When are an interior designer's design fees, product charges, and real-property improvement work subject to Florida sales tax?

Plain-English summary

Standalone interior-design services were not taxable, but design fees connected with sales of furniture or other tangible personal property were taxable. Phase I architectural review and Phase II design-development fees remained nontaxable when they were separately priced and did not require or become part of a property sale. When a fee was part of a taxable property sale, separate itemization did not remove it from the sales price.

The ruling treated real-property work differently. When the firm furnished and installed items that became part of realty, it generally acted as the consumer of the materials. It owed tax on those inputs and could not use a resale certificate merely because it charged the client; the client's real-property contract price and design fee were not retail sales of the materials.

The Department also addressed transaction details. Freight, insurance, delivery, travel, and similar costs remained taxable when they formed part of the property's selling price. Separately described interest, cancellation or restocking charges for services, and hourly help accompanying a client who bought directly from a retailer were nontaxable under the stated facts. Tax arose upon the relevant sale, delivery, and acceptance—not merely when a deposit was paid.

What this means for you

Interior-design tax treatment depends on what the contract actually sells. Separate, independently priced advice can remain a nontaxable service. If the designer sells property and the fee helps produce that sale, labeling the fee separately does not make it exempt. Real-property contracts require a different contractor-as-consumer analysis.

Common questions

Q: Are design fees always exempt as professional services? No. Fees tied to a sale of tangible personal property were part of the taxable sales price.

Q: Were Phase I and Phase II fees taxable when no property was sold with them? No, under the stated separately priced and independent service arrangements.

Q: Could the designer use a resale certificate for materials incorporated into real property? Generally no. For the described real-property work, the designer was the consumer and owed tax on the materials.

Q: Did a customer deposit itself trigger tax? No. The ruling tied tax to the sale, delivery, and acceptance rules, although deposits could fund tax when it became due.

Citations and references

• Fla. Stat. §§ 212.02(15)(a), (16), 212.05(1), and 212.06(1)(a) — sale, sales price, and tax on tangible personal property
• Fla. Stat. §§ 212.17 and 213.756 — refund and dealer-collected funds provisions cited
• Fla. Admin. Code rr. 12A-1.001(4)(a), 12A-1.006(1), (12), and 12A-1.012(1), (2) — services and decorator fees
• Fla. Admin. Code rr. 12A-1.045 and 12A-1.051 — transportation charges and real-property contracts
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 02A-014

Original ruling text

SUMMARY

QUESTION: When are design fees subject to Florida sales
tax?

ANSWER - Based on Facts Below: Fees charged by designers in
conjunction with the sales of tangible personal property
are a part of the total charge for the tangible personal
property and are subject to tax, even when separately
itemized and charged to their clients on a cost plus basis.
Fees charged by an interior decorator or designer solely
for consultation or designing services when no sale of
tangible personal property occurs in conjunction with those
services are not subject to tax. Examples of fees charged
solely for services rendered include designing decorative
schemes, advising clients, or recommending colors, paints,
wallpaper, fabrics, brands, or sources of supply. Under
most circumstances, designers who contract to furnish and
install tangible personal property that becomes a part of
realty are the ultimate consumers of materials and supplies
they use to perform contracts

Mar 18, 2002

Re: Technical Assistance Advisement 02A-014
Sales Tax - Interior Design Contract
XXX ("Taxpayer")
Sections 212.02(16), 212.05(1), 212.06(1)(a), 212.17,
213.756, F.S.
Rules 12A-1.001(4)(a), 12A-1.006(1) and (12), 12A-1.012(1)
and (2), 12A-1.045, 12A-1.051, F.A.C.

Dear :

This is in response to your letter to the Florida Department of
Revenue dated May 8, 2001. You asked for a technical assistance
advisement confirming that the taxation of your client's
"Interior Design Agreement" is in accordance with Florida law.

Facts

Your letter presents the following facts. Your client
(hereinafter "Taxpayer") is an interior design firm engaged in
design work, including architectural review, general design
development, and purchasing. Most, if not all, of its activities
are rendered in Florida. You say that clients engage Taxpayer
during the pre-construction phase of a residential construction
project or at other phases of a home decoration project, either
after construction has been completed or to reconfigure and
design an existing home.

In subsequent conversation, you advise that the Taxpayer seeks
to properly tax a transaction consisting of the provision of
design services, the sale of tangible personal property, and the
improvement of real property. You note that the taxpayer prefers
to present a unified project and in an abundance of caution,
collects and remits sales tax on the entire agreement, including
design services, the sale of tangible personal property, and the
improvement of real property, without paying use tax on
materials incorporated into real property improvements.

The Taxpayer and its clients enter into a standard contract
called "Interior Design Agreement," a copy of which you have
submitted as Exhibit B to your letter. Exhibit C contains a
sample proposal," and Exhibit D contains an "invoice." The
services provided under the contract are divided into three
separates phases. Each phase has an independent pricing
structure. Clients may hire the Taxpayer prior to or after Phase
I or Phase II, both of which are described below.

Phase I, "Architectural Review Services," is the Taxpayer's
review of alternative architectural approaches to the design and
construction of a home renovation or initial build-out,
including the review of the architectural layout of the proposed
project, including room sizes, layouts, interior and exterior
elevations, and lighting. The Taxpayer reviews and critiques the
architectural plan and approaches. The "Interior Design
Agreement" describes Architectural Review as follows:

The Designer shall act as consultant with regard to the
following areas pending receipt of a completed set of
sealed architectural plans from Client:

*

Review overall floor plans for space layout and
traffic flow.

