Were separately stated freight charges taxable when prestressed-concrete buyers could choose F.O.B. plant pickup or F.O.B. job-site delivery?

Subject

Freight Charges on Sale of Pre-stressed Concrete Products

Plain-English summary

The separately stated freight charge was not subject to sales tax. Buyers could choose F.O.B. plant and avoid delivery, or choose F.O.B. job site and pay a separately stated freight component arranged through an independent common carrier.

The ruling treated transportation as outside the sales price when the purchaser alone could avoid it and the invoice stated it separately. The freight quote included the carrier's charge plus the manufacturer's administrative markup.

What this means for you

Separate invoicing was necessary but not sufficient. The buyer also needed a real choice to avoid the transportation charge.

Common questions

Q: Was optional freight taxable? No.

Q: Could the buyer avoid the charge? Yes, by selecting F.O.B. plant.

Q: Who transported the concrete? A third-party common carrier arranged by the manufacturer.

Citations and references

• Fla. Stat. § 212.02(16) — sales price
• Fla. Admin. Code r. 12A-1.045(4)(a) and (5) — transportation charges and F.O.B. origin
• Florida Hi-Lift v. Department of Revenue, 571 So. 2d 1364 (Fla. 1st DCA 1990)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-035

Original ruling text

SUMMARY

QUESTION: Whether the manufacturer of pre-stressed concrete
products, would be required to collect tax from the
purchaser when the purchaser can request the products
F.O.B. Plant or F.O.B. Job Site and the freight charge is
separately stated on the invoice?

ANSWER - Based on Facts Below: The manufacturer would not
be required to collect tax from the purchaser when the
purchaser can request the products F.O.B. Plant or F.O.B.
Job Site and the freight charge is separately stated on the
invoice.

Jun 27, 2001

Re: Technical Assistance Advisement 01A-035
Sales and Use Tax
Taxability of Freight Charges on Sale of Pre-stressed
Concrete Products
Section 212.02(16), F.S.
Rule 12A-1.045(4)(a),(5), F.A.C.

Dear :

This letter is a response to your request dated April 30,
2001, for the Department's issuance of a Technical Assistance
Advisement ("TAA") concerning the above referenced party and
matter. Your request 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 PRESENTED

XXX (hereinafter "the manufacturer"), a manufacturer of
pre-stressed concrete products, at its purchaser's request will

quote purchase prices either F.O.B. Plant or F.O.B. Job Site.
If F.O.B. Job Site is quoted, the price is established by a
combination of the sales price of the pre-stressed product, plus
a freight component. The freight component is a combination of a
transportation charge secured from an independent transportation
company, increased by the manufacturer by a percentage
administrative mark-up fee.

If the quote for the F.O.B. Job Site is acceptable to the
purchaser, a purchase order is negotiated between the
manufacturer and the purchaser. The purchaser has the option of
determining whether the purchase order will be entered into,
setting the purchase price of the pre-stressed product and
separately stating the cost for transportation.

The manufacturer of pre-stressed concrete products is not
in the transportation business and contracts out its
transportation services through a third party common carrier.
For this request, we assume that all deliveries at plant or job
site occur in Florida.

REQUESTED ADVISEMENTS

A determination is requested on the sales tax application
of freight charges by the manufacturer on the sale of prestressed concrete products sold under the conditions specified
above.

APPLICABLE LAW

Section 212.02(16), F.S., defines "sales price," in part, as
follows:

(16) "Sales price" means the total amount paid for tangible
personal property, including any services that are a part
of the sale, valued in money, whether paid in money or
otherwise, and includes any amount for which credit is
given to the purchaser by the seller, without any deduction
therefrom on account of the cost of the property sold, the
cost of materials used, labor or service cost, interest
charged, losses, or any other expense whatsoever....

Rule 12A-1.045, F.A.C., provides in part, concerning freight
charges, as follows:

(4)(a) The charge for transportation services is not
subject to tax when both of the following conditions have
been met:

The charge is separately stated on an invoice or bill of
sale; and

2. The charge can be avoided by a decision or action solely
   on the part of the purchaser....

(5) If the seller contracts to sell tangible personal
property F.O.B. origin, the title to the property passes at
the point of origin. Since the title to the property
passes at the point of origin, transportation services
arranged by the seller and rendered to the buyer are not a
part of the taxable selling price, provided the
transportation charges are separately stated. Where the
transportation charges are billed by the seller to the
buyer but documentation is inadequate to establish the
point at which title passed to the buyer, it is presumed
that the tangible personal property was sold F.O.B. origin
and the title to the property passes at the point of
origin. In such instances, the transportation charges are
not considered a part of the selling price of the property,
if separately stated....

Court Decision

The appellate court in Florida Hi-Lift v. Department of
Revenue, 571 So.2d 1364 (Fla. 1 DCA 1990), held that sales
tax could not be imposed on transportation charges where
the terms of the lease provide that the lease is F.O.B.
lessor's premises and the transportation charges were not
deducted from the rental price.

The charge for freight service is not subject to tax only
if the charge for freight service is separately stated on the

customer's invoice or bill sale, and the charge can be avoided
by a decision or action solely on the part of the purchaser.

When tangible personal property is sold to the buyer under
the terms "F.O.B. origin" and title to the property passes at
the seller's location, separately stated freight charges are not
a part of the sales price and are not subject to Florida sales
tax.

CONCLUSION

The manufacturer would not be required to collect tax from
the purchaser when the purchaser can request the products F.O.B.
Plant or F.O.B. Job Site and the freight charge is separately
stated on the invoice.

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.

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 s. 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 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.

If you have any questions, please contact me at (850) 488-

8026.

Kind Regards,

Alan R. Fulton
Senior Tax Specialist
Technical Assistance and Dispute Resolution

Control No. 45129