Was an optional, separately listed furniture delivery-and-setup fee subject to Florida sales tax when delivery and installation were bundled together?

Plain-English summary

Florida required sales tax on the furniture retailer's entire optional “Prep/Deliv Chrg.” Although customers in the covered cash-purchase transactions could pick up the furniture and avoid the fee, the retailer bundled transportation with taxable setup and installation in one amount.

The service package included delivery scheduling, inspection, loading and unloading, unpacking, placing furniture in the customer's chosen location, assembly, hardware installation, touch-up painting, cleaning, adjustments, carton removal, moving existing furniture, and an in-home service warranty.

Customers could refuse some setup tasks after choosing delivery, but the price did not change. The invoice had one “Prep/Deliv Chrg.” line covering both delivery and setup; it never separately stated a transportation-only amount.

Optional delivery can be excluded if separately stated

Rule 12A-1.045 excluded a transportation charge from the taxable sales price when both conditions were met:

1. The transportation charge was separately stated on the invoice or bill of sale.
2. The customer could avoid the charge through the customer's own decision or action.

The ruling cited Department of Revenue v. B & L Concepts, Inc. for the same principle. On its own, an optional, separately stated delivery charge incidental to a sale could be nontaxable.

Installation remained taxable

Rule 12A-1.016(3)(a) taxed labor or services used to install sold tangible personal property that did not become part of realty, even when separately stated. The retailer's setup package expressly included assembly and installation.

Because the retailer charged one amount for delivery and installation, the delivery portion was not separately stated from the taxable setup service. The optional nature of the package did not change the result: the whole fee was included in the taxable sales price.

What this means for you

Furniture and home-goods retailers

Separately list a genuinely optional transportation charge if you want to analyze it apart from taxable assembly or installation. One combined line can make the whole amount taxable.

Businesses offering white-glove delivery

Services such as unpacking, assembly, placement, hardware installation, touch-up, and final adjustment can make the package more than transportation. Invoice wording should match what is actually provided.

Accountants and tax professionals

Check both customer choice and invoice separation. Optionality alone was not enough here because the taxable and potentially nontaxable components were bundled.

Common questions

Q: Did the customer have the option to avoid the fee?
A: Yes for the covered cash purchases, by picking up the furniture instead of choosing delivery and setup.

Q: Why was the fee still taxable?
A: It included taxable installation, and the retailer did not state delivery as a separate charge.

Q: Could a delivery-only charge be nontaxable?
A: The ruling said yes when it is separately stated and the customer alone can choose to avoid it.

Q: Did declining some setup tasks reduce the fee or tax?
A: No. Once delivery was selected, the customer paid the full bundled amount even if some setup services were refused.

Citations and references

• Fla. Stat. § 212.02(16) — sales price includes services that are part of a tangible-personal-property sale
• Fla. Stat. § 212.05 — sales tax on tangible personal property
• Fla. Admin. Code r. 12A-1.045 — taxable and excludable transportation charges
• Fla. Admin. Code r. 12A-1.016(3)(a) — taxable installation of sold 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-058

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.

September 28, 2004

Re: Technical Assistance Advisement 04A-058
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 August 25, 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 furniture products. For certain transactions, when a customer purchases furniture from the
Taxpayer, the Taxpayer will provide at the customer's option[], a "Delivery Service" and "Setup Service." If the
Delivery Service and Setup Service is accepted by the customer, Taxpayer charges the customer additional charges,
and lists such charges together on a separate line item of the customer's invoice as a "Prep/Deliv Chrg." In other
words, in these particular transactions a customer can avoid the "Prep/Deliv Chrg" at his or her sole discretion.
However, if the customer elects the Delivery Service and refuses particular services offered as part of the Setup
Service, such customer has no option but to pay the entire "Prep/Deliv Chrg." Further, although the "Prep/Deliv Chrg"
line item is separately stated for the [] price of the purchased items, the "Prep/Deliv Chrg" is a charge for both the
Setup Service and the Delivery Service. There is never a transportation charge separately stated from all other

charges.
Setup Service includes the following services: delivery scheduling; time window of delivery arrival; inspection of the
items; loading and unloading of the items; uncrating and unpacking of the items; set up of the items in the customer's
designated location; assembly and installation of all items including installation of all hardware; touch-up painting as
needed; cleaning and final adjustments of the items; pick up and removal of all cartons; relocating and moving the
customer's existing furniture from room to room within the customer's home; and, an in-home warranty service.
Pursuant to the terms of the in-home warranty service, if a customer is dissatisfied with their furniture or informs
[Taxpayer] that the furniture was damaged during delivery, [Taxpayer] will return to the customer's home and, at its
sole expense, repair, service, adjust, touch-up/paint or exchange the purchased furniture as needed until the
customer is satisfied. Customer[]s who pick-up their furniture and, therefore, do not pay the "Prep/Deliv Chrg," do not
receive the benefit of the in-home service warranty as to any damage that occurs during the transportation of their
furniture. However, customer[]s who pick up their furniture do receive the benefit of an in-home service warranty as to
any damage or defect in the furniture unrelated to the transportation of that furniture.
Taxpayer's invoice contains an additional line item for "Setup Charge." This line item is never used to show a charge
for Setup Service because the amount stated in the "Prep/Deliv Chrg" line item includes all fees for Setup Service.
It is the current practice of the Taxpayer to collect a sales tax on the "Prep/Deliv Chrg" and remit the same to the
Florida Department of Revenue. (Emphasis in Original)
A footnote in the petition sets forth the following information concerning when a customer has the option of avoiding
the Preparation/Delivery Charge, and it states as follows:
Only in particular transactions does a customer have the option of not paying a Delivery and Setup Fee. If the
customer pays for their purchases by: (1) cash; (2) cash equivalent; (3)... credit card other than a credit card issued by
Taxpayer's finance provider; or (4)... credit card issued by Taxpayer's finance provider and the total purchase amount
is less that $1,000.00 ("Cash Purchases"), then the customer has the option of picking up the furniture and not paying
the Delivery and Setup Fee. This request involves only those transactions involving Cash Purchases.
REQUESTED ADVISEMENT
Advice is requested on the taxability of the Delivery and Setup Fee, also identified as the "Prep/Deliv Chrg."
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.

(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 including
   installation of the item(s) purchased. 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 ("Prep/Deliv Chrg"), 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 #61329