*

Evaluate room sizes in relation to furniture
placement, aesthetics and overall function.

*

Evaluate adequacy of natural and artificial light.

*

Review all exterior elevations for overall aesthetic
appeal and function.

*

Assist in designing all interior elevations including,
but not limited to arches, columns, plant ledges,
ceiling treatments and molding details.

*

Provide suggestions for Client to consider regarding
any identified architectural problems or shortcomings.

Phase I fees are determined on hourly rates for the professional
designers (employees) of Taxpayer providing services to the
client as set forth in Schedule A of the Interior Design
Agreement. The Phase I fee is payable whether or not the client
purchases furniture or otherwise moves forward with Phases II
and III.

In Phase II, "General Design Development Services," Taxpayer
provides complete interior design for the project, including the
design, layout, and furniture plans for each room. Taxpayer
assists clients with selecting project builders' specifications,
then provides space planning and design development services,
including a fully scaled floor plan, and options for picking the
desired color scheme and furnishings. At the conclusion of Phase
II, Taxpayer presents a proposal to furnish the project site.
The sample Taxpayer proposal, enclosed as Exhibit C, includes
only lists of furnishings without any description of how
installation fees, costs, travel reimbursements, and freight are
billed. Once a client approves of the Phase II proposal, the

next phase, Phase III, the purchasing and installation phase,
begins.

Design fees charged for Phase II services, which are also
payable whether or not the client purchases furniture or
otherwise moves forward with Phase III, are based on whether the
engagement is pre-construction. For pre-construction Phase II
services, the fees typically are set at a dollar amount per
square foot of the project. For all other Phase II service
arrangements, the design fee is a fixed amount based on the
scope of the entire project, instead of a dollar per square foot
factor. Generally, Phase II design fees are paid in installments
with 1/2 of the Phase II fee payable at the end of Phase I
(i.e., when a complete set of architectural plans is delivered).
The next installment or 1/4 is generally payable at the midpoint
of the completion or substantial completion of the builder
specifications. The remaining balance, or 1/4 of the Phase II
fees, is due and payable upon the Taxpayer' full theme
presentation concluding Phase II.

Phase III is the "Purchasing Services" phase, whereby the
Taxpayer enters into contracts for the purchase of furniture,
fixtures, and the installation of the same that the client has
approved as part of the proposals submitted during Phase II.
Where necessary, the Taxpayer hires independent contractors to
install the fixtures and real property improvements (cabinets,
carpets, etc.) that it sells. The fees for Phase III services
are set on a "cost plus" basis (i.e., the Taxpayer's actual
costs to purchase the selected furniture and fixtures plus a
percentage, e.g., 35% of such costs). Actual costs are defined
as the manufacturer's price plus a 10% charge for freight,
shipping, receiving, storage, and delivery by the Taxpayer from
its main warehouse to the project site. An ancillary portion of
Phase III, the "Purchasing Services" phase, is that from time to
time an employee of the Taxpayer takes a client to a retail
store to assist the client in selecting artwork, accessories,
etc. Taxpayer charges for these services on an hourly basis
based on a schedule of rates for each professional designer
(employee). Invoices are periodically issued as the work and
purchases required to be made are effectuated.

With respect to Phase III purchasing fees, Taxpayer separately
states Florida sales tax of 6% on its proposals and invoices
based on the purchase cost (as defined) and the purchase fee.
While the Interior Design Agreement sets forth Florida sales tax
on the entire Phase III project price at the time the contract
is entered into, the sales tax is actually collected and
remitted as separate invoices are issued. Taxpayer collects and
remits Florida sales tax from its clients on the entire contract
relating to Phase III services, including the amount charged to
the client for: (i) the cost and installation of tangible
personal property; and (ii) the cost and installation of
improving real property. This includes the installation of
cabinetry, carpeting, paintings, murals, and other fixtures
within the particular dwelling. On all items of tangible
personal property purchased by Taxpayer, as part of its
performing services under an Interior Design Agreement, it
submits a resale exemption certificate to the seller of such
property in claiming the applicable exemption from Florida sales
tax.

The Interior Design Agreement provides reimbursement to the
Taxpayer for authorized travel expenses, expedited delivery
services, and reproduction of architectural and working
drawings. Reimbursements are separately stated and invoiced as
incurred, without a sales tax add-on. All payments under the
contract are due within 10 days of the invoice date. Failure to
timely pay the balance due on the invoice results in the accrual
of interest at the rate of 10% per annum. The agreement provides
that all merchandise purchased from Taxpayer is not returnable.
However, if Taxpayer agrees to cancellation of an item on an
approved proposal, the purchasing fee of 35% plus a 25%
restocking fee is due and payable by the Client.

Exhibit B, "Interior Design Agreement," is presented as one
agreement with the following parts:

(1) Architectural Review is for review only, not work that
would be included in the sale price or cost of
tangible personal property.

(2) General Services includes:

1.) Builder Specifications involves selection of
items such as hardware, flooring, etc.;
2.) Space Planning & Design Development includes the
selection of furnishings, fabrics, wall covering,
window treatments, built-ins, lighting, etc.

