Were charges for in-flight air-ground radiotelephone service subject to Florida telecommunications taxes?

Plain-English summary

Florida found the in-flight air-ground radiotelephone charges outside both the gross receipts tax and telecommunications sales tax. The service did not fit the statutory definitions of local, toll, private, or other listed telecommunications services then in effect.

Calls used hardwired aircraft handsets and ground radio stations, were not priced by distance, and gave passengers no exclusive or priority channel. The Department also concluded that the aircraft-installed system was not a “portable” communication service within the catchall language.

What this means for you

The holding depended on 1999 definitions and a specific aircraft system. It was not a general exemption for modern mobile or satellite communications.

Common questions

Q: Why was it not toll telephone service? Charges did not vary by distance, and the service did not provide unlimited calls for a periodic charge or use a local telephone-system station.

Q: Why was it not private communication service? Users received no exclusive or priority use of channels.

Q: Did the ruling cover all mobile services? No. It analyzed this specific air-ground system under the definitions then in effect.

Citations and references

• Fla. Stat. §§ 203.01, 203.012 — gross receipts tax and telecommunications definitions
• Fla. Stat. § 212.05(1)(e)1.a. — telecommunications sales tax
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99A-047

Original ruling text

SUMMARY

Charges for "air-ground radiotelephone service," which is
used by passengers to make telephone calls from an
aircraft, are not subject to gross receipts tax under s.
203.01, F.S., or sales and use tax under s.
212.05(1)(e)1.a., F.S., because the service does not fall
within any of the definitions of "telecommunication

service," in s. 203.012, F.S.

Sep 10, 1999

Re: Technical Assistance Advisement 99A-047
Sales and Use Tax -- Air-ground Services
Chapter 203, F.S.; Section 212.05(1)(e), F.S.
XXX ("Taxpayer")

Dear:

Your letter of May 18, 1999 requested a Technical Assistance
Advisement concerning the above referenced matter. This
response constitutes a Technical Assistance Advisement (TAA)
under Chapter 12-11, Florida Administrative Code, and is issued

to you under the authority of s. 213.22, Florida Statutes.

STATED FACTS

Your letter states the following:

[Taxpayer] is a XXX. Using the XXX name, [Taxpayer] offers
in-flight voice, fax, and data transmission service to
passengers of aircraft, primarily on commercial airlines.

The aircraft are specially-equipped to facilitate this air-

to-ground service.

Most of the communications are originated by airline
passengers, and such calls may terminate anywhere in the

world. A passenger can also register to receive calls, but

this is rare. Using a credit card or calling card, the
passenger dials a number from a handset that is hardwired
into the seatback in front of him, and a radio signal is
transmitted from the airplane. The signal is received by a
Radio Base Station ("RBS"), and the call is routed to a
central switch (located outside of Florida), which then is
routed over the public switched network to the call
destination. The RBS initially receiving the call is the
“originating RBS" and is generally the station nearest to
the aircraft. As the airplane begins to leave the range of
one RBS, the call is automatically transferred via "hand-
off" technology to the next RBS along the flight path.
Passengers are not furnished with exclusive or priority use

of a telecommunication channel or group of channels.

[Taxpayer] has XXX ground stations throughout the
continental United States that facilitate this service.

Five (X) RBS locations are in XXX. It is possible that the
nearest ground station to an aircraft would lack the

capacity to handle a call, whereupon another nearby ground

station would do so.

Each ground station serves a radius of approximately XXX
miles. As a result, it is likely that a XXX originating

RBS would receive many calls placed from aircraft in flight
over 5 states (XXX), or beyond Florida's territorial limits

in the XXX or the XXX. [Taxpayer] records identify the
originating ground station handling each call, but
[Taxpayer] generally lacks the capability to ascertain the
location of an aircraft in relation to any state

boundaries. Therefore, [Taxpayer] cannot distinguish
between calls placed from an aircraft in flight over

Florida and calls placed from aircraft in flight over other
states or international waters. In addition, [Taxpayer]

has no way of determining where an airplane from which a
call was placed took off or landed. [Taxpayer] has limited
capability of determining whether a call has been placed

from an aircraft when taxiing on the tarmac.

