Were continuing-medical-education program fees and the provider's program purchases subject to Florida sales or use tax?

Plain-English summary

Florida treated the continuing-medical-education programs as nontaxable services rather than sales of tangible property or admissions.

Fixed participant fees were not taxable across all three program categories. That remained true when a program included meals or an educational reception, and when spouses could buy related meals or reception access for the participants' convenience.

Entertainment tickets were different at the purchase stage. The provider paid admissions tax when buying them, but did not collect additional tax when passing the tickets to participants or spouses at the provider's exact cost.

The university and its direct-support organization could also buy the ordinary program inputs tax-free—including materials, facilities, equipment, food service, and similar items—when the purchase directly supported customary nonprofit educational activities, the exempt entity bought and paid directly, and it held a valid Florida consumer's certificate of exemption.

What this means for you

Continuing-education providers

Separate the educational service from any admission or property sale. If entertainment tickets are merely passed through at cost, document both the provider's purchase and the exact reimbursement.

Universities and nonprofit affiliates

Exempt status alone is not enough. The certified exempt entity must make the purchase directly and use it in its customary educational activities.

Common questions

Were CME registration fees taxable? No. Florida treated them as payments for nontaxable educational services.

Did meals or educational receptions make the fee taxable? No, on the program facts described in the TAA.

What about entertainment tickets? Tax was paid when the provider bought them; no additional tax was collected when participants reimbursed only the provider's cost.

Were the provider's program purchases exempt? Yes, when made directly by a qualifying exempt educational entity for its customary educational activities.

Citations and references

• Fla. Stat. §§ 212.02(1), 212.04(1)
• Fla. Stat. § 212.05(1)
• Fla. Stat. § 212.08(7)(o)1.
• Fla. Stat. §§ 240.227(9), 240.299(1)
• Fla. Admin. Code R. 12A-1.001(3), (f)1.
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99A-021

Original ruling text

SUMMARY

The referenced TAA involves the taxability of participation
fees and related activities sponsored by a continuing
professional education provider.

May 19, 1999

Re: Technical Assistance Advisement (99A-021)
Sales and Use Tax
Continuing Professional Education Programs
Sections 212.05(1), 212.04(1), 212.08(7)(o), F.S.
Rule 12A-1.001(3), F.A.C.
XXX ("University")
XXX ("Provider")
Continuing Medical Education Programs ("CME")

Dear :

This letter is a response to your request dated November
19, 1998, for the Department's issuance of a Technical
Assistance Advisement ("TAA") concerning the above referenced
parties and matter. Your request has been carefully examined
and the Department finds it to be in compliance with the
requisite criteria set forth in Chapter 12-11, F.A.C. This
response to your request constitutes a TAA and is issued to you
under the authority of section 213.22, F.S.

I. FACTS PRESENTED

University, through its Health Sciences Center Office of
Continuing Professional Education, plans, implements and
evaluates continuing education programs for physicians, nurses,
and other healthcare professionals. University has authorized
and engaged Provider to assist in the development and
presentation of the CME. University has indicated that the
activities of University and Provider include:

*

Printing and distribution of program announcements
including the purchase of mailing lists;

*

Placement of program advertisements;

*

Securing meeting arrangements, including necessary
facilities (hotels, convention centers, resorts,
etc.), transportation, meals, refreshments, and other
logistical support;

*

Payment of any honoraria and other program faculty
compensation and reimbursement;

*

Registration of all participants, including receipt
and administration of participation fees;

*

Acceptance and administration of support grants from
third parties;

*

Disbursement of funds to vendors as compensation for
goods and services provided in support of CME
activities; and

*

Maintaining detailed accounting of funds collected and
disbursed in a manner acceptable to the University.

