Were per-call and setup charges for automated prerecorded telemarketing taxable as telecommunications or tangible-property sales?

Subject

Telemarketing Services

Plain-English summary

The company's per-call and setup charges for placing calls and delivering prerecorded messages were nontaxable telemarketing-service charges. The company controlled the dialing computers, customers received no recording or other tangible property, and the affiliates were not billed for long-distance or other telecommunications.

The charges were therefore not subject to sales tax, gross receipts tax, or the state and local communications services taxes taking effect October 1, 2001.

The operator was the consumer of the underlying phone services it bought. Its Florida business-number and inbound toll charges were taxable to it, and it could not give the provider a resale certificate. If telemarketing was its only service, it did not need to register to collect sales tax.

What this means for you

Using telecommunications to perform a service did not mean the company resold telecommunications. Control, billing, and what the customer actually received separated the nontaxable service from the operator's taxable inputs.

Common questions

Q: Were customer telemarketing charges taxable? No.

Q: Did the company transfer tapes or recordings? No. Customer-supplied recordings were digitized for performance and then destroyed.

Q: Did the company owe tax on phone service it bought? Yes.

Q: Could it issue a resale certificate to the phone provider? No.

Citations and references

• Fla. Stat. §§ 203.01 and 203.012 — gross receipts tax and telecommunications
• Fla. Stat. § 212.05(1)(a)1.a. and (1)(e)1.a. — property and telecommunications sales tax
• Fla. Stat. § 212.08(7)(v)1. — professional and personal services
• Fla. Stat. §§ 202.11, 202.12, and 202.19 — state and local communications services tax
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-047

Original ruling text

SUMMARY

QUESTION: Are charges for placing telephone calls and
delivering prerecorded messages subject to Florida sales
tax and gross receipts tax?

ANSWER - Based on Facts Below: Sub-subparagraph
212.05(1)(e)1.a., F.S., imposes sales tax at a rate of 7
percent on telecommunications services, as defined or
described in Chapter 203, F.S., and any discretionary sales
surtax. See ss. 212.054 and 212.055, F.S. Beginning October
1, 2001, Chapter 202, F.S., imposes a Florida
communications services tax comprised of the rate of 6.8
percent for the state portion of the tax, and the rate of
2.37 percent for the state gross receipts tax portion of
the tax. See ss. 202.11 and 202.12, F.S. Charges for
communications services are also subject to local
communications services tax. See subsections 202.19(3) and
(5), F.S. Taxpayer does not charge Affiliate A and
Affiliate B for any long distance charges or any other
telecommunication services (or communications services).
Instead, taxpayer is in the business of selling
telemarketing services. Charges for telemarketing services
are not charges for toll telephone service or any other
service defined or described in Chapter 203 (or Chapter
202), F.S., as a "telecommunication service" (or
"communications service"). Such charges are not subject to
the gross receipts tax, nor are they subject to sales tax
as a telecommunication service. Such charges are also not
subject to Florida communications services tax or local
communications services tax.

Charges for placing telephone calls and delivering
prerecorded messages are charges for a service. Because
Taxpayer is not providing tangible personal property in
connection with its telemarketing services, Taxpayer's
charges for the telemarketing services are not subject to
sales or use tax. However, Taxpayer should pay sales tax
when purchasing tangible personal property to use in
providing its telemarketing services.

Furthermore, taxpayer is deemed the ultimate consumer of
the telecommunication services (and communications
services) it uses to provide telemarketing services to its
customers. The charge by a provider for the use of a
Florida business telephone number, by taxpayer, is
considered to be a charge for inbound "toll telephone
service," and is subject to tax under subsection
203.012(7), F.S. Taxpayer should be charged the applicable
sales tax, gross receipts tax, and any discretionary sales
surtax by its telecommunications service provider.
Beginning October 1, 2001, this charge is considered to be
a charge for communications services and is subject to tax
under Chapter 202, F.S. Beginning October 1, 2001, Taxpayer
should be charged the applicable Florida communications
services tax and local communications services tax by its
communications services provider. Consistent with this
position, taxpayer may not extend a resale certificate to
the telecommunications provider (or communications services
provider), since it is not selling a telecommunication
service (or communications service).

Aug 13, 2001

Re: Technical Assistance Advisement 01A-047
XXX (Taxpayer)
Sales and Use Tax - Telemarketing Services
Sections: 212.05(1)(a)1.a., 212.05(1)(e)1.a., and
212.08(7)(v)1., F.S.
Gross Receipts Tax
Sections: 203.01 and 203.012, F.S.

Dear :

This is a response to your letter dated March 28, 2001, in which
you requested a technical assistance advisement concerning the
applicability of sales and use tax and gross receipts tax on
telemarketing services.

