Was a separately stated independent-carrier newspaper delivery charge exempt when subscribers could avoid it by pickup or mail?

Plain-English summary

Florida excluded the independent-carrier delivery charge only when subscribers received complete information and could avoid the charge. At signup or renewal, the publisher had to disclose carrier and mail delivery charges, explain that pickup or mail would avoid the carrier charge, and separately state that charge on the invoice.

The publisher planned not to affirmatively explain all three options to telephone subscribers because of training demands. Florida said those subscribers' carrier charges remained taxable because the avoidability disclosure condition was not met.

What this means for you

An optional-charge exemption depends on the actual sales process, not merely an available alternative somewhere in company policy. Publishers should preserve scripts, renewal notices, pricing disclosures, customer elections, and invoices.

Common questions

Q: Was separate invoicing enough by itself?
A: No. The subscriber also had to be told the charges and how to avoid carrier delivery.

Q: Could pickup avoid the carrier charge?
A: Yes, as could mail delivery under the ruling's facts.

Q: What happened to telephone orders without the disclosure?
A: Their delivery charges were taxable.

Citations and references

• Fla. Stat. §§ 212.02 and 212.05 — sales price and sales-tax imposition
• Fla. Admin. Code r. 12A-1.045 — newspapers and delivery charges
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 03A-036

Original ruling text

SUMMARY

QUESTION: Are newspaper delivery charges subject to sales
tax when the charge is separately stated and can be avoided
by the customer?

ANSWER-Based on the facts below: Tax is not due on the
charge for newspaper delivery by independent carriers, if:
1) at the time of the initial subscription or subsequent
renewal, the subscriber is informed of the carrier delivery
charge and mail delivery charge; 2) at the time of the
initial subscription or subsequent renewal, the subscriber
is informed that the delivery charge can be avoided by an
election to either pick-up the newspapers at a distribution
center or to receive the newspapers by mail; and 3) the
carrier delivery charge is separately stated on the
invoice. In the present case, so long as the above three
criteria are met, no tax is due on the newspaper delivery
charge. However, since the Taxpayer's present plan is "not
to affirmatively tell a subscriber who orders by telephone
of the three delivery options due to the training
involved," those subscribers' delivery charges would not be
exempt from sales tax, as the transaction does not meet
criterion two (above).

Jul 16, 2003

Subject: Technical Assistance Advisement 03A-036
Newspaper Delivery Charges
Sales and Use Tax
Sections 212.02 and 212.05, F.S.
Rule 12A-1.045, F.A.C.
XXX ("the taxpayer")
FEI Number: XX

Dear :

This response is in reply to your petition dated June 4, 2003,

requesting the Department's issuance of a Technical Assistance
Advisement pursuant to s. 213.22, F.S., and Chapter 12-11,
F.A.C., regarding the above referenced matter and parties. An
examination of your petition 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 issuance of a TAA.

ISSUE

Whether newspaper delivery charges are subject to sales tax when
the charge is separately stated and can be avoided by the
customer.

FACTS

Your letter provides in part:

The Taxpayer, a newspaper publisher, publishes a daily
newspaper commonly known as [Newspaper]. The Taxpayer has
its principal offices in... Florida. The Taxpayer sells
newspapers through various means, including subscriptions
whereby a subscriber agrees to receive and pay for the
newspaper for a specified period of time, typically 4, 13,
26 or 52 weeks. Delivery of the newspaper is made to the
subscriber's residence or business by independent
contractors who have written agreements with the Taxpayer
to deliver newspapers within a specified geographic
territory. The Taxpayer pays the independent contractor
for this service. Subscribers may, upon request, have the
newspaper mailed to them rather than have the paper
delivered by a carrier.

Historically, subscribers who had their paper delivered by
the independent carrier were charged appropriate Florida
sales tax (including local option taxes where applicable)
based upon the total amount charged, which effectively
included the delivery charge incurred by the Taxpayer and
which was not separately stated on the subscriber's
invoice.

The Taxpayer intends on May 31, 2003 to change its delivery
and billing practices. Subscribers will now pay a separate
price for the newspaper and a charge for delivery.
Pursuant to the new procedure, subscribers will have three
delivery options at the commencement or renewal of a
subscription period. These options are:

(1) A subscriber may elect to have the paper delivered by
carrier.

