SUMMARY ISSUE ONE: Whether the Taxpayers activities in Florida create nexus.

QUESTION: Does the taxpayer's activities in Florida create nexus? ANSWER: Information obtained from the Florida Department of State, Division of Corporations, as well as the Taxpayers website, provides that the Taxpayers does have a continuing presence in Florida. Further, Exhibit A to the request for advisement provides that the Taxpayer offers onsite training for sale to its customers. The physical presence of corporate offices, officers, and agents in Florida may, in fact, create substantial nexus. ISSUE TWO: Whether the sale of the Taxpayers software that is delivered via electronic download is subject to Florida sales tax. QUESTION: Is the sale of the Taxpayers software, which is downloaded electronically by the customer subject to Florida sales tax? ANSWER Based on the Facts Below: The sale of the Taxpayers software that is delivered via electronic download, is not subject to Florida sales tax.

July 23, 2011 XXX Re: Subject: Technical Assistance Advisement (TAA) 11A-021 Sales and Use Tax Computer Software Sections 212.02, 212.05, and 212.06, Florida Statutes (F.S.) Rules 12A-1.027 and 12A-1.032, Florida Administrative Code (F.A.C.) [Taxpayer] XXX (Taxpayer) FEI # XXX

Dear XXX: This is in response to your letter dated April 8, 2011, requesting this Departments issuance of a Technical Assistance Advisement (TAA), pursuant to section 213.22, F.S., and Rule Chapter 12-11, F.A.C., that addresses whether the sale of the computer software and training offered by your client is subject to sales and use tax according to Chapter 212, F.S. An examination of your letter has established that 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

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Your letter provides the following, in part: *** TRANSACTION . . . [Taxpayer] is a software company based in XXX and incorporated in Florida. [Taxpayers] products are available for download nationwide through a secure internet connection. [Taxpayers] products can be described as office management software designed to assist financial advisors with client services. *** . . . A customer can access [Taxpayers] products and service either through their website, . . . or by calling [a phone number]. The purchase process for the software consists of a proposal and order agreement signed by the customer and [Taxpayer]. . . . [T]he product is remotely installed directly to the customers computer. There is no tangible aspect to this product. There is no software CD or paper instruction manual. All help and instructions needed by the customer are available on the computer. SALES TAX Each [Taxpayer] software package purchased in Florida has been charged with a 7% Florida sales tax. [Taxpayer] has been charging and remitting sales tax in Florida regardless of whether it should have been. The nature of the product is intangible and should not be subject to sales tax. The issue in question for this determination is whether [Taxpayers] software is subject to sales tax in Florida. *** . . . [Taxpayer] has no physical retail offices located in Florida and there are no officers located here for the purpose of furthering [Taxpayers] business. [Taxpayers] principal place of business is located in . . . XXX. [Taxpayer] is incorporated in Florida only for the purpose of collecting and remitting Florida sales tax. *** Along with your request for advisement, you provided the following exhibits: Exhibit A (referenced in your letter as New Purchase process), which describes Phase I: New Purchase process and Phase 2: Fulfillment process; and Exhibit B (referenced in your letter as Order for Products and Services), which provides a product and service schedule. Exhibit A, provides the following in part: *** Phase 2: Fulfillment process: *** a. [Program]

Technical Assistance Advisement Page 3 of 7 Implementation Services i. A series of 6 modules/phone meetings (1.5 hour phone sessions) . . . . 2. Module 2 is the install of [Program]: Tech Support performs the installation of [Program] remotely/electronically via [remote support] and phone, the install files are downloaded to clients environment from our server at [Program]. 3. We also deliver a 1 hour private Q&A session with a trainer via phone and [remote support] after module 6 is completed. b. [Live Program]: 1. The install of [Live Program] is performed by Tech Support (includes the [Program] Data Connector) happens remotely/electronically via [remote support] and phone - the installation files are downloaded from the XXX server and installed into the clients environment c. [Program] Mobile: 1. The install of [Live Program] is performed by Tech Support (includes the [Program] Data Connector) happens remotely/electronically via [remote support] and phone - the installation files are downloaded from the XXX server and installed into the clients environment. d. Data Migration Services A series of meetings via [remote support] (electronic)-all data transfer is done this way, we transfer the clients data to our secure, off network SQL2 server that only the migration team has access to, perform their work on the data and connect back to the client via [remote support] to deliver the database. e. Training and Consulting Services: Online training classes (Webinars): This is our most common training delivery method. Clients log in via [electronic meeting product] (like XXX) and attend remotely. Personal Web training (Private Webinars): Session delivered like online training classes but privately for a single client. Onsite Training: if the client purchases onsite training i. We prepare and print training materials and send them via mail to the client prior to the onsite class. The materials are: one copy of the On Site Basic Workbook (SEE ATTACHMENT) for each class attendee.

