Was stand-alone push-to-talk dispatch service subject to Florida communications services tax?

Plain-English summary

The stand-alone dispatch service was subject to Florida communications services tax. Users pressed a handset button to connect instantly with a predefined talk group for one-to-one or one-to-many communication, with only one person speaking at a time.

The Department concluded that this push-to-talk offering fit Florida's statutory definition of a communications service even when sold separately rather than as part of a cellular bundle.

What this means for you

Selling a communications feature on a stand-alone basis does not by itself remove it from the communications services tax. The function and statutory classification of the service control.

Common questions

Q: Was the answer limited to a bundled wireless package? No. The taxpayer specifically asked about dispatch service sold separately.

Q: What kind of service did the ruling address? A two-way push-to-talk radio service connecting a user with a predefined talk group.

Citations and references

• Fla. Stat. § 202.11(3), (8), (13), and (14) — communications-service definitions
• 47 C.F.R. § 20.3 — federal mobile-service definition cited by the ruling
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 02A-046

Original ruling text

SUMMARY

QUESTION: Is dispatch service, when sold as a separate
stand-alone service, a communications service subject to
communications services tax?

DISPATCH SERVICE DEFINED: Dispatch service is a two-way
radio, one-to-one/one-to-many communication service in
which the user presses a button on the side of a handset
and is instantly connected with a pre-defined talk group.
The button must be depressed to talk (known as "push to
talk") and only one person at a time can talk.

ANSWER 1 - Based on Facts Below: Yes. Dispatch service is
a communications service as defined in s. 202.11(3), F.S.,
and is subject to communications services tax.

Oct 29, 2002

Re: Technical Assistance Advisement 02A-046
Communications Services Tax
Dispatch Communications Services
Title 47, part 20.3, of the Code of Federal Regulations
Section 202.11(3), (8), (13), and (14), F.S.

Dear :

This is a response to your letter dated June 21, 2002, in which
you have requested a Technical Assistance Advisement regarding
the application of communications services tax to a specific
service that your company, XXX (hereinafter "Taxpayer"), sells
to subscribers. Your letter refers to this service as "dispatch
service." You have asked the Florida Department of Revenue
(hereinafter "Department") for a ruling that Taxpayer will not
have an obligation to collect Florida communications services
taxes from subscribers who purchase dispatch services after July
31, 2002, when such services are sold as a separate stand-alone
service.

Stated Facts

In your letter, you note that Taxpayer is headquartered outside
Florida. Taxpayer registered with the Department as a dealer of
communications services on October 4, 2001. Taxpayer currently
calculates and collects communications services tax, whether
sold separately or as a bundled package of services, on cellular
interconnect service, dispatch service, paging service, circuit
switched data service, and voice mail.

Your letter also provides the following facts about Taxpayer:

[Taxpayer] provides mobile telephone service over
Specialized Mobile Radio ("SMR") frequencies to
approximately XX subscribers in several states, including
Florida. It provides both interconnected and dispatch
service, and subscribers can access both of those services
from the same mobile unit, i.e., handset. However, the two
services are very different. From a functionality
standpoint, [Taxpayer's] interconnected service is the type
of service most people associate with mobile phones, and it
provides communications with any other landline or mobile
telephone user via interconnection with the public switched
telephone network. Quite simply, the subscriber dials a
valid telephone number, either landline or mobile, and the
call is routed through the public switched telephone
network for connection to the dialed number. In contrast,
[Taxpayer's] dispatch service provides the ability to
communicate with a group of pre-defined users. Dispatch
service is a two-way radio, one-to-one/one-to-many
communication service in which the user presses a button on
the side of the handset and is instantly connected with the
pre-defined talk group. The button must be depressed to
talk (known as "push to talk") and only one person at a
time can talk. These dispatch calls are carried on a
private network that cannot access or be accessed by the
general public.

In addition to their differences in functionality,
interconnected and dispatch services are also very

different with regard to their underlying technology. That
is, calls on [Taxpayer's] system take different paths
depending on whether they are interconnected or dispatch
calls. [Taxpayer's] interconnected service utilizes a XX
switch, which is similar to the equipment used by regular
cellular and broadband PCS [Personal Communications
Service] providers to route calls to the public switched
telephone network. Its dispatch service, however, utilizes
a completely separate dispatch application processor
("DAP"). A DAP is a system independent of the public
switched telephone network that enables dispatch users to
communicate with other dispatch users in their talk group
and/or fleets.