(3) The Design Fee section states that the design fee is
earned in full with execution of the Agreement and is
non-refundable if the Client elects not to go forward
with the project, but may be paid in the following
installments:

1.) 50% upon receipt of a completed set of
architectural plans;
2.) 25% upon substantial completion of builder
specifications; and
3.) 25% upon full theme presentation.

(4) Purchasing Services are billed for "cost" plus a 35%
purchasing fee. "Cost" is defined as the
manufacturer's price plus a 10% charge. The Taxpayer
charges 6% sales tax on its purchasing service
contracts so that sales tax is imposed on the "cost"
and the 35% purchasing fee.

(5) Reimbursable Expenses include:

1.) Authorized travel expenses, such as airfare,
hotel accommodations, taxi fare, car rental and
gasoline, in addition to a per diem of $150.00
per hour with a maximum of $1,000.00 per day;
2.) Client requested specialty delivery services; and
3.) Expense of reproduction of architectural and
working drawings.

(6) Miscellaneous provisions include duties of the
Taxpayer and Client pursuant to the contract and other
common contract provisions.

Exhibit C, "Proposal", shows charges for proposed items of

furniture and accessories with purchasing fee, taxed at 6% of
the total cost of the tangible personal property and the
purchasing fee. Exhibit D, "Invoice", shows charges for proposed
items of furniture and accessories with purchasing fee, taxed at
6% of the total cost of the tangible personal property and the
purchasing fee.

Requested Advisements

1. Are decorator fees received by [Taxpayer] for Phase I
   services[,] where the client does not purchase tangible
   personal property incident to the contracted services,
   subject to Florida sales tax? What if the amount of Phase I
   fees [is] separately stated and is not based on whether any
   tangible personal property is purchased by the client[,]
   and the client ultimately purchases tangible personal
   property pursuant to Phase II and possibly Phase III
   charges. Do the Phase I fees become taxable? If so, at what
   time?

2. If [Taxpayer] has previously collected and remitted Florida
   sales tax for Phase I only services, is it required by the
   DOR to file a claim for refund (and make required
   remittances to former clients) with the DOR?

3. Are decorator fees received by [Taxpayer] for Phase II
   services, where the client does not purchase any tangible
   personal property incident to the contracted services,
   subject to Florida sales tax?

4. If [Taxpayer] has previously collected and remitted Florida
   sales tax for Phase II services where the client did not
   purchase any items of tangible personal property pursuant
   to such contract, is it required by the DOR to file a claim
   for refund (and make required remittances to former
   clients) with the DOR?

5. As to Phase II (and possibly Phase I) services, must
   Florida sales tax be collected and remitted to the DOR as
   payments are made by a client under [an] Interior Design
   Agreement, without regard to any form of itemization by

[Taxpayer] in the Interior Design Agreement between amounts
charged for design fees and related services versus amounts
charged for the purchase of tangible personal property and
the installation of the same, if one or more items of
tangible personal property are in fact purchased and
delivered to the client? Does any de minimis rule apply
such as where a client cancels a contract after Phase I and
Phase II have been completed, and the value of the services
rendered was in fact far greater than the charges for
furniture purchased? [You give the following example:
[S]uppose a client has been charged and paid $15,000 in
design fees for Phase I and II services and cancels the
Phase III contract after having purchased from [Taxpayer]
furniture at a `cost-plus' charge of $1,500? Is the entire
$16,500 subject to Florida sales tax?]

6. In the alternative to requested item #5, in the event that
   [Taxpayer] charges a client for design services, including
   the purchase of tangible personal property, as well as for
   any installation charges incident thereto, must 6% of all
   amounts paid and collected from the client under each
   contract be timely remitted to the DOR as Florida sales
   tax?

7. For staged payments made by clients under Phase II and
   Phase III design fee contracts, when are Florida sales tax
   payments required to be collected and paid over from client
   deposits received in advance of invoices? Can such amounts
   be considered collected and remitted by [Taxpayer] on the
   date of each invoice?

8. Are all amounts paid by clients to [Taxpayer] under the
   Interior Design Agreement for tangible personal property
   and the cost of installation thereon that ultimately are
   considered to be real property improvements subject to
   Florida sales tax?

9. Based on the Interior Design Agreement, do [Taxpayer's]
   purchases of tangible personal property from other vendors
   on behalf of its clients qualify for a resale exemption
   certificate?

10. Must [Taxpayer] collect Florida sales tax on freight,
insurance and delivery charges [that] are incurred by
clients under the Interior Design Agreement?

11. Once an Interior Design Agreement for all three design
    Phases is entered into by a client and [Taxpayer], can a
    client direct [Taxpayer] to modify or amend the Agreement
    so as to reduce the overall impact of Florida sales taxes
    on the entire contract, i.e. by later having the client
    enter into a separate real property contract with
    separately stated labor charges?

12. Are late charges in the form of interest imposed on a
    client subject to Florida sales tax?

13. As to client cancellation charges required under the
    Interior Design Agreement, i.e., 35% purchasing fee and 25%
    restocking fee, are such fees charged by Taxpayer subject
    to Florida sales tax when collected or are such charges
    solely for services and not subject to Florida sales tax.

14. Should [Taxpayer] impute a sales tax amount of a client's
    purchase of tangible personal property when it sends a
    designer to a retail store with a client and the client
    purchases tangible personal property directly from such
    retail store?

