Were interior-design fees taxable when the designer also sold furniture and other property under the same contract?

Plain-English summary

The Florida Department of Revenue held that the homeowner's interior-design fees were taxable because the designer also sold furniture and other tangible personal property under the contract.

A design or advice fee can be exempt when no sale of tangible personal property is involved, or when it is a fixed fee wholly unrelated to a separate property sale. Here, however, the contract required purchases through the designer, compensated the designer through markups, and applied the retainer to purchases after a stated minimum. The homeowner did buy property through the designer.

Because the services were related to those sales, the taxable sales price included design work and related charges such as meetings, calls, correspondence, travel, and installation. Separate service invoices did not change the result.

What this means for you

Interior designers

Design fees connected to your sale of furniture, furnishings, or other property may become part of the taxable sales price.

Clients and advisors

Look at the entire contract and transaction, not only whether a particular invoice lists services separately.

Common questions

Q: Are stand-alone interior-design or advice services always taxable?
A: No. The cited rule exempts a fee solely for design or advice when no property sale is involved.

Q: Did separate service invoices keep these fees exempt?
A: No, because the services were related to property sold under the overall arrangement.

Q: Which related charges did the ruling identify as part of the taxable sales price?
A: It included meetings, phone and correspondence, travel time, installation, and other services forming part of the sale.

Citations and references

• Fla. Stat. §§ 212.02(4) and (16), 212.06(1)(a), and 213.22
• Fla. Admin. Code rr. 12A-1.001(2)(a) and 12A-1.006(12)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 15A-004

Original ruling text

Executive
Director
Marshall Stranburg

QUESTION: IS ANY PORTION OF TAXPAYER’S CONTRACT WITH AN INTERIOR DESIGNER
SUBJECT TO FLORIDA SALES AND USE TAX?
ANSWER: INTERIOR DESIGN FEES RELATED TO THE SALE OF TANGIBLE PERSONAL
PROPERTY ARE SUBJECT TO TAX AS PART OF THE SALES PRICE OF TANGIBLE PERSONAL
PROPERTY. ACCORDINGLY, BASED ON THE CONTRACT SUPPLIED, THE INTERIOR DESIGN
FEES ARE SUBJECT TO SALES AND USE TAX.
May 4, 2015
XXX
Re:

Technical Assistance Advisement 15A-004
Sales and Use Tax – Interior Design Services
Subsection: 212.02 and 212.06, Florida Statutes (F.S.)
Rules: 12A-1.001, 12A-1.006, Florida Administrative Code (F.A.C.)
Petitioner: XXX [hereinafter “Taxpayer”]
SSN: XXX

Dear XXX:
This letter is a response to your petition dated XXX, 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, Florida Administrative Code. This response to your request constitutes a TAA and
is issued to you under the authority of Section 213.22, F.S.
Issue
Whether the interior design fees that Taxpayer was charged by an interior design company are subject to
Florida sales and use tax.
Presented Facts
Taxpayer entered into a contract dated December 4, 2012, for interior design services with an interior
design firm (Designer).

Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Howard Moyes, Interim Director  Information Services – Damu Kuttikrishnan, Director

http://dor.myflorida.com/dor/
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
Page 2

The contract calls for Designer to provide a number of specified services. The Designer will:
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Provide preliminary layouts, which will be coordinated with all mechanical and electrical
requirements.
Suggest interior detail changes.
Provide all design work for review and approval by Taxpayer.
Provide an overall color scheme with suggestions for window treatments, built-ins, cabinetry, floor
coverings, hardware, etc., design fireplace treatments, and develop a furniture plan.
Provide paint specifications, charts, and color sheets for interiors.
Shop for all materials, furnishings, and accessories to be used and purchased through Designer.
Furnishings are specified to be sold to Taxpayer with a mark-up that varies depending on the
vendor and/or item type. Purchases to be made will be offered to the client and will be submitted to
client for approval in the form of proposals.
Supervise installation of all items purchased through Designer.
Provide information needed to secure subcontractors to implement Designer’s design plans.
Designer will not act as a construction manager, and it is not liable for actions of subcontractors
paid directly by Taxpayer or the builder.

Designer is paid in the form of mark-ups on materials purchased. The materials purchased includes a
$200,000 minimum. Designer’s $10,000 fee/retainer is applied to purchases once the $200,000 minimum
is met. Designer charges $125 per hour for drafting time for all drawings, sketches, and details of
treatments or elevations, including coordination and documentation of all consultants to produce design
documents, and including phone conferences to coordinate the efforts. Travel time is billed at $50 per
hour.
Your petition also includes, as “Exhibit 3,” invoices for various service fees charged by Designer to
Taxpayer. The invoices are numbers 23219, dated 12/31/2012, 23478 dated 3/5/2013, and 23578 dated
4/15/2013. The petition also includes “Exhibit 4,” two proposals separately detailing various furniture,
lighting, and other tangible personal property to be purchased from the Designer and installed in the
Taxpayer’s home upon Taxpayer’s approval. On all of these invoices and proposals, the designer charged
the Taxpayer for or included sales tax.
In a recent phone conversation, you confirmed that after some negotiation, you did purchase furniture and
other tangible personal property pursuant to this contract.
TAXPAYER’S POSITION
It is your position that the proposed rule1 cited in Technical Assistance Advisement (TAA) 02A-014,
provides guidance regarding Taxpayer’s designer services. You provide a breakdown of the then
proposed rule and opine that the services for which the Designer charged you are not subject to tax based
on your reading of the proposed rule.

