DEPARTMENT
OF REVENUE
RULE CHAPTER TITLE: COMMUNICATIONS
SERVICES TAX
RULE TITLE: RULE NO:
Tax Due at Time of Sale;
Tax Returns and Regulations 12A-19.020
Substitute Communications
Systems 12A-19.036
Homes for the Aged and
Religious and Educational Organizations Exemptions from the Communications
Services Tax 12A-19.043
Public Use Forms 12A-19.100
PURPOSE AND EFFECT: The
purpose of the proposed amendments to Rule 12A-19.020, F.A.C. (Tax
Due at Time of Sale; Tax Returns and Regulations), is to provide that:
(1) form DR-700016, Florida Communications Services Tax Return (R.
06/03), is to be used to report communications services tax on services
billed from June 1, 2003, through June 30, 2003; and (2) form DR-700016,
Florida Communications Services Tax Return (R. 07/03), is to be used
to report communications services tax on services billed on or after
July 1, 2003.
The purpose of the creation
of Rule 12A-19.036, F.A.C. (Substitute Communications Systems), is
to: (1) provide guidance concerning the application of communications
services taxes to substitute communications systems; (2) provide that
state and local communications services taxes are imposed on the actual
costs of operating a substitute communications system; (3) provide
that operators are required to register with the Department to report
and remit taxes annually; (4) provide that substitute communications
systems operated by governmental entities are not subject to tax on
their operating costs; (5) provide definitions for purposes of the
rule for the terms “substitute communications systems,” “switched
service,” “dedicated facility,” and “actual cost”; (6) provide the
characteristics of a substitute communications systems; (7) provide
examples of communications systems and guidance on whether such systems
are “substitute communications systems”; and (8) provide examples
of the taxable costs of operating a substitute communications system.
The purpose of the proposed
amendments to Rule 12A-19.043, F.A.C., is to: (1) change the title
to “Homes for the Aged and Religious and Educational Organizations
Exemptions from the Communications Services Tax”; (2) implement 2003
legislative changes providing for an exemption from the Florida communications
services tax and the local communications services tax for qualified
homes for the aged; (3) define the term “homes for the aged” for purposes
of the exemption; (4) provide that a qualified home for the aged is
required to issue an exemption certificate to the selling dealer to
purchase communications services tax-exempt; and (5) provide a suggested
exemption certificate for such purchases.
The purpose of proposed
amendments to Rule 12A-19.100, F.A.C. (Public Use Forms), is to adopt,
by reference, changes to form DR-700016, Florida Communications Services
Tax Return.
SUBJECT AREA TO BE ADDRESSED:
The subject of this workshop is: (1) the adoption of changes to the
Florida Communications Services Tax Return; (2) the proposed guidelines
to implement the exemption from the Florida communications services
tax and the local communications services tax for qualified homes
for the aged; and (3) the proposed guidelines for the application
of the communications services taxes to substitute communications
systems.
SPECIFIC AUTHORITY: 202.15,
202.151, 202.16(2), 202.26(3)(a), (c), (d), 213.06(1) F.S.
NOTICE UNDER THE AMERICANS
WITH DISABILITIES ACT: Any person requiring special accommodations
to participate in any proceeding before the Technical Assistance and
Dispute Resolution Office is asked to advise the Department at least
48 hours before such proceeding by contacting Nancy Purvis at (850)488-0712.
Persons with hearing or speech impairments may contact the Department
by using the Florida Relay Service, which can be reached at (800)955-8770
(Voice) and (800)955-8771 (TDD).
THE PERSONS TO BE CONTACTED
REGARDING THE PROPOSED RULE DEVELOPMENT WORKSHOP ARE: Gary Gray, Tax
Law Specialist, Technical Assistance and Dispute Resolution, and Jennifer
Silvey, Senior Attorney, Department of Revenue, P.O. Box 7443, Tallahassee,
Florida 32314-7443, telephone (850)922-4729 for Mr. Gray, (850)922-4727
for Ms. Silvey.
The Department’s proposed
rules are available on the Department’s web site: www.myflorida.com/dor/rules.
