Were electronic financial data, analytics, news, and third-party exchange feeds subject to Florida communications tax, and were optional computers taxable?

Plain-English summary

Florida did not impose communications services tax on the provider's financial databases, analytics, news, or separately invoiced third-party exchange feeds because they were “information services,” not taxable communications services. The provider used telecommunications to deliver information, but the customers were buying the capability to retrieve, process, manipulate, and use financial content.

The service gave banks, brokers, insurers, and similar customers access to continuously updated global financial data, proprietary analytics, news, and optional exchange feeds. Customers connected through dedicated phone lines and provider-owned routers or through their own internet service. The agreements made customers responsible for the electricity and communications services needed for delivery.

Information delivered by communications was still an information service

Section 202.11 broadly defined communications services as transmitting or routing data, but expressly excluded information services. The statute defined an information service as offering capabilities to generate, acquire, store, transform, process, retrieve, use, or make information available via communications services.

The Department found that the financial platform fit that exclusion. The basic service and third-party financial feeds were therefore outside the communications services tax, even though they arrived through telephone or internet connections.

Software and hardware had different sales-tax results

The provider supplied software needed to access the data and, for an extra fee, offered its own monitors and computers. All provider equipment remained its property and had to be returned at contract termination.

The Department separated the components:

• Bundled data and software: Not subject to sales tax because the software was intertwined with the electronically delivered information service in a single charge.
• Separately charged computers and monitors: Subject to sales tax as leases of tangible personal property. The agreements gave customers possession and limited use of the hardware for consideration.

Other communications remained outside the requested holding

The provider acknowledged that re-leased T-1 lines and a private satellite television feed were taxable communications services and was already remitting tax. It did not request a ruling on those revenue streams.

The Department also flagged a possible “substitute communications system” issue where dedicated routers, T-1 connectivity, backup systems, and other equipment might create a private network. It identified the statute but did not make a final determination that the described financial information service was such a system.

What this means for you

Financial-data and SaaS providers

Electronic delivery does not by itself turn a data product into a taxable communications service. The central question is whether customers buy transmission or the capability to retrieve and work with information.

Providers bundling software with data

Software necessary and incidental to an electronically delivered information service can follow the nontaxable service treatment when it is not separately charged. Tangible delivery or separate licensing can change the analysis.

Businesses leasing customer hardware

Separately priced computers, monitors, routers, or other equipment may be taxable rentals even when used only to access a nontaxable information service.

Common questions

Q: Were the provider's financial database charges subject to communications services tax?
A: No. The service was an excluded information service.

Q: Were third-party stock-exchange feeds taxable?
A: No under the same information-service analysis, even though they were separately invoiced.

Q: Was the access software subject to sales tax?
A: No under these invoices, because it was bundled and intertwined with the electronically delivered information service.

Q: Were optional computers and monitors taxable?
A: Yes. Their separate charges were taxable leases of tangible personal property.

Q: Did the Department decide the substitute-system issue?
A: No final determination appears in the advisement. It identified a possible issue based on dedicated network equipment and connectivity.

Citations and references

• Fla. Stat. § 202.11(3) and (7) — communications services exclude defined information services
• Fla. Stat. § 202.11(16) — substitute communications system
• Fla. Stat. §§ 202.12 and 202.19 — state and local communications services tax
• Fla. Stat. § 212.02(10)(g), (15), (16), and (19) — leases, sales, sales price, and tangible personal property
• Fla. Stat. § 212.05 — sales tax on tangible personal property
• Fla. Admin. Code r. 12A-1.032(2) — rentals of computers and related hardware
• Fla. Admin. Code r. 12A-1.062(5) — electronically furnished information
• Fla. Admin. Code r. 12A-1.071 — tangible personal property rentals
• Department of Revenue v. Quotron Systems, Inc., 615 So. 2d 774 (Fla. 3d DCA 1993) — electronically delivered information and incidental software or equipment
• Department of Revenue v. Henley Holdings, Inc., 599 So. 2d 1282 (Fla. 1st DCA 1992) — information-service treatment

