Was a monthly in-house copy-center fee exempt as a personal service when it included a fixed number of copies plus mail, fax, courier, and facilities work?

Plain-English summary

Florida taxed the full monthly fee paid to the third-party copy-center operator. The agreement promised a specified number of copies, charged for additional and color copies, and supplied paper and toner, so copies were the core tangible product—not an inconsequential part of a personal service.

The contract also included fax, mail, delivery, courier, and facilities services, but it did not identify what portion of the lump-sum monthly fee paid for those activities. Because otherwise nontaxable services were bundled into the charge for taxable copies, the Department treated the entire contract price as taxable.

Common questions

Why did the personal-service exemption fail? The number and type of copies were expressly priced in the agreement, making copies central to the transaction.

Were mail and courier services necessarily taxable by themselves? The Department did not decide that. It taxed the entire lump sum because those charges were not allocated separately.

Who was liable if the operator did not collect the tax? The ruling said the purchaser could be liable for tax, interest, and penalties under section 212.07(8).

Citations and references

• Fla. Stat. §§ 212.02(14), (15), (19) and 212.05(1)(a)1.a.
• Fla. Stat. § 212.08(7)(v)1.
• Fla. Stat. § 212.07(8)
• Department of Revenue v. B & L Concepts, Inc., 612 So. 2d 720 (Fla. 5th DCA 1993)
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99A-002

Original ruling text

SUMMARY

Taxpayer seeks a determination that the monthly specified
fee it pays to Copier for copies, office supplies, and fax,
mail, delivery and courier services, is a payment for a
personal service transaction involving sales as an
inconsequential element for which no separate charge is
made, and is thus exempt from the sales tax pursuant to
Section 212.08(7)(v)1., F.S.

It is a fundamental principle of Florida law that
exemptions from tax are strictly construed against the
taxpayer. In the instant case, the copies are not
inconsequential, but are the very essence of the
transaction. Paying the monthly fee entitles Taxpayer to a
specified number of copies each month. Additional and color
copies may be purchased at a specified cost. The
Agreement's precise specification of the number and type of
copies Taxpayer will receive in exchange for the base
monthly fee undermines Taxpayer's contention that the
contract is for services. Consequently, all consideration
paid by Taxpayer to Copier for copies is taxable, and not a
payment for a service transaction that includes sales of
tangible personal property as inconsequential elements for
which no separate charges are made.

The Department is unable to determine which portion of the
monthly charge, if any, is attributable to fax, mail,
delivery, or courier services. Case law establishes that a
service charge is taxable when included in a lump sum
charge for a taxable sale. Currently, because the contract
provides for a monthly lump sum charge, the entire amount
paid by Taxpayer to Copier under the contract is taxable.

Jan 20, 1999

Re: Technical Assistance Advisement 99A-002
Sales and Use Tax

In House Copy Shop Operated by Third Party
Rules 12A-1.071(10); 12A-1.027; 12A-1.041(1), F.A.C.
XXX ("Taxpayer")
XXX ("Copier")

Dear :

This response to the letter of June 11, 1998, constitutes a
Technical Assistance Advisement (TAA) issued in accordance with
the provisions of Chapter 12-11, Florida Administrative Code
(F.A.C.), and pursuant to the authority granted by s. 213.22,
Florida Statutes (F.S.).

FACTS

In its letter, Taxpayer sets forth the facts it believes to
be relevant as follows:

[Taxpayer] entered into a management contract with [Copier]
to manage and operate a copy center, convenience copier,
FAX, mail (including morning pickup of mail from post
office(s) and delivery of mail to pre-sort corporation)[,]
downtown courier runs, and general facilities services. In
exchange for these personal services, [Copier] is paid a
monthly fee. (Letter, page 1)

As part of the contract [Copier] agrees to provide a
support service person designated as a site manager. All
wages, insurance, work[ers'] compensation and other
employee benefits of the support service person are paid by
[Copier]. [Copier] guarantees the staffing of the support
service person during regular business hours and overtime
must be authorized by [Taxpayer]. The site manager is
subject to the direction and supervision of [Taxpayer].
The site manager provides services exclusively for
[Taxpayer] and his/her services are not available to the
general public. [Copier] provides [its] own copiers.
Copying supplies and copier maintenance are provided at no
additional charge. (Letter, page 1)

At the Department's request, Taxpayer provided a copy of

the "Facilities Management Agreement" (Agreement) to the
Department. In the Agreement, Copier agrees to provide Taxpayer
with certain services, including "management service to manage
and operate their copy center, convenience copier, FAX, mail (to
include morning pickup of mail from post office(s) and delivery
of mail to pre-sort corporation in the evening), downtown
courier runs, office supplies and general facilities services."
(Agreement, paragraph 3).

Additionally, paragraph 8 of the Agreement provides that
"pricing" is determined as follows:

[Copier] shall charge [Taxpayer] a management fee of $4,200
per month ["specified fee"] to include 30,000 copies
["specified number"] produced in house. All copies
produced in house over [the specified number] will be
billed at .05 cents [specified cost]. Additional charges
for approved overtime, along with any overage will be
billed to [Taxpayer] at month [sic] end. All prices quoted
in this Agreement are exclusive of the applicable Florida
state sales tax. [Copier] will pass on inflation and cost
of living increase to [Taxpayer]... not to exceed 2% per
year upon each anniversary date. Management fee includes
bank depositing and courier trips restricted to [the]
downtown area. (emphasis supplied).

