The Florida Department of Revenue (“Florida DOR”) clarified in a recent Technical Assistance Advisement (TAA) that certain electronically downloaded and streamed music services are subject to the Florida Communications Services Tax because such services fell within the state’s statutory definition of communications service.
In the TAA, the Florida DOR responded to a taxpayer inquiry regarding a potential change in the taxpayer’s liability for the Florida Communications Services Tax (“CST”) after the inquiring taxpayer added downloadable and streaming music services and downloadable videos to its customer offerings through its Membership subscription. The Membership subscription’s offerings previously included only streaming video services, and in a previous decision, the Florida DOR determined that the taxpayer was liable for the CST based on revenue collected from the taxpayer’s streaming video service offerings.
In the most recent TAA, the Florida DOR determined the added downloadable option for the video service did not change its prior finding that the video service was subject to the CST. In addition, the DOR found that the taxpayer’s revenue generated from the purchases of either downloadable or streaming music services through the Member subscription were likewise subject to the CST because “music services” were part of the statutory definition of communications services.
Specifically, the Florida DOR concluded that downloadable and streaming music services were a form of video services. Florida Statute Sec. 202.11(24) defines “video services” 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 . . . the term includes basic, extended, premium, pay-per-view, digital video, two-way cable, and music services.” (emphasis added)
In turn, the Florida DOR concluded that “video services”, as defined by Sec. 202.11(24), fell within Florida’s statutory definition of “communications services” under Sec. 202.11(1), which defines such services 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, regardless of the medium or methods used.”
Thus, in other words, since “music services” are defined as a category of “video services”, under a combined reading of Sections 202.11(24) and 202.11(1), “music service” is a form of “communications services”, and thus subject to the CST.
However, in the TAA, the Florida DOR did not respond directly to the taxpayer’s inquiry as to whether there was a distinction between streaming and downloadable video or music services. The taxpayer opined in its inquiry that while streaming video or music services fell within the definition of communications services, the video or music content ceased to be a communications service once the content was downloaded to the customer’s device. Instead, the Florida DOR, without detailed explanation, concluded that video and music services remained a communications service after being downloaded to a customer’s device because the customer had paid for the downloaded content through its Member subscription, which permitted the customer to acquire the content in either a downloaded or streamed format at their preference. In other words, because the customer’s method of payment did not differ whether the video or music service was acquired in a downloaded or streamed format, the video and music services remained communications services in a downloadable format.
The effect of the Florida DOR’s TAA is that the scope of the CST has seemingly broadened to include not only streamed video, but also such video and music services that are acquired by customers in either a downloadable or streaming format. Thus, under the TAA, taxpayers currently liable for the CST should review their accounting systems to ensure that their calculations of their CST liability include both video and music services that are purchased by a customer in either a downloadable or streaming format.
We will continue to monitor the Florida DOR’s interpretations of taxpayer’s liability for the Communications Service Tax. Should you have any questions regarding your business’s liability for the tax, or any other service tax applicable to your business, feel free to contact Allison Rule at (703) 714-1312, or adr@commlawgroup.com.
