Were paid and free-trial memberships for grocery access, delivery benefits, and product discounts subject to Florida sales tax?

Plain-English summary

The Florida Department of Revenue concluded that an online grocery delivery membership and its free one-month trial were not subject to Florida sales and use tax.

The membership provided same- or next-day delivery, free delivery on qualifying orders, access to certain groceries and local-shop or restaurant selections, and discounts on changing products. None of those individual benefits was a taxable service under the facts presented.

The membership also did not grant access to a place of amusement, sport, recreation, or physical fitness, so it was not a taxable admission or recreational-club membership. The separate prerequisite membership did not include communications services, and the two fees were separately stated.

What this means for you

Online retailers

Analyze each included membership benefit. A bundle can remain nontaxable when none of its component services is taxable, but a different bundle containing taxable admissions, communications, or transaction-linked charges may produce another result.

Subscription and delivery businesses

The ruling focused on prepaid delivery benefits, product access, and discounts. It also noted that transportation charges connected with a particular tangible-property sale can be taxable even though transportation by itself may not be.

Accountants and tax professionals

Preserve separate billing and the terms describing each benefit. The Department's conclusion was limited to this program's stated benefits and did not create a general exemption for every membership fee.

Common questions

Q: Was the membership a taxable admission?
A: No. It did not provide access to an amusement, recreation, or physical-fitness place.

Q: Were the delivery benefits taxable by themselves?
A: No, on the facts presented. The ruling separately cautions that delivery charges tied to sales of tangible property may be taxable.

Q: Was the free trial taxable?
A: No. The Department reached the same nontaxable conclusion for the one-month trial.

Citations and references

• Fla. Stat. §§ 212.02(1), 212.04, 212.05, and 213.22
• Fla. Admin. Code r. 12A-1.045

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 17A-017

Original ruling text

Executive
Director
Leon M. Biegalski

August 30, 2017
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
Re:

Technical Assistance Advisement 17A-017
Sales and Use Tax
XXXXXXXXXX (“Company”)
FEI #: XXXXXXXXX
Section 212.05, 212.02 and 212.04, Florida Statutes (F.S.)
Rule 12A-1.045, Florida Administrative Code (F.A.C.)

Dear XXXXXXXX:
This response is in reply to your letter to the Department, dated May 23, 2017, in which you are
requesting the Department's issuance of a Technical Assistance Advisement ("TAA") pursuant to s.
213.22, F.S., and Chapter 12-11, F.A.C., concerning the taxability of XXXXXXXXX Memberships. 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.
REQUESTED RULING
Whether charges for XXXXXXXXX Memberships, and free, one-month trial memberships, are subject to
Florida sales tax.
FACTS
As stated in your request for advisement:
Company offers a membership program known as XXXXXXXXX XXXX-XX (“XXXXXXXX” or
“XXXXXX XXXXXX XXXXXX”). The membership program is available to existing XXXXXXX
XXXXXX members for an additional membership fee.

Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

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

Technical Assistance Advisement
XXXXXXXXX allows members to shop for groceries, everyday essentials, favorites from
local shops and restaurants on XXXXXXX (the “Website”) in select cities. Customers
may sign up for a free month trial membership and thereafter a paid monthly membership.
Participants in the XXXXXXXXX membership program are referred to as “XXXXXX
XXXXXX XXXXXX Members” or “XXXXXXXX Members.” In order to be an
XXXXXXXX member, a customer is also required to have an XXXXXX XXXXX
(separate membership available for $10.99 a month or $99 annually and agree to the
XXXXX XXXXX Terms & Conditions to activate their XXXXXXXX membership.) [As
noted in footnote 1 of your request, the XXXXX membership program does not offer
access to communications services.] While an XXXXX XXXXXX Membership is a
prerequisite to purchasing XXXXXXX, a participant in XXXXX XXXXX may decide to
purchase XXXXXXX at anytime during their XXXXX XXXXX Membership. Further, the
fees for the XXXXX XXXXX and XXXXXXXXX memberships are separately stated on
each participant’s bill. The current benefits of XXXXXXXXXX include:
Delivery – XXXXXXX Members are entitled to receive same day or next
day scheduled delivery. Free delivery is available on XXXXXX orders over
$40, as well as other discounted shipping benefits on eligible XXXXXXX
purchases made on the Website. Products eligible for these shipping
benefits are designated as XXXXXXX on the Website’s products pages.
XXXXX XXXXX Items – XXXXXXXX Members receive access to the
XXXXXXXX groceries, everyday essentials, and selections from
neighborhood shops and restaurants. Examples include fresh produce,
meats, dairy, frozen items, and household essentials such as soap and
detergents. Customers that are not XXXXXXXX Members may purchase
other items (other than perishable items) on the Website for a regular Prime
shipping charge. While the XXXXXXX catalog is “exclusive” to
XXXXXXX Members, many of the items available in the catalog are not
exclusive.
XXXXX XXXXX Deals – XXXXXXXX Members receive discounts on
certain items of tangible personal property. For example, XXXXXXX
Members can purchase certain fruits and vegetables at a discount. The suite
of products offered to XXXXXXXXX Members at a discount continues to
change based on availability.
You have attached as Exhibit A, three Technical Assistance Advisements regarding the applicability of
sales tax on Taxpayer’s various membership programs, including XXXXXXXX. In the XXXXXX ruling,
the Department concluded that none of the XXXXXX Membership services qualified as services subject
to sales and use tax. You state that based on the rationale for concluding that the XXXXXXX XXXXX
Membership is not subject to Florida sales and use tax, the XXXXXXXX Membership should not be
taxable. Similar to the XXXXXXXX Membership, the primary XXXXXX benefit is to obtain prepaid

Technical Assistance Advisement
shipping. Like the XXXXXXXX membership, the shipping benefits included in the XXXXXXX
Membership are F.O.B. origin and are separately stated, even if the shipping charge is $0.00.
.

LAW AND DISCUSSION
Chapter 212, F.S., imposes a sales tax on the sale and use of tangible personal property and some services in the
state of Florida. Sections 212.04 and 212.05, F.S., specifically impose a tax collection obligation on persons
engaged in the business of making sales of tangible personal property and specified services, including the sale
of admissions. As defined in s. 212.02(1), F.S.:

The term “admissions” means and includes the net sum of money after deduction of any
federal taxes for admitting a person or vehicle or persons to any place of amusement, sport,
or recreation or for the privilege of entering or staying in any place of amusement, sport, or
recreation, including, but not limited to, theaters, outdoor theaters, shows, exhibitions,
games, races, or any place where charge is made by way of sale of tickets, gate charges, seat
charges, box charges, season pass charges, cover charges, greens fees, participation fees,
entrance fees, or other fees or receipts of anything of value measured on an admission or
entrance or length of stay or seat box accommodations in any place where there is any
exhibition, amusement, sport, or recreation, and all dues and fees paid to private clubs and
membership clubs providing recreational or physical fitness facilities, including, but not
limited to, golf, tennis, swimming, yachting, boating, athletic, exercise, and fitness facilities,
except physical fitness facilities owned or operated by any hospital licensed under chapter
395.
The tax on admissions is specifically applicable to membership benefits to “a place of amusement, sport, or
recreation” or “recreational or physical fitness facilities,” which the XXXXXXX Membership does not provide.
As previously noted, the only services provided with the XXXXXXX Membership are: (1) same day or next day
delivery; (2) free delivery on orders of $40 or more; (3) access to XXXXXXXX products (perishable groceries)
not available to XXXXXX XXXXX members; and, (4) discounts on certain products.
Transportation charges incurred without the sale of tangible personal property in Florida are not subject to sales
tax. Transportation charges that are included with the sale of tangible personal property may be subject to tax.
See Rule 12A-1.045, F.A.C.

CONCLUSION
As none of the individual services included in an XXXXXX Membership are subject to Florida sales and use
tax, neither the sale of the XXXXXXX Membership nor the one-month free trial membership are subject to
Florida sales and use tax.

This response constitutes a Technical Assistance Advisement under s. 213.22, F.S. which is binding on the
department only under 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.

Technical Assistance Advisement
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.
If you have any further questions with regard to this matter and wish to discuss them, you may contact me
directly at (850) 717-7202.
Sincerely,

Richard R. Parsons
Tax Law Specialist
Technical Assistance & Dispute Resolution
(850) 717-7202
Record ID: 213480