With regard to supplies, the Agreement provides:

[Copier] will provide 8 1/2 x 11, 8 1/2 x 14 and 11 x 17
white 20 lb. bond and toner for all copiers, at no
additional charge. All color papers and cover stocks will
be charged separately. Paper clips, rubber bands, staplers
& staples will be provided by [Taxpayer]. (Agreement,
paragraph 11) (emphasis supplied).

Thus, the specified fee negotiated under the Agreement
includes the "specified number" of copies; additional copies may
be purchased for the "specified cost" per copy. (Agreement,
paragraph 8). White paper and toner are owned by Copier and
provided free of charge, while "color papers and cover stocks"
are "charged separately." (Agreement, paragraph 11). Moreover,

the Agreement requires Copier to provide two copy machines, one
to be placed in the "main reproduction center," and one to be
placed in the "convenience copier area." (Agreement, paragraph
4). Pursuant to the Agreement, "[a]ll copy equipment [is] the
property of [Copier] (or the supplier, if leased by [Copier])."

Exhibit B to the Agreement, entitled Off-Site Contract
Pricing, provides prices for copies produced outside Taxpayer's
office. Under Exhibit B, all copies "produced off-site at
[Copier's] Main [P]lant due to size, nature of deadline, etc.
will be billed at same price per copy as in [the] Management
Fee." (Exhibit B, page 1). The off-site contract prices
"include pick up and delivery on a 24 hour - seven days a week
schedule with no extra charge for rush orders." (Exhibit B, page
2 (underlining, bolding, and capitalization omitted)).

ISSUE

Whether fees paid by Taxpayer to Copier under the Agreement
are for "personal service transactions that involve sales as
inconsequential elements for which no separate charges are made"
and thus exempt from sales tax under Section 212.08(7)(v)1.,
F.S.

TAXPAYER'S POSITION

Taxpayer argues that all fees it pays to Copier pursuant to
the Agreement are for professional services, and requests that
the Department issue a Technical Assistance Advisement
determining that "fees paid for Facilities Management personal
services are not subject to sales tax."

In support of its argument that the fees are exempt from
the sales tax, Taxpayer relies upon Section 212.08(7)(v)1.,
F.S., which provides an exemption from the sales and use tax for
"personal service transactions that involve sales as
inconsequential elements for which no separate charges are
made."

STATUTORY AND ADMINISTRATIVE AUTHORITY

The following statutory and administrative law is relevant
to the issue at hand:

Section 212.05(1)(a)1.a., F.S., sets forth the legislative
intent to tax "each item or article of tangible personal
property when sold at retail in [Florida]."

Section 212.02(15)(a), F.S., defines a sale as "[a]ny
transfer of title or possession, or both, exchange, barter,
license, lease, or rental, conditional or otherwise, in any
manner or by any means whatsoever, of tangible personal property
for a consideration." (emphasis supplied). Section
212.02(14)(a), F.S., in turn, defines a retail sale as a sale of
tangible personal property to any person for any purpose other
than for resale.

Pursuant to Section 212.02(19), F.S., "tangible personal
property" means "property which may be seen, weighed, measured,
or touched...." Photocopies, which may be seen, weighed,
measured, or touched, are tangible personal property. Absent a
specific exemption, the sale in this state of photocopies at
retail is a taxable transaction.

Section 212.07(8), F.S., 1998 Supplement, provides in
relevant part:

Any person who has purchased at retail, used, consumed,
distributed, or stored for use or consumption in this state
tangible personal property,... and cannot prove that the
tax levied by this chapter has been paid to his or her
vendor, lessor, or other person is directly liable to the
state for any tax, interest, or penalty due on any such
taxable transactions. (emphasis supplied).

ANALYSIS

Pursuant to the Agreement, Copier charges Taxpayer a
monthly specified fee, which includes include a specified number
of copies produced in house. (Agreement, paragraph 8). There is
also a specified cost for each copy above the specified
provided. Id. Color copies are not included in the contract

price. (Agreement, paragraph 11). For large or high priority
projects, Copier may produce copies at its main plant rather
than at Taxpayer's office. (Exhibit B, page 1). These copies
are "billed at the same price per copy as in [the] Management
Fee." Copier is also obligated to provide certain office
supplies under the terms of the agreement. (Agreement, paragraph
3).

Section 212.05(1)(a)1.a., F.S., provides that all sales at
retail of "tangible personal property" in Florida are subject to
the sales tax. Under Section 212.02(19), F.S., "tangible
personal property" means "personal property which may be seen,
weighed, measured, or touched...." Photocopies, which may be
seen, weighed, measured, or touched, are tangible personal
property. Thus, copiers are engaged in the sale of tangible
personal property when they sell copies to their customers

On its face, the Agreement provides that Copier will
produce copies for Taxpayer. Absent a specific exemption, the
sale in this state of copies at retail is a taxable transaction.
Sections 212.05(1)(a)1.a., and 212.02(19), F.S. Like copies,
office supplies are items of tangible personal property, the
sale of which is taxable under Chapter 212, Florida Statutes.