The following questions were added in conversation after the
submission of the initial request for technical advice:

15. In a situation where the Interior Design Agreement requires
    that the Taxpayer's client pay a deposit in advance of any
    purchase of furniture and an invoice is issued to the
    client in advance of the client's taking delivery and
    possession of furniture, what sales tax should appear on
    the invoice and when is it due? Example: The Agreement
    calls for $80,000.00 for design work and $40,000.00 for
    furniture purchases (including applicable markup) for a
    total contract price $120,000.00. The client has remitted a
    deposit of $30,000.00 for all services and furniture.

Shortly after the Phase II and Phase III work is
undertaken, the client is invoiced for furniture having a
cost to the client of $400. The invoice date is 1/31. The
client subsequently takes delivery of the selected
furniture on 3/31. Again, when is the sales tax due and on
how much? At this point, is the Florida sales tax
determined to be on $120,000, $80,400, $25,400, or some
other basis? If the former number is appropriate, what
occurs if the client does not complete the contract and the
final agreed service fees are $25,000, or alternatively
$10,000?

16. In the situation set out in question 15, must the deposit
    paid by the client be used to remit the tax? What if the
    deposit is less than the correct sales tax payment?

17. If the Taxpayer takes a client to a retail store to assist
    the client in selecting artwork, accessories, etc., and the
    Taxpayer charges for these services on an hourly basis
    based on a schedule of rates for each professional designer
    -employee, are such additional fees non-taxable, even where
    other items of tangible personal property under the Phase
    II and Phase III design services agreement have or will be
    purchased?

18. Are travel expenses reimbursed by a client under the
    Interior Design Agreement subject to Florida sales tax?
    What if the services rendered under the Agreement were for
    a client whose residence or office which is being decorated
    is located outside of Florida?

19. What if the client whose residence is being decorated is
    located outside of Florida, are any of the Florida sales
    taxes due on the Interior Design Agreement where all of the
    furniture to be purchased is acquired from vendors outside
    of Florida? What if one item of tangible personal property
    under the same Agreement [was] purchased by the Taxpayer
    from a Florida manufacturer, does such make the entire
    contract subject to Florida sales tax? What if the purchase
    of the tangible personal property by the Taxpayer from the
    manufacturer is exempt due to the Taxpayer's presentation

of its Florida resale exemption certificate.

20. In order to avoid any issue on whether Florida sales taxes
    are not due and payable on any portion of an Interior
    Design Agreement which would otherwise fall within the
    scope of a "real property contract" or "mixed contract" for
    the provision of real property improvements, as such terms
    are defined under the Florida Administrative Code, the
    Interior Design Agreement is revised to contain the
    following recital:

The Designer and Client agree that all purchases of
tangible personal property made by the Client from the
Designer are subject to Florida sales tax,
notwithstanding any exemption from sales tax that may
otherwise be extended to the Client in accordance with
Florida law. Accordingly, Designer shall collect from
Client, the applicable sales tax percentage, i.e., 6%
on all of its design fees and charges from Phase II
and III services based on the gross sales price.

21. In the situation set out in question 20, may the Taxpayer
    use its resale certificate in avoiding Florida sales and
    use tax on all purchases incident to completing Phase II
    and III service requirements, including those purchases of
    tangible personal property that could otherwise qualify as
    part of a "real property contract" or "mixed contract" for
    the provision of real property improvements?

22. As an alternative to the situation set out in question 20,
    if the client enters into a contract for design services
    that is exclusively for real property improvement items
    (and design services) only, i.e., wallcoverings, carpet,
    built-in, murals, etc., is the cost of each item taxable to
    the client? If not, is the Taxpayer in such instance
    required to pay use tax on the cost of such items? Can the
    Taxpayer still use its resale exemption certificate to
    avoid the imposition of Florida sales tax on purchasing the
    various items of wallcovering, carpet, built-ins, etc.? In
    such instance, are the design fees non-taxable for Florida
    sales tax purposes, including any mark-up charged by the

Taxpayer to the client for the cost of the materials and
installation?

Law and Discussion

Mixing the provision of services and tangible personal property
in the same sale subjects the services to being taxed. The
Taxpayer's multi-phase contract links the personal services to
the sale of the tangible personal property. The charges for
service provided by Taxpayer are not taxable unless they are
provided as part of the sale of tangible personal property by
Taxpayer to the client.

Sections 212.02(16) and 212.06(1)(a), F.S., provide that every
sale of tangible personal property is taxable, including any
services that are a part of the sale. Rule 12A-1.006(12),
F.A.C., states that charges by an interior decorator are exempt
from tax when no materials or supplies are used.

Rule 12A-1.001(2)(a), (b), F.A.C., which is in the process of
revision for clarification, until the revision is complete,
provides:

1. An interior decorator's fee is taxable as part of the
   selling price under Section 212.02(16), F.S., or as a
   part of the cost price under Section 212.02(4), F.S.,
   and cannot be exempted as a professional or personal
   service charge when the transaction involves the sale
   of tangible personal property. This is true when the
   fee is paid in the form of a trade discount, as is the
   case when a supplier grants the decorator a trade
   discount and the decorator in turn bills the client
   for the full list price. The decorator fee is also
   taxable when it appears as an amount added to the
   decorator's cost when billed to the client for
   tangible personal property on a cost plus basis.

2. If the decorator's fee is solely for designing the
   interior and exterior decorative scheme or for
   advising his clients and recommending colors, paints,
   wallpaper, fabrics, brands, sources of supply, etc.,

and there is no sale of tangible personal property
involved, then such fee would be exempt as a
professional or personal service transaction.

