Were subscriptions to an online real-estate information service, downloaded software, CDs, and shipping subject to Florida sales tax?

Plain-English summary

The online real-estate information subscription and electronically downloaded access software were not subject to Florida sales tax. They did not constitute sales of tangible personal property.

Free software CDs supplied to subscribers also did not create a taxable customer sale, but the provider was the consumer and owed tax when it acquired those discs. A hard-copy CD or other tangible property sold for a charge was taxable.

Shipping connected with a taxable CD was generally part of the taxable sales price, whether bundled or separately stated. Transportation could be exempt when separately stated and avoidable solely by the purchaser's choice. If the provider charged only shipping and handling for otherwise free property, the ruling said no tax was due on that charge.

What this means for you

Delivery method and pricing separated the outcomes. Online access and downloads were nontaxable; physical media sold for money was taxable; free media shifted tax to the provider's purchase; and shipping depended on the underlying sale and customer choice.

Common questions

Q: Was the online subscription taxable? No.

Q: Was downloaded software taxable? No.

Q: Was a free software CD taxable to the subscriber? No, but the provider owed tax on acquiring it.

Q: Was a sold map-data CD taxable? Yes.

Citations and references

• Fla. Stat. §§ 212.05(1)(a)1.a. and 212.02(15), (19) — retail sale, sale, and tangible personal property
• Fla. Admin. Code r. 12A-1.062(5) — information services
• Fla. Admin. Code r. 12A-1.045(4) — transportation charges
• Department of Revenue v. Henley Holdings, Inc., 599 So. 2d 1282 (Fla. 1st DCA 1992)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-075

Original ruling text

SUMMARY

QUESTION: Are on-line real estate information services
subject to sales tax?

ANSWER - Based on Facts Below: Internet based real estate
information services do not constitute the sale of tangible
personal property, as defined in s. 212.02(19), F.S.
Furthermore, any charge for software that is downloaded by
electronic means does not constitute a sale of tangible
personal property and is exempt from tax.

In addition, software provided in the form of a hard copy
CD at no cost to subscribers is exempt from tax. In this
respect, the Provider is the ultimate consumer of the CD's
and is required to pay sales tax on the acquisition of the
CD's used in providing the software. However, any tangible
personal property sold by the Provider such as a hard copy
CD would be subject to sales tax.

Any shipping and handling fees associated with shipping
tangible personal property are taxable under some
circumstances. For example, if the Provider charges $25.00
for map data CD's and shipping and handling is included,
the entire charge is subject to tax. If the Provider
charges $20.00 for map data CD's and $5.00 for shipping,
the entire charge of $25.00 would also subject to tax.
However, Rule 12A-1.045(4), F.A.C., provides that
transportation charges are exempt if the charge is
separately stated and the charge can be avoided solely by a
decision of the purchaser. In addition, if the Provider
charges only for shipping and handling, no tax is due.

Dec 18, 2001

Re: Technical Assistance Advisement 01A-075
Sales and Use Tax
Section: 212.05(1)(a)1.a., F.S.
Section: 212.02(15), F.S.

Section: 212.02(19), F.S.
Rule 12A-1.045(4), F.A.C.
Internet Based Real Estate Information Service

Dear :

This is a response, styled a Technical Assistance Advisement, to
your letter dated August 8, 2001. You have asked the Florida
Department of Revenue to provide clarification and guidance on
the application of sales and use tax to an on-line real estate
information service.

Background

You presented the following facts:

... XXX [the taxpayer] provides an online real estate
information service[,] [XXX (Service)], whereby users may
browse the taxpayer's databases residing in servers within
the State of Florida. Users access taxpayer's service
using either dial-up links to the taxpayer's servers, or
through a connection through the Internet. [Users] have
discretion as to what data is browsed and can customize
search and viewing criteria.

Taxpayer sells the service as a subscription, a copy of
which is attached.

