Were initial and renewing memberships for an online diet-information service taxable in Florida?

Plain-English summary

Florida did not tax the initial or automatically renewing membership fees for the online diet service. Subscribers received personalized menus, recipes, shopping lists, interactive tools, meetings, support boards, and newsletters electronically rather than receiving tangible personal property.

The Department treated the membership as an information service outside Chapter 212 sales tax. It also found the online-access charges outside Chapter 202 communications services tax because information services, internet access, email, and similar online services were excluded from the cited definition.

What this means for you

The ruling addressed only subscription fees for electronically delivered information. The vendor still owed tax on its own taxable equipment, property, services, and purchased communications services.

Common questions

Q: Did automatic renewal change the result? No. Both the initial term and monthly renewals received the same treatment.

Q: Did the ruling exempt the vendor's own business purchases? No. It expressly preserved tax on taxable property, services, and communications used by the vendor.

Citations and references

• Fla. Stat. §§ 212.02 and 212.05 — tangible personal property and sales tax
• Fla. Admin. Code r. 12A-1.062(5) — electronic information displays
• Fla. Stat. §§ 202.11, 202.12, and 202.19 — communications services tax
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 03A-001

Original ruling text

SUMMARY

QUESTION 1: Taxpayer sells Internet diet information in the
form of a monthly membership. Is the fee charged for the
initial membership term and the automatic monthly renewal

taxable?

ANSWER 1 - Based on Facts Below: No. Internet based diet

information services do not constitute the sale of tangible
personal property, as defined in s. 212.02(19), F.S. Rule
12A-1.062(5), F.A.C., provides that information furnished
by way of electronic images, which appear on the
subscriber's video display screen, does not constitute a

sale of a taxable information service.

Jan 13, 2003

Re: Technical Assistance Advisement 03A-001
Sales and Use Tax - Internet Based Diet Service
Sections: 202.11(3), 202.12, 202.19, 212.05(1),
212.02(15),(16),(19), 212.08(7)(v)1., F.S.

Rule: 12A-1.062(5), F.A.C.
XXX (Vendor)
FEI #: XX

Dear:

This is in response to your letter dated XX, and other
correspondence provided requesting a technical assistance
advisement (TAA) regarding the above referenced party and
matter. Your letter has been carefully examined and the
Department finds it to be in compliance with the requisite
criteria set forth in Chapter 12-11, F.A.C. This response to
your request constitutes a TAA and is issued to you under the

authority of section 213.22, F.S.

FACTS

You state in your letter referenced above that your client,
Vendor, sells subscriptions for a fee. The fee includes the
right to use the web-site and obtain a bi-weekly diet and

complimentary fitness e-mail newsletter. You also state:

Each [Vendor] member can enjoy the convenience and privacy
of 24 hours a day/7 days a week access to their

personalized on-line [Vendor] program that includes
customized weekly menus, recipes and grocery shopping

lists, interactive tools, online meetings, support boards,

chats, fitness tips, professional advice, and more through

their desktops.

TAXPAYER POSITION

You state that you believe the revenue generated from these
services is not subject to Florida sales tax, based on Rule 12A-
1.062(5), F.A.C. You believe the charges for furnishing
information by way of electronic images which appear on the
subscriber's video screen do not constitute a sale of tangible
personal property nor does the transaction constitute the sale

of a taxable information service.

REQUESTED ADVISEMENT

In your letter dated XX, you request a ruling on the fee charged
for the initial membership term and the automatic monthly

renewal.

APPLICABLE STATUTES AND RULES

Section 212.05 (1), F.S., levies a tax upon the sale of tangible

personal property 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, F.S., provides in pertinent parts:

(15) "Sale" means and includes:

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.

(16) "Sales price" means the total amount paid for tangible
personal property, including any services that are a part
of the sale, valued in money, whether paid in money or
otherwise, and includes any amount for which credit is
given to the purchaser by the seller, without any deduction
therefrom on account of the cost of the property sold, the
cost of materials used, labor or service cost, interest
charged, losses, or any other expense whatsoever. "Sales
price" also includes the consideration for a transaction
which requires both labor and material to alter, remodel,

maintain, adjust, or repair tangible personal property...

(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,
including electric power or energy, boats, motor vehicles

and mobile homes as defined in s. 320.01(1) and (2),

aircraft as defined in s. 330.27, and all other types of

vehicles....

Section 212.08(7)(v)1., F.S., provides:

1. Also exempted are professional, insurance, or personal
   service transactions that involve sales as inconsequential

elements for which no separate charges are made.

Rule 12A-1.062(5), F.A.C., provides:

(5) The charge for furnishing information by way of
electronic images which appear on the subscriber's video
display screen does not constitute a sale of tangible
personal property nor does it constitute the sale of a

taxable information service.

Sections 202.12 and 202.19, F.S., impose state and local tax on
the sales of communications services that begin and end in
Florida or that either begin or end in Florida and are charged

to a Florida service address. Section 202.11(3), F.S., defines

“communications services" as follows:

(3) "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. The term does not include:

(a) Information services.

(h) Internet access service, electronic mail service,
electronic bulletin board service, or similar on-line

computer services.

RESPONSE

The charge for electronically transmitted information is not
subject to tax, pursuant to Chapter 212, F.S., as there has been
no exchange of tangible personal property. This charge is
construed to be a service. The Department takes the position
that Internet based diet information services do not constitute
the sale of tangible personal property, as defined in s.
212.02(19), F.S. Rule 12A-1.062(5), F.A.C., provides that
information furnished by way of electronic images, which appear
on the subscriber's video display screen, does not constitute a

sale of a taxable information service.

The monthly charges made by Vendor to its subscribers for access
to Vendor's on-line program are not subject to tax under Chapter
202, F.S., because the on-line services are not included in the

definition of "communications services" in Chapter 202, F.S.

This advisement addresses only Vendor's obligation to collect

taxes on the monthly fees charged to its subscribers. Vendor's
offices are in Florida. Vendor is liable for sales or use tax

on any equipment or other tangible personal property and on any
taxable services (e.g., cleaning or security services) purchased
or used by Vendor in Florida. Vendor is also liable for
communications services tax on any communications services
described in Chapter 202, F.S., that Vendor purchases or uses in

carrying on its activities.

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 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,

Valerie Koenitzer, CPA

Senior Tax Specialist

Technical Assistance and Dispute Resolution

(850) 922-9412

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