Were online legal-document membership subscriptions subject to Florida sales tax when no tangible property was transferred or licensed?

Plain-English summary

The Florida Department of Revenue concluded that this provider's online membership-subscription fees were not subject to Florida sales tax.

Licensed attorneys and their staff used credentials to access legal-document drafting software on the provider's servers or in the cloud. They did not need to download the software to their own computers or servers, and completed documents were delivered electronically.

On those facts, the provider did not transfer possession of, lease, or license tangible personal property. The Department therefore found no taxable retail sale under section 212.05.

What this means for you

Online service providers

Document what the customer actually receives and whether any tangible personal property or software possession is transferred or licensed. This ruling turned on the absence of such a transfer.

Law firms and other subscribers

Electronic access and electronically delivered completed documents were not enough, on these facts, to make the subscription a sale of tangible personal property.

Accountants and tax professionals

Separate the hosted service from any downloadable or separately transferred products. The ruling addressed this provider's particular membership arrangement.

Common questions

Q: Did customers download the drafting software?
A: No. The ruling says the software remained on the provider's servers or in the cloud.

Q: Were electronically downloaded completed documents treated as tangible personal property?
A: No. The Department cited the absence of a transfer or license of tangible personal property.

Q: Did the ruling tax the membership fee as a retail sale?
A: No.

Citations and references

• Fla. Stat. §§ 212.02(15)(a), 212.02(19), 212.05, and 213.22
• Department of Revenue v. Quotron Systems, Inc., 615 So. 2d 774 (Fla. 3d DCA 1993)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 17A-010

Original ruling text

April 25, 2017

Executive
Director
Leon Biegalski

TAX: Sales and Use Tax
TAA NUMBER: 17A-010
ISSUE: Whether Taxpayer’s subscription membership fees are subject to sales tax?
STATUTE CITE(S): Section(s) 212.02(15)(a), 212.05, F.S.
RULE CITE(S):
QUESTION: Are Taxpayer’s on-line legal document drafting services sales of tangible
personal property?
ANSWER: No. Taxpayer does not transfer possession of, lease, or license tangible personal
property.

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Subject: Technical Assistance Advisement (“TAA”)
TAA 17A-010
Membership Subscription
Section(s) 212.05, Florida Statutes (“F.S.”)
Rule(s) 12A-1.032, Florida Administrative Code (“F.A.C.”)
XXXXXXX (“Petitioner”) (“Taxpayer”)
Business Partner#: XXXXXXX
FEI#: XX-XXXXXXXX
Dear XXXXXX:
This letter is a response to your petition dated March 1, 2017, for the Department’s issuance of a
Technical Assistance Advisement (“TAA”) to Petitioner, regarding whether Taxpayer’s on-line
subscription membership service charges. Your petition has been carefully examined, and the
Department finds it to be in compliance with the requisite criteria set forth in Rule Chapter 12Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

www.floridarevenue.com
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Page 2 of 2
Technical Assistance Advisement
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.
Issue
Whether Taxpayer’s membership subscription fees are subject to Florida sales or use tax?
Facts
Taxpayer sells membership subscriptions to its online support services for authorized users.
Taxpayer uses cloud computing and on-demand software. Taxpayer and its members execute a
Membership Agreement and XXXXXXX Agreement. Members are licensed attorneys and their
staff. Members gain access to the membership portal on Taxpayer’s website with unique
member identification and password credentials. Members do not need to download any
software to their local computers or servers to gain access to membership services. The services
include access to legal document drafting (XXXXXXXX) software located on Taxpayer’s
servers or the cloud. The members may download a ribbon to properly assemble the document
they assembled. Members are entitled to attend certain XXXX courses, or use Taxpayer’s online
XXXXX services. Members also have access to an interactive community with other members.
The completed documents are downloaded electronically.
Taxpayer Position
Taxpayer maintains that no sales tax is due, because there is no transfer of tangible personal
property and Taxpayer only provides professional services.
Applicable Law
Section 212.05, Florida Statutes (“F.S.”), provides that every person is exercising a taxable
privilege who engages in the business of selling tangible personal property at retail. Section
212.05(1)(a)1.a., F.S., provides that for the exercise of such privilege, a tax is levied on each
taxable transactions at the rate of six percent of the sales price of each item of tangible personal
property sold. Section 212.02(15)(a), F.S., defines the word “Sale” to include “[a]ny transfer of
title or possession, … license, lease, or rental, … of tangible personal property for a
consideration.”
Based on the facts provided, Taxpayer is not selling tangible personal property, because
Taxpayer does not transfer or license tangible personal property. See Department of Revenue v.
Quotron Systems, Inc., 615 So.2nd 774 (Fla. 3rd DCA 1993) (Transfer of electronic images is not
a sale of tangible personal property). See s. 212.02(19), F.S.
Response
Taxpayer’s membership subscription fees are not subject to Florida sales tax imposed by section
212.05, F.S.

Page 3 of 3
Technical Assistance Advisement

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 section 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 10 days of the date of this
letter.
Respectfully,

Chuck Wallace
Technical Assistance & Dispute Resolution
850-717-7541
Record ID: 212925