In a memorandum dated March 11, 1999, you have indicated
that there are three common "categories" of CME programs
offered. In all categories, the program participant pays a
fixed fee. In "Category One," the fixed fee covers the lecture,
food service (continental breakfast, breaks, and/or lunch), and
the course syllabus. In "Category Two," the fixed fee covers
the items listed in Category One, and an evening reception.
This category may involve, as an optional purchase, meal and
reception tickets for spouses of the program participants. In
"Category Three," the fixed fee covers the items listed in
Category One and may or may not cover entertainment for the
program participants, such as tickets to theme parks, theatre
tickets, or tickets to a golf tournament. These "entertainment
tickets" may also be provided, always for an additional charge,
to spouses of program participants. Provider does not make any
profit on the "entertainment ticket;" it simply passes through
the cost to participants.

University is a member of the State University System of
Florida. Provider is a direct-support organization of
University, and is currently exempt from Federal income taxation
under section 501(a) of the Internal Revenue Code as a 501(c)(3)

organization. Both University and Provider currently hold a
State of Florida consumer's certificate of exemption.

Course materials are only available to CME participants.
Provider does not distribute or sell audio or video
reproductions of the CME programs.

II. REQUESTED ADVISEMENT

Are the fees charged by University and/or Provider to
program participants subject to sales tax? Is any sales or use
tax owing by University and/or Provider on the purchase or use
of certain enumerated items involved in providing the CME?

A. Applicability of Sales Tax - Fees Paid by Participants

Statutory and Code Authority

Section 212.05, F.S., provides, in relevant part, that:

... every person is exercising a taxable privilege who
engages in the business of selling tangible personal
property at retail in this state,..., or who rents or
furnishes any of the things or services taxable under this
chapter,.... (E.S.)

Section 212.05(1), F.S., indicates that for the exercise of
this privilege:

... a tax is levied on each taxable transaction or
incident,....

Section 212.05(1)(a)1.a., F.S., provides that the sales tax
shall be imposed upon:

... the sales price of each item or article of tangible
personal property when sold at retail in this state,....
(E.S.)

Section 212.02(16), F.S., defines sales price, in relevant
part, as:

... the total amount paid for tangible personal property,
including any services that are a part of the sale,....
(E.S.)

Section 212.02(1), F.S., defines "admissions," as follows:

The term "admissions" means and includes the net sum of
money ... 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.

Section 212.04(1), F.S., imposes a sales tax on
"admissions." Relevant parts of section 212.04, F.S., follow.

(1)(c) The provisions of this chapter that authorize a taxexempt sale for resale do not apply to sales of admissions.
However, if a purchaser of an admission subsequently
resells the admission for more than the amount paid, the
purchaser shall collect tax on the full sales price and may
take credit for the amount of tax previously paid. If the
purchaser of the admission subsequently resells it for an
amount equal to or less than the amount paid, the purchaser
shall not collect any additional tax, nor shall the
purchaser be allowed to take credit for the amount of tax
previously paid.

Rule 12A-1.001(3)(b), F.A.C., provides as follows.

(b) Sales or rentals of tangible personal property, rentals
or leases of transient rental accommodations, rentals or
leases of real property, rentals or leases of parking,
docking, or tie down spaces, admissions, or other
transactions subject to the tax imposed by Chapter 212,
F.S., made by exempt entities, ..., are taxable. Such
entities are required to register in the same manner as
other dealers and collect and remit tax on transactions
which are subject to the tax imposed by Chapter 212,
F.S.... (E.S.)

Discussion

Sales tax is imposed upon the sale of tangible personal
property, and upon the sale of admissions, unless an exemption
for the specific transaction involved in the sale, is available.
Sections 212.05(1), 212.02(16) and 212.04(1), F.S. The fact
that an otherwise taxable sale is made by an "exempt" entity, as
opposed to a "non-exempt" entity, does not control the ultimate
taxability of such sale. See, Rule 12A-1.001(3)(b), F.A.C.

