Were charges for personalized billing statements and notices subject to Florida sales tax?

Subject

Data Processing Services

Plain-English summary

Charges for the customized billing statements, billing letters, notices, and related data reports were not subject to Florida sales tax. The provider processed confidential customer-specific data for financial institutions and retailers, and each resulting document was useful only for the individual for whom it was produced.

The Department treated the paper output as an inconsequential continuation and completion of the data-processing service. The provider paid tax on ordinary paper it consumed and collected tax when it separately resold specialized paper.

What this means for you

Personalized output for one customer was distinguished from a taxable information service sold or reused across customers. The facts also separated an incidental printed deliverable from separately sold tangible personal property.

Common questions

Q: Were personalized billing statements taxable tangible property? No. They were incidental to the exempt data-processing service.

Q: Did sending statements directly to a client's customers change the result? No. The ruling still treated them as customer-specific service output.

Q: Was separately resold specialized paper taxable? Yes. The provider collected and remitted tax on those separate paper charges.

Citations and references

• Fla. Stat. § 212.05(1)(a)1.a. — retail sales of tangible personal property
• Fla. Stat. § 212.08(7)(v) — professional and personal services
• Fla. Admin. Code r. 12A-1.001(16) — service transactions and personal reports
• Fla. Admin. Code r. 12A-1.032(6) — service-bureau bookkeeping
• Fla. Admin. Code r. 12A-1.062(1), (3) — taxable information services and single-customer reports
• Askew v. Bell, 248 So. 2d 510 (Fla. 1st DCA 1971) — printed output as completion of a service
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00A-024

Original ruling text

SUMMARY

QUESTION: Should charges for personalized data reports,
including customer billing statements, and customer billing
letters or notices be considered nontaxable data processing
services that generate informational reports that are of a
personal and individual nature?

ANSWER - Based on facts below: Bookkeeping services, which
include the furnishing of financial statements and reports,
are considered a data processing service. Data processing
services are considered an exempt professional service when
provided to a single customer and is personal or individual
in nature. Providing customized billing statements and
billing correspondence is a continuation and completion of
the services begun with the recording of data. Therefore,
they are considered to be data processing services and
exempt as a professional service.

May 18, 2000

Re: Technical Assistance Advisement 00A-024
Data Processing Services
Sales and Use Tax
Section 212.08(7)(v), F.S.
XXX (Taxpayer), Petitioner
FEI #:XX

Dear :

This is in response to your letter dated March 15, 2000,
requesting a technical assistance advisement regarding
Taxpayer's data processing services.

QUESTION PRESENTED

Whether charges to Taxpayer's clients for creation of
personalized data reports, including customer billing

statements, and customer billing letters and notices, are not
subject to Florida sales tax because such charges are for sale
of data processing services that generate informational reports
that are of a personal and individual nature.

FACTS

Taxpayer provides comprehensive and personalized data processing
services to financial institutions and others, including retail
businesses. The services Taxpayer renders allow its clients to
outsource credit card data processing and billing functions and
obtain such services at a more economical cost than had the
clients performed these functions themselves. Taxpayer enters
into contracts with its clients and pursuant to such contracts
provides its clients with on-line access to various data,
manipulation of data, and creation of data reports, including
billing statements, billing letters, and billing notices. Many
of the data reports created by Taxpayer, such as customer
billing statements, letters, and notices, are sent directly by
Taxpayer to the customers of Taxpayer's clients.

Taxpayer's clients can elect under the contracts to receive
different levels of services; however, the following is a
general description of the services routinely provided by
Taxpayer. Financial institutions and other sources, including
merchants, provide Taxpayer with raw data, which data is
specific to individual customers and is required to be treated
as confidential data in the hands of Taxpayer. Taxpayer then
stores, organizes, and manipulates the raw data or information
that it maintains in order to generate the personalized
documents sent to the customers of Taxpayer's clients. Taxpayer
generally pays or accrues sales or use tax on the paper its uses
when creating these personalized documents. In very limited
circumstances, Taxpayer purchases specialized paper and resells
it to its clients, and in these circumstances Taxpayer collects
and remits sales tax on the charges for paper.

APPLICABLE STATUTES AND RULES

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

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 212.08(7)(v), F.S., provides:

(v) Professional services.1. Also exempted are professional, insurance, or
personal service transactions that involve sales as
inconsequential elements for which no separate charges are
made.

2. The personal service transactions exempted pursuant
   to subparagraph 1. do not exempt the sale of information
   services involving the furnishing of printed, mimeographed,
   or multigraphed matter, or matter duplicating written or
   printed matter in any other manner, other than professional
   services and services of employees, agents, or other
   persons acting in a representative or fiduciary capacity or
   information services furnished to newspapers and radio and
   television stations. As used in this subparagraph, the term
   "information services" includes the services of collecting,
   compiling, or analyzing information of any kind or nature
   and furnishing reports thereof to other persons.

Rule 12A-1.001(16), F.A.C., provides in part:

(16) SERVICE TRANSACTIONS.

(a) Professional, insurance or personal service
transactions which involve sales as inconsequential
elements for which no separate charges are made are exempt.
(b) The exemption described in paragraph (a) does not
apply to personal service transactions which involve sales
of tangible personal property, whether or not as
inconsequential elements, when the service provided is an
information service involving the furnishing of printed,
mimeographed, multigraphed matter, microfiche, microfilm,
or matter duplicating written or printed matter. The
furnishing of information, including a written report to a
person of a personal or individual nature and which is not
or may not be substantially incorporated in reports
furnished to other persons, is not an information service
within the meaning of the law and is exempt. In such cases
the person furnishing the information is required to pay
the tax on the purchases of tangible personal property used
by him in connection therewith. See Rule 12A-1.062,
F.A.C....