Credit cards are used for a majority of the traffic.

[Taxpayer] does not issue either the credit cards or

calling cards that are used. Most of the cards are issued

by unrelated third party financial institutions (credit

cards) and local interexchange telephone companies (calling
cards). It follows that [Taxpayer] does not issue bills for

any of the calls, but rather receives payment from

financial institutions (in the case of calls placed with

credit cards) and the issuers of calling cards. The

caller's billing address is not provided to [Taxpayer] and

[Taxpayer] generally has no access to such information.

Passengers are charged a flat amount per call plus a per
minute charge. Rates for calls received on the aircraft

are the same as for air-to-ground calls, and are paid for

by airline passengers in the same manner as calls
originating from the aircraft, that is, by credit card or

calling card. None of the charges are based, in any way, on

the distance of a call.

REQUESTED ADVISEMENT

Taxpayer requests a determination that its "air-ground
radiotelephone service" is not subject to tax under Chapter 203

or Chapter 212, Florida Statutes.

APPLICABLE LAW

GROSS RECEIPTS TAX PROVISIONS

Section 203.01(1), F.S., provides, in part:

203.01 Tax on gross receipts for utility services.--

(1)(a) Every person that receives payment for any utility
service shall report by the last day of each month to the
Department of Revenue, under oath of the secretary or some
other officer of such person, the total amount of gross
receipts derived from business done within this state, or
between points within this state, for the preceding month
and, at the same time, shall pay into the State Treasury an
amount equal to a percentage of such gross receipts at the
rate set forth in paragraph (b). Such collections shall be

certified by the Comptroller upon the request of the State

Board of Education.

(b) Beginning July 1, 1992, and thereafter, the rate shall
be 2.5 percent...

"Utility service" is defined in Section 203.012(9), F.S., to

include telecommunication services.

Section 203.012(5), F.S., provides:

(5) The term "telecommunication service" means:
(a) Local telephone service, toll telephone service,
telegram or telegraph service, teletypewriter 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.

The term "telecommunication service" does not include any
Internet access service, electronic mail service,
electronic bulletin board service, or similar on-line

computer service.

Section 203.012(3), F.S., defines "local telephone service":

(3) The term "local telephone service" means:

(a) The access to a local telephone system, and the
privilege of telephonic-quality communication with
substantially all persons having telephone or radio
telephone stations constituting a part of such local

telephone system; or

(b) Any facility or service provided in connection with a

service described in paragraph (a).

The term "local telephone service" does not include any
service which is a toll telephone service; private
communication service; cellular mobile telephone or
telecommunication service; specialized mobile radio, or
pagers and paging, service, including but not limited to
“beepers” and any other form of mobile and portable one-way

or two-way communication; or teletypewriter service.

Section 203.012(4), F.S., defines "private communication

service":

(4) The term "private communication service" means:

(a) A communication service furnished to a subscriber or
user that entitles the subscriber or user to exclusive or
priority use of a communication channel or groups of
channels, or to the use of an intercommunication system for
the subscriber's stations, regardless of whether such
channel, groups of channels, or intercommunication system
may be connected through switching with a service described

in subsection (3), subsection (6), or subsection (7);

(b) Switching capacity, extension lines, and stations, or
other associated services which are provided in connection
with, and which are necessary or unique to the use of,

channels or systems described in paragraph (a); or

(c) The channel mileage which connects a telephone station
located outside a local telephone system area with a

central office in such local telephone system.

Section 203.012(6), F.S., defines "teletypewriter service":

(6) The term "teletypewriter service" means the access from
a teletypewriter, telephone, or other data station of which
such station is a part, and the privilege of
intercommunication by such station with substantially all
persons having teletypewriter, telephone, or other data

stations constituting a part of the same teletypewriter

system, to which the subscriber or user is entitled upon

payment of a charge or charges, whether such charge or
charges are determined as a flat periodic amount, on the
basis of distance and elapsed transmission time, or some
other method. The term "teletypewriter service" does not

include local telephone service or toll telephone service.

