TAA 19A-015 Computers, Software, Information Services
QUESTION & ANSWER:
- Are the Taxpayer’s charges to its customers for online educational courses subject to Florida sales & use tax or CST?
Review of documentation provided and the Taxpayer’s website, confirms that the Taxpayer's charges to its customers for online educational courses are not subject to sales and use tax or communications services tax.
June 19, 2019
XX
Subject: Technical Assistance Advisement 19A-015
STATUTE CITE(S): Sections 202.11 and 212.02, Florida Statutes (F.S.)
RULE CITE: Rule 12A-1.062, Florida Administrative Code (F.A.C.)
XX ("Taxpayer")
FEIN XX
Dear XX:
This is in response to your letter dated August 1, 2018, requesting this Department’s issuance of a Technical Assistance Advisement (“TAA”) pursuant to section 213.22, F.S., and Rule Chapter 12-11, F.A.C., concerning the taxability of the services offered by your client. An examination of your letter has established you have complied with the statutory and regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting your request for a TAA.
Facts and Requested Advisement
Your letter provides the following in part:
[The Taxpayer] is a corporation headquartered outside of Florida and does not have any facilities in Florida. [The Taxpayer] provides an education platform that partners with top universities and organizations worldwide to offer courses online for anyone to take.
[The Taxpayer’s] customers are members of the general public (i.e., "learners") interested in taking one of their online programs. For [the Taxpayer’s] regular catalog of online courses, learners begin their training by creating an account directly with the Company. Once logged in, the learner chooses from 2,000+ courses taught by professors from 160+ partnering universities located around the world. The learner registers for the course of their choice, or the course required by their current university curriculum, and begins the course.
* * *
Classes have a syllabus, modules, quizzes and tests, auto-graded and peer-reviewed assignments, time planning tools, automated email communications, and community discussion forums. While learners have little to no direct interaction with the instructor, each course offers an online forum for peer discussion regarding the course. On this forum, learners may post questions, answers, or general discussion topics to engage with other learners enrolled in that course. . . .
Most of [the Taxpayer’s] courses are free to the general user. Learners can register and complete the course without payment. However, [the Taxpayer] does offer "Course Certificate" courses for a fee, which range from $XX to $XX per course, or in the alternative, there is a monthly subscription option for $XX per month. The Course Certificate” is issued by [the Taxpayer] and includes the University or industry partner name. Certificates verify completion and confirm the learner’s identity . . . .
[The Taxpayer] also offers Specializations for learners who want to master a specific career skill. Specializations are coherent series of courses designed to teach a high demand skill. When a learner completes a Specialization, they receive a "Specialization Certificate."
[The Taxpayer] also offers University-recognized degrees. . . . For degrees, [the Taxpayer] does not sell directly to the learner, rather the degree-granting University does. [The Taxpayer] provides a portion of online learning. The University may supply some additional online education through their website.
Lastly, [the Taxpayer] also offers an enterprise product, which allows businesses to either: (a) hand-pick courses to create customized training programs aligned to their employees' specific needs; or (b) select an unlimited number of courses per employee thereby allowing employees to take any course offered.
Specializations, Degrees, and Enterprise all utilize the same online features as described with the regular catalog courses above.
* * *
. . . [The Taxpayer] is not selling tangible personal property or providing a taxable service to learners located in Florida. . . .
* * *
The Taxpayer requested and received a Letter of Technical Assistance (LTA) regarding the taxability of its online courses. In preparing a response, the Department requested additional information from the Taxpayer. The Taxpayer provided the following information in a letter dated March 18, 2016:
[The Taxpayer] provides course content on a wide variety of digital platforms, including the [Taxpayer’s] website and the [Taxpayer] App, which is available for download on iOS, Android, and Apple TV.
Students may stream or download the course lectures via the . . . website or the . . . App. However, students cannot download music, any videos other than the course lectures, quizzes, or the online forum for peer discussion. Once a student has successfully completed a course, [The Taxpayer] provides a shareable certified link that can be shared via the student's Linkedln account, which allows users to access a digital certificate, grade, and course syllabus.
* * *
In response to the Department’s request for additional supporting documentation you provided, among other things, copies of the following:
- The “Terms of Use,” effective July 11, 2018;
- Sample Enterprise Contract;
- Sample Enterprise Invoice;
- Sample Course Certificate Invoice;
- Sample Course Certificate Selection;
- Sample Course Certification Election to Purchase;
- Sample No Course Certificate Selection;
- Sample Course Certificate Invoice;
- Sample Course Certificate Listing;
- Sample Specialization Invoice;
- Sample Specialization Listing;
- Online Course Hosting & Services Agreement; and,
- Revenue Share Agreement
* * *
The Terms of Use provide the following in part:
. . . These Terms of Use (Terms) govern your use of [the Taxpayer’s] website, apps, and other products and services (Services’). As some of our Services may be software that is downloaded to your computer, phone, tablet, or other device, you agree that we may automatically update this software, and that these Terms will apply to such updates. Please read these Terms carefully, and contact us if you have any questions. . . .
Subject to these Terms and our policies (including the Acceptable Use Policy, Honor Code, and course-specific eligibility requirements and other terms), we grant you a limited, personal, non-exclusive, non-transferable, and revocable license to use our Services. You may download content from our Services only for your personal, noncommercial use, unless you obtain [The Taxpayer]’s written permission to otherwise use the content. You also agree that you will create, access, and/or use only one user account, and you will not share with any third-party access to or access information for your account. Using our Services does not give you ownership of any intellectual property rights in our Services or the content you access.