Rule 12A-1.032(6), F.A.C., provides:

(6) When a Service Bureau performs a bookkeeping
service for a client, such as keeping a set of records and
the furnishing of financial statements, payrolls, tax
reports, accounts receivable and accounts payable
statements, etc., the charge therefor is for a professional
service and is exempt. The various statements furnished are
construed to be sales as inconsequential elements for which
no separate charges are made.

Rule 12A-1.062(1) and (3), F.A.C., provides:

(1) The sale of information services involving the
furnishing of printed, mimeographed, multigraphed matter,
or matter duplicating written or printed matter, other than
professional services and services of employees, agents, or
other persons acting in a representative or fiduciary
capacity, are taxable....
(3) "Information Services" means and includes the
services of collecting, compiling, or analyzing information

of any kind or nature, or furnishing reports thereof to
other persons. The charge for furnishing information
services, such as newsletters, tax guides, research
publications, and other written reports of compiled
information, which are not produced for and provided
exclusively to a single customer, is taxable.

TAXPAYER POSITION

The Florida Sales & Use Tax law generally taxes the sale of
tangible personal property, and generally does not tax the sale
of services. The courts have recognized that provision of
tangible personal property in conjunction with the sale of a
service does not necessarily turn a non-taxable sale of services
into a taxable sale of tangible personal property.

In Askew v. Bell, 248 So.2d 510 (Fla. 1st DCA 1971), the court
considered whether the charges by a court reporter for a
transcript of a hearing, which charges were separate from and
subsequent to the charges for attendance at the hearing, were
subject to sales tax. In ruling that they were not taxable, the
Court cited the following finding of the trial court: "`the
reporter throughout the entire process is engaged in rendering a
service and that the furnishing of any commodity is a mere
incident to that service.' The preparation of a transcript 'is a
continuation and completion of the services begun with the
recording.'"Id.

The Department's Rule 12A-1.001(16)(b), F.A.C., adopts this same
approach to differentiating between the sale of a service and
the sale of tangible personal property. That rule provides in
relevant part that "[t]he furnishing of information, including a
written report to a person of a personal or individual nature
and which is not or may not be substantially incorporated in
reports furnished to other persons, is not an information
service within the meaning of the law and is exempt." And, Rule
12A-1.062(3), F.A.C., provides that while charges for noncustomized "information services" are taxable, charges for
written reports of compiled information provided exclusively to
a single customer are not taxable.

Section 212.08(7)(v), F.S., expressly excludes certain services
from taxation under the sales and use tax. Rule 12A-1.032(6),
F.A.C., further elaborates upon this provision by explaining
that bookkeeping services, including furnishing of financial
statements and reports, constitutes an exempt professional
service. In First Federal Savings and Loan Association of
Putnam County, v. Department of Revenue, 15 FALR 3259 (June 6,
1993), data processing services that a bank purchased from a
seller acting as a service bureau under Rule 12A-1.032(6),
F.A.C., were considered professional services exempt under
section 212.08(7)(v), F.S.

Finally, data processing services were taxable under the Florida
services tax, which was in effect from July 1, 1987, through
December 31, 1987. Data processing was included within the
definition of a "service" in section 212.02(22)(ee), F.S.
(1987). There was a limited exemption from the tax on data
processing provided in section 212.0592(35), F.S., for certain
services performed by a financial institution. When the
services tax was repealed, Florida's tax on data processing was
likewise repealed.

Like the transcript of the court reporter, the customized
billing statements and billing correspondence produced by
Taxpayer constitute a "continuation and completion of the
services begun with the recording" of the data. And, as with
"[t]he furnishing of information, including a written report to
a person of a personal or individual nature and which is not or
may not be substantially incorporated in reports furnished to
other persons" contemplated by Rule 12A-1.001(16)(b), F.A.C.,
Taxpayer's furnishing of billing statements, letters and notices
of a personal or individual nature, is not an information
service within the meaning of the law and is exempt. These
billing statements, letters and notices produced by Taxpayer are
of a personal and individual nature. They are designed for one
person only. They are not form documents customized in name
only, but are personalized to the extent that the data contained
in the documents is of no value to anyone other than the
specific individual for whom the document is produced.

RESPONSE

The sale of tangible personal property is a taxable transaction
as provided by section 212.05, F.S. However, where professional
or personal services are sold and only inconsequential tangible
personal property is sold without a separate charge, then the
transaction is not taxable as provided by section
212.08(7)(v)1., F.S. As provided by Rules 12A-1.001(16),
F.A.C., and 12A-1.032(6), F.A.C., Taxpayer is not selling
tangible personal property, but is selling a data processing
service because the data processed remains of a personal nature
as provided by Rule 12A-1.062(3), F.A.C. The tangible personal
property provided by Taxpayer is inconsequential in relation to
the data processing services provided by Taxpayer, and the
provision of the tangible personal property represents nothing
more than a continuation or completion of the services begun
with the recording of the data. Therefore, the charges
represent non-taxable charges for a data processing service, not
charges for the sale of tangible personal property.

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 advise as specified in Section 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 advise 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 which 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,

Charles Wallace
Senior Tax Specialist
Technical Assistance and Dispute Resolution
(850) 922-4734

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