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 04A19-001

Original ruling text

SUMMARY
QUESTION 1: Is Taxpayer's charge to its customers for access to its financial information service subject to Florida’s
Communications Services Tax?
ANSWER - Based on Facts Below: No. The Taxpayer's financial information service is not subject to the
communications services tax of Chapter 202, F.S., because it is an "information service" excluded from the definition
of "communications services." According to the documentation provided, the Taxpayer provides its customers with
access to researchable databases of global financial information and news through dedicated phone lines of the
customers and Taxpayer-owned communications equipment (routers). Access to the Taxpayer's services is
accomplished by communications software loaded onto the customer's computer, or for an increased fee via the
Taxpayer's flat panel monitor and/or computer. Thus, the Taxpayer is providing an information service that is delivered
via a telephonic connection.
QUESTION 2: Is Taxpayer's charge to its customers for access to third party financial information services subject to
Florida's Communications Services Tax?
ANSWER - Based on Facts Below: No. For the same reasons as stated above in Question 1, the Taxpayer's third
party financial information service is not subject to the communications services tax of Chapter 202, F.S., because it is
an "information service" excluded from the definition of "communications services."

September 20, 2004

Subject: Technical Assistance Advisement 04A19-001
Communications Services Tax - Financial Information Services
Section 202.11, F.S.
Section 202.12 , F.S.
XXX [Taxpayer], Petitioner
Taxpayer Identification Number: XX
Dear :
This is a response to your letter dated March 25, 2004. You have requested a Technical Assistance Advisement
(TAA) regarding the applicability of communications services tax to the services provided by Taxpayer. Your letter has
been carefully examined, and the Department finds it to be in compliance with the requisite criteria set forth in Rule
Chapter 12-11, F.A.C. This response to your request constitutes a TAA and is issued to you under the authority of s.
213.22, F.S.
ISSUE

Whether Taxpayer's charges to its customers for access to a financial information service is subject to Florida
communications services tax.
FACTS
In your letter, you stated the facts relevant to the taxpayer’s situation as follows:

[Taxpayer] offers its customers a financial information service (the "financial information service") comprised primarily
of access to (i) a database of financial information, (ii) proprietary and/or sophisticated analytics for evaluating
financial products, and (iii) comprehensive news coverage. [Taxpayer's] customers include banks, brokers, insurance
companies, and similar customers in the financial services industry. The financial data, analytics and news are
accessed and maintained on mainframe computers located in State A and State B. These computers continuously
provide updated news and financial data accessible by the customer with real time and delayed information.
Customers generally access the information service via dedicated phone lines linked to certain [Taxpayer]-owned
communications equipment, referred to as routers, installed at the customer premises. More specifically, the routers
are connected via telephone lines to various node sites owned and maintained by [Taxpayer]. The node sites contain
[Taxpayer] owned central communications equipment that assist[s] in routing the signals to and from the mainframe
computers located in State A and State B. Customers may also access the mainframe computers through the
customer's internet service provider. In addition to access to the financial data, analytics, and news, customers have
the ability to send and receive e-mail to and from any internet address and any other [Taxpayer] customer as part of
the service. Embedded in the financial database information are links to external internet sites; as such, the service
enables limited internet access.
Generally, [Taxpayer] provides its customers with a keyboard and a small amount of communications software that is
loaded onto the customer's PC. For an increased fee, the customer may also utilize a [Taxpayer] provided flat panel
monitor and/or personal computer. At all times, such equipment (including the router) remains the property of
[Taxpayer] and at the termination of the contract any and all equipment must be returned to [Taxpayer].
Using any of the options outlined above, customers gain access to a researchable database of global financial
information and news. In addition to this access, customers may employ the analytics to use, manipulate, and present
the information in various formats and to make sophisticated financial calculations using such data.
In addition to the basic information described above, additional third party information services are available for an
extra charge, and are invoiced separately from the basic service. For example, feeds of real-time information from
various stock exchanges (such as the Chicago Mercantile Exchange) are available for an additional charge
(hereinafter referred to as "exchange feeds").
The contract entered into by [Taxpayer] with each of its customers is structured as a lease agreement whereby the
lessor ([Taxpayer]) agrees to provide the lessee (customer) with the data, software, and equipment necessary to

