How did Florida communications services tax apply to one charge bundling DSL internet access with telephone service?

Plain-English summary

The Florida Department of Revenue treated the provider's bundled DSL offering as two components. Telephone service was a taxable communications service when it originated or terminated in Florida and was charged to a Florida service address. High-speed internet access was not a communications service and was not subject to communications services tax.

The provider charged one bundled amount but used its standard published telephone charge, plus the subscriber-line and federal universal-service-fund charges, to identify the taxable portion. The Department accepted that allocation because the amounts could be reasonably identified from books and records kept in the regular course of business.

What this means for you

Communications providers

A single bundled price does not necessarily make internet access taxable, but the nontaxable amount must be reasonably identifiable in regular business records.

Accountants and tax professionals

Preserve the pricing materials and accounting support used to separate taxable telephone service from nontaxable internet access.

Common questions

Q: Was the DSL internet-access portion subject to Florida communications services tax?
A: No.

Q: Was the telephone-service portion taxable?
A: Yes, when the stated Florida origination-or-termination and service-address conditions were met.

Q: Did the Department accept the provider's allocation?
A: Yes, because its regular books and records reasonably identified the charges.

Citations and references

• Fla. Stat. §§ 202.11(1), (6), and (13), 202.12(1), 202.125(1), and 213.22
• Internet Tax Freedom Act § 1105(5), 47 U.S.C. § 151 note

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 15A19-003

Original ruling text

Executive
Director
Marshall Stranburg

QUESTION: ARE CHARGES FOR THE TAXPAYER’S SALES OF “XXXX BROADBAND
SERVICE” TO FLORIDA CUSTOMERS SUBJECT TO FLORIDA CST?
ANSWER: THE TAXPAYER’S CHARGES FOR ITS “XXXX BROADBAND” SERVICE
INCLUDE CHARGES FOR PHONE SERVICE AND HIGH SPEED INTERNET ACCESS. THE
PHONE SERVICE IS A COMMUNICATIONS SERVICE AND IS SUBJECT TO CST WHEN
THE SERVICE ORIGINATES OR TERMINATES IN FLORIDA AND IS CHARGED TO A
FLORIDA SERVICE ADDRESS. THE HIGH SPEED INTERNET ACCESS IS NOT A
COMMUNICATIONS SERVICE AND IS NOT SUBJECT TO CST.
QUESTION: IF SO, IS THE METHOD OF ALLOCATION OF THE CHARGE FOR
APPLICATION OF CST ACCEPTABLE?
ANSWER: BECAUSE THE TAXPAYER CAN REASONABLY IDENTIFY THE CHARGES
FOR THE INTERNET ACCESS SERVICES IN ITS BOOKS AND RECORDS KEPT IN THE
REGULAR COURSE OF BUSINESS, THE TAXPAYER’S METHOD OF ALLOCATING
TAXABLE AND NONTAXABLE PORTIONS OF THE CHARGE IS ACCEPTABLE.
May 15, 2015
RE:

Technical Assistance Advisement 15A19-003
Communications Services Tax
XXXX (Taxpayer)
BPN #: XXXX
Chapter 202, Florida Statutes

Dear XXXX,
This is a response to your letter dated March 20, 2015. You have requested a Technical Assistance
Advisement (TAA) regarding the Department’s position on whether Florida Communications
Services Tax and Gross Receipts Tax (CST) applies to sales of “XXXX” provided by the
Taxpayer. The information provided with your letter established that you meet the requirements
for a TAA.
ISSUE
Are charges for the Taxpayer’s sales of “XXXX” to Florida customers subject to Florida CST?
If so, is the method of allocation of the charge for application of CST acceptable?
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Sue Harlan, Interim Director  Information Services – Damu Kuttikrishnan, Director

http://dor.myflorida.com/dor/
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
Page 2 of 5

FACTS
The Taxpayer is a wholly owned subsidiary of XXXX with its principle place of business in
XXXX. The Taxpayer provides wireline local exchange telephone service and also offers a
residential service, “XXXX” (XXXX). XXXX is a Digital Subscriber Line (DSL) based Internet
access service, but also includes the XXXX.
DSL is, generally, the high bandwidth transmission of data over traditional copper telephone lines.
The Taxpayer describes its provision of the service as follows:
DSL-based Internet access is provided by separating the transmission frequency
over the customer’s local telephone line between a voice and a data channel. The
data transmission frequencies are used to connect the customer to the Internet. With
XXXX, the local voice telephone service on the customer’s line is limited. XXXX
is blocked other than for the ability of the customer to XXXX. XXXX includes
both local and long distance calls. However, the customer is able to XXXX. The
customer is provided with a telephone number that appears on monthly bills, and
may rent or purchase the necessary modem from Taxpayer (in which event sales tax
is applied [to the rental of the modem]) or obtain it independently. The charge is a
single amount for “XXXX,” with no itemization except for taxes and fees….
The XXXX capabilities are part of the XXXX service as sold in Florida. Sales of Internet access
services in other states are not sold as “XXXX,” but as XXXX.” The distinction is made clear by
the Taxpayer, in its “XXXX,” which provides,
XXXX
XXXX

XXXX
XXXX
In the Taxpayer’s “XXXX,” with an effective date of XXXX, the XXXX includes XXXX for a
charge of XXXX per month. The charge description is footnoted with the requirement that a
customer must also subscribe to the Taxpayer’s High-Speed Internet. This is a reduced rate from
the “Local Telephone Service,” which includes additional services for a charge of XXXX per
month.1

1

XXXX.

