Were the agency's dealership mailer and event-personnel contracts subject to Florida sales tax?

Subject

Advertising/Personnel Contracts

Plain-English summary

The lump-sum advertising contract was taxable, while the separate personnel contract was exempt on the stated facts. The advertising agency designed and distributed mailers containing a flyer and promotional check, but did not separately state printing and mailing charges to the dealership.

Because the distributed printed goods were taxable and their charges were bundled into one contract amount, the entire advertising-contract charge was taxable. The event-personnel contract involved directors, greeters, hosts, and training services; it remained exempt while tangible items were limited to inconsequential items such as sales tags.

What this means for you

Separately stating taxable production charges could materially change the result. The ruling said that a separate printing amount would have limited collection to that amount and allowed a resale certificate for the outside printing and mailing vendors.

Common questions

Q: Was the entire lump-sum advertising contract taxable? Yes.

Q: Why? The contract bundled taxable printed promotional goods with the advertising services instead of separately stating the production charges.

Q: Was the personnel contract taxable? No, so long as any transferred property remained inconsequential, such as sales tags.

Citations and references

• Fla. Stat. § 212.08(7)(ccc) — advertising agencies and distributed promotional goods
• Fla. Stat. § 212.08(7)(v) — personal services with inconsequential sales
• Fla. Admin. Code r. 12A-1.001 — service transactions
• Fla. Admin. Code r. 12A-1.008 — printed materials
• Fla. Admin. Code r. 12A-1.034 — promotional materials
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00A-019

Original ruling text

SUMMARY

QUESTION: Are the amounts received by an advertising
agency, as defined in section 212.08(7)(ccc), F.S., under a
contract pursuant to which the agency produced and
distributed mailers consisting of a flyer and a promotional
check, subject to tax?

ANSWER - Based on Facts Below: Yes. Promotional goods,
such as brochures, direct mail letters, and other printed
goods, are subject to tax when produced or reproduced for
distribution (although the creative services used to design
the materials may be exempt). Section 212.08(7)(ccc)3.,
F.S. Accordingly, because a lump sum amount is charged
under the contract, the entire amount received under the
contract is taxable. If the amount charged for the
printing of the mailers had been separately stated in the
contract, the agency would have needed to collect tax only
on such amount and could have issued a resale certificate
to the vendor who performed the printing function.

Title:

Advertising/Personnel Contracts

Apr 19, 2000

Re: Technical Assistance Advisement 00A-019
Sales & Use Tax - XXX
Section 212.08(7)(v); 212.08(7)(ccc), F.S.
Rules 12A-1.001, 12A-1.008, 12A-1.034, F.A.C.
XXX ("Taxpayer")
F.E.I. # XX

Dear :

This is in response to your letter dated XX, for the
Department's issuance of a Technical Assistance Advisement
("TAA") concerning the above referenced party and matter. Your

letter has been carefully examined and the Department finds it
to be in compliance with the requisite criteria set forth in
Chapter 12-11, F.A.C. This response to your request constitutes
a TAA and is issued to you under the authority of section
213.22, F.S.

Facts

It is stated that the Taxpayer is engaged in the advertising
agency business. Taxpayer assists new car dealers in selling
cars at promotional events that are staged at a dealership's
place of business. The taxpayer develops a marketing strategy
for the dealer that includes advice on sales promotion and
techniques, target audience, and methods of maximizing
attendance.
In developing the marketing strategy to produce the promotional
sales event, the Taxpayer discusses with the dealer the sales
volume that the dealer wishes to achieve. Two separate
contracts are entered into, one for advertising services and one
for the provision of personnel to assist in the sales event.
The amounts charged by the Taxpayer are set forth separately for
each contract. Under the advertising contract, the Taxpayer
agrees to design and mail promotional flyers. The advertising
contract has printed space for the car dealer to insert
information about the date or dates of the sales, whether new or
used cars or trucks are to be sold, special financing or rebate
offers, and gifts to attendees. Using this information, the
Taxpayer decides on the details of the flyer. The flyers are
then printed by an outside printer hired by the Taxpayer. A
mailer is prepared, consisting of the flyer and a promotional
check. The direct mailing is also done by an outside direct
mail company hired by the Taxpayer. The Taxpayer pays for the
costs of the printing and mailing directly to these vendors. The
Taxpayer also pays sales tax on the printing and mailing. The
dealer does not incur any separate charges for these costs, nor
are they separately stated in the contract. Based upon its
market analysis, the Taxpayer determines the addresses to which
the mailers are to be delivered. The advertising contract also
provides space for the dealer to specify its zip code
preference. Under both the advertising and the personnel
contracts, one half of the contract total is due on the day of

order with the balance due seven days prior to the sales event.