access the electronic financial information and news service described above (see copy of actual contract attached).
Each contract refers to a schedule of services, which defines the service to be provided be the number of viewable
screens.
The contract refers to [Taxpayer] as the lessor and the customer as lessee. The term of the agreement is clearly
delineated and does not cease upon the occurrence of a specific event or achievement of a specific goal. The
customer usually enters into a two-year agreement with [Taxpayer], which allows the customer access to the overall
information service for a flat monthly charge billed quarterly in advance. As the customer changes its number of
screens and equipment configurations, the original contract continues to govern, but is updated over time by updated
schedules of services.

Billings are based solely upon the number of users and types of equipment configurations at each subscriber location.
Length of time or frequency of use is not relevant. The information service is shown on one line (with one of the
descriptions above) and the charge for equipment, if any, is shown on a second line. Currently most multiple-screen
users pay $1,350 per month per screen for the information service and equipment charges are added onto that base
price.

As stated above, third party information services are billed on separate invoices, and have no associated additional
equipment....
[Taxpayer] has not charged its Florida customers the CST on the information service or equipment....

Additionally, you provided the following supporting documents, which are attached: Invoices, Third Party Services
Invoices, Agreements, Supplemental Agreements, and Third Party Agreements.
TAXPAYER REQUESTED ADVISEMENT

1. Is [Taxpayer's] charge to its customers for access to the financial service subject to Florida’s [Communications
   Services Tax]?
2. Is [Taxpayer's] charge to its customers for access to third party financial information services subject to Florida's
   [Communications Services Tax]?
   TAXPAYER POSITION
   In your letter, you stated the Taxpayer's position as follows:

s. 202.12(1)(a)2. imposes the CST on any communications service which "[o]riginates or terminates in this state and
is charged to a service address in this state, when sold at retail." s. 202.11(3) defines communications service as the
"transmission ... of ... data ... to a point ... by ... any electronic ... medium." s. 202.11(3)(a) excludes information
services from the definition of communications services, and s. 202.11(3)(h) excludes internet access, electronic mail
service, and electronic bulletin board services from tax.
s. 202.11(7) defines a nontaxable (per s. 202.11(3)(a)) information service as "offering of a capability for ... generating,
acquiring, storing, transforming, processing, retrieving, using, or making available information via communications
services (emphasis added)."
[Taxpayer's] financial information service fits within the definition of a nontaxable information service under s.
202.11(7), and as such is nontaxable when delivered (from State A and State B) to customers in Florida. The mere
fact that the information service is delivered electronically does not subject it to CST; delivery via a communication
mode is permitted per s. 202.11(7). In addition, to the extent that the service permits internet access, it can be
considered nontaxable under s. 202.11(3)(h) as well.
Similarly, third party information services offered by [Taxpayer] in addition to its financial information fit within the
definition of a nontaxable information service under s. 202.11(7), and as such are nontaxable when delivered to
customers in Florida.
APPLICABLE STATUTES AND RULES
Section 202.11, F.S., titled "Definitions," provides in pertinent part:
As used in this chapter:

(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.

(7) "Information service" means the offering of a capability for generating, acquiring, storing, transforming, processing,
retrieving, using, or making available information via communications services, including, but not limited to, electronic
publishing, web-hosting service, and end-user 900 number service. The term does not include any video, audio, or
other programming service that uses point-to-multipoint distribution by which programming is delivered, transmitted, or
broadcast by any means, including any interaction that may be necessary for selecting and using the service,
regardless of whether the programming is delivered, transmitted, or broadcast over facilities owned or operated by the
seller or another, or whether denominated as cable service or as basic, extended, premium, pay-per-view, digital,
music, or two-way cable service.

