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Florida Second Judicial Circuit Court Confirms Electronically Delivered Software Is Nontaxable Intangible Property

Tax Development Oct 03, 2023

Florida Second Judicial Circuit Court Confirms Electronically Delivered Software Is Nontaxable Intangible Property

The Florida Second Judicial Circuit Court recently ruled1 that sales of software for upgrades on existing hardware are not services subject to sales tax because electronically delivered software is intangible property, the sale of which is nontaxable.

T-Mobile Resources LLC (TMR) is an affiliate of T-Mobile that acts as a procurement company for related entities by centralizing purchases for cell site equipment, software, and services. TMR sold electronically delivered software that had been purchased from Nokia Siemens Networks US LLC to TM South, an affiliate, and collected sales tax on the transactions. No hardware was included in the sales to the T-Mobile affiliate.

TMR filed refund claims for tax paid on sales from 2011 through 2015, claiming that the sales were nontaxable intangible property. A Department of Revenue (“Department”) auditor recommended approval of the claims in 2016, but a supervisor contacted TMR the following year, stating that the auditor had left the department and the claim was denied. After several Petitions for Reconsideration of Refund Denial were filed, trial was finally scheduled to hear the case in 2022.

The Department contended that the sale of software was subject to sales tax as a service sold with tangible property. The Court disagreed and noted that the Department’s position in the case was contrary to the position it had taken during a recent administrative hearing involving Oracle. In that hearing, the administrative law judge found that electronically delivered software was a nontaxable intangible and concluded as a matter of law that the department recognized that “a charge solely for electronically transmitted information is not subject to sales tax.”2

The Department also claimed that TMR provided insufficient documentation to support the refund claims. It sought to exclude from the Court’s consideration any information the taxpayer provided during discovery in the case, limiting the evidence to just documentation that TMR had provided during the Department’s initial refund audit. Again, the Court disagreed with the Department’s position, stating that the Court is “the finder of fact that measures all the evidence put before it during trial, to resolve conflicts in the evidence, and to weigh the credibility of witnesses.” In reviewing the facts provided by the witnesses in this case, the Court ruled that TMR was due the refund of sales tax paid on the transactions at issue, as they constituted nontaxable sales of intangibles.

Please contact our Ryan tax professionals for additional information.

1 T-Mobile Resources LLC v. Florida Department of Revenue, Case Number 2021-CA-000206, in the Florida Second Judicial Circuit Court. (September 27, 2023).

2 Oracle America Inc. v. Department of Revenue, Case No. 22-1053, issued January 13, 2023. Technical Assistance Advisement, No. 09A-049, Florida Department of Revenue (September 23, 2009).


Susan Bittick

Dustin Davis

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