Sales Use and Tax TAA 19A-011 Taxable Services, Cleaning, Detective, Pest

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

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.

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 above- mentioned 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 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 the 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,

/s/Felicia S.W. Thomas Felicia S.W. Thomas, Esq. Senior Attorney

Technical Assistance & Dispute Resolution ID No. 172716