Did vendor volume discounts and promotional allowances count as additional compensation for the retailer's taxable customer sales?

Plain-English summary

The Florida Department of Revenue concluded that four vendor discount and allowance arrangements were not compensation received by a retailer for its sales of tangible personal property.

One agreement clearly reduced the retailer's purchase cost based on purchase volume. The other three provided promotional or sales-based vendor funding, but they did not reimburse specific customer transactions, require customer-presented coupons, or represent manufacturer rebates assigned by customers to the retailer.

The Department therefore did not treat those allowances like manufacturer-funded coupons or rebates included in the statutory sales price. The conclusion depended on the retailer's representations and the specific four agreements reviewed.

What this means for you

Retailers receiving vendor funds

Separate purchase-volume discounts and general promotional allowances from transaction-specific coupon or rebate reimbursements. The latter can affect taxable sales price differently.

Accountants and tax professionals

Review how funding is calculated, whether it tracks individual customer sales, and what customers must present or are told at the point of sale.

Common questions

Q: Was the purchase-volume discount customer-sale compensation?
A: No. It was based on the retailer's purchases from the vendor.

Q: Why were the promotional allowances not treated like manufacturer coupons?
A: They did not reimburse identified customer transactions and customers did not present a vendor-funded coupon or rebate device.

Q: Would every vendor allowance receive this treatment?
A: No. The ruling was limited to the four agreements and facts presented.

Citations and references

• Fla. Stat. §§ 212.02(16), 212.05, 212.055, 212.06, 212.07, 212.21(2), and 213.22
• Fla. Admin. Code r. 12A-1.018

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 17A-029

Original ruling text

Executive
Director
Leon M. Biegalski

QUESTION:
With respect to Exhibits 1-4, whether vendor discounts and allowances received by Taxpayer are
not construed to be compensation for the sale of tangible personal property.
ANSWER:
With respect to Exhibits 1-4, the vendor discounts and allowances received by Taxpayer are not
construed to be compensation for the sale of tangible personal property.
October 27, 2017
XXXX
XXXX
XXXX
XXXX
Re:

Technical Assistance Advisement 17A-029
Florida Sales and Use Tax – Sales Price
Sections: 212.02; 212.05; 212.055; 212.06; 212.07; 212.21, Florida Statutes (F.S.)
Rule: 12A-1.018, Florida Administrative Code (F.A.C.)
XXXX (“Taxpayer”)
FEIN: XXXX
BPN: XXXX

Dear XXXX:
This letter is a response to your petition received on June 7, 2017, for the Department of
Revenue’s (“Department”) issuance of a Technical Assistance Advisement ("TAA") concerning
the above-referenced Taxpayer 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 (“F.A.C.”). This response to your request constitutes a TAA and is
issued to you under the authority of Section (“s.”) 213.22, Florida Statutes (F.S.).
FACTS PROVIDED
Taxpayer is engaged in retail sales in Florida and other states. Taxpayer intends to implement
any of four types of agreements with its vendors. Taxpayer provides the following regarding the
agreements (labeled Exhibits 1 – 4).
•

Exhibit 1-XXXX (minimum units sold; funding for “promotional activities;” retail
discounts at discretion of Taxpayer)
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

www.floridarevenue.com
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
Page 2

This exhibit envisions Taxpayer and vendor agreeing that Taxpayer will sell, within a
specified period (which Taxpayer can unilaterally extend for up to 30 days), a minimum
number of units of a product. The vendor will provide funding to Taxpayer on a “per unit
sold” basis, but Taxpayer is not required to use such funds to reduce the retail selling
price or amount paid by the customer for the product. These features appear in the
following text from Exhibit 1:
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
If Taxpayer opts to use some or all of the vendor funding allowance for a temporary price
reduction, it does so subject to an agreed maximum reduction per unit. See the “XXXX”
field on Exhibit 1. The vendor may opt for a maximum coverage for each contract.
If Taxpayer chooses to discount the retail price to its customer, no documentation is
displayed or provided to the customer (e.g., advertising, signage, price labels, receipts)
that will attribute the price discount or any portion thereof to the vendor or any other third
party.
In short, Taxpayer will have no obligation to reduce the selling prices or amounts
customers pay for products, and if it does so it will not represent to the customer that the
discount or any portion of it is funded by the vendor.
•

Exhibit 2-XXXX (no minimum units sold; funding for “promotional activities;” retail
discounts at discretion of Taxpayer)
This agreement is essentially the same as Exhibit 1, except that there is no requirement to
sell a minimum number of units. Again, Taxpayer will have no obligation to reduce its
retail selling prices or amounts paid by customers, and if it does so it will not represent to
the customer that the discount is funded by the vendor.