THE PRELIMINARY TEXT OF
THE PROPOSED RULE DEVELOPMENT IS:
STATE OF FLORIDA
DEPARTMENT
OF REVENUE
CHAPTER
12A-19, FLORIDA ADMINISTRATIVE CODE
COMMUNICATIONS
SERVICES TAX
AMENDING
RULES 12A-19.020, 12A-19.043 AND 12A-19.100
CREATING
RULE 12A-19.036
12A-19.020
Tax Due at Time of Sale; Tax Returns and Regulations.
(1) through (3)(b) No
change.
(c) Form DR-700016, Florida
Communications Services Tax Return, contains current tax rates for
each local taxing jurisdiction. These rates are also contained on
the Department’s Internet site at the address shown inside the parentheses
(www.myflorida.com/dor/taxes/local_tax_rates.html). The Department’s
Internet site and form DR-700016 are revised when the tax rate in
any local jurisdiction changes.
(d) The following versions
of form DR-700016, Florida Communications Services Tax Return, are
applicable to the reporting periods and service billing dates indicated:
(1) SCOPE OF RULE. This
rule provides guidance concerning the application of communications
services taxes to substitute communications systems, the determination
whether a person is operating a substitute communications system,
and the calculation of state and local communications services taxes
on the actual costs of operating a substitute communications system.
(2) GENERAL. State and
local communications services taxes are imposed on the actual costs
of operating a substitute communications system. Operators of substitute
communications systems are required to register with the Department
and to report and remit taxes annually. See Rules 12A-19.010 and 12A-19.020,
F.A.C., for guidance on registration and reporting requirements. Substitute
communications systems operated by governmental entities are not subject
to tax on the operating costs. If a substitute communications system
provides a communications service that would be exempt under Section
202.125, F.S., if purchased from a dealer of communications services,
the costs of operating that system are not taxable.
(3) DEFINITIONS. For purposes
of this rule, the following terms have the meanings set forth in this
subsection.
(a) “Substitute communications
system” means any system capable of providing communications services
that are a substitute for any switched service or dedicated facility
that a dealer would use to provide communications services. A substitute
communications system must be capable itself of providing switched
service. A substitute communications system may be operated on a “stand
alone” basis or may be interconnected to communications services or
systems provided by a dealer of communications services. A substitute
communications system has all of the following characteristics:
1. The system consists
of tangible personal property, facilities, and/or equipment capable
of providing the user with its own communications services.
2. The system provides
the capability to switch communications signals between or among points.
3. The system does not
depend on any communications services provided by a dealer of communications
services, although it may interconnect with a dealer’s system.
4. The system is operated
exclusively for a taxpayer’s own use, it is not for hire or for resale,
and no excess capacity of the system is sold or provided to any third
party in any manner.
(b) “Switched service”
means any service that uses a mechanical, electrical, optical, or
other device that opens or closes circuits, completes or breaks an
electrical or other path along which signals travel, or selects paths
or circuits to allow for the transmission, conveyance, or routing
of communications signals between and among points.
(c) The term “dedicated
facility” means any equipment or equipment system that provides a
specific user the exclusive use of transmission channels or circuits
to carry communications signals.
(d) The term “actual cost”
includes materials, labor, and other costs that are directly attributable
to the operation and maintenance of a substitute communications system.
Examples of costs that may be directly attributable to operation of
a substitute communications system are depreciation of equipment and
facilities, lease or rental expenses associated with equipment and
facilities, repair and maintenance, storage costs, insurance costs,
tools and equipment used to maintain the system, utilities used to
operate the system, taxes, licensing and franchising costs, interest
expense, and employee salaries and benefits.
1. For purposes of this
rule, the term “actual cost” does not include the initial purchase
price of equipment that is capitalized and comprises or is part of
the system. It does, however, include lease or rental expenses for
equipment and facilities and depreciation costs associated with equipment
and facilities. Depreciation costs are the amounts claimed for federal
income tax purposes.
2. Subsequent purchases
of equipment and materials used to maintain or repair the system are
included in the term “actual cost” when such items are accounted for
as expense items rather than capitalized.