Taxpayer does not provide any tangible personal property to
the subscriber apart from:

a) If requested at any time, taxpayer will provide
user with its software to access the service on a CD.
The taxpayer does not charge for the software as a
separate item, nor [does it charge] user however many
copies of the software are requested, though [it] has
the right, though never exercised, of charging a
shipping and handling fee. The software provided is
licensed to the user under the terms of the licensing
clauses in the subscription agreement. User may
download the software from taxpayer's web-site at any

time, and, in this case, the CD is not required.

b) As part of taxpayer's service, user may request map
data (not software) on CD. All such data is available
through the online service, and the CD's are not
requested. These Data CD's are provided in a limited
quantity to the user before [the user is] charged a
media fee for additional copies that may be requested
at any time.

Requested Advisement and Taxpayer's Position

You presented the following:

After reviewing information from the Department of
Revenue's web-site, specifically the Information Services
section: 12A-1.062, it is our belief that [the taxpayer] is
within the guidelines to meet the sales & use tax
exemption. However, should the Department find that the
service is taxable due to the Data CD's alone, it is
requested that it be confirmed that if a customer elects
not to have the right to be shipped data CD's, service is
not taxable for that customer.

Discussion.

The service itself is not [a taxable] information service,
since it meets the exemption in FAC 12A-1.062(5). The
service itself is not tangible property, since the nature
of the purchase is information: see Department of Revenue
v. Henley Holdings, Inc., 599 So.2d 1282 (Fla 1st DCA
1992).

The software and data on the non-required CDs (that are the
only possible items that could be deemed tangible personal
property for our service) are provided free. The software
is used as a means of accessing our services much as a
browser is used for accessing the Web or much as AOL
(America Online) is an Internet service who ships out CDs,
yet they not a taxable service.

The taxpayer's position is that any tangible personal
property provided in the way of CD's are incidental to the
essential character of the service offered its customers.

Discussion and Analysis of Law

The taxability of real estate information services provided by
the Internet is based on an analysis of general sales and use
tax statutes, rules, and case law. 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 follows:

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 ....

In Department of Revenue, State of Florida vs. Quotron Systems,
Inc., 615 So.2d 774 (Fla. 3rd DCA 1993), the Third District
Court of Appeal affirmed the trial court's holding that the
transmission of electronic images to video display screens does
not constitute a sale of tangible personal property and is
therefore not subject to sales tax. The trial court rejected
the Department of Revenue's contention that "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).

Consistent with the cited law, the Department takes the position
that Internet based real estate information services do not

constitute the sale of tangible personal property, as defined in
s. 212.02(19), F.S. Furthermore, any charge for software that
is downloaded by electronic means does not constitute a sale of
tangible personal property and is exempt from tax.

In addition, software provided by the taxpayer in the form of a
hard copy CD at no cost to its subscribers is exempt from tax.
In this respect, the taxpayer is the ultimate consumer of the
CD's and is required to pay tax on the acquisition of the CD's
used in providing the software. However, any tangible personal
property sold by the taxpayer such as a hard copy CD would be
subject to sales tax.

Also noted in your letter is the fact that the taxpayer has the
right to charge a shipping and handling fee. You are alerted to
the fact that shipping and handling fees associated with
shipping tangible personal property are taxable under some
circumstances. For example, if the taxpayer charges $25.00 for
map data CD's and shipping and handling is included, the entire
charge is subject to tax. If the taxpayer charges $20.00 for
map data CD's and $5.00 for shipping, the entire charge of
$25.00 would also subject to tax. However, Rule 12A-1.045(4),
F.A.C., provides that transportation charges are exempt if the
charge is separately stated and the charge can be avoided solely
by a decision of the purchaser. In addition, if the taxpayer
charges only for shipping and handling, no tax is due.

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 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 you have any further questions with regard to this matter and
wish to discuss them, you may contact me directly at (850)9224729.

Sincerely,

Gary L. Gray
Tax Law Specialist
Technical Assistance & Dispute Resolution

GLG\
Control No: 47627