It is a fundamental principle of Florida law that
exemptions from tax are strictly construed against the Taxpayer.
Capital City Country Club, Inc. v. Tucker, 613 So.2d 448, 452
(Fla. 1993). See also United States Gypsum Co. v. Green, 110
So.2d 409 (Fla. 1959); State ex rel. Szabo Food Services, Inc.
v. Dickinson, 286 So.2d 529 (Fla. 1973). Taxpayer argues that
Section 212.08(7)(v), F.S., which exempts service transactions
that include inconsequential "sales [of tangible personal
property] for which no separate charges are made," is applicable
to the charges made under the Agreement. Taxpayer's reliance
upon this exemption, however, is misguided.

In the instant case, the copies are not inconsequential,
but are the very essence of the transaction. Paying the base
monthly charge under the Agreement entitles Taxpayer to the
specified number of copies each month. Additional copies and
color copies are not included in this base monthly fee, but may

be purchased at a specified cost. The Agreement's precise
specification of the number and type of copies Taxpayer will
receive in exchange for the base monthly fee undermines
Taxpayer's contention that the contract is solely for services.
Copier's contractual obligation to provide office supplies
further undermines Taxpayer's argument.

Moreover, Exhibit B to the Agreement provides that "copies
produced off-site... will be billed at [the] same price per copy
as in [the] Management Fee." On occasion, then, Copier produces
copies for Taxpayer at its main plant. If Copier sold these
same copies to any other retail customer from its main plant,
the entire amount charged for the copies would be taxable. A
mere change in the location of the copy shop from the main plant
to Taxpayer's office should not, and does not, render the sale
of otherwise taxable copies exempt.

The sale of copies is not an inconsequential element of the
transaction; therefore, Section 212.08(7)(v), F.S., does not
apply. Where the sale or use of tangible personal property does
not fit squarely within an exemption set forth by the
legislature, the property is subject to tax. In the instant
case, the sale of copies is a primary element of the
transaction. Consequently, all consideration paid by Taxpayer
to Copier for copies is taxable, and not a payment for a service
transaction that includes "sales [of tangible personal property]
as inconsequential elements for which no separate charges are
made." Section 212.08(7)(v), F.S.

The Department recognizes the possibility that a portion of
the monthly charge is for fax, mail, delivery, and courier
services, or for the convenience of locating the copy equipment
on Taxpayer's premises. Nevertheless, based upon the information
supplied, the Department is unable to determine which portion of
the monthly charge, if any, is attributable to these services.
With regard to otherwise nontaxable services included in a lump
sum contract for sale, the seminal case of Department of Revenue
v. B & L Concepts, Inc., 612 So.2d 720 (Fla. 5th DCA 1993) is
instructive.

In that case, the Fifth District Court of Appeal considered

whether a service charge becomes taxable when included in a lump
sum charge for a taxable sale. Id. at 721-22. According to the
Court:

the proper line of demarcation is that if service charges
or fees incidental to the sale or lease are imposed at the
option of the vendor or lessor, those service charges or
fees are a part of the "sales price" and are subject to the
sales tax, but if such service charges or fees are
separately itemized and applied at the sole option or
election of the vendee or lessee, or can be avoided by
decision or action on the part of the vendee or lessee
alone, then those charges and fees are only incidental to
the sale, are not part of the "sales price" and are not
subject to sales tax.

Id. at 721. Currently, because the contract provides for a
monthly lump sum charge, the entire amount paid by Taxpayer to
Copier under the contract is taxable.(FN 1) If tax is not paid
to Copier on the full contract price, Taxpayer is liable to the
state for all tax, interest, and penalties due. Section
212.07(8), F.S., (Supp. 1998).

Taxpayer limited its inquiry to the taxability of copies
produced in accordance with the Agreement, and did not inquire
about the taxability of the copy equipment provided.
Accordingly, the Department will not address the question
whether Taxpayer is deemed to be leasing any of the copy
equipment provided under the Agreement.

DETERMINATION

Because the Agreement is for the sale of tangible personal
property, Taxpayer must remit tax to Copier on the full contract
price.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., and 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 from that
expressed in this response.

You are further advised that this response and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect confidential
information, we request you notify the undersigned in writing
within 15 days of any deletions you wish made to the request or
this response.

Should you have any questions concerning this Advisement,
please do not hesitate to contact me.

Sincerely,

Rebecca Newton-Clarke
Attorney
Technical Assistance and
Dispute Resolution
(850) 488-9669

RNC/
Control #: 34523

FOOTNOTE 1: There is no suggestion that any of the printed
materials are purchased by Taxpayer for resale to its clients.
If Taxpayer does purchase any of the printed materials for
resale, Taxpayer should register with the Department as a dealer
and extend a resale certificate to Copier. See Section
212.07(1), F.S.; Rule 12A-1.038, F.A.C.