3. In some instances, the decorator may receive a fixed
   sum, which is not in any way contingent upon the sale
   of tangible personal property to the same client. In
   such cases the decorator's fee cannot be considered as
   a part of the selling price of the property sold
   because there is no connection between the
   transactions.

4. If the decorator's client reimburses the decorator for
   the payroll cost of personnel on the decorator's
   payroll assigned to a specific project, the duties
   performed by such employees will determine whether or
   not this item is taxable. For example, if these
   employees were engaged in painting murals on walls,
   etc., the charge made for their services is exempt,
   whereas, if these employees fabricate tangible
   personal property such as making bedspreads or
   draperies then the charge for their labor is taxable.

There is language proposed for the purpose of clarifying Rule
12A-1.001(2), F.A.C. As currently published for the amendment
process, subject to public comment and further amendment, the
proposed language reads:

SERVICE TRANSACTIONS.

(a)1. Fees charged by interior decorators or designers in
conjunction with the sales of tangible personal property
are a part of the total charge for the tangible personal
property and are subject to tax, even when separately
itemized and charged to their clients on a cost plus basis.

2. When the sale of tangible personal property by an
   interior decorator or designer to a client requires the
   client to purchase consultation or design services, the
   consultation or design fees are a part of the total charge
   for the tangible personal property and are subject to tax,

even when the fees are separately itemized and charged to
the client.

3. When an interior decorator or designer bills a client
   for the full list price of the tangible personal property
   sold and then receives the equivalent of a fee through the
   decorator's or designer's supplier in the form of a trade
   discount, the decorator or designer is required to collect
   tax on the total amount billed to the client.

4. Fees charged by an interior decorator or designer solely
   for consultation or designing services when no sale of
   tangible personal property occurs in conjunction with those
   services is not subject to tax. Examples of fees charged
   solely for services rendered include designing decorative
   scheme, advising clients, or recommending colors, paints,
   wallpaper, fabrics, brands, or sources of supply.

5. A fee charged by an interior decorator or designer is
   solely for services and not in conjunction with the sale of
   tangible personal property by the decorator or designer to
   the same client if all of the following conditions are met:

a. the fee is allocated in the contract to consultation
or designing services;
b. the contract provides for separate pricing of any
tangible personal property that may be purchased by
the client from the decorator or designer;
c. the consultation or design services fee is separately
stated from the sales price of any tangible personal
property on statements and invoices;
d. the client is obligated to pay the consultation and
designing services fee regardless of whether the
client purchases any tangible personal property from
the decorator or designer under the contract;
e. the client is not obligated to purchase tangible
personal property from the decorator or designer;
f. the tangible personal property that is purchased from
the decorator or designer is of a type that is
routinely purchased without such service;
g. the amount of the consultation fee is not contingent

upon whether the client purchases any tangible
personal property from the decorator or designer or
upon the sales price of any tangible personal property
the client purchases from the decorator or designer.

6. Interior decorators or designers who contract to furnish
   and install tangible personal property which becomes a part
   of realty are the ultimate consumers of materials and
   supplies they use to perform contracts unless the contract
   is one described in Rule 12A-1.051(3)(d), F.A.C. In the
   case of all contracts other than those described in that
   paragraph, the interior decorator or designer should not
   charge tax to its customers. It should pay tax to its
   suppliers on all purchases of tangible personal property
   that will be incorporated into a real property improvement
   and should not extend an Annual Resale Certificate to make
   tax-exempt purchases. It should also pay tax on all
   materials it fabricates for its own use in performing such
   contracts. If the interior decorator or designer uses a
   subcontractor to install tangible personal property, the
   subcontractor is responsible for paying tax on materials
   and supplies purchased and used by the subcontractor as
   provided in Rule 12A-1.051, F.A.C. supplies furnished by
   the interior decorator or designer, the decorator or
   designer is responsible for paying tax due on the materials
   and supplies furnished to the subcontractor. See Rule 12A1.051, F.A.C., for guidance on the taxation of real
   property contractors and subcontractors.

Regardless of whether Taxpayer's design/architectural review fee
is calculated as a lump sum or on an hourly basis, its
taxability depends on whether Taxpayer sells tangible personal
property in conjunction with the design.

The Taxpayer is obligated to collect and remit the tax on the
design fee at the moment of sale of the tangible personal
property, regardless of whether the customer pays immediately or
over time. Taxpayer is entitled to a refund or credit of the tax
collected and remitted on cancellation of the order and
presentation of proof of refund of the tax to the customer, as
long as the cancellation is within the statute of limitations.

Section 212.06(1)(a), F.S., provides that tax at the rate of 6
percent of the retail sales price is due as of the moment of
sale, collectible from all dealers on the sale at retail in this
state of tangible personal property or services taxable under
Chapter 212, F.S. Section 212.02 (15) (a), F.S., provides that
"Sale" means any transfer of title or possession, or both,
conditional or otherwise, of tangible personal property for a
consideration. 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.

In the case of the Taxpayer's transactions, when the sale occurs
will depend on the terms of the agreement. If the purchase
agreement requires the client to approve all of the tangible
personal property furnished, even if the property is furnished
over time, the tax is due when the client approves and accepts
it. Otherwise, tax is considered to be imposed when the client
is invoiced for the tangible personal property and that property
has been delivered to the purchaser's location. Tax is not
imposed at the time that the deposits or down payments are made.
However, the amount of tax applicable to the down payment or
deposit will be due upon the delivery of the tangible personal
property. The entire amount of the design fee is taxable at the
time of the first sale of tangible personal property, the sales
price of which includes that service.