In University's situation, it is the Department's position
that the provision of the CME programs by Provider constitutes
the rendering of services, that are not subject to tax under
Chapter 212, F.S. Provider is not engaged in the business of
making taxable sales of tangible personal property or
admissions. Provider, however, does consume items of tangible
personal property when rendering these services.(FN 1)

With regard to the CME programs referred to as "Category
One" programs, the Department considers the fixed fees paid by
the program participants to be payment for the receipt of the
non-taxable services rendered by the Provider. Therefore,
Provider is not required to collect and remit sales tax on
charges made to these CME participants.

With regard to the CME programs referred to as "Category
Two" programs, the Department considers the fixed fees paid by,

and the optional purchases made by, the program participants to
have been received for the rendering of CME services. Brochures
provided by University indicate that the program receptions,
available in a "Category Two" program, afford the participants
an opportunity to meet and converse with colleagues and the
lecture faculty. Under these circumstances, the receptions
would be considered to be an activity that furthers and promotes
the educational purposes of the programs. Attendance at these
receptions by spouses of the program participants, and the
availability of program meals for spouses, is considered by the
Department to be provided as a convenience to the participants.
Therefore, the fixed fees paid by, and the optional purchases
made by, the program participants in a "Category Two" program
are not subject to the imposition of sales tax.

With regard to the CME programs referred to as "Category
Three" programs, the Department considers the fixed fees paid by
program participants to have been received for the rendering of
CME services.

It is the Department's understanding that the availability
of "entertainment tickets" is provided merely as a convenience
to the program participants. The "entertainment tickets" are
only available to CME program participants and their spouses.
In a telephone conversation of April 15, 1999, University
represented that the entertainment tickets involved are provided
to the program participants for the same amount paid by
University and/or Provider for such tickets.

Under section 212.04(1), F.S., sales tax is due when
tickets such as the "entertainment tickets" are purchased by
Provider and tax would not be collected on the purchase of the
"entertainment tickets" from Provider by CME program
participants, so long as Provider is merely recouping its cost.
However, the applicability of a sales or use tax to University's
purchase of the "admissions" is discussed in part II.B. of this
response.

Conclusion

Those fees received by University and/or Provider from

program participants in a "Category One," "Category Two," or
"Category Three" CME program, are not subject to a sales or use
tax. Under the circumstances and in the manner described
herein, costs recouped for Provider for "entertainment tickets"
purchased from Provider by CME participants are not subject to
the imposition of sales or use tax.

B. Applicability of Sales or Use Tax - Purchases Made by
University and/or Provider

Statutory and Code Authority

Section 212.05(1)(b), F.S., provides for the imposition of
a use tax in the following circumstances:

At the rate of 6 percent of the cost price of each item or
article of tangible personal property when the same is not
sold but is used, consumed, distributed, or stored for use
or consumption in this state....

Section 212.08(7)(o)1., F.S., provides a limited exemption
from sales tax for sales or leases to certain nonprofit
organizations. Relevant parts of this subparagraph follow:

1. There are exempt from the tax imposed by this chapter
   transactions involving:
   ...
   b. Sales or leases to nonprofit religious, nonprofit
   charitable,..., or nonprofit educational institutions when
   used in carrying on their customary nonprofit religious,
   nonprofit charitable,..., or nonprofit educational
   activities,....

d. "Educational institutions" means state tax-supported or
parochial, church and nonprofit private schools, colleges,
or universities which conduct regular classes and courses
of study required for accreditation by, or membership in,
the Southern Association of Colleges and Schools, the
Department of Education,..., or nonprofit private schools
which conduct regular classes and courses of study accepted
for continuing education credit by a Board of the Division

of Medical Quality Assurance of the Department of Health or
which conduct regular classes and courses of study accepted
for continuing education credit by the American Medical
Association.... (E.S.)

Section 240.227, F.S., provides as follows:

The president is the chief administrative officer of the
university and is responsible for the operation and
administration of the university. Each university
president shall:
...
(9) Develop a program of continuing education and
establish, pursuant to rules and guidelines adopted by the
Board of Regents, fees for continuing education activities
within the university service area when there is a
demonstrated and justified need. The university is
authorized to cooperate with any public utility, any other
governmental entity or private individual, or any type of
profit or nonprofit legal entity in connection with the
establishment and operation of such a continuing education
program,....