* * *
The sample Contract for Enterprise Services provides the following in part:
- Obligations.
a. As of the Launch Date (as defined herein), [the Taxpayer] grants to Organization and its users (“Users”) a non-exclusive, non-transferable, revocable right to access and use the User Services and Content Services (collectively, “Services”) subject to the terms and conditions set forth in this Order Form. “User Services” means (i) customized landing page featuring the Organization logo and selected courses, (ii) User engagement reports, (iii) payment solution(s) that allow Users to seamlessly access premium course experiences and skip checkout, and (iv) enterprise-level User support. “Content Services” means access to [the Taxpayer]’s Course and/or Specialization certificate service, including access to Course assessments and grades, for certain massive online open content offerings to be mutually agreed upon in writing by [The Taxpayer] and Organization.
* * *
Requested Advisement
You request a TAA that confirms that the Taxpayer’s “online educational courses are not subject to Florida sales & use tax or CST.” In an email dated May 1, 2019, you confirmed that the Taxpayer’s request is regarding “the fee charged directly to the learners by [the Taxpayer], and not in regards to the revenue share between the Taxpayer’s and the universities.” As a result, this letter does not address the University-recognized degree programs.
Law and Discussion
Sales and Use Tax:
All sales of tangible personal property in the State of Florida are subject to tax, unless specifically exempt by Chapter 212, F.S. The term "sale" is defined in s. 212.02, F.S., to mean "[a]ny transfer of title or possession, or both ... of tangible personal property for a consideration." "Tangible personal property" is defined under s. 212.02(19), F.S., to mean and include ". . . personal property which may be seen, weighed, measured, or touched or is in any manner perceptible to the senses ...."Section 212.02(16), F.S., defines "sales price" to include "any services that are sold as part of the sale" of tangible personal property. When tangible personal property and services are sold as part of the same sale, the entire sales price is subject to tax.
A charge solely for electronically transmitted information is not subject to sales tax, pursuant to Chapter 212, F.S., as there has been no exchange of tangible personal property. See Department of Revenue v. Quotron Systems, Inc., 615 So.2d 774, 778 (Fla. 3rd DCA 1993), where the court held that electronic images that appear on video display screens are not "tangible personal property" as defined in s. 212.02(19), F.S., and that transmission of such images is not a "sale." See also Rule 12A-1.062(5), F.A.C., which provides that information furnished by way of electronic images, which appear on the subscriber's video display screen, are not subject to sales tax.
You have provided that all courses offered, including “Course Certificate," “Specialization Certificate,” and “Enterprise” courses are conducted via the Internet. You also provide that the Taxpayer “is not selling tangible personal property or providing a taxable service to learners located in Florida. . . .” Review of the Taxpayer website and the documentation provided confirms that all course content, including the verification of completion certificate, is delivered in a digital format.
Communication Services Tax:
Chapter 202, F.S., imposes communications services tax on the retail sale of communications services in Florida. Gross receipts tax is also imposed on these services, pursuant to Chapter 203, F.S. "Communications services" are defined, in part, as the transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals to a point or between or among points by or through any medium or method, regardless of the protocol used for such transmission or conveyance. The term includes such transmission, conveyance, or routing in which computer processing applications are used to act on the form, code, or protocol of the content for purposes of transmission, conveyance, or routing without regard to whether such service is referred to as voice-over-Internet-protocol services or is classified by the Federal Communications Commission as enhanced or value-added (See s. 202.11(1), F.S.) The definition of communications services excludes information services and Internet access.
Internet access 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 related to the provision of Internet access. However, Internet access "does not include voice, audio or video programming, or other products and services ... that utilize Internet protocol or any successor protocol and for which there is a charge . . . ." (See s. 1105(5) of the Internet Tax Freedom Act, 47 U.S.C. s. 151 note, as amended by Pub. L. No. 110-108.)
The definition of communications services excludes "information services." "Information services" are defined as the ". . . the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, using, or making available information via communications services, including, but not limited to, electronic publishing .... The term includes data processing and other services that allow data to be generated, acquired, stored, processed, or retrieved and delivered by an electronic transmission to a purchaser whose primary purpose for the underlying transaction is the processed data or information. The term does not include video service." (See s. 202.11(5), F.S.)
Video services are communications services and are specifically defined as “the transmission of video, audio, or other programming service to a purchaser, and the purchaser interaction, if any, required for the selection or use of a programming service . . . over facilities owned by the provider or a third party. The definition goes on to include “. . . basic, extended, premium, payper-view, digital video, two-way cable, and music services.” See section 202.11(24) F.S.
Based upon the information provided, a charge for a course is not the sale of a communications service, as the service being provided neither enables the customer to communicate nor is it a video, audio, or other programming service.
Conclusion
Review of documentation provided and the Taxpayer’s website, confirms that the Taxpayer's charges to its customers for online educational courses are not subject to sales and use tax or communications services tax.
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 lead to identification of the Taxpayer.
Your response should be received by the Department within 15 days of the date of this letter.
Sincerely,
Brinton Hevey
Brinton Hevey Tax Law Specialist
Technical Assistance and Dispute Resolution
Record ID: 172335
