How did Florida tax a vehicle protection plan and a dealer's discretionary electronic tag-and-title processing fee?

Plain-English summary

The dealership sold a separately stated protection program covering repair or replacement if specified paint, fabric, carpet, vinyl, or leather protection failed. It also charged customers $68 for electronic tag-and-title processing.

Florida classified the protection program as a taxable service warranty rather than part of the motor vehicle's sales price. It was taxed at 6% plus the applicable discretionary surtax, and the ruling stated that the $5,000 surtax limitation for tangible personal property did not apply to the service warranty.

The electronic filing charge was taxable as part of the vehicle price. It represented dealer cost and profit and was discretionary, not a fee mandated by the state, a subdivision, or a licensed tag agency.

What this means for you

Dealer add-ons must be classified separately. A protection agreement can be a service warranty with its own surtax treatment, while an optional administrative fee can enter the vehicle sales price even when separately stated.

Common questions

Was the protection plan part of the vehicle price? No. It was taxed as a service warranty.

Did the $5,000 surtax cap apply to the warranty? No, under the ruling's stated rule.

Was the electronic filing fee taxable? Yes, because it was dealer-imposed rather than government-mandated.

Citations and references

• Fla. Stat. §§ 212.02, 212.05, 212.0506, 212.054, and 212.055 and Fla. Admin. Code rr. 12A-1.007 and 12A-1.105, as listed or discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 10A-053

Original ruling text

SUMMARY
QUESTION: Are vehicle protection agreements included in the taxable sales price of a
vehicle?
ANSWER: No. Vehicle protection agreements are considered service warranties and are not
included in the sale price of a motor vehicle.
QUESTION: Are discretionary charges for the electronic processing of a tag and title taxable?
ANSWER: Yes. Discretionary charges for the electronic processing of a tag and title are not
mandated fees pursuant to Rule 12A-l .007(1), F.A.C.
December 7, 2010
XXX
Re:

Technical Assistance Advisement 10A-053
Sales and Use Tax
Motor Vehicle — Sales Price

Dear:
This response is in reply to the letter we received from you on October 11, 2010, requesting the
Department’s issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section 213.22,
F.S., and Rule Chapter 12-1 1, F.A.C., regarding the Department’s position on the issue described
below. An examination of your letter 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.
Stated Facts
XXX (the Taxpayer) is a motor vehicle dealership that sells new and used motor vehicles in the
State of Florida. When the Taxpayer sells a motor vehicle, it offers its customer an opportunity to
purchase the ) XXX Program. The XXX Program is a limited warranty that offers exterior paint
protection, interior fabric and carpet protection, and/or interior vinyl and leather protection for the
vehicle the Taxpayer is selling. If the protection fails to protect the vehicle against the items listed
in the limited warranty, XXX, Inc. will repair or replace those items free of charge for the term of
the warranty. The program is offered for 1 to 5 years - depending upon the number of miles on the
vehicle being sold.

Technical Assistance Advisement
Page 2 of 3
If the Taxpayer’s customer chooses to purchase the XXX Program, the Taxpayer installs the
protection on the vehicle and separately states the charge for the program under “XXX XXX” on
the customer’s invoice for the vehicle. The Taxpayer treats this program as part of the sales price of
the vehicle and charges 6% sales tax on this program, plus any discretionary sales surtax which it
limits to the first $5,000 as part of the price of the vehicle.
Additionally, when the Taxpayer sells a motor vehicle, it processes each customer’s tag and title
electronically. The Taxpayer charges its customer $68 for this electronic processing. This charge is
separately stated on the customer’s invoice for the vehicle under “Electronic Filing System”. The
Taxpayer does not charge sales tax on this charge.
Requested Advisement
The Taxpayer is requesting that the Department confirm that the Taxpayer is charging the correct
amount of tax on its charges for its XXX Program and its electronic processing.
Discussion
All sales of tangible personal property in the State of Florida are subject to tax, unless specifically
exempt by Chapter 212, F.S. Every person who engages in the business of selling tangible personal
property at retail in this state is exercising a taxable privilege. For exercising this privilege, the
person is responsible for charging, collecting, and remitting Florida sales tax on the sales price of
each retail sale at the rate of6% plus any discretionary sales surtax. Sections 212.05(l)(a)l .a., and
212.054(1), F.S.
When applying discretionary sales surtax to the sale of items of tangible personal property, the
surtax only applies to the first $5,000 of the sales price of the item of tangible personal property at
the rate imposed by the county where the item of tangible personal property is delivered. However,
when transactions involve the sale of a motor vehicle, the surtax applies at the rate imposed by the
county in which the purchaser intends to register the motor vehicle. Section 212.055(2)(b), F.S., and
Rules 12A- 1 5.004(2)(a), 1 2A-l 5.0035(5),and 12A-l 5.003(4), F.A.C.
The XXX Program indemnifies the purchaser of the limited warranty for the cost of repairing or
replacing certain items of tangible personal property on the vehicle. This type of indemnification is
considered a service warranty and not a sale of tangible personal property. Accordingly, the XXX
Program should not be taxed as part of the sales price of the vehicle, as discussed above, but taxed
as a service warranty. Section 212.0506, F.S., and Rule 12A-l.105, F.A.C. Service warranties are
taxed at the rate of 6%, plus any discretionary sales surtax. The surtax rate is the rate imposed by
the county in which the purchaser intends to register the motor vehicle. However, the surtax is
imposed without the $5,000 limitation. Section 212.0506, F.S., and Rules 12A-l. 105, 12A-15.003,
and 12A- 15.004, F.A.C. [Emphasis Supplied]
We now turn to your other request. Separately stated fees required to title, license, register, transfer
ownership, record a lien, or operate any motor vehicle in this state that are mandated by the state, its
subdivisions, or any state or licensed tag agency or office, are not included in the sales price of a

Technical Assistance Advisement
Page 3 of 3
motor vehicle and are nontaxable. The customer’s invoice for the vehicle indicates that the $68
“Electronic Filing System” charge “represents costs and profit to the seller/dealer for . . . preparing
documents related to the sale and for Electronic Vehicle Registration.” Accordingly, this is a
discretionary charge that is not mandated pursuant to Rule 12A- 1 .007(1), F.A.C. Thus, the
“Electronic Filing System” charge is taxable as part of the sales price of the item of tangible
personal property being sold (vehicle) and should be taxed accordingly. Section 212.02(16), F.S.
Conclusion
The Taxpayer is not taxing its XXX Program correctly. The Taxpayer should tax this program as a
service warranty and not as part of the sales price of the vehicle. The Taxpayer is also not taxing its
“Electronic Filing System” charge correctly. The Taxpayer should tax this charge as part of the sale
price of the vehicle.
This response constitutes a Technical Assistance Advisement under s. 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 s. 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 advice 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.
If you have any further questions with regard to this matter and wish to discuss them, you may
contact me directly at (850) 717-7068.
Respectfully,

Kimberly McCorvey
Technical Assistance & Dispute Resolution
Record ID: 90808