Section 240.299(1), F.S., defines a "university directsupport organization." Relevant portions of that definition
follow:

(a) ... an organization which is: ...

2. Organized and operated exclusively to receive, hold,
   invest, and administer property and to make expenditures to
   or for the benefit of a state university in Florida....

3. An organization which the Board of Regents, after
   review, has certified to be operating in a manner
   consistent with the goals of the university and in the best
   interest of the state....

Rule 12A-1.001(f)1., F.A.C., provides as follows:

Nonprofit educational institutions must hold consumer's

certificates of exemption in order to be exempt from
payment of tax on materials and supplies which are
purchased for use by them in their customary educational
activities. (E.S.)

Discussion

According to information provided by University in writing
or by telephone, the expenditures normally made by University
and/or Provider in the development and presentation of CME would
include the purchase of mailing lists, printing and distribution
of program announcements, placement of program advertisements,
payment for meeting facilities, rental of audio/visual
equipment, reproduction of written materials such as the program
outline or syllabus, payments to speakers, payments for food
service, and the occasional, incidental purchase "entertainment
tickets." University has requested advisement as to the
applicability of sales or use tax to these expenditures.

Ordinarily, a purchaser will pay either a sales or a use
tax upon the purchase or use of taxable tangible personal
property. The use tax, in general, is due when a purchaser has
not paid sales tax at the time the taxable item being consumed
was purchased. Section 212.05(1)(a) and (b), F.S. Additionally,
rentals of tangible personal property are taxable under section
212.05(1), F.S., and rentals of real property are taxable under
section 212.031, F.S. However, in this situation, an exemption
from payment of the foregoing sales and use taxes may be
available under either of sections 212.08(6), F.S., or
212.08(7)(o)1., F.S.

Section 212.08(7)(o)1., F.S., provides an exemption, from
the tax imposed by Chapter 212, for any sale or lease to a
nonprofit educational institution when that institution is
utilizing the purchased or leased item to "carry on" its
"customary" nonprofit educational activities. Section
240.227(9), F.S., indicates that one of a university's
"customary" educational activities is the development and
provision of continuing education programs within its service
area. Section 240.299(1), F.S., indicates that Provider, as a
university direct-support organization, should also be carrying

on a "customary" nonprofit educational activity in providing
CME. A direct-support organization is required to be operated
exclusively for the benefit of its related state university and
be operating in a manner consistent with the goals of such
university. The Department considers the expenditures normally
made by University and/or Provider, as disclosed by University
and as described above, in the development and presentation of
the indicated CME programs, as being utilized by University
and/or Provider to "carry on" their "customary" nonprofit
educational activities.

Rule 12A-1.001(f)1., F.A.C., requires a nonprofit
educational institution to hold a consumer's certificate of
exemption before such institution may make exempt purchases. It
is our understanding that both University and Provider currently
hold valid consumer's certificates of exemption issued under
section 212.08(7)(o)1., F.S. Therefore, purchases will be exempt
as long as the items purchased are purchased to "carry on"
"customary" nonprofit educational activities and payment for the
purchases is made directly by the exempt entity.

Conclusion

The expenditures normally made by University and/or
Provider, as disclosed by University and as described above, in
the development and presentation of the indicated CME programs,
under the authority of section 212.08(7)(o)1., F.S., as
applicable, would not be subject to sales or use tax when
purchases are made directly by University and/or Provider.

III. CLOSING REMARKS

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

Sincerely,

R. Clay Brower
Revenue Program Administrator
Technical Assistance and Dispute
Resolution

AT
Control No. 35893
Enclosure

FOOTNOTE 1. The applicability of sales and use tax to the costs
for the items of tangible personal property consumed during
presentation of the CME programs will be discussed later in this
response.