Section 212.17(1)(a) and (c), F.S., provides that when there is
a return of merchandise after the tax has been collected on that
sale and the purchase price and sales tax has been refunded to
the customer, the dealer is entitled to reimbursement of the
amount of tax refunded to the purchaser by the dealer.

Rule 12A-1.012(1) and (2), F.A.C., interprets the statute and
provides that the full amount of tax on credit sales,
installment sales, or sales made on any kind of deferred payment
plan is due at the moment of the transaction in the same manner
as a cash sale. The rule explains that the credit or refund is
based on the ratio that the total tax bears to the unpaid
balance of the sales price, excluding finance or other non-

taxable charges, as reflected in the sales contract.

Section 213.756, F.S., provides that funds collected from a
client are state funds from the moment of collection and are not
subject to refund to the seller absent proof that they have been
refunded to the client. In the event that tax is charged on
design fees but tangible personal property contemplated by the
contract is not ultimately sold to the client, the tax on the
fee may be refunded to Taxpayer upon presentation of proof that
it has been refunded to the client.

While the sale of tangible personal property is taxable, real
property improvement is not taxable to the customer. The real
property contractor is responsible for tax on materials used,
because the contractor is the ultimate consumer of those
materials. See Rule 12A-1.051(4), F.A.C.

Rule 12A-1.051(2)(h), F.A.C., states where relevant:

1. "Real property contract" means an agreement, oral or
   written, whether on a lump sum, time and materials, cost
   plus, guaranteed price, or any other basis, to:

a. Erect, construct, alter, repair, or maintain any
building, other structure, road, project, development, or
other real property improvement;

In this case, Taxpayer should neither charge its clients tax for
real property improvements nor should it give resale
certificates to its vendors for materials and supplies used in
its real property improvements, unless the transaction qualifies
as a "retail sale plus installation" agreement under Rule 12A1.051(3)(d), F.A.C., or is a mixed contract for the provision of
real property improvement and tangible personal property under
Rule 12A-1.051(8)(d), F.A.C.

To the extent that the Taxpayer, as real property improvement
contractor or its subcontractor, treats the transaction as
though it were a sale of tangible personal property, giving a
resale certificate when obtaining the materials and charging the
client sales tax on the real property improvement, the Taxpayer

or its subcontractor remains liable for failure to pay use tax
on the materials.

Rule 12A-1.051(8)(d), F.A.C., provides that if a mixed contract
for the provision of real property improvement and tangible
personal property clearly allocates the contract price among the
various elements of the contract, and such allocation is bona
fide and reasonable in terms of the costs of materials and
nature of the work to be performed, taxation will be in
accordance with the allocation. For example, a residential
developer builds and sells a home on a cost plus basis, but the
contract provides separately stated prices for the sale and
installation of certain optional free standing appliances that
are tangible personal property and are not classified as real
property fixtures. The contractor may purchase those appliances
using a resale certificate and charge sales tax on the price
paid for the appliances, including installation, by the home
buyer. The contractor is responsible for paying tax on all the
materials that are included in the cost plus price of the home,
other than the separately itemized appliances. If Taxpayer's
contract is mixed, and it is primarily for the provision of
tangible personal property, the entire value of the contract
could be taxed as though it is one for the sale of tangible
personal property. However, if the various parts of the
transactions are clearly allocated, taxation will be in
accordance with the allocation.

Rule 12A-1.006(1)(a),(4), F.A.C., provides in part:

(1)(a) Where parts are furnished by the repairer, the
entire charge the repairer makes to a customer for
adjusting, applying, installing, maintaining, remodeling,
or repairing tangible personal property is taxable, except
as otherwise provided in paragraph (b) of this subsection.
...
(4) Except as otherwise provided in paragraph (b) of
subsection (1), charges for repairs of tangible personal
property which require labor or service only are taxable
unless the repairer (dealer) can establish by evidence in
the dealer's records that the dealer furnished no tangible
personal property which was incorporated into or attached

to the repaired item. It is immaterial that the cost of the
material furnished is insignificant when compared to the
cost of the labor involved....

If Taxpayer sells tangible personal property and pays a third
party to install it, and it remains tangible personal property
after installation, it is likely that the labor charges will be
taxable unless the installer can prove that no tangible personal
property was used in the installation.

Rule 12A-1.045, F.A.C., provides that the charge for
transportation services is not subject to tax when the charge is
separately stated on an invoice or bill of sale and the charge
can be avoided by a decision or action solely on the part of the
purchaser. It appears that the freight charges are not
separately stated in the case of this contract. They are part of
an overall 10% fee related to the value of the tangible personal
property that covers freight, shipping, receiving, storage, and
delivery by Taxpayer. As such, they are taxable under Sections
212.02(16) and 212.06(1)(a), F.S.

With respect to the reimbursed expenses for travel, the taxable
"sales price" of tangible personal property as defined in
Section 212.02(16), F.S., is "the total amount paid... without
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 expense whatsoever". As part of
performing the contract and selling tangible personal property,
Taxpayer incurs travel and lodging costs which are passed
through as part of the pricing. Taxpayer cannot deduct these
costs and remove them from the sales price just because they are
separately stated.