Technical Assistance Advisement
Page 3 of 5

Because of the described calling features that are part of the “XXXX,” the Taxpayer has charged
Florida CST, by allocating the amount of the charge for the part of the service that is not Internet
access, XXXX, as the taxable portion of the charge subject to CST. Also included as part of the
taxable portion are charges to the customer for the Subscriber Line Charge (SLC) and the Federal
Universal Service Fund (FUSF). Where applicable, the exemption provided in s. 202.125(1), F.S.,
is applied for Taxpayer’s sales to residential households.
The Taxpayer provided two customers invoice examples – one for a “XXX” area code number in
XXXX, FL, and the other for an “XXXX” area code number in XXXX, FL. The charges for
XXXX are XXXX and XXXX, respectively. The “XXX” area code invoice has a “XXXX” credit
of XXXX, reducing the charge to XXXX for the month of the invoice.
TAXPAYER POSITION
The Taxpayer provides that Florida law, as it defines “sales price” in s. 202.11(13), F.S., provides
that the sales price is the total amount charged in money or other consideration for the right or
privilege of using a communications service and does not include property and other charges, even
when not separately itemized, which are not subject to CST. “Internet access,” pursuant to s.
202.11(1), F.S., is not a communications service and is defined in s. 202.11(6), F.S., as having the
same meaning as provided in the Internet Tax Freedom Act. The Internet Tax Freedom Act
provides that, generally, Internet access is the service that allows a user the ability to access the
Internet, and services purchased or sold to provide such access to the Internet.
The Taxpayer opines that the definition of communications services provided in s. 202.11(1), F.S.,
does contain an exclusion for Internet access, but not for XXXX. Nor are the XXXX included in
the definition of Internet access. Additionally, the Taxpayer states that the “… tax appears to apply
not just to the actual act of using communications services, but to the ‘right or privilege’ of doing
so….” The Taxpayer provides that a charge for a communications service, whether utilized or not,
is considered taxable.
In regards to the allocation of the charges, the Taxpayer provides that, pursuant to s.
202.11(13)(b)8., F.S., charges for goods and services not subject to CST, when such charges can
be reasonably identified in the dealer’s books and records, are not subject to CST, even if bundled
with charges for taxable communications services. The Taxpayer states that it has “… performed
such an allocation, excluding Internet access from the measure of tax and including its standard,
published charges (plus SLC and FUSF) in the remainder. [The] Taxpayer’s books and records
kept in the regular course of business support its published charge for the communications service,
and this facilitates direct identification of the portion allocable to Internet access….”
LAW AND DISCUSSION
Communications services are defined, in part, as the transmission, conveyance, or routing of voice,
data, audio, video, and/or any other information or signals to a point or between or among points,
regardless of the medium or methods used. The definition of communications services excludes
Internet access.

Technical Assistance Advisement
Page 4 of 5

Internet access is, therefore, not a communications service. Internet access, as defined in s.
202.11(6), F.S., and s. 1105(5) of the Internet Tax Freedom Act, 47 U.S.C. s. 151 note, as amended
by Pub. L. No. 110-108, is “… a service that enables users to connect to the Internet to access
content, information, or other services offered over the Internet ….” It includes services such as
homepages, electronic mail, instant messaging, and services purchased, used, or sold in the
provision of Internet access.
Communications services tax is imposed upon the retail sale of communications services when the
services (1) originate and terminate in Florida, or (2) originate or terminate in Florida and are
charged to a Florida service address. (s. 202.12(1), F.S.)
Communications services tax is computed on the sales price of the communications services. The
“sales price” of communications services is “… 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….” (Emphasis supplied. See s. 202.11(13), F.S.) The “sales price” includes items such as
detailed billing, voicemail, directory assistance, etc., whether or not separately stated. It also
allows that when charges for communications services include products or services otherwise not
subject to CST, such products or services may be excluded from the taxable sales price when such
charges “… can be reasonably identified from the selling dealer’s books and records kept in the
regular course of business.” (s. 202.11(13)(a) and (b)8., F.S.) If the products and services
otherwise not subject to CST are not separately stated or may not be identified from the dealer’s
books and records, then such charges are considered part of the “sales price” and are subject to
CST.
The Taxpayer’s charges for “XXXX”service sold to Florida customers is a bundled service
package that includes High Speed Internet access, telephone service with an XXXX. The telephone
service provided is the transmission of voice signals and is a communications service. When such
services originate or terminate in Florida and are charged to a Florida service address, they are
subject to CST. Internet access is not a communications service and is not subject to CST. When
the charge for Internet access is bundled with the charge for a communications service, the Internet
access is not taxable when charges for it can be reasonably identified in the selling dealer’s books
and records kept in the regular course of business.
The “sales price” is the amount subject to CST. In this case, the charge for “XXXX” made to the
customer includes High Speed Internet access, which is not subject to CST, and phone services,
which are subject to CST. The Taxpayer charges approximately XXXX for the bundled services.
The Taxpayer has allocated $20.00, plus the amounts charged for the SLC and FUSF, as the
taxable sales price. This is based on the charge for the “XXXX” phone service identified in its
“XXXX.” As these amounts are “… reasonably identified from the selling dealer’s books and
records kept in the regular course of business…,” this is an acceptable method of allocating the
amount of the charge subject to CST.

Technical Assistance Advisement
Page 5 of 5

CONCLUSION
The Taxpayer’s charges for its “XXXX” service include charges for phone service and High Speed
Internet access. The phone service is a communications service and is subject to CST when the
service originates or terminates in Florida and is charged to a Florida service address. The High
Speed Internet access is not a communications service and is not subject to CST.
Because the Taxpayer can reasonably identify the charges for the Internet access services in its
books and records kept in the regular course of business, the Taxpayer’s method of allocating
taxable and nontaxable portions of the charge is acceptable.
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.
Should you have any questions, please feel free to contact me.
Sincerely,

Carla M. Bruce
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 717-6315
Record ID: 193031