Taxpayer's Position

It is your position that the sale of dispatch services by
Taxpayer, when such services are sold as a separate service
(i.e., not sold as part of an aggregated or "bundled" package
that includes taxable services), are exempt from communications
services tax. Taxpayer proposes to discontinue collecting
communications services tax on its sales of dispatch service
when sold as a separate service. Taxpayer will continue to
collect and remit communications services tax on cellular
interconnect service, paging service, and voice mail services,
and will collect and remit communications services tax on its
sale of dispatch services when sold as part of a bundled package
of services that includes taxable services.

In support of your position that Taxpayer's sales of dispatch
services are exempt from communications services tax, you assert
that dispatch services are excluded from the federal definition
of commercial mobile radio service (hereinafter "CMRS").
Effective August 1, 2002, s. 202.11(8), F.S., defines "mobile
communications service" as follows:

"Mobile communications service" means commercial mobile
radio service, as defined in 47 C.F.R. s. 20.3 as in effect
on June 1, 1999. The term does not include air-to-ground
radiotelephone service as defined in 47 C.F.R. s. 22.99 as
in effect on June 1, 1999.

CMRS, is defined in Title 47, part 20.3, of the Code of Federal
Regulations (hereinafter "C.F.R."), as:

Commercial mobile radio service. A mobile service that is:

(a)(1) provided for profit, i.e., with the intent of
receiving compensation or monetary gain;

(2) An interconnected service; and

(3) Available to the public, or to such classes of eligible
users as to be effectively available to a substantial
portion of the public; or

(b) The functional equivalent of such a mobile service
described in paragraph (a) of this section.

You state that Taxpayer's dispatch service is not
interconnected. Taxpayer's subscribers can use dispatch service
only to communicate among members of a pre-defined talk-group
and the dispatch service communications go through Taxpayer's
DAP, which is physically separate from the XX switch used for
interconnected services. Due to this lack of interconnection,
you argue that Taxpayer's dispatch service should not be
classified as CMRS and therefore should not be subject to
communications services tax.

Applicable Authority and Discussion

According to Newton's Telecom Dictionary, 16th Edition, the term
"dispatch" is "[a] radio communications technique where one
communicates to many through short bursts of communication.
Users of dispatch services include taxis, trucking companies and
service personnel." (Emphasis added.)

The term "communications services" is defined in s. 202.11(3),
F.S., as:

"Communications services" means the transmission,
conveyance, or routing of voice, data, audio, video, or any

other information or signals, including cable services, to
a point, or between or among points, by or through any
electronic, radio, satellite, cable, optical, microwave, or
other medium or method now in existence or hereafter
devised, regardless of the protocol used for such
transmission or conveyance....

Section 202.11(13), F.S., provides:

"Sale" means the provision of communications services for a
consideration.

Section 202.11(14), F.S., provides:

"Sales price" means the total amount charged in money or
other consideration by a dealer for the sale of the right
or privilege of using communications services in this
state, including any property or other services that are
part of the sale. The sales price of communications
services shall not be reduced by any separately identified
components of the charge that constitute expenses of the
dealer, including, but not limited to, sales taxes on goods
or services purchased by the dealer, property taxes, taxes
measured by net income, and universal-service fund fees.

As you can see, the definition of communications services is
very broad and covers a wide range of services. The service
does not need to be defined as CMRS under 47 C.F.R. s. 20.3 to
be subject to Florida's communications services tax. The
service does not need to be interconnected to be subject to
Florida's communications services tax. And, the service does
not need to be for profit to be subject to Florida's
communications services tax. Section 202.11(3), F.S., simply
states that the transmission of a signal by any means for a
consideration is subject to communications services tax.
Although there are a few exemptions and exclusions from the tax,
there is no specific exemption or exclusion for dispatch
services. Therefore, based on the information provided in your
letter and Chapter 202, F.S., Taxpayer's dispatch services are
communications services.

Advisement

Based on the foregoing discussion and analysis, charges by
Taxpayer for dispatch services are charges for a communications
service subject to communications services tax.

Closing Statement

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.

We have noted your request to have a copy of this advisement
sent to a third party. Please be advised that the Department
does not send copies to third parties. If you have any further
questions with regard to this matter and wish to discuss them,
you may contact me directly at (850)922-4729.

Sincerely,

Gary L. Gray
Tax Law Specialist

Technical Assistance & Dispute Resolution

GLG\
Control No: 50832