Section 202.12, F.S., titled, "Sales of communications services," states in part:
The Legislature finds that every person who engages in the business of selling communications services at retail in
this state is exercising a taxable privilege. It is the intent of the Legislature that the tax imposed by chapter 203 be
administered as provided in this chapter.
RESPONSE
Section 202.12, F.S., provides that every person who engages in the business of selling telecommunications services
at retail in the State of Florida is exercising a taxable privilege. Section 202.11(3), F.S., defines "communications
services" to mean "... 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 protocol
used for such transmission or conveyance...." However, Section 202.11(3)(a), F.S., excludes "information services"
from the definition of "communications services." Section 202.11(7), F.S. defines "information service" to mean "... the
offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, using, or making
available information via communications services, including but not limited to, electric publishing, web-hosting
service, and end-user 900 number service...."
Issue 1: Is Taxpayer's charge to its customers for access to the financial service subject to Florida’s
Communications Services Tax?
No. The Taxpayer's financial information service is not subject to the communications services tax of Chapter 202,
F.S., because it is an "information service" excluded from the definition of "communications services." According to
your letter and the documentation provided, the Taxpayer provides its customers with access to researchable
databases of global financial information and news and for additional fees third party information services, such as
stock exchanges, through dedicated phone lines of the customers and Taxpayer-owned communications equipment
(routers). Access to the Taxpayer's services is accomplished by communications software loaded onto the customer's
computer, or for an increased fee via the Taxpayer's flat panel monitor and/or computer. The Agreements specify that
the customer is responsible for all electricity and communications services necessary to facilitate the Taxpayer's
delivery of its information service. Thus, the Taxpayer is providing an information service that is delivered via a
telephonic connection.
Issue 2: Is Taxpayer's charge to its customers for access to third party financial information services subject
to Florida's Communications Services Tax?
No. For the same reasons as stated above in Question 1, the Taxpayer's third party financial information service is not
subject to the communications services tax of Chapter 202, F.S., because it is an "information service" excluded from
the definition of "communications services."
Other Issues

Current treatment of T-1 lines and satellite television. In your letter, you state that the Taxpayer has two revenue
streams that are clearly subject to Florida's communications services tax: re-lease of T-1 lines and the provision of
private satellite television feed. Because the Taxpayer has registered and currently remits the appropriate taxes, the
taxpayer does not seek a ruling with respect to the applicability of Florida's communications services tax to these
revenue streams.
However, it should be noted that the re-lease of the T-1 lines is subject to communications services tax at the state
rate of 9.17% under section 202.12(1)(a), F.S., and the applicable local rate under section 202.19, F.S. The satellite
television service is subject to communications services tax at the state rate of 13.17% under section 202.12(1)(c),
F.S., and no local rates apply.
Possible substitute system. In reviewing the Software License Agreement, Standard Agreement, and various
Schedules of Services, there is the possibility that the Taxpayer has created a substitute system by utilizing dedicated
routers, connectivity, including T-1 lines, back up systems, and other equipment to provide some of its customers with
a dedicated network and back up networks for the provision of Taxpayer's information service. Section 202.11(16),
F.S., defines "substitute communications system" to mean "... any telephone system, or other system capable of
providing communications services, which a person purchases, installs, rents, or leases for his or her own use to
provide himself or herself with services used as a substitute for any switched service or dedicated facility by which a
dealer of communications services provides a communication path." Section 202.12(1)(b), F.S., provides that
substitute systems are subject to communications services tax at the state rate of 9.17% and the applicable local rate
under section 202.19, F.S., on the actual cost of operating the substitute system.
Distribution of Lessee Data. Within the Software License Agreement, Standard Agreement, and various Schedules of
Service, there are provisions by which the Taxpayer will distribute the data of its Lessee/customer to others via its
information services network. This service will be delivered at no cost to the Lessee, and any user of the service shall
pay the Taxpayer the standard fees for the Taxpayer's services plus any fees charged by the Lessee for access to the
Lessee's data. Rule 12A-1.062(5), F.A.C., states that charges for furnishing information by way of electronic images is
neither taxable as the sale of tangible personal property nor is it taxable as the sale of an information service.
Lease and License of Tangible Personal Property and Software. According to the Software License Agreement,
Standard Agreement, and various Schedules of Services, the Taxpayer's services consist of a nonexclusive and
nontransferable license and lease for the use of the Taxpayer's software, data, and equipment. According to the
various invoices, the charges are separately stated as follows: data and software are bundled in various forms
according to the type of service ordered by the customer, such as to a terminal or to a laptop, and the monitors and
personal computers are listed by size.
Rule 12A-1.032(2), F.A.C., provides that "... [t]he rental of a computer and its related components including terminal
equipment (hardware) which is physically located in this state, is taxable." Furthermore, canned software delivered in
tangible forms, such as CDs or disks, is taxable under Section 212.05, F.S. However, software and equipment that is
not separately stated and incidental to the provision of an information service provided via electronic images is not
taxable. See, Department of Revenue v. Quotron Systems, Inc., 615 So.2d 774, 778 (Fla. 3rd DCA 1993) and
Department of Revenue v. Henley Holdings, Inc., 599 So.2d 1282 (Fla. 1st DCA 1992), aff'g, Case No. 89-4381 (Fla.