Section 203.012(7), F.S., defines "toll telephone 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.

SALES AND USE TAX PROVISIONS

Section 212.05(1)(e), 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...

(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...

DETERMINATION

Chapter 203, F.S., imposes a tax on the gross receipts that are
received by a utility provider for any utility service, derived

from business done within this state. Section 203.01(1)(a),
F.S. "Utility service" includes telecommunication services.
Section 203.012(9), F.S. Sales tax is also levied upon charges
for "telecommunication service," as defined in Chapter 203,
F.S., at a rate of seven percent. Section 212.05(1)(e)1.a.,

F.S.

Section 203.012(5)(a), F.S., defines "telecommunication service"
to include local telephone service, toll telephone service,
telegram or telegraph service, teletypewriter service, or

private communication service. These terms, other than
"telegram or telegraph service,” are further defined in s.
203.012(3), (4), (6), and (7), F.S. These definitions are

reprinted, infra.

The “air-ground" service provided by taxpayer is not "local

telephone service," "teletypewriter service," or "telegram or

telegraph service."

The "air-ground" service is not "private communication service,"
because it does not entitle the user to exclusive or priority
use of a communication channel or groups of channels, or to the

use of an intercommunication system for the subscriber's

stations.

The “air-ground" service is not "toll telephone service” under

s. 203.012(7)(a), F.S., because the charge for the service is
the same regardless of where the aircraft is located, and thus
the charge does not vary with distance. "Air-ground" service is
not "toll telephone service," under s. 203.012(7)(b), F.S.,
because it does not entitle the user to an unlimited number of
telephonic communications upon the payment of a periodic charge,
and because the station that provides "air-ground" service is
not within a local telephone system. Finally, the “air-ground"
service is not "toll telephone service" under s. 203.012(7),

F.S. (flush language), because it is not wide area telephone

service (WATS).

However, Section 203.012(5)(b), F.S., further defines
"telecommunication service,” to include cellular mobile

telephone or telecommunication service, specialized mobile
radio, pagers and paging service (including but not limited to
"beepers"), and any other form of mobile and portable one-way or

two-way communication.

"Air-ground radiotelephone service" is a distinct classification
within "commercial mobile radio service" (CMRS). CMRS includes
private paging, specialized mobile radio service, air-ground
radiotelephone service, cellular radio telecommunication

service, and others. Section 203.012(5)(b), F.S., identifies

the taxable mobile communication services, and several types of
CMRS are listed. "Air-ground radiotelephone service" is not

listed as a taxable telecommunication service under this

provision.

Finally, the “air-ground" service is not taxable as "any other

form of mobile and portable one way or two-way communication,"
because the service is not "portable." The term "portable" is
defined in Webster's as "capable of being carried; easily or
conveniently transported: light or manageable enough to be
readily moved." Webster's Third New International Dictionary.
"Air-ground radiotelephone service" is not "portable" under any
definition of the word. It requires substantial improvements to

an aircraft, and is not "light or manageable enough to be

readily moved," or "capable of being carried."

Since the "air-ground" service does not fall within any
definition of "telecommunication service" in s. 203.012, F.S.,
the charge for such service is not subject to gross receipts tax
under s. 203.01, F.S., or sales and use tax on

“telecommunication service" under s. 212.05(1)(e)1.a., F.S.

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, your request and
related backup documents are public records under Chapter 119,
F.S., and are subject to disclosure to the public under the
conditions of s.213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names,
addresses, and any other details that might lead to

identification of the taxpayer. Your response should be

received by the Department within 15 days of the date of this

letter.

Sincerely,

Ralph G. Pepe

Tax Law Specialist

Technical Assistance & Dispute
Resolution

(850) 922-4802

Control #: 37924