Could a professional shopper avoid Florida sales tax on mandatory delivery charges by stating them separately from the delivered goods?

Subject

Delivery Services

Plain-English summary

Separately stating the delivery charge did not make it exempt. The independent contractor was a professional shopper that bought requested goods with its own funds, bore the risk of loss, and transferred title and possession to the consumer when delivery succeeded.

The Department found no agency agreement between the contractor and consumer. Because the consumer could not avoid delivery or the associated fees, those charges were part of the sales price of the contractor's retail sale and were taxable with the goods.

What this means for you

Invoice wording did not control. The seller's role, when the sale occurred, who bore risk, and whether the delivery was part of the completed sale determined the tax treatment.

Common questions

Q: Was the separately stated delivery fee taxable? Yes.

Q: Who made the retail sale? The independent contractor.

Q: Was the contractor treated as the consumer's agent? No.

Citations and references

• Fla. Stat. §§ 212.02(15)(a), 212.02(16), 212.05(1)(a)1.a., and 212.06(1)(a) — sale, sales price, and retail tax
• Fla. Admin. Code r. 12A-1.045 — transportation charges
• American Telephone & Telegraph Co. v. Department of Revenue, Case No. 1D99-193 (Fla. 1st DCA)
• Florida Hi-Lift v. Department of Revenue, 571 So. 2d 1364 (Fla. 1st DCA 1990)
• Department of Revenue v. B&L Concepts, 612 So. 2d 720 (Fla. 5th DCA 1993)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-024

Original ruling text

SUMMARY

QUESTION: Can the seller separately state the charge for
delivery in order to avoid sales tax?

ANSWER - Based on Facts Below: An independent contractor
who is delivering goods it purchased for resale to members
of a web portal cannot avoid collecting sales tax on
delivery charges associated with the sale of tangible
personal property.

May 14, 2001

Re: Technical Assistance Advisement 01A-024
Sales and Use Tax - Delivery Services
Sections 212.02(15)(a); 212.02(16); 212.05(1)(a)1a., F.S.,
and Rule 12A-1.045, Florida Administrative Code
XXX (hereinafter Taxpayer)

Dear :

This is a response to your petition dated January 26, 2001, for
the Department's issuance of a Technical Assistance Advisement
("TAA") concerning the above referenced matter. Your petition
has been carefully examined and the Department finds it to be in
compliance with the requisite criteria set forth in Rule 12-11,
F.A.C. This response to your request constitutes a TAA and is
issued to you under the authority of s. 213.22, F.S.

STATED FACTS

This letter responds to your letter presenting your request for
guidance on the applicability of our State's sales tax to
delivery services rendered under the facts and circumstances you
have described, as follows:

The taxpayer is a web portal specially designed to make
possible the "XXX" (the "XXX") in a specified geographic

area. The Taxpayer's members consist of retailers who need
efficient home delivery for their customers ("Retail
Members"), consumers who need efficient home delivery of
local area products and services ("Consumer Members") and
independent contractors who provide transportation services
("Independent Contractor") pursuant to an independent
contract agreement, a copy of which is attached as Exhibit
A. In exchange for membership fees and usage fees, the
Taxpayer brings together it members for this specially
organized XXX.

The Taxpayer's XXX Service is prompted when a Consumer
Member contacts the Club with a request to have a
particular item purchased and delivered (the "Requested
Item"). The Taxpayer then conveys this request to an
Independent Contractor who will purchase the Requested Item
on the Consumer Member's behalf. The [Requested Item] may
be purchased from either a Retail Member or a nonparticipating retailer. In either case, at the time of
purchase, the Independent Contractor pays the purchase
price of the Requested Item, including any applicable
Florida sales tax and any applicable local option surtax.
The Independent Contractor then delivers the Requested Item
to the Consumer Member in exchange for a service fee and
reimbursement of the amount paid for the Requested Item at
the time of purchase. The Independent Contractor may also
receive an optional gratuity.

Here, the issue is whether the seller may separately state the
charge for delivery in order to avoid sales tax. In this
situation, the Independent Contractor makes (taxable) purchases
for resale. The Independent Contractor is a professional
shopper who is engaged in the business of locating, purchasing,
selling and delivering products to Consumer Members. In a
recent discussion, it was stated that in addition to taking
orders, the Independent Contractor also anticipates the needs
and desires of Consumer Members with the intent to induce sales.
Once the Independent Contractor makes the purchase, the item is
delivered directly to Consumer Members for a fee plus the amount
of the purchase. The fee includes delivery charges plus any
other fees associated with the transaction.

LAW AND ANALYSIS

Section 212.05(1)(a)1.a., F.S., imposes sales tax on the
privilege of selling tangible personal property "... at retail
in this state...." The vendor is obligated to collect the tax.
The tax is measured against the total sales price of the item
sold.

Section 212.02(15)(a), F.S., defines "Sale" as:

(a) Any 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.

