FL TAA 98A-076 Sales and Use Tax 1998-09-28

Were one-time and monthly charges for shared web-hosting services subject to Florida sales and use tax?

Short answer: No. Shared web-hosting charges were nontaxable service fees where the provider retained ownership and control of the server and did not sell, rent, lease, or license hardware, canned software, or telecommunications. The ruling did not decide shopping-cart hosting or dedicated servers.

Apply this to your situation

This page answers the general question as of 1998. Ezel answers yours, under current Florida tax law, with citations.

Disclaimer: This Florida Technical Assistance Advisement applied 1998 law to one shared-hosting arrangement in which the provider controlled its Florida server and supplied no hardware, canned software, or telecommunications to customers. Under section 213.22, it binds the Department only for that requester and those facts. It expressly does not decide shopping-cart or dedicated-hosting services, and current digital-service rules must be checked separately.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.

View original ruling (PDF)

Subject

Web Hosting Services

Plain-English summary

The described shared web-hosting service was not subject to Florida sales and use tax. The provider installed, stored, and maintained customers' websites on a server it owned and controlled. Customers received an internet presence but did not rent server space, use the server to process data, or receive tangible personal property.

The conclusion depended on the service excluding the development, sale, rental, lease, or license of hardware and off-the-shelf or canned software delivered on physical media. It also excluded charges for telecommunications connecting internet users to the hosted site.

The Department did not decide the tax treatment of the provider's shopping-cart option or dedicated web-hosting services. Florida gross receipts tax did not apply to the shared-hosting service reviewed.

What this means for you

The ruling treated shared hosting as a service because the provider kept ownership and control of the server. Giving a customer control of equipment, providing a dedicated server, licensing canned software, or charging for connectivity could require a different analysis.

Common questions

Q: Were both setup and monthly hosting fees nontaxable? Yes, for the shared-hosting service described.

Q: Did the customer rent space on the server? No. The ruling's facts expressly said the customer did not rent web space.

Q: Did this ruling cover e-commerce shopping carts? No. The shopping-cart option and dedicated hosting were expressly left unresolved.

Citations and references

Fla. Stat. § 212.05(1)(c)-(d) — leases and rentals of tangible personal property
Fla. Stat. § 212.08(7)(v) — professional and personal service transactions
Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

Landing page: Florida Tax Law Library
Advisement: TAA 98A-076

Original ruling text

SUMMARY

Taxpayer's "shared web-hosting" services are not subject to
sales and use tax if the following considerations apply:
(1) the taxpayer retains ownership and control of the webserver; (2) taxpayer's shared web-hosting services do not
include transactions regarding the development, purchase,
sale, rental, lease, or license to use hardware, or "offthe-shelf" or canned software; (3) taxpayer's shared webhosting services do not include charges for
telecommunication services connecting an Internet user to a
customer's web site; and, (4) transactions associated with
taxpayer's shared web-hosting option known as "shopping
cart," and "dedicated web-hosting" services are not covered
by this TAA.

Sep 28, 1998

Re: Technical Assistance Advisement 98A-076
Sales and Use Tax--Web Hosting Services
Statute sections 212.05(1)(c)-(d), and
212.08(7)(v), Florida Statutes
Petitioner: XXX (Taxpayer)

Dear

This response is a reply to your petition of May 5, 1998, in
which you requested that the Florida Department of Revenue
(Department) issue a Technical Assistance Advisement on whether
web hosting services are subject to sales and use tax. The
Department finds that your request is in compliance with the
required criteria contained in Rule Chapter 12-11, Florida
Administrative Code. Therefore, this response constitutes a
Technical Assistance Advisement issued under the authority of
section 213.22, Florida Statutes, and Rule Chapter 12-11, F.A.C.

FACTS

Your letter of May 5, 1998, stated the following as facts:

Taxpayer has affiliates which provide Internet-related
services;

"web hosting" is one of the Internet-related services being
provided by Taxpaye's affiliates (the affiliate is called
an Internet Service Provider or ISP);

web hosting occurs when an ISP finds a home for a
customer's web site, which gives the customer(s) a
presence on the Internet;

the customer uses the web site to display advertising or
information on the World Wide Web;

the customer does not rent web space;

the ISP's web server is a type of computer, and is located
in Florida;

the ISP's computer is not used by customer(s) to process
data or information;

there is no transfer of tangible personal property between
the ISP and its customer(s); and,

the ISP imposes one-time charges and monthly fees for web
hosting services.

LAW

The Florida Statutes which apply to the taxable status of web
hosting services are:

FLORIDA SALES AND USE TAX:

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... 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:

(c) At the rate of 6 percent of the gross proceeds derived
from the lease or rental of tangible personal property, as
defined herein, except the lease or rental of a commercial
motor vehicle....

(d) At the rate of 6 percent of the lease or rental price
paid by a lessee or rentee, or contracted or agreed to be
paid by a lessee or rentee, to the owner of the tangible
personal property.

212.08 Sales, rental, use, consumption, distribution, and
storage tax; specified exemptions.--The sale at retail, the
rental, the use, the consumption, the distribution, and the
storage to be used or consumed in this state of the
following are hereby specifically exempt from the tax
imposed by this chapter.
(7) MISCELLANEOUS EXEMPTIONS.-(v) Professional services.--

Also exempted are professional, insurance, or personal
service transactions that involve sales as inconsequential
elements for which no separate charges are made....

FLORIDA GROSS RECEIPTS TAX:

Florida's Gross Receipts Tax statutes do not apply to the
services discussed in this Technical Assistance Advisement.

ANALYSIS AND CONCLUSION

A) Charges by your company to install, store, and maintain a
customer's web site on your web server (i.e. shared webhosting) are considered a service for sales and use tax
purposes, and do not constitute the sale, the rental, or

the lease of tangible personal property. The Department's
conclusions are based on the following considerations:

your company retains ownership and control of the web
server;

the shared web hosting services discussed above do not
include transactions associated with the development,
purchase, sale, rental, lease, or license to use any
hardware (other than as described above), or "off-theshelf" or canned software provided by CD, diskette, or
other tangible means;

the web hosting services offered by your company to the
customer(s) do not include charges to provide
telecommunication services connecting an Internet user (a
third party) to your customer's web site;

a determination of the taxable status of your company's
following web hosting services is specifically not
addressed in this Advisement:

the shared web hosting option known as "shopping
cart;" and,

"dedicated web hosting" services.

B) Therefore, the "shared web hosting" services described
above are not subject to sales and use tax under Chapter
212, Florida Statutes.

This response constitutes a Technical Assistance Advisement
under section 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 section 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 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 section 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.

Sincerely,

Larry W. Green
Tax Law Specialist
Technical Assistance and Dispute Resolution

LWG/
Control #34111

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