FACTS

In your letter, you stated, in part:

... Taxpayer[ ] is one of a group of commonly owned
companies providing telemarketing services[,] primarily
through voice mail broadcasting, to its affiliate
companies.... [Taxpayer and its affiliate companies] are
organized pursuant to the laws of the State of Florida....

The primary service provided by [Taxpayer] is a service
[that is] marketed under the name [of] XXX [(XX)]. The XXX
[(Affiliate A)] and XXX [(Affiliate B)] are the exclusive
marketers of the [XX] service provided by [Taxpayer]. As a
result of the foregoing, virtually all of the sales of the
[XXX] service are to [Taxpayer's] affiliates, [Affiliate A]
and [Affiliate B]. The two separate marketing entities
([Affiliate A] and [Affiliate B]) were organized
specifically for the purposes of creating name brand
recognition within distinctly different market segments[,]
which are being targeted by each of the companies.

[XX] is a computerized message delivery service capable of
placing a personalized pre-recorded message (in its
entirety) on the target customer's answering machine or
voice mail service. The target customer in this case is the
customer of the business buying the direct marketing
services from either [Affiliate A] or [Affiliate B]. The
intent of the service is to create the impression that each
call is made personally and individually to the buyer's
targeted customers or prospects. The [XX] technology
includes the ability to automatically detect when the phone
is answered by an automated answer[ing] machine or voice
mail system.

With a letter dated July 5, 2001, you provided a description of
the services provided. This description states, in part:

... [XX] is basically an automated telemarketing service
that utilizes prerecorded voice messages. [Taxpayer's]
customers use the [XX] service to place high volumes of

telephone calls and deliver prerecorded messages[,] when
the telephone is answered.

Customers wishing to use the [XX] service craft a message
that will be delivered to their calling list. The message
is [ ] 1) recorded by the customer and sent to [Taxpayer]
on tape[;] 2) recorded over the telephone[;] or 3) recorded
at [Taxpayer's] offices.

[Taxpayer] owns dozens of telephone dialing-calling
computers that are capable of placing calls and playing
digitized voice messages over the telephone. Each dialingcalling computer is connected to multiple telephone lines,
allowing each computer to place approximately one hundred
simultaneous telephone calls. [Taxpayer] directly controls
all the dialing-calling computers making the calls. The
customer who utilizes the telemarketing service has no
access to or control over [Taxpayer's] dialing-calling
computers.

Upon further clarification, you stated that a customer places an
order with Affiliate A or Affiliate B, which contacts Taxpayer
with the order. You stated that Taxpayer does not provide
tangible personal property when providing the computerized
message delivery service. You stated that tapes are only
involved when a customer supplies a recording to Taxpayer, which
is digitized to a file that is use by Taxpayer's computer. The
message recordings are not provided to customers on a tape as
part of Taxpayer's services, but are solely used to execute
Taxpayer's services. Once the services are performed, the
recordings are destroyed. Taxpayer bills Affiliate A and
Affiliate B on a per call basis and for set up fees, and
Affiliate A and Affiliate B, in turn, bill the customer.
Furthermore, you stated that Taxpayer purchases
telecommunication services from providers to use in its
computerized message delivery service.

QUESTION

Whether the service provided by Taxpayer is subject to Florida
sales tax or gross receipts tax?

LAW

The following statutory authority is relevant to the issue under
advisement:

Section 203.01, F.S., dealing with tax on gross receipts for
utility services, provides, in part:

(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)....

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

Section 203.012, F.S., provides, in part:

(2)(a) Gross receipts from telecommunication services
include the gross receipts for all telecommunication
services of whatever nature, including, but not limited to,
access charges and charges for right of access; residential
and business 1-party, 2-party, and 4-party rotary charges;
centrex charges; directory assistance charges; public
telephone charges; touch-tone charges; emergency number
charges; private branch exchange message charges; public
announcement service charges; dial-it charges; local area
data transport charges; key lines charges; private branch
exchange trunk-flat rate charges; and directory listing
charges other than yellow-page classified listing charges.

(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.

(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.

(9) The term "utility service" means electricity for light,
heat, or power; natural or manufactured gas for light,
heat, or power; or telecommunication services.

Paragraph 212.02(15)(a), F.S., defines sale as:

Any transfer of title or possession, or both,... license,
lease, or rental, conditional or otherwise, in any manner
or by any means whatsoever, of tangible personal property
for a consideration.

Section 212.05, F.S., provides in part:

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 this 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 . . . .

(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....

Paragraph 212.08(7)(v), F.S., provides an exemption from sales

and use tax on the sale of certain services. This paragraph
states, in pertinent part:

1. ... 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.

