Was a mailing-list license taxable when the names and addresses were transferred only electronically?

Subject

Electronic Data Transmission

Plain-English summary

Florida did not impose sales or use tax on the electronically transferred mailing-list information. The magazine-subscription company bought and licensed names and addresses for limited promotional use. After June 30, 1998, it stopped using magnetic tapes or any other tangible medium and transferred every list directly from one computer to another over public telephone lines.

The Department reasoned that a retail sale required tangible personal property—property perceptible to the senses. The digital list became visible only when displayed on a computer screen, and the cited Florida cases had rejected treating electronically displayed information as tangible property. The payment covered only use of the names and addresses; there was no charge for telecommunications or other compilation or transfer services.

What this means for you

The delivery method controlled the ruling. The same information had historically moved on magnetic tape, but the approved transactions used no disk, tape, printout, or other physical medium. A bundled sale involving physical property or separately charged services was outside the conclusion.

Common questions

Q: Was the customer buying the mailing list outright? Not exactly. The ruling described a limited-use license, often for one promotional mailing within a set time.

Q: Did electronic delivery make the list tangible property? No. Displaying the data on a screen did not make the transmitted information taxable tangible personal property under the cases the Department applied.

Q: Would a list delivered on tape receive the same result? The ruling did not approve that transaction. Its conclusion expressly depended on no tangible medium accompanying the information.

Citations and references

• Fla. Stat. § 212.05(1)(a) — retail sales of tangible personal property
• Fla. Stat. § 212.02(15), (19) — definitions of sale and tangible personal property
• Department of Revenue v. Quotron Systems, Inc., 615 So.2d 774 (Fla. 3d DCA 1993)
• Henley Holdings Inc. v. Department of Revenue, No. 89-4381 (Fla. 2d Cir. Ct. July 22, 1991), aff'd, 599 So.2d 1282 (Fla. 1st DCA 1992)
• Attorney's Title Insurance Fund, Inc. v. Department of Revenue, No. 91-1832 (Fla. 2d Cir. Ct. May 13, 1992)
• Fla. Stat. § 203.012 — telecommunications definition discussed in the footnote
• Fla. Stat. § 213.22 — Technical Assistance Advisements

OCR citation check: the verification service resolved Quotron but did not resolve the Henley Holdings reporter citation or parse the trial-court docket citation for Attorney's Title Insurance Fund. Both strings were re-read against the official PDF text and are preserved exactly as published.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-077

Original ruling text

SUMMARY

The transfer of mailing list by means of the digital
electronic transfer is not the sales of tangible personal
property subject to sales and use tax, when not associated

with the sale of other tangible personal property.

Oct 05, 1998

Re: Technical Assistance Advisement 98A-077
Sales and Use Tax - Electronic Data Transmission
Sections: 212.05, 212.06, F.S.

Petitioner: XXX. (Taxpayer)

Dear:

This is a response to your request dated XX, 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.

FACTS

You provide the following facts:

[Taxpayer] has its principal offices in...., Florida.

[Taxpayer] is engaged primarily in the sale of magazine
subscriptions. In the course of this business, [Taxpayer]
has a need to obtain the use of mailing list information

(i.e., names and addresses) for promotional mailings.
[Taxpayer] also obtains through its business operations
names, addresses and other information the use of which it
sells to third parties for similar purposes. Mailing list
information is purchased from and sold to persons located

both within and outside of Florida.

Although, for convenience, we will use the terms "purchase"
and "sale" with regard to the mailing list information,

these are not entirely accurate references. It is actually
more accurate to say that this information is rented rather
than purchased because the price paid by the purchaser
allows only a limited use of the information. Normally, the
names and addresses can only be used for one promotional
mail-out and often there is a limitation on the time within
which that mail-out must occur. The price paid is an agreed
amount calculated based on the number of names/addresses
purchased. For example, a purchaser may purchase a list of

50,000 names and pay $25 per one-thousand names.

[Taxpayer] obtains its names from responses to sweepstakes
promotions intended to generate sales of magazines
subscriptions. [Taxpayer] only offers for sale, however,
names of sweepstakes entries and does not sell names of

those persons who actually purchase magazine subscriptions.