1

This proposed rule was not promulgated at the time of the referenced TAA; nor is it at this time proposed or promulgated.

Technical Assistance Advisement
Page 3
Law and Discussion
The charges for services provided by Designer are not taxable unless or until they are part of the sale of
tangible personal property by Designer to the client charged for those services.
Sections 212.02(16) and 212.06(1)(a), F.S., provide that every sale of tangible personal property is
taxable, including any services that are a part of the sale. Rule 12A-1.006(12), F.A.C., states that
charges by an interior decorator are exempt from tax when no materials or supplies are used. According to
Rule 12A-1.001(2)(a)1., F.A.C., an interior decorator's fee is taxable and cannot be exempted as a
professional or personal service charge when the transaction involves the sale of tangible personal
property. Rule 12A-1.001(2)(a)2. and 3., F.A.C., make it clear that the design fee is exempt only if it is
charged for advice and is not contingent on or part of the sale of tangible personal property.
Rule 12A-1.001(2)(a), F.A.C., provides as follows:
(2) SERVICE TRANSACTIONS.
(a)1. An interior decorator’s so-called fee is taxable as a part of the selling price under Section
212.02(16), F.S., or as a part of the cost price under Section 212.02(4), F.S., and cannot be
exempted as a professional or personal service charge when the transaction involves the sale of
tangible personal property. This is true when the so-called fee is paid in the form of a trade
discount, as is the case when a supplier grants the decorator a trade discount and the decorator in
turn bills the client for the full list price. The decorator fee is also taxable when it appears as an
amount added to the decorator’s cost when billed to the client for tangible personal property on a
cost plus basis.

2. If the decorator’s fee is solely for designing the interior and exterior decorative scheme or for
   advising his clients and recommending colors, paints, wallpaper, fabrics, brands, sources of
   supply, etc., and there is no sale of tangible personal property involved, then such fee would be
   exempt as a professional or personal service transaction.
3. In some instances, the decorator may receive a fixed sum, which is not in any way contingent
   upon the sale of tangible personal property, as a so-called decorator fee. Then, in other completely
   unrelated transactions, he may sell tangible personal property to the same client. In such cases the
   decorator’s fee cannot be considered as a part of the selling price of the property sold because there
   is no connection between the transactions.
4. If the decorator’s client reimburses the decorator for the payroll cost of personnel on the
   decorator’s payroll assigned to a specific project, the duties performed by such employees will
   determine whether or not this item is taxable. For example, if these employees were engaged in
   painting murals on walls, etc., the charge made for their services is exempt, whereas, if these
   employees fabricate tangible personal property such as making bedspreads or draperies then the
   charge for their labor is taxable.
   Regardless of whether Designer’s design fee is calculated as a lump sum or on an hourly basis, its
   taxability depends on whether Designer sells tangible personal property in conjunction with the design.

Technical Assistance Advisement
Page 4
Tax is due on the design fee related to the sale of tangible personal property regardless whether it is on an
invoice with the charges for the tangible personal property or invoiced separately.
As stated, the taxable sales price of tangible personal property includes any services that are a part of the
sale. This includes charges for meetings, phone and correspondence, travel time, installation, etc. The
taxable sales price is not limited to the straight charge for the tangible personal property (plus mark-up, if
applicable).
The invoices provided with Taxpayer’s petition specifically denoted above as “Exhibit 3” do not contain
any charges for tangible personal property or the implementation of the design. However, because you
did purchase tangible personal property from the designer, the interior design fees are subject to tax as
they are part of a transaction that involved and are related to the sale of tangible property.
As to your contention regarding a previously issued TAA, it is important to note that a Technical
Assistance Advisement has no precedential value except to the taxpayer who requests the advisement.
Moreover, such an advisement is not an order or rule or policy of general applicability. See Section
213.22(1), F.S. We note that the facts presented in the TAA you cite are different than the facts presented
in your request. The controlling contract in the cited TAA involved a project implemented in phases with
the client having the option to move forward with each phase. Further, it relied on a proposed rule which
was not promulgated and is no longer proposed. However, the TAA confirms that once there is the sale of
tangible personal property, all of the designer fees become subject to tax, even the designer fees charged
in the earlier phases, if they are related to the sale of tangible personal property.
Conclusion
The subject interior design fees are related to the sale of tangible personal property and are subject to tax.
Closing Statement
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 Section 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 10 days of the date of this letter.
Sincerely,
R. Clay Brower
Revenue Program Administrator
Technical Assistance and Dispute Resolution
Control # 144694