The Florida Department of Revenue issued a Technical Assistance Advisement concluding that a taxpayer’s online learning services were subject to the state’s Communications Services Tax (“CST”) as a “video service” (statutorily defined as “the transmission of video, audio, or other programming service to a purchaser …” and includes “digital video”), while the taxpayer’s sales of an internal email service were nontaxable “information services.” Florida Dep’t of Revenue, Technical Assistance Advisement 22A19-002R (Oct. 7, 2022).

The taxpayer operated an online professional networking platform that allowed its members to connect and explore career opportunities. The taxpayer’s internal email service allowed members to send each other internal email messages. The taxpayer’s online learning service provided educational video courses available to stream or download.

The Department concluded that the taxpayer’s sales of the internal email service were nontaxable “information services” (which are statutorily excluded from the CST) because the purchaser’s “primary purpose” was to receive data or information.

However, the Department concluded that the online learning service was subject to CST because it “involved” the transmission of digital video. The taxpayer asserted that the online learning service should be characterized as a tax-exempt information service and the Department did not disagree that this may be the underlying purpose of the service. However, the Department stated that the “the underlying purpose of the video service is irrelevant” because there is no “primary purpose” test in determining whether something is a “video service” for CST purposes (in contrast to determining whether something is a nontaxable “information service”).

In recent years, we have seen the Department take progressively broader interpretations of “video service” as it attempts to expand the scope of the CST. The Department’s conclusion here that the online learning service is a taxable video service merely because it “involves” the transmission of a digital video appears to be an expansion of the statutory language (“involve” is not a statutory term) and a narrow view of the nature of the particular transaction at issue. Indeed, it is unclear why the Department believes a “primary purpose” test should apply only to nontaxable “information service” determinations and not to other taxability determinations under the CST statute. Furthermore, the Department attempts to override the “primary purpose” test for nontaxable information services by concluding that any service involving elements of a “video service” is taxable, regardless of whether it could otherwise qualify as a nontaxable information service. This is a questionable interpretation of the statutory language.