Was a fixed-fee plan for receiving unlimited calls from the Dominican Republic subject to Florida communications services tax?

Plain-English summary

A Florida company sold a fixed-fee plan that let United States customers receive unlimited calls from the Dominican Republic. Calls moved from a Dominican switch to the company's Miami switch and then through United States providers to the customer's phone. Customers could receive calls but could not place outgoing calls through the plan.

Florida ruled that the plan was a taxable communications service for customers receiving calls at a Florida service address. Routing voice signals through the company's equipment met the statutory definition, and receiving the service in Florida was enough even though calls originated abroad and the customer could not call out.

For mobile phones, tax applied when the customer's primary-use street address was in Florida. The ruling also rejected double-tax arguments: local phone service was separate from the plan, and the submitted upstream invoice showed federal charges rather than Florida communications services tax.

The advisement stated a historical 2008 combined state rate of 9.17%, plus the applicable local rate. Current rates should be checked separately.

What this means for you

Communications providers should source service by the customer's service address, not just by where a call begins or where the provider is headquartered. A one-way inbound service can still be taxable when it routes calls to a Florida customer.

A registered dealer may issue a resale certificate for communications services bought for resale. The ruling said purchases made before registration did not qualify for that treatment.

Common questions

Did foreign origination make the plan exempt? No. The service used a Miami switch and terminated at Florida customers' service addresses.

Did it matter that customers could only receive calls? No.

Was tax due at both state and local levels? Yes, under the rates described in the 2008 ruling.

Citations and references

• Fla. Stat. § 202.11(2) and (14) (communications services and service address)
• Fla. Stat. §§ 202.12 and 202.19 (state and local communications services tax)
• Fla. Stat. § 203.01(1)(b) (gross receipts tax component)
• Fla. Stat. §§ 202.11(11) and 202.16(2); Fla. Admin. Code r. 12A-19.060 (resale treatment)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 08A19-001

Original ruling text

SUMMARY

FACTS
Taxpayer is a Florida limited liability company and a subsidiary of a Costa Rican holding
company with residency in the Dominican Republic. Taxpayer is in the business of providing
long distance and private network services. It was formed for the purpose of providing
administrative, marketing and technical support to the parent company for their “Plan” product
and other services marketed in the United States.
Under Plan, Taxpayer sells to its customers in the United States the ability to receive unlimited
telephone calls from the Plan area code for a fixed fee. The Plan customer in the United States
can only receive calls. No outgoing calls can be made under the Plan. This service is sold to
customers in various states, including Florida. There is no written contract between Taxpayer
and its Plan customers.
Taxpayer owns a telephone network switch in the Dominican Republic and another switch
located in Miami. When the individual in the Dominican Republic initiates a Plan call, it is
transferred from the local Dominican Republic phone number to the Taxpayer’s switch located
in the Dominican Republic. This switch in turn transfers the call to Taxpayer’s Miami switch,
which transfers the call to a United States service provider who terminates the call by
transferring it to a local provider.

QUESTION: Is Taxpayer’s Plan is subject to Florida communications services tax?
ANSWER: The sale of communications services in the State of Florida is taxable. Under
section 202.11(2), F.S., “communications services” means the transmission, conveyance, or
routing of voice, data, audio, video, or any other information or signals to a point, or between or
among points. Taxpayer is providing communications services under Plan, because the service it
sells enables customers to transmit voice signals between or among points using Taxpayer’s
equipment to convey or route the calls from the Dominican Republic to the US.
April 15, 2008
XXX
XXX
XXX
Re:

Technical Assistance Advisement 08A19-001
Communications Services Tax – Telephone Calling Plan
XXX (Taxpayer)

Technical Assistance Advisement
Page 2 of 6

BP Number: XXX
Sections:
202.11, 202.12, 202.16, 202.19, 203.01, 213.22, Florida Statutes (F.S.)
Rule:
12A-1.060, Florida Administrative Code (F.A.C.)

Dear XXX:
This is a response to your two letters dated XXX, and XXX. You have requested a Technical
Assistance Advisement regarding the Department’s position on the taxability of your client’s
“Plan” service which for a fixed fee allows a person in the United States (US) to receive
unlimited long distance telephone calls from someone in the Dominican Republic, where the
area code is 809. Information in your letters and related during our telephone calls has
established that you meet the requirements for a Technical Assistance Advisement.
Facts
Taxpayer is a Florida limited liability company and a subsidiary of a Costa Rican holding
company with residency in the Dominican Republic. Taxpayer is in the business of providing
long distance and private network services. It was formed for the purpose of providing
administrative, marketing and technical support to the parent company for their “Plan” product
and other services marketed in the United States. Taxpayer requests a ruling as to whether its
Plan is subject to Florida communications services tax.
Under Plan, taxpayer sells to its customers in the United States the ability to receive unlimited
telephone calls from the 809 area code for a fixed fee. The fee is $XXX per month, $XXX for 6
months, and $XXX for annual service. The purchaser may select any home, business or cell
phone number to receive calls. The Plan customer in the United States can only receive calls.
No outgoing calls can be made under the plan. This service is sold to customers in various
states, including Florida. There is no written contract between Taxpayer and its Plan customers.
You add that Taxpayer already pays communications services tax to the company that provides it
with the telephone services that Taxpayer uses to provide its Plan service. However, you
submitted a XXX invoice from a New York communications company showing details of the
communications services Taxpayer purchased for the previous month and listing a Universal
Service Fund Surcharge and Federal Excise Tax as the surcharges and taxes Taxpayer pays to
that provider. This invoice contained nothing to indicate that Florida communications services
tax was collected on the services provided.
Taxpayer owns a telephone network switch in the Dominican Republic and another switch
located in Miami. When the individual in the Dominican Republic initiates a Plan call, it is
transferred from the local Dominican Republic phone number to the Taxpayer’s switch located
in the Dominican Republic. This switch in turn transfers the call to Taxpayer’s Miami switch,

