T-Mobile Granted Sales Tax Refund on Sales of Electronically Delivered Software in Florida

T-Mobile Resources LLC (TMR), an entity of T-Mobile, was granted a $5.6 million Florida sales tax refund for sales of electronically delivered software to a T-Mobile affiliate (TM South). TMR acts as a procurement company for entities affiliated with T-Mobile by centralizing purchases for cell site equipment, software and services.

TMR sold electronically delivered software that it purchased from Nokia to TM South. TMR collected and remitted Florida sales tax on the sales. No hardware was sold by TMR along with the software. Upon the sale, all software was electronically transferred to a support server owned by the purchasing entity then electronically transferred to individual cell sites owned by the purchasing entity. All software was purchased for, uploaded to, and used on existing hardware. Much of the software at issue constituted software upgrades. TMR identified the sales tax refund during a routine sales tax audit and submitted a refund claim to the state.

In Florida, the sale of electronically delivered software is not a sale of tangible personal property or a taxable service and therefore is not subject to Florida sales tax. The DOR acknowledged that all software at issue in the case was delivered electronically and that electronically delivered software is not subject to Florida sales tax. The DOR contended that the software is taxable since it is a service sold with tangible personal property.

The court found that the DOR’s determination is incorrect since electronically delivered software is an intangible, not a service. The judge cited numerous previous cases (including Oracle America Inc. v. Department of Revenue, among others) that reached this determination. The court stated that even if the software were a service, it is not subject to sales tax since it was not sold with tangible personal property. TMR presented competent and credible testimony that each line item on the software invoices requested by the DOR in its audit sample was electronically delivered software, and no tangible personal property was listed on the invoices. Additionally, TMR provided the DOR with sufficient documentation to support its refund claim.

As a result, the court found that TMR’s refund claim should be granted and that sales tax paid on the software should be refunded to TMR. The court directed the DOR to issue the refund to TMR plus applicable interest. (T-Mobile Resources LLC v. Florida Department of Revenue, case number 2021-CA-000206, Florida Second Judicial Circuit Court)

Posted on October 10, 2023