•

Exhibit 3-XXXX (minimum units sold; no restriction on use of funds; retail discounts at
discretion of Taxpayer)
Like Exhibit 1, this agreement commits Taxpayer to sell a minimum number of units
between specified dates. Like Exhibits 1 and 2, this one requires no reduction in the retail
prices or amounts paid by customers; any such reductions are the prerogative of
Taxpayer. Exhibit 3 differs from Exhibits 1 and 2 in that Exhibit 3 contains no
requirement to use vendor funding for promotional purposes. There is also a maximum
temporary price reduction per unit, as described above. As with the other exhibits, if
Taxpayer chooses to offer a discount to its customers, it will not represent to the customer
that the discount is funded by the vendor.

Technical Assistance Advisement
Page 3
•

Exhibit 4-XXXX (minimum units purchased; no restriction on use of funds; retail
discounts at discretion of Taxpayer)
This exhibit contemplates Taxpayer moving to a program where it commits to purchase a
minimum number of units within a prescribed period which Taxpayer would be entitled
to extend by up to thirty days. The vendor would in exchange provide Taxpayer with a
specified, per unit discount. The vendor’s per unit discount would continue on all
amounts above the minimum purchased, unless the parties agree otherwise. Taxpayer
would have no obligation to reduce its retail selling prices or amounts paid by customers
for the vendor’s products. As with the other exhibits, if Taxpayer chooses to offer a
discount to its customers, it will not represent to the customer that the discount is funded
by the vendor.
In all four of the new contract types, vendor funding allowances to Taxpayer could come
in a number of different forms, but the most common method is likely to be in the form
of offsets to amounts paid to vendors for the underlying products….

The agreements provided also indicate that members of Taxpayer’s retail establishment may be
provided discount handouts at the retail location.
REQUESTED ADVISEMENT
With respect to Exhibits 1 – 4, vendor discounts and allowances received by Taxpayer are not
construed to be compensation for the sale of tangible personal property.

TAXPAYER POSITION
Taxpayer provides in part:
… In all four of Taxpayer’s fact patterns described above, Taxpayer will obtain funding
allowances from its vendor, but its retail sales prices will be the amounts received from
its customers. Any reductions in retail sales prices will result solely from Taxpayer’s
decision to offer discounts. Such a discount to the customer is clearly a “dealer discount”
of the kind contemplated in Rule 12A-1.018(4). It cannot be a part of the “sales price” as
defined in section 212.02(16), because it is not part of the “total amount paid for tangible
personal property.”
Despite the factual nuances, the scenarios described are materially the same as a typical
volume discount allowed by vendors. The wholesale price is commonly reduced based on
the number of units sold or purchased by the retailer. Although it is possible using
arithmetic to attribute a portion of the vendor allowance to each retail transaction, this
would be possible with any wholesale discount. It does not mean that the seller will
actually reduce the amount payable by the retail customer, nor does it prescribe the
amount of any such reduction. It does not convert a reduction that the dealer decides to

Technical Assistance Advisement
Page 4
offer from a dealer discount into a vendor “coupon” arrangement wherein the vendor may
be viewed as effectively paying a portion of the customer’s purchase price….
Taxpayer submits that none of its vendor allowances under Exhibits 1, 2, 3, and 4 are
properly treated as elements of its retail sales prices to customers. Any reduction in the
amount payable by Taxpayer’s customer for a product will be a dealer discount, and the
sales price for purposes of calculating the Florida sales tax will be the amount Taxpayer
receives from the customer, net of the discount. We request the Department to confirm its
agreement with the foregoing….
In an email of August 31, 2017, Taxpayer stated all four agreements are essentially volume
purchase discounts Taxpayer receives from Vendor based upon purchases from Vendor.
According to Taxpayer, any reimbursements to Taxpayer from the vendor are not from
manufacturer coupon redemption or rebates.
LAW AND DISCUSSION
The legislature has declared its intention in s. 212.21(2), F.S., that each and every sale, use,
storage, consumption, or rental of tangible personal property1 in Florida is taxable, subject only
to the exemptions and exclusions contained within Chapter 212, F.S. Tax is due and payable at
the rate of 6 percent, plus any applicable surtaxes imposed under s. 212.055, F.S., on the total
consideration received for each item or article of tangible personal property when sold at retail or
rented/used in this state. See s. 212.05, F.S.
Section 212.06(1)(a), F.S., provides in pertinent part that tax at the rate of 6 percent of the retail
sales price as of the moment of sale shall be collectible from all dealers. The full amount of the
tax on a credit sale, installment sale, or sale made on any kind of deferred payment plan shall be
due at the moment of the transaction in the same manner as on a cash sale.
Dealers are required to, as far as practicable, add the amount of the tax imposed under Chapter
212, F.S., to the sale price. Any dealer who neglects, fails, or refuses to collect the tax therein
provided upon any, every, and all retail sales made by him or his agents or employees of tangible
personal property or services which are subject to the tax imposed by this chapter shall be liable
for and pay the tax himself. Additionally, a dealer may not advertise or hold out to the public, in
any manner, directly or indirectly, that he or she will absorb all or any part of the tax, or that he
or she will relieve the purchaser of the payment of all or any part of the tax, or that the tax will
not be added to the selling price of the property or services sold or released or, when added, that
it or any part thereof will be refunded either directly or indirectly by any method whatsoever...."
See s. 212.07(4), F.S.
The term “sales price,” is defined in s. 212.02(16), F.S., to mean “the total amount paid for
tangible personal property, including any services that are a part of the sale, valued in money,
whether paid in money or otherwise, and includes any amount for which credit is given to the
1