Section 212.06(5)(a)1., F.S., provides that it is not the
intention of this chapter to tax tangible personal property
produced or manufactured in this state for export, as long as
the exporter or manufacturer delivers it to a licensed exporter
or to a common carrier for shipment outside the state or mails
the it by United States mail outside of the state. Rule 12A1.064, F.A.C., interprets the statute and sets out how to
document such a sale in order to avoid the tax.

Advisement

1. Decorator fees received by Taxpayer for Phase I services
   where the client does not purchase tangible personal
   property incident to the contracted services are not
   subject to Florida sales tax. See Sections 212.02(16) and
   212.06(1)(a), F.S.; Rules 12A-1.006(12) and 12A-1.001(4)(a)

2. and 3., F.A.C. If the amount of Phase I fees is
   separately stated and is not based on whether any tangible
   personal property is purchased by the client, and the
   client ultimately purchases tangible personal property
   pursuant to Phase II and possibly Phase III charges, the
   Phase I fees would become taxable only if those services
   are part of the sale of the tangible personal property. If
   that were the case, the services would be taxable at the
   time of the sale of the tangible personal property as
   described above. In later conversation, you advise that the
   Taxpayer does not sell the tangible personal property
   mentioned in Phase I (that is, arches, columns, plant
   ledges, ceiling treatments or molding details.) Under these
   circumstances, the Phase I Architectural Review fees are
   not subject to tax because they are not part of the sales
   price of any tangible personal property.

3. If Taxpayer has previously collected and remitted Florida
   sales tax for Phase I when the services were not part of
   the sale of the tangible personal property, the tax on the
   fee may be refunded to Taxpayer upon presentation of proof
   that it has been refunded to the client. Section 213.756,
   F.S., provides that funds collected from a client are state
   funds from the moment of collection and are not subject to
   refund to the seller absent proof that they have been
   refunded to the client.

4. Decorator's fees received by Taxpayer for Phase II services
   where the client does not receive title to, or possession
   of, any tangible personal property transferred by Taxpayer,
   are not subject to sales tax. See Sections 212.02(16) and
   212.06(1)(a), F.S., Rule 12A-1.001(4)(a), (b), F.A.C.

4. If Taxpayer has previously collected and remitted Florida
sales tax for Phase II decorator fees in a contract where
no tangible personal property was sold, the same law and
procedure as set out in paragraph 2, above, apply.

5. As to Phase II (and possibly Phase I) services, all of the
   Florida sales tax is due on the price of the tangible
   personal property and the design fees that are part of the
   sale at the time of the sale, as described above, without
   regard to when payments are received, any form of
   itemization, and any distinction between charges for design
   fees and related services and charges for sales of tangible
   personal property. De minimis charges are not relevant to
   an example involving a $15,000 design fee and furniture
   purchased on a cost plus basis for $1,500. If the design
   fee is part of the sale of the furniture, the entire
   $16,500 is subject to tax, because the design fee is part
   of the taxable sales price of the tangible personal
   property. This kind of absurd result is easily avoided
   where the agreement is drafted to avoid such a result.

6. In the alternative to the request set out in question 5, in
   the event that the Taxpayer charges a client for design
   services "that include the purchase of tangible personal
   property," as well as any installation charges incident
   thereto, at the time of the sale of the tangible personal
   property, 6% of all amounts charged to, rather than amounts
   paid or collected from, the client under each contract must
   be timely remitted to the Florida Department of Revenue as
   sales tax. It should be noted, however, that the law does
   not, as the Taxpayer asserts, tax design services "that
   include the purchase of tangible personal property," but
   rather taxes the purchase price of tangible personal
   property that includes design services. Sections
   212.06(1)(a) and 213.756, F.S.

7. For staged payments made by clients under Phase II and
   Phase III design fee contracts, the law requires that
   Florida sales tax be collected and remitted in full
   whenever there is a sale of the tangible personal property.
   As set forth above, when the sale occurs will depend on the

terms of the agreement. If the purchase agreement requires
the client to approve all of the tangible personal property
furnished, even if the property is furnished over time, the
tax is due when the client approves and accepts it.
Otherwise, tax is considered to be imposed when the client
is invoiced for the tangible personal property and that
property has been delivered to the purchaser's location.
Tax is not imposed at the time that the deposits or down
payments are made. However, the amount of tax applicable to
the down payment or deposit will be due upon the delivery
of the tangible personal property. The entire amount of
the design fee is taxable at the time of the first sale of
tangible personal property, the sales price of which
includes that service. Using client deposits received in
advance of sale or billing to pay sales tax is a decision
between the decorator and the client rather than a matter
of tax law. See Sections 212.02(15)(a), 212.06(1)(a),
213.756, F.S.

8. Amounts paid by clients to Taxpayer under the Interior
   Design Agreement for tangible personal property and the
   cost of installation thereon are not subject to Florida
   sales tax if they are for real property improvements,
   unless the taxpayer treats the Agreement as a mixed
   contract for real property improvement and provision of
   tangible personal property, the predominant nature of which
   is for tangible personal property. Rule 12A-1.051(8)(d),
   F.A.C.

9. Based on the Interior Design Agreement, Taxpayer's
   purchases of tangible personal property from other vendors
   on behalf of its clients qualify for resale exemption, as
   long as Taxpayer does not purchase the items to consume
   itself in real property improvement (unless part of a mixed
   contract qualifying as one for provision of tangible
   personal property) on behalf of its client. Rule 12A1.051(8)(d), F.A.C.