3. If the substitute communications
system is located in more than one state, the actual cost of such
system for purposes of this rule shall be the actual costs directly
attributable to the system’s equipment or components that are physically
located in the State of Florida.
4. Certain costs may have
to be allocated between the operation of a substitute communications
system and other operations. For example, a repair technician may
be responsible for maintaining equipment dedicated to a substitute
communications system and for other equipment not related to the substitute
communications system. Only the amount of the total cost of the technician
allocated to the substitute system is taxable under Chapter 202, F.S.
(4) EXAMPLES OF COMMUNICATIONS
SYSTEMS. The following examples illustrate the application of this
rule.
(a) A taxpayer acquires
and operates a telephone system with switching and routing capabilities
allowing for intercom and other self-contained communications at the
taxpayer’s facility. The taxpayer’s system connects to the local exchange
carrier’s system, and the taxpayer pays the local exchange carrier
and a long distance carrier for communications services between the
taxpayer’s facility and other locations. The taxpayer is operating
a substitute communications system, because the system performs routing
and transmission operations at the taxpayer’s facility using switching
capabilities that a telephone company would use to provide telephone
services. The taxpayer owes communications services tax on the actual
cost of operating the system. The purchases of external communications
services from local and long distance carriers are not part of the
costs of the operating the taxpayer’s substitute system.
(b) A taxpayer acquires
and operates a computer local area network (LAN) system that uses
a router to provide switching capabilities necessary to connect the
multiple computers used by the taxpayer’s employees. The taxpayer
is providing transmission, switching, and routing services for its
own use. The taxpayer is operating a substitute communications system,
and it owes communications services tax on the actual costs to operate
and maintain the system.
(c) A taxpayer acquires
and operates all of the equipment necessary for a wireless dispatch
system that transmits and switches voice or data signals to provide
a communications path between and among remote receivers and a central
base station. Communications services dealers would use similar equipment
and switching capabilities to provide wireless communications services.
The taxpayer owes communications services taxes on the actual costs
of operating the system.
(d) A taxpayer acquires
and uses equipment for a wireless dispatch system that does not have
switching capabilities and does not provide communications channels
between and among remote receivers. The taxpayer purchases the switching
services or “airtime” from a communications services provider and
pays communications services tax to the provider. The system is not
a substitute communications system.
(e) A taxpayer purchases
telephone transmission and receiving equipment located at various
sites where the taxpayer does business and acquires and installs a
tower for the purpose of providing communications services between
and among those sites in lieu of using a local exchange provider and
long distance provider. The taxpayer owes communications services
taxes on the actual costs of operating the system.
(f) A taxpayer acquires
and operates the equipment necessary to transmit, route, and switch
data to permit monitoring the activities and operations of manufacturing
equipment, pipelines, rail systems, or utilities. The taxpayer owes
communications services taxes on the actual cost of operating the
system.
(g) An individual has
two home personal computers and purchases and installs the equipment
that allows the two computers to be connected to each other. The connection
allows the two computers to share a single printer, use a single Internet
connection, share files and documents, and play games. The equipment
consists of a “router” that receives the signal from one computer
and sends it to the other computer over a cable that connects each
computer to the router. This system is a substitute communications
system, because it provides its own switching between two computers.
The individual is not entitled to depreciation deductions and incurred
no labor costs to install the connection. In addition, there are no
other costs that can be identified as directly attributable to the
operation of the system. The individual therefore has no substitute
communications system liability. If there were any actual costs identifiable
to operating the system, the individual would be liable for 2.37 percent
gross receipts tax and local communications services tax. The individual
would be exempt from the 6.8 percent state portion under the residential
exemption in Section 202.125, F.S.
(h) A small business has
five computers, each connected to a central router. The connection
allows the computers to share printers, files and documents, and other
business related activities. This system is a substitute communications
system, because it provides its own switching between the five computers.
The business owes communications services tax on the actual cost of
operating the system.
(i) An individual purchases
a “walkie-talkie” set for his two grandsons. The set permits direct
voice contact between two handsets and all other handsets using the
same channel or frequency so long as they are within a certain distance
of each other. The walkie-talkie is not a substitute communications
system, because it does not have switching capabilities.