Technical Assistance Advisement
Page 3 of 6

which transfers the call to a United States service provider who terminates the call by
transferring it to a local provider.
Taxpayer’s Position
Taxpayer believes its sales of Plan are not subject to Florida communications services tax for
several reasons. First, it contends the service is provided outside the State of Florida and the
United States. Second, it points out that the United States customer cannot make long distance
calls using the 809 number assigned, only the Dominican Republic customer can call the United
States customer.
Third, it asserts that the local United States provider that terminates the call at the customer’s
Florida location collects all communications services taxes in the United States, and to also
impose tax on the Plan service would be double taxation. Taxpayer states double taxation also
would occur because it pays all state, county, local and federal taxes through the
communications services it purchases from a New York communications company.

Discussion
Under section 202.12, F.S., the sale of communications services is taxable. Under section
202.11(2), F.S., “communications services” means the transmission, conveyance, or routing of
voice, data, audio, video, or any other information or signals to a point, or between or among
points. Clearly, taxpayer is providing communications services under Plan, because the service
it sells enables customers to transmit voice signals between or among points using taxpayer’s
equipment to convey or route the calls from the Dominican Republic to the US.
The tax applies to sales of communications service which:
• originate and terminate in Florida, or
• originate or terminate in Florida and are charged to a service address in Florida.
Service address, as defined by section 202.11(14), F.S., generally means the location of the
communications equipment from which communications services originate or at which
communications services are received by the customer. Where the location of the equipment is
not known, the service address is the location of the customer’s primary use of the
communications services, i.e., the customer’s street address.
It is clear that the Plan service uses Taxpayer’s equipment to transfer a call from the Dominican
Republic to its switch in Miami, then route it to a local United States provider, which delivers
the call to its end customer, the purchaser of Plan. This is the service being sold by Taxpayer.

Technical Assistance Advisement
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Some of these end customers are located in Florida, and for those customers, Plan calls terminate
in Florida. Since these customers receive Plan services in Florida, the sales of Plan to these
Florida customers are received at a Florida service address, and Florida communications services
tax is due on the sales price of these sales.
Where the Florida Plan buyer’s phone equipment is mobile rather than fixed, the sales to mobile
phone customers are taxable if the location of the primary use of the customer’s mobile phone
service is in Florida, i.e., if the street address where the customer receives the phone service is
located in Florida.
To put it simply, Taxpayer’s sales of Plan to Florida customers who receive their Plan calls at a
service address located within the State of Florida are subject to Florida’s communications
services tax under section 202.12(1)(a)2., F.S. (state rate) and section 202.19(4), F.S. (local rate).
Under sections 202.12(2) and 203.01(1)(b), F.S., the combined state rate is 9.17%, which is
made up of a 6.8% state tax and a 2.37% gross receipts tax. The local rate, which varies by
jurisdiction, is applied under section 202.19(4)(a)1., F.S. Both the state tax rate and the
applicable local rate based on the customer’s service address apply to Plan sales involving a
Florida service address.
Taxpayer’s double taxation argument is not valid. While the local provider may charge the
customer communications services tax for local telephone service, this tax does not cover
Taxpayer’s sales of Plan to Florida customers. The ability to receive unlimited calls from the
Dominican Republic for a fixed price is a service sold by Taxpayer alone, and is separate and
distinct from the services sold by a customer’s local telephone service provider.
Taxpayer’s other double taxation argument – that it already pays communications services tax
when it buys telephone services from its provider – also is not valid since the invoices furnished
by Taxpayer show only payments of Universal Service Fund Surcharge and Federal Excise Tax,
but show no payment of Florida communications services tax by Taxpayer. Taxpayer’s letter
does not mention whether Taxpayer is a registered Florida communications services tax dealer
that issues resale certificates when purchasing communications services for resale. Note that
after registering as a communications services dealer with the Florida Department of Revenue,
Taxpayer may issue a resale certificate to avoid paying Florida communications services tax on
purchases of communications services that Taxpayer sells to Florida customers. Any purchases
of communications services by Taxpayer prior to registration do not qualify for resale treatment
and are subject to Florida communications services tax. See sections 202.11(11) and 202.16(2),
F.S., and Rule 12A-19.060, F.A.C.
Finally, Taxpayer’s additional arguments are without merit. Its claim that its services are
provided wholly outside Florida and the United States conflicts with the fact that its switching

Technical Assistance Advisement
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network is located in Miami, and customers located in Florida could purchase its service and
receive Plan calls in Florida. The fact its customers can only receive calls and not use the
service to call out has no bearing on taxability since receipt of a service at a Florida service
address alone is enough to trigger tax liability.
In conclusion, Taxpayer’s sales of Plan to Florida customers who receive their Plan calls at a
service address located within the State of Florida are subject to Florida’s communications
services tax.
This response constitutes a Technical Assistance Advisement under § 213.22, F.S., which is
binding on the Department only under the facts and circumstances described in the taxpayer’s
request. Our response is based solely on the facts and the specific situation summarized above,
and the laws as they exist at the time this Technical Assistance Advisement was issued.
Subsequent changes in the law or its interpretation by the courts may invalidate the conclusions
in this Technical Assistance Advisement.
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 § 213.22, F.S.,
which allows public disclosure so long as confidential information is first deleted. In an effort to
protect confidentiality, please send us an edited copy of your request for a 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.

Technical Assistance Advisement
Page 6 of 6

Should you have any questions, please feel free to contact me at 950-922-4729.
Sincerely,

Gary L. Gray
Program Administrator
Technical Assistance and Dispute Resolution
Record ID: 36789