Was an optional home-electronics delivery-and-setup fee taxable when delivery, hookup, testing, and demonstration shared one price?

Plain-English summary

Florida required sales tax on the home-electronics retailer's entire optional delivery-and-setup fee. Delivery was always included, while setup could include hooking up, testing, and demonstrating the product. The retailer charged one amount for the package and did not reduce it when a customer accepted delivery but declined setup.

Delivery alone could have been excluded

Rule 12A-1.045 allowed a transportation charge to be excluded from taxable sales price when it was separately stated and the customer could avoid it by choosing pickup or another option.

The retailer's overall service was optional and appeared as a separate invoice line from the product. But the invoice did not separate delivery from setup inside that line.

Setup was taxable installation

Rule 12A-1.016(3)(a) taxed labor or services used to install sold tangible personal property that did not become part of realty. Hooking up the electronics was installation, and installation remained taxable whether separately stated or optional.

Because delivery and taxable setup shared one price, the delivery portion could not satisfy the separate-statement requirement. The fact that some customers declined setup did not change the charge or the tax result.

What this means for you

Electronics and appliance retailers

If delivery and installation have different tax treatment, price and invoice them separately. A single “delivery and setup” line can make the full amount taxable.

Businesses offering optional installation

Customer choice does not make installation nontaxable. Optionality helps a delivery-only fee only when that transportation charge is also separately stated from taxable services.

Accountants and tax professionals

Review what the fee covers and whether the price changes when a customer declines part of the service. The invoice label alone does not allocate the charge.

Common questions

Q: Could customers avoid the whole service fee?
A: Yes. Delivery and setup were offered at the customer's option.

Q: Could a customer decline setup but keep delivery?
A: Yes, but the customer still paid the full combined fee.

Q: Why was the entire fee taxable?
A: Setup was taxable installation, and delivery was not separately priced from it.

Q: Could an optional delivery-only charge be nontaxable?
A: Yes under the rule when separately stated and avoidable by the customer's decision.

Citations and references

• Fla. Stat. § 212.02(16) — sales price includes services that are part of a sale
• Fla. Stat. § 212.05 — sales tax on tangible personal property
• Fla. Admin. Code r. 12A-1.045 — transportation charges and the separate-statement/customer-choice test
• Fla. Admin. Code r. 12A-1.016(3)(a) — taxable installation of tangible personal property
• Department of Revenue v. B & L Concepts, Inc., 612 So. 2d 720 (Fla. 5th DCA 1993) — optional, separately stated delivery charges

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 04A-051

Original ruling text

SUMMARY

QUESTION: Is a separately stated "Delivery and Setup Fee" that is imposed only at the option of the purchaser

properly included in the taxable sales price of the item sold?

ANSWER - Based on Facts Below: Yes. The Delivery and Setup Fee is a separately stated lump sum charge that is

optional to the customer. Although a separately stated delivery fee that is imposed only at the option of the customer
could be excluded from the taxable sales price of the item sold, installation charges, such as the setup, are subject to
tax, regardless whether the charges are separately stated and imposed only at the option of the customer. Since the

delivery charge and the setup (installation) charge are made as a single amount, the charge is subject to tax.

August 25, 2004

Re: Technical Assistance Advisement 04A-051
Sales and Use Tax - Delivery and Set-up Fee
Sections: 212.02, 212.05, F.S.

Rules: 12A-1.016, 12A-1.045, F.A.C.
Petitioner: XXX (herein "Taxpayer")

FEI: XX

Dear :

This letter is a response to your petition dated July 30, 2004, for the Department's issuance of a Technical Assistance
Advisement ("TAA") concerning the above referenced party and matter. Your petition 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 s. 213.22, F.S.

FACTS

The petition sets forth the following facts:

Taxpayer sells high quality home electronic products. When a customer purchases an electronic product, the taxpayer
will provide, at the customer's option, "Delivery and Setup Services" for an added charge ("Delivery and Setup Fee"),
which, if accepted by the customer, is listed separately on the customer's invoice. In other words, a customer can

avoid the Delivery and Setup Fee at his or her sole discretion.

Delivery and Setup Services always include delivery of the merchandise ("Delivery Services"). Delivery and Setup
Services may or may not also include "hooking up," testing and demonstration of the product to the customer ("Setup
Services"). Sometimes, the customer will receive both the Delivery and Setup Services for paying the Delivery and
Setup Fee. However, even if the customer chooses to have the product delivered, and pay a Delivery and Setup Fee,
the customer may choose not to accept the Setup Services. In other words, a customer will pay for a "Delivery and

Setup Fee," but only receive Delivery Services. In these circumstances, the customer still pays the same amount for

the Delivery and Setup Fee, even though the customer never received any Setup Services.

It is the current practice of the Taxpayer to collect a sales tax on the Delivery and Setup Fee and remit the same to

the Florida Department of Revenue....

REQUESTED ADVISEMENT

Advice is requested on the taxability of the Delivery and Setup Fee.

LAW AND DISCUSSION

Section 212.05, Florida Statutes, generally imposes tax on the sale of tangible personal property. The tax is based on
the sales price of the tangible personal property sold. The term "sales price" is defined in Section 212.02(16), Florida
Statutes, to mean in pertinent part "the total amount paid for tangible personal property, including any services that

are a part of the sale."

Rule 12A-1.045, Florida Administrative Code, discusses the sales tax as it relates to transportation charges, and it

states in pertinent part as follows:

(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.

KKK

(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.... (Emphasis Supplied)

The court held, in Department of Revenue v. B & L Concepts, Inc., 612 So.2d 720 (Fla. 5DCA 1993), that separately

stated delivery charges that are imposed only at the option of the purchaser, and that are incidental to the sale of
tangible personal property, are not properly includable in the taxable sales price of tangible personal property sold.

Rule 12A-1.045, Florida Administrative Code, is consistent with the findings of the court.

B & L Concepts, id., did not address the taxability of installation charges. Rule 12A-1.016(3)(a), Florida Administrative

Code, discusses the taxable status of installation charges, and it states as follows:

The total consideration received for labor or services used in installing tangible personal property which is sold and

does not become a part of realty, is taxable even though such charge may be separately stated. (Emphasis Supplied)

Installation charges are taxable when sold with taxable tangible personal property regardless whether the installation
charges are separately stated or optional to the purchaser. The petition describes the Setup Service as "hooking-up"
the item(s) purchased; in other words, the Setup Service involves the Taxpayer installing the electronics sold. It is

irrelevant that the customer sometimes declines the setup service portion of the delivery and setup service.

Taxpayer charges a single lump-sum, albeit optional, fee for the delivery and installation of tangible personal property.
The transportation charge is not separately stated, since installation is included in the same lump-sum amount. In
addition to being optional to the purchaser, transportation charges must be separately stated from any other charges
in order to be excluded from the taxable sales price of tangible personal property. Therefore, Taxpayer is correct to
collect and remit tax on the Delivery and Setup Fee, since the setup charge (installation) is taxable and the delivery

charge (transportation) is not separately stated from the taxable setup charge.

CONCLUSION

The Delivery and Setup Fee is subject to tax. Although a separately stated delivery fee that is imposed only at the
option of the customer could be excluded from the taxable sales price of the item sold, installation charges, such as
the setup, are subject to tax, regardless whether the charges are separately stated and imposed only at the option of

the customer.

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.

Sincerely,

Sara D. Faulkenberry
Tax Law Specialist

Technical Assistance and Dispute Resolution

Control #61066