(j) An individual purchases
a citizens band (CB) radio. CB radios broadcast and capture radio-frequency
signals. CB radios permit direct voice contact between two radios
and all other CB radios using the same channel or frequency, so long
as they are within a certain distance of each other. The CB radio
is not a substitute communications system, because it does not have
switching capabilities.
(k) An individual acquires
the amateur radio equipment necessary to operate as a “Ham” operator
under a license from the Federal Communications Commission under Section
47, C.F.R. As with CB radios, Ham operators broadcast radio signals
in all directions. Ham operator equipment is not a substitute communications
system, because it does not have its own switching capabilities.
(l) Provider A sells or
leases Company X a specialized mobile radio system. Company X is a
plumbing company. The radio system includes a base station and several
mobile radio units. The radio system uses Provider A’s switching capabilities,
and Provider A charges Company X a fee for the transmission of its
signals, typically referred to as “airtime.” The radio system acquired
by Company X is not a substitute communications system, because it
uses Provider A’s switching services, and Provider A charges Company
X a fee for the transmission or the airtime that is subject to communications
services tax.
(m) Provider A sells or
leases Company X a private two-way mobile radio system. Company X
is a plumbing company. The radio system includes a base station, a
central tower used for signal switching by Company X, and several
mobile radio units. Provider A does not provide Company X with airtime
or switching services. The equipment Company X acquired provides it
with services that are dedicated and exclusively used by Company X
for its internal use. The two-way radio system does not have any excess
channel capacity and cannot be used by any third party. The two-way
mobile radio system is a substitute communications system, and Company
X must pay communications services tax on the actual cost of maintaining
the system.
(5) EXAMPLES OF TAXABLE
COSTS. The following examples illustrate the taxable costs of operating
a substitute communications system.
(a)1. Provider A sells
Utility X a private two-way mobile radio system on June 1, 2002. Utility
X provides electricity to its customers and uses the system for dispatch
and communication between and among service vehicles and base offices.
The radio system includes a base station, a central tower used for
signal switching by Utility X, and several mobile radio units. Provider
A does not provide Utility X with airtime or switching services. The
two-way radio system is dedicated and exclusively used by Utility
X for its internal use. Utility X is located in an unincorporated
area of a county with a local communications services tax rate of
2.8 percent. The initial purchase price for the two-way mobile radio
system, including equipment and installation totals $1,000,000. During
the 2002 calendar year, Utility X incurred the following expenses
attributable to the two-way mobile radio system:
a. One service technician
with an annual salary of $60,000 (includes annual salary and benefits)
who spent 50 percent of his time maintaining the system during the
period July 1, 2002, to December 31, 2002.
b. Depreciation expense
of $200,000 for the system equipment claimed on Utility X’s 2002 federal
income tax return.
c. Two additional mobile
units were purchased in October 2002 for $2,000.
d. Several mobile units
were repaired in November 2002. The cost to repair the units totaled
$1,000.
e. Interest expense claimed
on Utility X’s 2002 federal income tax return for the loan used for
the purchase of and secured by the system was $20,000.
f. Miscellaneous parts,
tools, and equipment purchased by Utility X to maintain and repair
the system during the year totaled $3,500.
2. The initial purchase
price of the two-way mobile radio system for $1,000,000 and the two
additional mobile units purchased in October 2002, for $2,000, is
not part of the “actual cost” of a substitute communications system
and therefore not subject to communications services tax. In this
example, the items subject to communication services tax include:
(1) the portion of the service technician’s salary and benefits attributable
to maintaining the system totaling $15,000 (50 percent of the salary
and benefits for 6 months), (2) the depreciation expense for the system
($200,000), (3) the repair to several mobile units ($1,000), (4) the
interest expense directly attributable to the system ($20,000), and
(5) the miscellaneous parts, tools and equipment ($3,500). Utility
X should remit $21,962.15 Florida communications services tax ($239,500
x .0917) and $6,706.00 local communications services tax ($239,500
x .028), for a combined payment totaling $28,668.15 to the Florida
Department of Revenue.