(2) A subscriber may elect to pick-up the paper at one of
several distribution centers operated by the Taxpayer.

(3) A subscriber may elect to receive the paper by mail
delivery.

... Subscribers are free to choose their delivery options
at the commencement of the initial subscription period or
at the commencement of any renewal period. The Taxpayer's
present plan is not to affirmatively tell a subscriber who
orders by telephone of the three delivery options due to
the training involved, as the Taxpayer sometimes uses the
services of telemarketers to promote the sale of
subscriptions. If, as is frequently the case, the
subscriber simply orders a subscription and does not make
payment at the time of order, then the Taxpayer will send a
Confirmation Letter to the subscriber. Some subscribers
(both new and renewal) will make an advance payment via
credit card for a defined subscription period. The
Taxpayer does not presently intend to send these "advance
pay" subscribers (other than those one time situations
where there was a significant subscription period in
existence on May 31, 2003) any of the Documents set forth
above, until another circumstance arises that might trigger
the Taxpayer's procedures to send one or more of the
Documents.

In the case of new subscriptions or renewals, all
subscribers will be sent a confirmation letter confirming
the subscription or renewal. The confirmation letter sets
forth the amount due for a subscription and separately

states the charge for delivery (referred to as
transportation costs in the confirmation letter) and the
amount of sales tax that is imposed on the price for the
newspaper. The specific amount for the newspaper cost is
not separately stated. Under the new procedure,
appropriate sales tax (including local option taxes where
applicable) will be charged on the implicit sales price of
the newspaper but not the delivery charge, because the
subscriber has the option to receive the paper by carrier
delivery or to pick-up the newspaper at a distribution
center and avoid the delivery charge. Consistent with the
Taxpayer's existing practice, sales tax will not be imposed
on the sale price of a newspaper when the subscriber elects
to receive the newspaper by mail at the beginning of a
subscription period. See, Section 212.08(7)(w), Fla. Stat.

TAXPAYER POSITION

If the Taxpayer implements the procedures described herein on or
after May 31, 2003, the charge for delivery (i.e., the
transportation cost) of a subscription will not be subject to
sales tax because (i) the transportation charge is separately
stated on the Documents, and (ii) the procedures proposed to be
implemented by the Taxpayer and the Documents it will use to
compliment these procedures clearly reflect to the subscriber
how the transportation charge can be avoided by the election of
the subscriber to receive the newspaper by other means.

APPLICABLE STATUTES AND RULES

Section 212.05, F.S., states in pertinent part:

It is hereby declared to be the legislative intent that
every person is exercising a taxable privilege who engages
in the business of selling tangible personal property at
retail in this state, including the business of making mail
order sales, or who rents or furnishes any of the things or
services taxable under this chapter....

Section 212.02(16), F.S., defines "sales price" 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 pertinent part:

(1) "Transportation charges" include carrying, delivery,
freight, handling, pickup, shipping, and other similar
charges or fees.

(2) Transportation charges which are not separately stated
on an invoice or bill of sale, but are included in the
sales price of taxable tangible personal property, are
subject to tax.

(3)(a) Where the seller agrees to deliver tangible personal
property to some designated place and the purchaser cannot
elect to avoid the charge for transportation services, the
charge for the transportation service is subject to tax,
even if separately stated on an invoice or bill of sale....

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

1. 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....

RESPONSE

Tax is not due on the charge for newspaper delivery by
independent carriers, if: 1) at the time of the initial

subscription or subsequent renewal, the subscriber is informed
of the carrier delivery charge and mail delivery charge; 2) at
the time of the initial subscription or subsequent renewal, the
subscriber is informed that the delivery charge can be avoided
by an election to either pick-up the newspapers at a
distribution center or to receive the newspapers by mail; and 3)
the carrier delivery charge is separately stated on the invoice.

In the present case, so long as the above three criteria are
met, no tax is due on the newspaper delivery charge. However,
since the Taxpayer's present plan is "not to affirmatively tell
a subscriber who orders by telephone of the three delivery
options due to the training involved," those subscribers'
delivery charges would not be exempt from sales tax, as the
transaction does not meet criterion two (above).

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 advise is based, may subject
similar future transactions to a different treatment than
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.

Sincerely,

Kelley A. Cramer
Attorney
Technical Assistance and Dispute Resolution
(850) 922-4835

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