The content of the list purchased is dictated by the

purchaser who may specify certain regions, income levels,
family size and other factors, The seller of the list

produces it in accordance with the customer's

specifications. Rarely, if ever, do a purchaser's

specifications match precisely any pre-existing compilation

of names possessed by the seller. In addition, it is also
extremely rare that any two customers would use the same
specifications when purchasing information. In [Taxpayer]'s
case, the purchased names and addresses are downloaded into
their computer and subjected to a process which eliminates
duplicate names and names which may require deletion due to
other requirements or specifications. This process is

common in the industry for purchasers of names and

addresses.

In the past, for approximately 99% of sales and purchases

by [Taxpayer] (or related entities), the names and

addresses were transferred on a computer-readable, magnetic
tape. In the other 1% of cases, no tangible medium was used

to transfer the names and addresses. In the latter cases,

the information was transferred directly from the seller's
computer to the buyer's computer over public telephone
lines. In those cases where the transfer was accomplished
through the use of a tape, a separate, inconsequential

charge was made for the tape.

Effective June 30, 1998, [Taxpayer] no longer acquires or
transfers mailing list information through the use of
magnetic tape or any other tangible medium. All

information purchased or sold by [Taxpayer] is transferred

electronically from one computer to another via public

telephone lines. The amount paid to or received by
[Taxpayer] is exclusively for the use of the
names/addresses provided -- there is no charge for
telecommunications or other services involved in the

compilation or transfer of the information. (E.S.)

REQUESTED ADVISEMENT

You ask:

On behalf of [Taxpayer], we request that the Department
issue a Technical Assistance Advisement holding that
[Taxpayer]'s purchases and sales of mailing list
information after June 30, 1998 are not subject to sales or
use tax because they do not involve the transfer of any

tangible personal property.

LAW AND ANALYSIS

Section 212.05(1)(a), F.S., 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, 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:

(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.

Section 212.02 (15) and (19), F.S., define the terms, sale_ and

"tangible personal property” as:

212.02 Definitions.-
The following terms and phrases when used in this chapter
have the meanings ascribed to them in this section, except

where the context clearly indicates a different meaning:

... (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.

(c) The producing, fabricating, processing, printing, or

imprinting of tangible personal property for a

consideration for consumers who furnish either directly or
indirectly the materials used in the producing,

fabricating, processing, printing, or imprinting.

(d) The furnishing, preparing, or serving for a

consideration of any tangible personal property for

consumption on or off the premises of the person
furnishing, preparing, or serving such tangible personal
property which includes the sale of meals or prepared food

by an employer to his or her employees.

(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.)

In Department of Revenue, State of Florida vs. Quotron Systems,

Inc., 615 So.2d 774 (Fla. 3rd DCA 1993), the Court determined

that there was no indication supporting the Department's
contention that the term "tangible personal property" includes
the conveyance and display on customer terminals of commodity
price quotations and other financial news. Similar decisions
were also rendered in Henley Holdings Inc. v. Department of
Revenue, No. 89-4381 (Fla. 2d Cir. Ct. July 22, 1991), aff'd 599
So.2d 1282 (Fla. 1st DCA 1992) and Attorney's Title Insurance

Fund, Inc. v. Department of Revenue of the State of Florida, No.

91-1832 (Fla. 2d Cir. Ct. May 13, 1992).

Your inquiry is very similar to the above cases. At the time of
sale, the only way that the electronically transmitted mailing
list is perceptible to the senses, as required by the definition
of tangible personal property, is to display that list ona

computer screen.

It is clear from the facts of your letter, and the above facts

and law that no tangible personable property has been
transferred by the taxpayer for a consideration. The digital
transfer of information by computer without any accompanying
tangible personal property such as disks, tapes, hard copy or
other media, for a consideration is not taxable under Florida

sales tax law as the sale of tangible personal property.(FN 1)

CONCLUSION

The transfer of mailing list by means of the digital electronic
transfer as you describe in your request is not subject to sales

and use tax.

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. 34833

FOOTNOTE 1 With regard to sales taxes on the gross receipt from
telecommunications, chapter 97-283, L.O.F., effective May 31,
1997, removes "computer exchange service" from those services

defined as telecommunication services, under s. 203.012, F.S.