Section 212.02(16), F.S., defines "Sales price," stated in part:

(16) "Sales price" means 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 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....

When services are rendered and a charge is made to the
customer as part of the total charge for the item(s) sold,
such services are subject to tax. Even though they may be
separately itemized on the invoice or bill, they are part
of the same transaction. A service can include a duty or
obligation under taken by the seller to facilitate the sale
of tangible items sold to the customer. In instances where
the sale clearly contemplates the performance of a service
as part of the transaction, sales tax is due on the
service. Transportation or delivery charges are examples of
services typically sold in conjunction with the sale of
tangible personal property....

Rule 12A-1.045, F.A.C.(FN 1), which deals with sales tax on

transportation charges, recognizes the decisions in Florida
Hi-Lift v. Department of Revenue, 571 So.2d 1364 (Fla. 1DCA
1990), and Department of Revenue v. B&L Concepts, 612 So.2d 720
(Fla. 5DCA 1993). When the service is incidental to the sale,
sales tax is not due on the service.

In American Telephone and Telegraph Company v. Florida
Department of Revenue(FN 2), Case No.1D99-193 1st DCA, the court
determined that even though the charge for the service may be
separately stated, sales tax is still applicable when the
service is "inextricably intertwined" with the sales of the
tangible personal property. The court applied the statutory
definition of "sales price" which clearly states that services
that are a part of the sale of tangible personal property are
also subject to tax. The court rejected the argument that the
customer could elect to avoid the service, and restated the
statutory definition of "sales price." The court held that
"'services that are a part of the sales' language is not limited
to those services that must be purchased with tangible personal
property." The court pointed out that it was not the intent of
the legislature to limit or expand the language of the statute,
therefore, any service(s) sold in conjunction with tangible
personal property is also taxable.

The Consumer Member cannot avoid delivery charges, or other fees
associated with the sale. The charge is part of the sales
price. The Consumer Member has not purchased the item(s) until
it has been successfully delivered to them. Section
212.06(1)(a), F.S., provides that sales tax is due "at the rate
of 6 percent of the retail sales price as of the moment of
sale...." The time at which the "sale" occurs is the point
where the nature of the transaction must be established. In
this case, the sale to the Consumer Member occurs when the
item(s) has been delivered to the Consumer Member.

Section 212.02(15)(a), F.S., applies in that the Independent
Contractor is making a "sale" by transferring title and
possession of these items to the Consumer Member for a
consideration. The Independent Contractor purchases these items
with its own funds for resale and bares all risk of loss.
Therefore, the Independent Contractor is making a retail sale to

the Consumer Member.

Furthermore, we can find no contractual agreement or
relationship between the Independent Contractor and the Consumer
Members. Thus, we do not find that the Independent Contractor
is making purchases as agent with the intent of being reimbursed
by Consumer Members.

CONCLUSION

We find that the Independent Contractor is selling the Requested
Item to Consumer Members and the delivery charge is part of the
sales price of these items and, thus, subject to tax.

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 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 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., 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 before disclosure. In an effort to protect the
confidentiality of such information, we request you provide the
undersigned with a redacted copy of your request for Technical
Assistance Advisement, backup material and response by
___.

Sincerely,

Mr. Joseph D. Franklin III

Technical Assistance and Dispute Resolution
(850) 922-2833

JDF3/
Ctrl# 43786

FOOTNOTE 1 Rule 12A-1.045, F.A.C., provides in part:

(1) "Transportation charges" includes carrying, delivery,
freight, handling, pickup, shipping, and other similar
charges or fees.

(2) Transportation charges which are not separately stated
on an invoice or bill of sale but are included in the sales
price of taxable tangible personal property are subject to
tax.

(3)(a) Where the seller agrees to deliver tangible personal
property to some designated place and the purchaser can not
elect to avoid the charge for transportation services, the
charge for the transportation service is subject to tax,
even if separately stated on an invoice or bill of sale....

4)(a) The charge for transportation services is not subject
to tax when both of the following conditions have been met:

1. The charge is separately stated on an invoice or bill of
   sale; and

2. The charge can be avoided by a decision or action solely
   on the part of the purchaser

FOOTNOTE 2 The Department of Revenue assessed sales and use tax,
plus penalty and interest, against engineering services and
telecommunication equipment sold to a customer. Engineering
services were sold together with the telecommunication
equipment. AT&T argued that engineering services are not subject
to tax when the charges for engineering services are separately
stated. Based on its detailed findings, the court concluded:
"[t]he sales of the engineering was inextricably intertwined

with the sales of the telecommunication equipment in the
transactions." The court thus concluded that the services at
issue were "part of the sale" of the equipment. AT&T also
argued that because the engineering services could be purchased
without the equipment, the sale of the services was not subject
to tax. The court declined to support this argument and
concluded that sales of engineering services were taxable.