The personnel contract lists the number of personnel, such as
directors, greeters, and hosts, that the Taxpayer will provide
during the sales promotion event. These personnel actively
participate in meeting with customers and facilitating sales.
The dealer also agrees to provide personnel, such as
salespersons, finance managers, and support staff, to
accommodate the expected turnout. Prior to the sale, the
Taxpayer will provide special training and instruction to the
dealer's employees, and during the sale, the dealer's employees
are expected to support the efforts of the Taxpayer's personnel.
At the dealer's request, the Taxpayer can provide a decorator
and tangible items such as sales tags.

Requested Advisement

Whether the amounts received by the Taxpayer pursuant to either
the advertising contract or the personnel contract are taxable.

Applicable Law and Discussion

Your letter sets forth arguments in support of the proposition
that all amounts received under both contracts should be exempt,
and you base those arguments primarily on two cases, Southern
Bell Telephone and Telegraph Company v. Department of Revenue,
336 So.2d 30 (Fla. 1st DCA 1978), and The William Cook Agency,
Inc. v. Department of Revenue, 93 Tax F.A.L.R. 458 (April 19,
1993), affirmed 644 So.2d 319 (Fla. 1st DCA 1995). Since the
dates of decision of those cases, the Florida legislature has
amended the law as it applies to the taxability of the services
of advertising agencies.

Section 212.08(7)(ccc), F.S., as amended effective July 1, 1999,
defines the term "advertising agency" as "any firm that is
primarily engaged in the business of providing advertising
materials and services to its clients." You have stated that the
Taxpayer is engaged in the advertising business, and this
Advisement is therefore based upon the Taxpayer qualifying under
the above definition as an advertising agency.

Section 212.08(7)(ccc)2., F.S., provides that the sale of
advertising services by an advertising agency to a client is
exempt from sales tax. Also exempt are certain items of
tangible personal property that are produced or otherwise
created by an advertising agency for its clients and that are
used in the performance of advertising services.

However, promotional goods, such as brochures, direct mail
letters, and other printed goods, are subject to tax when
produced or reproduced for distribution (although the creative
services used to design the materials may be exempt). Section
212.08(7)(ccc)3., F.S.

Accordingly, the mailers produced by the Taxpayer, which consist
of a flyer and a promotional check, are subject to tax since
these materials are produced for distribution by the Taxpayer on
behalf of its clients. You state in your letter that the
charges for printing and distribution are not separately stated
in the advertising services contract. Because those charges are
not separately stated, the entire amount received by the
Taxpayer under the advertising services contract is subject to
tax. (If the amounts charged for the printing of the mailers
were separately stated in the advertising services contracts,
the Taxpayer would need to collect tax only on such amounts and
could issue a resale certificate to the vendors who perform the
printing and mailing functions.)

The amount received by the Taxpayer under the personnel contract
is not for the provision of advertising services but is instead
for the provision of the services of a certain number of the
Taxpayer's personnel at the sales promotion event. No transfer
of tangible personal property is involved, except that, upon
request, the Taxpayer may provide such items as sales tags.

Section 212.08(7)(v), F.S., provides that personal service
transactions that involve sales only as inconsequential elements
for which no separate charges are made are exempt. It would
therefore appear that the charges for providing personnel under
the personnel contracts would be exempt so long as the
Taxpayer's provision of tangible personal property is limited to
such items as sales tags.

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 upon 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 from that which is expressed in this response. In
particular, the law enacting the exemption for advertising
agencies authorized the Department of Revenue to promulgate
rules to administer this law. As of the date of this letter,
the rule has not been promulgated. However, the Department of
Revenue anticipates adopting a rule or rules clarifying this
law. Please watch for the public notices concerning the rule,
which will be posted on the Department of Revenue's internet
site: http://sun6.dms.state.fl.us.

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 that you provide the
undersigned with an edited copy of your request for Technical
Assistance Advisement, the backup material and this response,
deleting names, addresses, and any other details that 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,

Robert D. Heyde
Senior Attorney
Control # 40162