(b) Company B is a small
theme park located in a municipality with a local communications service
tax rate of 2.8 percent. Company B enters into a lease agreement on
January 1 for equipment that constitutes a substitute communications
system from Provider Y. Company B’s lease payment to Provider Y for
the system is $20,000 per month or $240,000 per year, which includes
sales tax. The lease payments for the system are subject to communications
services tax. Company B, in this example, should remit $22,008.00
Florida communications services tax ($240,000 x .0917) and $6,720.00
local communications services tax ($240,000 x .028), for a combined
payment totaling $28,728.00 to the Florida Department of Revenue.
Specific Authority 202.26(3)(c),
213.06(1) FS. Law Implemented 202.11(1), (16), 202.12(1)(b), 202.125,
202.15, 202.19(7) FS. History-New .
12A-19.043 Homes for the
Aged and Religious and Educational Organizations Exemptions from the
Communications Services Tax.
(1)(a) The sale of communications
services, as defined in Section 202.11(3), F.S., is subject to the
Florida communications services tax and the local communications services
tax, unless specifically exempt.
(b) This rule provides
guidelines regarding sales by religious institutions and the documentation
and recordkeeping requirements regarding the exemption for sales to
homes for the aged and to religious or educational organizations from
the communications services taxes.
(2) SALES TO HOMES FOR
THE AGED.
(a) The sale of communications
services to a home for the aged, as defined by Section 202.125(4),
F.S., is exempt from the Florida communications services tax and the
local communications services tax when the home for the aged is exempt
from federal income tax under s. 501(c)(3) of the Internal Revenue
Code, holds a valid Consumer’s Certificate of Exemption (form DR-14)
issued by the Department for sales and use tax purposes, and meets
one of the following provisions:
1. The home for the aged
is licensed as a nursing home or an assisted living facility under
Chapter 400, F.S.; or
2. At least 75 percent
of the occupants in the home for the aged are 62 years of age or older
or totally and permanently disabled and the home for the aged qualifies
for an ad valorem property tax exemption under Section 196.196, 196.197,
or 196.1975, F.S.
(b) DOCUMENTATION REQUIREMENTS.
1. To be entitled to exemption
as a home for the aged at the time of purchase, the purchaser must
issue to the selling dealer a certificate signed by an authorized
representative stating that the purchases are for a home for the aged,
as defined by Section 202.125(4), F.S., that is exempt from federal
income tax under s. 501(c)(3) of the Internal Revenue Code. Dealers
are not required to obtain copies of Internal Revenue Service determination
letters granting homes for the aged exemption under s. 501(c)(3) of
the Internal Revenue Code.
2. The following is a
suggested format to be provided by a home for the aged to the selling
dealer.
EXEMPTION CERTIFICATE
FOR PURCHASES OF
COMMUNICATIONS
SERVICES BY
HOMES FOR
THE AGED
DATE: _____________________________
TO: _________________________________
(Selling Dealer's Business Name)
I, the undersigned, am
a representative of the exempt home for the aged identified below.
The purchases of communications services made on or after _________________________
from the business identified above are for use by the home for the
aged identified below.
The charges for the purchases
of communications services from the dealer identified above will be
billed to and paid directly by the exempt home for the aged identified
below. These purchases are exempt from the Florida communications
services tax and the local communications services tax because the
entity is exempt from federal income tax under s. 501(c)(3) of the
Internal Revenue Code, holds a valid Florida Consumer’s Certificate
of Exemption, and is a “home for the aged,” as defined by Section
202.125(4), F.S.
Under penalties of perjury,
I declare that I have read the foregoing and that the facts stated
in it are true.
(2) through (4) renumbered
(3) through (5) No change.
Specific Authority 202.26(3)(c)
FS. Law Implemented 92.525(2), 202.125(4), 202.13(2), 202.16(4), 202.26(2),
202.34(3), 213.37 FS. History-New 1-31-02, Amended 4-17-03, .
12A-19.100 Public Use
Forms.
(1)(a) The Department
employs the following public-use forms and instructions in the administration
of Chapter 202, F.S., Communications Services Tax. These forms are
hereby incorporated by reference in this rule.