RESPONSE

Chapter 203, F.S., imposes a tax on the gross receipts received
by a utility provider for any utility service, including
telecommunication services. See ss. 203.01(1)(a) and 203.012(9),
F.S. Sub-subparagraph 212.05(1)(e)1.a., F.S., imposes sales tax
at a rate of 7 percent on telecommunication service, as defined
or described in Chapter 203, F.S., and any discretionary surtax.
See ss. 212.054 and 212.055, F.S.

Beginning October 1, 2001, Chapter 202, F.S., imposes a Florida
communications services tax comprised of the rate of 6.8 percent
for the state portion of the tax, and the rate of 2.37 percent
for the state gross receipts tax portion of the tax. See ss.
202.11 and 202.12, F.S. Charges for communications services are
also subject to local communications services tax. See
subsections 202.19(3) and (5), F.S.

Sub-subparagraph 212.05(1)(a)1.a., F.S., imposes sales tax at
the rate of 6 percent on the sale of tangible personal property.

The sale of professional and personal services is not subject to
sales tax. See subparagraph 212.08(7)(v)1., F.S. The sale of a
professional or personal service in connection with the sale of
tangible personal property, unless the tangible personal
property is an inconsequential element of the transaction as a
whole, is subject to sales tax. See subparagraph 212.08(7)(v)1.,
F.S.

Your letter, the description of Taxpayer's services, invoices
and contracts provided illustrate that Taxpayer does not charge
Affiliate A and Affiliate B for any long distance charges or any
other telecommunication services (or communications services).
Based upon the information provided in your request, Taxpayer is
in the business of selling telemarketing services. Charges for
telemarketing services are not charges for toll telephone
service or any other service defined or described in Chapter 203
(or Chapter 202), F.S., as a "telecommunication service" (or
"communications service").

Such charges are not subject to the gross receipts tax, nor are
they subject to sales tax as a telecommunication service. Such
charges are also not subject to Florida communications services
tax or local communications services tax.

You stated that Taxpayer does not provide tangible personal
property when providing the telemarketing service. You stated
that "[t]he message is 1) recorded by the customer and sent to
Taxpayer on tape[;] 2) recorded over the telephone[;] or 3)
recorded at Taxpayer's offices." The message recordings are not
provided to customers on tape as part of Taxpayer's services,
but are solely used to execute Taxpayer's services. Once the
services are performed, the recordings are destroyed.
Specifically, you stated, and the invoices provided illustrate,
that Taxpayer only charges Affiliate A and Affiliate B for its
telemarketing services on a per call basis, and for set up fees.

Charges for placing telephone calls and delivering prerecorded
messages are charges for a service. Because Taxpayer is not
providing tangible personal property in connection with its
telemarketing services, Taxpayer's charges for the telemarketing
services are not subject to sales or use tax. However, Taxpayer

should pay sales tax when purchasing tangible personal property
to use in providing its telemarketing services.

Furthermore, you stated that Taxpayer purchases
telecommunication services from providers to use in its
telemarketing service. Taxpayer is deemed to be the ultimate
consumer of the telecommunication services (and communications
services) it uses to provide the telemarketing services to its
customers. It is assumed that taxpayer's business is located in
Florida, that all inbound calls will terminate in Florida, and
that the charges are billed to a Florida device, number, or
customer, as stated in section 203.60, F.S. The charge by your
provider for the use of the Florida business telephone number,
by Taxpayer, is considered to be a charge for inbound "toll
telephone service," and is subject to tax under subsection
203.012(7), F.S. Taxpayer should be charged the applicable
sales tax, gross receipts tax, and any discretionary surtax by
its telecommunications service provider. Beginning October 1,
2001, this charge is considered to be a charge for
communications services and is subject to tax under Chapter 202,
F.S. Beginning October 1, 2001, Taxpayer should be charged the
applicable Florida communications services tax and local
communications services tax by its communications services
provider. Consistent with this position, taxpayer may not extend
a resale certificate to the telecommunications provider (or
communications services provider), since it is not selling a
telecommunication service (or communications service).

Taxpayer does not need to register with the Department to
collect and remit sales tax if the only service provided by
Taxpayer is the telemarketing service. This advisement only
addresses the specific service of providing telemarketing
service by Taxpayer. It does not contemplate a scenario where
Taxpayer provides telecommunication services (or communications
services) or tangible personal property to customers.

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 from that which is 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.

If I may be of further assistance, please do not hesitate to
contact me.

Sincerely,

Isabel Nogues
Attorney
Technical Assistance and
Dispute Resolution
(850) 488-9669

Control # 44728