Tangible personal property is defined as including “personal property which may be seen, weighed, measured, or
touched or is in any manner perceptible to the senses ....” See s. 212.02(19), F.S.

Technical Assistance Advisement
Page 5
purchaser by the seller, without any deduction therefrom on account of the cost of the property
sold, the cost of materials used, labor or service cost, interest charged, losses, or any other
expense whatsoever. “Sales price” also includes the full face value of any coupon used by a
purchaser to reduce the price paid to a retailer for an item of tangible personal property; where
the retailer will be reimbursed for such coupon, in whole or in part, by the manufacturer of the
item of tangible personal property; or whenever it is not practicable for the retailer to determine,
at the time of sale, the extent to which reimbursement for the coupon will be made….”
Rule 12A-1.018, Florida Administrative Code (F.A.C.)., provides that the tax is imposed upon
the total sales price of tangible personal property sold at retail. A dealer’s discount is a reduction
in the sales price, but a coupon or refund issued directly by the manufacturer is not such a
reduction.
Exhibit 4 is clearly a purchase contract between Taxpayer and Vendor, in which Taxpayer’s
purchases are discounted based upon the volume of purchases. While the success of Taxpayer’s
resale of vendors product will affect subsequent purchases of the product by Taxpayer, the
discount Taxpayer receives appears to be based upon its purchases, not upon sales. Whether the
allowances in Exhibit 1 - 3 are compensation received for the sale of tangible personal property
requires further analysis.
Based upon Exhibit 1, Taxpayer agrees to sell a minimum number of items, and vendor provides
funding for each unit sold. The terms state, Taxpayer must use vendor funding for promotional
activities but, in its discretion, may use the vendor funding to reduce the retail selling price of a
product. Exhibit 2 is comparable to Exhibit 1, except that there is no requirement to sell a
minimum number of units. Taxpayer states Exhibit 3 differs from Exhibits 1 and 2 in that
Exhibit 3 contains no requirement to use vendor funding for promotional purposes. It is unclear
based upon Exhibit 3 how the funding is determined.
With respect to Exhibits 1 - 3, the meaning of the term “promotional activities” is not defined,
but the agreements do not require per transaction retail price reductions for which Taxpayer will
be reimbursed a like amount by vendor. Additionally, based upon Taxpayer statements in its
request, it is presumed customers need not produce anything at the time purchase; there are no
vendor funded coupons or other devices used by customers, nor are there any advisements or
representations to the customer that a vendor coupon or rebate is in any way involved or is being
assigned from customer to Taxpayer.
Assuming the facts as represented and understood are correct and remain unchanged, vendor
allowances in Exhibits 1 - 3 are not analogues to manufacturer's coupons or rebates. While
Taxpayer receives allowances from vendor based upon sales, the allowances are not for
reimbursement for specific transactions (i.e., sales to customers) involving use of a vendor
funded coupon or other device, or rebate. Therefore, such allowances would not be construed as
compensation received by the dealer for the sale of tangible personal property.

Technical Assistance Advisement
Page 6
CONCLUSION
With respect to Exhibits 1 - 4, vendor discounts and allowances received by Taxpayer are not
construed to be compensation received by Taxpayer for the sale of tangible personal property.
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. 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,

Heather Miller
Technical Assistance & Dispute Resolution
Florida Department of Revenue
cc:

XXXX

XXXX
XXXX
XXXX
XXXX