Was a charge for DNA-based ancestry analysis and an individualized report delivered on CD-ROM subject to Florida sales tax?

Plain-English summary

Florida concluded that the charge for DNA-based ancestry analysis and an individualized customer report was exempt from sales tax as a professional service. The company analyzed a cheek-swab sample to estimate the customer's ancestry and, for a customer of mixed ancestry, ancestral proportions.

The testing was not performed for a medical purpose. The customer received a CD-ROM containing a certificate and results table, a graph, a map of ancient human migration patterns, and the customer's genotypes at the tested markers.

The report was personal to one customer

Florida generally taxed information services involving duplicated written matter, including collecting or analyzing information and furnishing reports. But the cited rule excluded information of a personal or individual nature that was not, and could not be, substantially incorporated into reports for other people.

The Department treated this DNA analysis as a customer-specific professional service. The CD-ROM did not turn the transaction into a taxable sale of tangible personal property because it was only an inconsequential element and carried no separate charge.

The company still paid tax on consumed supplies

The service exemption did not exempt the provider's own purchases. Supplies consumed in Florida by the testing company were taxable, expressly including the blank CD-ROMs used to deliver results.

What this means for you

DNA testing and ancestry companies

Document that each report is created for one person and is not a standardized product furnished to other customers. Keep any tangible delivery item incidental and avoid a separate product charge if relying on this ruling's analysis.

Laboratories and report providers

Distinguish tax treatment of the customer-facing service from tax due on consumable supplies used to perform or deliver it.

Accountants and tax professionals

Review whether the provider is selling individualized professional judgment or a reusable information product. Also trace the provider's own use-tax obligations for supplies.

Common questions

Q: Was the ancestry-analysis charge taxable?
A: No. Florida treated it as an exempt professional service on the stated facts.

Q: Why was the report not a taxable information service?
A: It was personal to one customer and could not be substantially incorporated into reports for others.

Q: Did delivery on a CD-ROM make the service taxable?
A: No. The CD-ROM was an inconsequential element with no separate charge.

Q: Were the provider's blank CD-ROMs exempt?
A: No. The company owed tax on supplies it consumed in Florida, including blank discs.

Citations and references

• Fla. Stat. § 212.08(7)(v) — professional services and information services
• Fla. Admin. Code r. 12A-1.062(1), (3) — taxable information services and individualized reports
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 04A-001

Original ruling text

SUMMARY

QUESTION: What is the taxable status of DNA testing and the
related analysis performed in order to measure an
individual's racial ancestry, if they are of mixed race,
their ancestral proportions.

ANSWER - Based on Facts Below: The charge for the analysis
and reporting of a person's racial ancestry, based on a
study of the person's DNA, would be exempt from sales tax
as a professional service.

Jan 07, 2004

Re: Technical Assistance Advisement 04A-001
XXX ["Client"]
Sales Tax and Use Tax - Ancestry Testing Analysis Services
Section 212.08(7)(v), F.S.
Rule 12A-1.062, F.A.C

Dear :

This is in response to your letter of October 28, 2003, in which
you request the issuance of a Technical Assistance Advisement on
the taxable status of ancestry testing analysis services
provided to customers located in Florida. Your letter provides
in part:

... [Client] is in the business of providing ancestry
analysis to individuals. The test is performed by analyzing
a sample of DNA provided by the individual. The DNA sample
is provided in the form of a cheek swab. The DNA test will
measure an individual's racial ancestry and their ancestral
proportions, if they are of mixed race. The DNA test is
not done for any medical purpose, but is specifically
designed to help a person identity his or her racial
ancestry and their ancestral proportions.

You indicate that once the test is complete, the customer will
receive the results in the form of a CD-Rom. The customer may
then print out the reports, which include the following:

A certificate and results table showing the ancestral
proportions;

A graphical representation of the results;

A map of ancient human migration patterns; and

Individual's genotypes at tested markers.

APPLICABLE LAW

Section 212.08(7)(v), F.S., concerning professional services,
provides in part:

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-1.062, F.A.C., provides in part:

(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)(a) "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.

(b) The term "information services" does not include the
furnishing of information, including a written report to a
person of a personal or individual nature, that is not or
may not be substantially incorporated in reports furnished
to other persons.

DISCUSSION AND CONCLUSION

Professional services that involve either no tangible personal
property being sold or rented or only inconsequential elements
of tangible personal property being provided are exempt from
sales tax, pursuant to Section 212.08(7)(v), F.S. Information
services are not taxable when the report is of an individual
nature and is not available to other parties. The charge for the
analysis and reporting of a person's racial ancestry, based on a
study of the person's DNA, would be exempt from sales tax as a
professional service.

Any supplies consumed in Florida by the testing company would be
subject to tax. This would include the blank CD-ROMs.

CLOSING STATEMENT

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S. which is binding on the department only
under 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., which are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Your name, address, and any other
details which might lead to identification of the taxpayer must
be deleted by the Department before disclosure. In an effort to
protect the confidentiality of such information, we request you
provide the undersigned with an edited copy of your request for
Technical Assistance Advisement, backup material and response
within fifteen days of the date of this advisement.

Sincerely,

Jonathan E. Swift
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 922-4840

Control 57505