2nd Cir. Ct. 1991). In the instant case, the provision of the software is intertwined with the provision of the Taxpayer's
information service as a single charge. Thus, the charge for the software and data would not be subject to sales tax.
The provision of computer equipment is separately stated on the invoices. The Software License Agreement,
Standard Agreement, and various Schedules of Services, provide the following relevant terms: upon termination, the
Taxpayer has the right to recover the equipment from the lessee's premises; the Taxpayer shall have reasonable
access to the Lessee's property for the purpose of maintaining the equipment; the Lessee shall not use the equipment
for any other purpose than those expressly approved by the Taxpayer; Taxpayer will relocate the equipment at the
lessee's expense by request; and the lessee shall not separate, unbolt, move, modify, or use for any unauthorized
purpose the equipment leased from the Taxpayer. Thus, the agreements all contemplate a lease of the computer
equipment for the limited purpose of accessing and receiving the Taxpayer's information services.
Transactions that involve renting or leasing of tangible personal property, where the customer possesses or uses the
tangible personal property of the Taxpayer for a consideration, are subject to sales tax. Section 212.05, F.S., provides
that every person engaged in the business of selling tangible personal property in the state of Florida is engaging in a
taxable privilege, unless specifically exempt by statute. Section 212.02(15), F.S., defines "sale" to mean and include
"[a]ny 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 212.02(19), F.S., defines "tangible
personal property" as "... personal property which may be seen, weighed, measured, or touched or is in any manner
perceptible to the senses...." Section 212.02(16), F.S., defines "sale price" as meaning "... the total amount paid for
tangible personal property, including any services that are a part of the sale...." Section 212.02(10)(g), F.S., defines
"lease," "let" or "rental" to include "... the leasing or rental of tangible personal property and the possession or use
thereof by the lessee or rentee for a consideration, without transfer of the title of such property...." Rule 12A-1.071,
F.A.C., interprets these provisions.
In the instant case, the leasing of the computer equipment is a separately stated option to the provision of the
Taxpayer's information service. While the terms of the agreements provide for a limited use of the computer
equipment, the terms clearly provide for a lease of the equipment for which a separate charge is being made.
Therefore, the lease of the computer equipment is not incidental to the provision of the services and is subject to sales
tax.
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 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.
Sincerely,
Sebrina L. Wiggins
Attorney
Technical Assistance and Dispute Resolution
(850) 488-6386
SW/
Ctrl # 59471