Technical Assistance Advisement Page 4 of 7 Practice Management Consulting Engagements (includes an onsite component): *** Exhibit B provides that all available products are installed via remote installation and that technical support is offered via toll-free number. The training for the listed products and services is described as either web-based or video-based. *** Review of the Taxpayers registration information filed with the Florida Department of State, Division of Corporations, as well as the 2011 For Profit Annual Report, provide that the Taxpayers principal place of business and the address of its President and Vice Presidents are in Florida. The Taxpayers website provides the following: [Program] is the award-winning and flagship product of [Taxpayer], an innovative software development firm based in [Florida] with operations in [XXX]. *** Exhibit A provides, in part, that the Taxpayer will print and mail the training materials to the clients prior to the onsite training. During a phone conversation on April 25, 2011, a Taxpayer representative stated that this information is incorrect. The Taxpayer representative provided that the training materials consist of a workbook that is only available electronically on the Taxpayers website. The Taxpayer representative stated that the taxpayer does not provide a physical copy of the workbook, does not mail any material to the client and does not impose a separate charge for the workbook. Taxpayers Position The Taxpayer asserts that [Taxpayer] has no nexus with the state of Florida, and that to subject Taxpayer to taxation in this state would violate the due process clause of the 14th amendment of the United States Constitution. The Taxpayer further asserts that the products it sells are intangible and should not be subject to sales tax. Requested Advisement You request an advisement that provides that Taxpayer not be required to collect sales tax on all future Florida transactions. You also provide that [Taxpayer] understands that there will be no refund on sales tax already remitted from past sales. Applicable Authority Nexus: Section 212.06, F.S., provides that sales tax is collectable from all dealers. Section 212.06(2)(c), F.S., defines dealer to mean:

Technical Assistance Advisement Page 5 of 7 [E]very person . . . who sells at retail or who offers for sale at retail, or who has in his or her possession for sale at retail; or for use, consumption, or distribution; or for storage to be used or consumed in this state, tangible personal property, including a retailer who transacts a mail order sale. Section 212.06(2)(g), F.S., further defines as a dealer, in part, every person who solicits business through representatives or agents and as a result receives orders for tangible personal property from consumers for use in this state. It is a settled principle that visible territorial boundaries will not always establish the limits of a states taxing power or jurisdiction. The courts have turned to the activities of out-of-state dealers in the taxing state to establish the necessary ties between the out-of-state dealer and the taxing state. For purposes of the analysis, nexus is any activity, relationship, connection, link, or business activity that must be present before a state has the right to impose a tax. Due to the complexity and intricacies of the nexus issue, courts have dealt with nexus on a caseby-case basis, relying heavily on the specific facts of each case. The Taxpayer cites Department of Revenue of the State of Florida v. Share International, Inc., 676 So.2d. 1362 (Fla. 1996), to support its assertion that it does not have nexus in this state. However, the facts in Share are distinguishable from the facts presented in this case. Share did not have offices, officers, or agents residing in Florida. Share had a presence in Florida for approximately three days each year for seminars at which its products were available for sale. The court found that, under those facts (that is, the presence in Florida of representatives accepting orders for three days from the attendees), the activities did not constitute sufficient contacts with the state to constitute nexus. The most that can be drawn from that decision is that a business with no agents soliciting orders, no employees, no offices, retail outlets, locations of any kind, or property located in Florida, does not have nexus. In this case, information obtained from the Florida Department of State, Division of Corporations, as well as the Taxpayers website, provides that the Taxpayer does have a continuing presence in Florida. Further, Exhibit A provides that the Taxpayer offers onsite training for sale to its customers. The physical presence of corporate offices, officers, and agents in Florida may, in fact, create substantial nexus. Software: Section 212.05, F.S., provides that the sale of tangible personal property is subject to tax. The term sale includes a license to use tangible personal property. See Section 212.02(15), F.S. Service only transactions, except those authorized for taxation by Chapter 212, F.S., are generally not subject to sales tax. When tangible personal property and services are a part of the same sale, the entire sales price is subject to sales tax. See Section 212.02(16), F.S. Software supplied on a tangible medium is taxable. Charges for services that are part of the sale of such taxable software are part of the sales price and are subject to sales tax. Section 212.02(16) and Rule 12A-1.032, F.A.C., provides that a sale of customized software is a

Technical Assistance Advisement Page 6 of 7 service transaction and is not subject to sales tax, provided that the customized software is not part of the sale of other tangible personal property. Likewise exempt is a sale that solely involves software, canned or customized, that is provided to the customer in an electronic format, as there is no conveyance of tangible personal property. Keep in mind that electronically accessed canned software is subject to Florida sales tax when sold as part of the sale of tangible personal property. In this case, the facts stated in your letter along with Exhibit A and Exhibit B provide that the product is remotely installed directly to the customers computer. The Taxpayer provides installation of the software remotely/electronically. The install files are downloaded to [a] clients environment from [the Taxpayers] server. Exhibit A provides that online training classes represent [the] most common training delivery method. However, the exhibit provides that in some cases the Taxpayer will provide onsite training. For onsite training, the Taxpayer prepare[s] and print[s] [the] training materials and send[s] them via mail to the client prior to the onsite class. Rule 12A-1.027(2)(a), F.A.C., provides that the sale of printed tangible personal property, including all charges to the consumer for materials, for the production or fabrication of items used, and for binding and finishing the printed property or graphic matter for distribution, are subject to tax. However, during the referenced phone conversation of April 25, 2011, the Taxpayers representative asserted that in no case does the Taxpayer provide a tangible copy of the training materials. Conclusion Information obtained from the Florida Department of State, Division of Corporations, and the Taxpayers website provides that the Taxpayers corporate officers reside in Florida. The physical presence of the Taxpayers corporate officers, as well as training personnel in this state, may create substantial nexus. However, the facts submitted for review indicate that the software under advisement is always provided in an electronic format. In addition, the Taxpayer asserts that the Taxpayer does not provide any tangible personal property to its clients in conjunction with the sale of the electronically delivered software. According to the foregoing discussion, the sale of the Taxpayers software that is delivered via electronic download is not subject to Florida sales 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

Technical Assistance Advisement Page 7 of 7 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 Tax Law Specialist Technical Assistance and Dispute Resolution 850/717-6839 Record ID: 101465