Is a document-scanning service taxable when the seller delivers digitized invoices on separately charged CDs?

Plain-English summary

The Florida Department of Revenue ruled that a company's invoice-scanning transactions were taxable because the seller delivered the digitized records on CDs it supplied and separately charged for. The customer sent boxes of paper records; the seller prepared and scanned them, created the CDs, returned the discs, and billed for "Master CD ROM" and "Duplicate CD ROM."

Florida generally does not tax pure services, and it exempts certain service transactions involving only inconsequential tangible personal property for which no separate charge is made. Neither condition fit. The Department found the CDs consequential because the transaction's purpose could not be completed without the digital delivery media, and the invoices separately stated charges for them.

Because the CDs were consequential tangible personal property, section 212.02(16) included the scanning and related services in the taxable sales price. The Department also denied the requested refund because sales tax was properly due on the sample invoices.

What this means for you

Document-scanning and conversion businesses

The delivery method can determine taxability. Supplying and separately charging for physical media made this more than a pure digital service transaction on the facts presented.

Businesses buying digitization services

Review whether the vendor supplies CDs, drives, or other physical media and whether those items are separately stated. The inconsequential-property exemption cited in the ruling requires both that the property be inconsequential and that no separate charge be made.

Accountants and tax professionals

The true-object argument did not overcome the physical-media facts. The Department treated the entire invoice as taxable because the services were part of the sale of consequential tangible personal property.

Common questions

Q: Why was the CD considered consequential?
A: The Department said the transaction's purpose—providing the digitized invoices—could not be completed without the seller-supplied CD-ROM.

Q: Did separately stating the CD help make the service exempt?
A: No. It defeated one requirement of the exemption, which applies only when no separate charge is made for the tangible property.

Q: Was only the CD charge taxable?
A: No. Florida's definition of sales price included the services that were part of the sale, so the transactions shown on the sample invoices were taxable.

Q: Was the customer entitled to a refund?
A: No. The Department found the tax was due and that none of the refund criteria had been met.

Citations and references

• Fla. Stat. §§ 212.02(16), 212.05, and 212.08(7)(v)
• Fla. Stat. §§ 213.22 and 215.26
• Fla. Admin. Code r. 12A-1.062

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 19A-011

Original ruling text

QUESTION:
Is the service of providing digitized invoices on a CD, furnished by a dealer and separately stated
on an invoice to a customer, a taxable service or exempt information services? If the services are
exempt, is the customer entitled to a refund of sales tax from the State of Florida?
ANSWER:
The service of providing digitized invoices on a CD, furnished by the dealer, involves tangible
personal property of a consequential nature, which is also separately stated on the customer’s
invoice. Therefore, the service is taxable. Neither the dealer nor the customer would be entitled
to a refund of sales tax, as none of the criteria for issuing refunds has been met. If a refund was
due, the dealer is required to refund the customer first before seeking a refund from the State of
Florida or the customer would have to obtain a validly executed Assignment of Rights from the
dealer.
April 26, 2019
XXXX
XXXX
XXXX
XXXX
XXXX

RE:

Technical Assistance Advisement
TAA 19A-011
AMS#: 7000172716
Florida Sales and Use Tax - Information Services
Sections 212.02, 212.05, 212.08, and 215.26, Florida Statutes (“F.S.”)
Rule 12A-1.062, Florida Administrative Code (“F.A.C.”)
XXXX (“Taxpayer”)
BPN: XXXX
FEIN: XXXX

Technical Assistance Advisement
April 26, 2019
Florida Department of Revenue
Page 2

XXXX (“Client”)
FEIN: XXXX
XXXX (“POA”)
FEIN: XXXX
Dear XXXX:
This letter is a response to your petition dated March 1, 2019, for the Florida Department of
Revenue's ("Department") issuance of a Technical Assistance Advisement concerning the above
referenced party and matter. Your petition has been carefully examined and the Department
finds it to be in compliance with the requisite criteria set forth in Chapter 12-11, Florida
Administrative Code. This response to your request constitutes a TAA and is issued to you under
the authority of s. 213.22, F.S.

