax applicable to

interstate telecommunication services other than private

communication services shall be levied and collected

exclusively as provided in this part. (E.S.)

Because you indicate that none of Taxpayer's calls are billed or

charged to a Florida telecommunication number, device, telephone

number, or customer, and none of the calls originate and

terminate in Florida, the charge is not taxable in Florida.

This response is expressly contingent upon these facts. Any
calls originating or terminating, in Florida, or charged to a
telecommunications number, device, or customer, are taxable in

accordance with chapter 203, F.S.

Finally, both Chapter 203, F.S., and Chapter 212, F.S., provide
that telecommunication services may be purchased without paying
the taxes to the provider (in this case the long distance

provider), only for the services that are in fact being resold.

A separate resale certificate must be given to the provider for

the Gross Receipts tax and Sales tax.

Therefore, with regards to your specific questions, and in light

of the above statutes and analysis:

|. Should Taxpayer charge their clients sales tax for the

amounts billed by them?

No. Although Taxpayer provides a telecommunication service
as defined in s. 203.012(7), F.S., as a "toll telephone"

service, it does not bill or charge a Florida

telecommunication number, device, telephone number, or
customer and none of the calls originate and terminate in
Florida. This response is contingent upon Taxpayer acting

as a bridge in Florida for a call in progress.

Il. Should Taxpayer pay sales tax to the long distance

carriers for the amounts billed to them?

No. Taxpayer does not need to pay sales tax if it extends a
resale certificate to the long distance provider for the

sales tax. In order to extend a valid resales certificate
Taxpayer must be registered for sales tax and comply with
the requirements of 12A-1.038, F.A.C.

Ill. Should Taxpayer charge their clients gross [receipts]

tax for the amounts billed by them?

No. See answer | above.

IV. Should Taxpayer pay gross [receipts] tax to the long

distance carriers for the amounts billed to them?

No. Tax is not due if Taxpayer extends a resale certificate
to the long distance provider for the Gross Receipts tax.
In order to extend a valid resales certificate, Taxpayer
must be registered for Gross Receipt tax and comply with

the requirements of 12B-6.004(2)(e), F.A.C.

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 (850)488-6374 (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.

Control No. 32572