STATED FACTS PRESENTED
Your petition dated March 1, 2019, references a letter dated January 9, 2019, which states, in
pertinent part:
[The Taxpayer] has been contacted by a third party contracted by our [Client] to
seek reimbursement from the State of Florida for sales tax that we charged them
on invoices. This third party states that, starting with the date of Jan. 1, 2016
through September 21, 2018, a refund from the State of Florida is due [the Client],
in the amount of $7,930.99. [The Taxpayer]’s process for [the Client] is as follows:
[The Taxpayer] receives a shipment of boxes containing device history records.
[The Taxpayer] sorts, prepares the paper by removing staples, and tapes torn
papers to make ready for the actual imaging and indexing processes. After
processing, a CD or CDs are created with all the collected data and … shipped back
to [the Client]. An invoice is then created for approval and payment by [the Client].
In a Recovery Basis Memo drafted by the Power of Attorney [the POA], [the POA] states that [the
Client] paid sales tax on purchases of invoice scanning services from [the Taxpayer]. [The POA]
opines that the CD [the Client] receives is an inconsequential part of the transaction. The true
object is the receipt of digitized invoices. The invoices are provided exclusively to [the Client].
[The POA] further opines that these purchases were not taxable.

Technical Assistance Advisement
April 26, 2019
Florida Department of Revenue
Page 3

You provide no contracts or agreements with the request for advisement. However, you
represent that you have had a long-standing verbal agreement with [the Client] since 2003. You
provided for review copies of invoices as samples of the transactions conducted.

REQUESTED ADVISEMENT
You seek an opinion from the Department regarding the taxability of the services provided to
[the Client] and whether [the Client] is entitled to a refund of sales tax paid on the abovementioned service.
LAW AND RESPONSE
All sales of tangible personal property in Florida are subject to tax, unless specifically exempt by
Chapter 212, F.S. Pure service transactions, those that do not involve the sale of tangible personal
property, are generally not subject to tax under Florida law, unless the taxation of the service is
specifically authorized by Chapter 212, F.S. Section 212.08(7)(v), F.S., provides an exemption for
professional, insurance, or personal services transactions that involve inconsequential elements
of tangible personal property for which no separate charge is made. Conversely, Florida sales tax
applies on other services that are part of the sale of tangible personal property.
Section 212.08(7)(v)2., F.S., and Rule 12A-1.062, F.A.C., promulgated to administer the
referenced law, states that 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. "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. See Rule 12A-1.062(3)(a), F.A.C. However, 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. See Rule 12A-1.062(3)(b), F.A.C.
The taxability of a transaction will be determined by the nature of the transaction. Should any
tangible personal property be transferred to Taxpayer’s Client of a consequential nature, which
was not originally provided by Client, then the transaction will be subject to the tax.
Any doubt must be resolved against the exemption applying. Therefore, in order for the subject
transactions to be exempt, the elements themselves must be inconsequential; that is to say,
of no consequence to the transaction. There is no statutory definition of the term
"inconsequential," and its judicial interpretation has been inconsistent. However, the purpose
of the transaction is to scan hard copy invoices onto a CD ROM, furnished by Taxpayer, to

Technical Assistance Advisement
April 26, 2019
Florida Department of Revenue
Page 4

provide the Client digitized invoices. Therefore, the transaction could not be completed
without the existence of the CD ROM. Accordingly, the CD ROM is tangible personal property
of a consequential nature.
Further, s. 212.08(7)(v)1., F.S., only applies to service transactions involving tangible personal
property "for which no separate charge is made." Taxpayer separately states the charge for
"Master CD ROM" and “Duplicate CD ROM” on the Client's invoice. Section 212.05, F.S., provides
that sales tax applies to the total "sales price" of tangible personal property. "Sales price" is
defined in s. 212.02(16), F.S., as the "total amount paid for tangible personal property, including
any services that are part of the sale." (Emphasis supplied). Thus, the various components of the
invoice must be included in the taxable sales price of the invoice. No refund is due to the Client.
CONCLUSION
The Department concludes the CD ROM is of consequence to the transaction, and [the
Taxpayer]’s invoices for its services separately state the charge for "Master CD ROM" and

“Duplicate CD ROM”. Therefore, these transactions do not qualify as exempt and sales tax is due
on these invoices. No refund is due to [the Client] for the transactions described and captured
in the sample invoices.
CONCLUSION
The Department concludes the CD ROM is of consequence to the transaction, and [the
Taxpayer]’s invoices for its services separately state the charge for "Master CD ROM" and
“Duplicate CD ROM”. Therefore, these transactions do not qualify as exempt and sales tax is due
on these invoices. No refund is due to [the Client] for the transactions described and captured
in the sample invoices.
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 that
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

Technical Assistance Advisement
April 26, 2019
Florida Department of Revenue
Page 5

lead to identification of the taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,
/s/Felicia S.W. Thomas
Felicia S.W. Thomas, Esq.
Senior Attorney
Technical Assistance & Dispute Resolution
ID No. 172716