10. Taxpayer must collect Florida sales tax on freight,
    insurance, and delivery charges that are charged to clients
    under the Interior Design Agreement, because they are part

of the cost of the item and because the client has no role
in the selection of the provider of these services. Rule
12A-1.045, F.A.C.

11. Once an Interior Design Agreement for all three design
    phases is entered into by a client and Taxpayer, a client
    cannot have Taxpayer modify or amend the Agreement so as to
    reduce the overall impact of Florida sales taxes on the
    entire contract for any purpose, "i.e. by later having the
    client enter into a separate real property contract with
    separately stated labor charges."

12. Late charges in the form of interest imposed on a client
    are not subject to Florida sales tax. They do not meet the
    definition of charges for a taxable transaction, because
    they do not involve the transfer of title or possession of
    tangible personal property. Section 212.06(1)(a), F.S.

13. As to client cancellation charges required under the
    Interior Design Agreement, i.e., 35% purchasing fee and 25%
    restocking fee, such fees charged by Taxpayer are solely
    for services, do not meet the definition of a taxable sale,
    a transfer of title or possession of tangible personal
    property, and are not subject to Florida sales tax, as long
    as such fees are separately described and billed. Section
    212.06(1)(a), F.S.

14. Taxpayer should not impute a sales tax amount to a
    customer's purchase of tangible personal property when it
    sends a designer to a retail store, with a client and the
    customer purchases tangible personal property directly from
    such retail store because Taxpayer did not sell this
    tangible personal property to the customer. Under the facts
    proffered, the retail store would collect and remit sales
    tax on what it sells as a result of this visit. Nor should
    any fees charged by Taxpayer for accompanying the customer
    be taxed, because this is a nontaxable service as long as
    such fees are separately described and billed.

15. In a situation where the Interior Design Agreement requires
    that the Taxpayer's client pay a deposit in advance of any

purchase of furniture, and an invoice is issued to the
client in advance of the client's taking delivery and
possession of furniture, sales tax should appear on the
invoice on the price and the design fee, unless the design
fee has been billed and taxed on a separate invoice. The
tax is due on sale to the customer as described in the
response to question 7. In the example: Where the Agreement
calls for $80,000.00 for Phase II design work and
$40,000.00 for furniture purchases including applicable
markup for a total contract price of $120,000.00. The
client has remitted a deposit for all services and
furniture. Shortly after Phase II and Phase III work is
undertaken, the client is invoiced for furniture having a
cost to the client of $400.00. The invoice date is 1/31.
The client subsequently takes delivery of the selected
furniture on 3/31. No tax is due on the Phase II services
as long as the following requirements are met: design fees
are separately stated; they are allocated in the contract
to design only; the amount of the design fee is not
contingent on the purchase of tangible personal property;
the design agreement does not require the purchase of
tangible personal property; and the contract provides for
separate pricing of tangible personal property. Tax is on
the $40,000.00 purchase price of the furniture and any
Phase II or III services, whatever price they turn out to
command, either $25,000.00 or $10,000.00, that fail the
seven part test for being disassociated from the sale of
the tangible personal property. The tax is due on delivery
and acceptance on 3/31, regardless of the size of any
deposit or when such deposit is remitted. Section
212.06(1)(a), F.S.

16. In the situation set out in question 15, the deposit could
    be used to remit the tax if no other funds are available,
    because the tax is due at the moment of sale. Section
    212.06(1)(a), F.S. The Department has no authority to
    dictate the source of funding for the tax remitted. If the
    Taxpayer and its client have a deposit available for the
    purpose of remitting sales tax, the Department has no
    requirement that it be used or not used. The Department is
    charged with the responsibility of requiring that tax be

remitted when the sale occurs. Since the Taxpayer is
responsible for collecting and remitting sales tax, the
Taxpayer would be wise to make certain that funds are
available for the purpose when due.

17. If the Taxpayer takes a client to a retail store to assist
    the client in selecting artwork, accessories, etc., and the
    Taxpayer charges for these services on an hourly basis
    based on a schedule of rates for each professional designer
    (employee), these fees are not taxable as long as the
    billing for these services is clear and unless the Taxpayer
    and not the Taxpayer's client orders the tangible personal
    property. If the Taxpayer is making the purchases for its
    client, then the hourly fees are taxable as services that
    are part of the sale. Sections 212.02(16) and 212.06(1)(a),
    F.S. If this service is not taxable, its non-taxability is
    not affected if Phase II and III design fees are taxed as
    part of the sales price of other tangible personal
    property.

18. Taxpayer is not permitted to remove its travel costs from
    the taxable sales price of the tangible personal property
    by treating them as separately reimbursed costs. Sections
    212.02(16) and 212.06(1)(a), F.S. If no tangible personal
    property delivered pursuant to the contract is ever in
    Florida, no design fee is taxable. In order for the design
    fee to be taxable, there must be a taxable sale of tangible
    personal property, meaning that it must become part of the
    general mass of the property of this state.

19. Much of this question is answered in paragraph 19. If one
    item is purchased from a Florida manufacturer for export
    out of Florida, by common carrier, it is not considered a
    Florida sale and tax is not due on the sale or the design
    fee. If the purchase is for delivery in Florida, it is a
    Florida sale and would render any services that are part of
    the sale, such as a design fee, no matter how large,
    taxable. The use of a resale certificate is not relevant to
    the taxability of this type of transaction as between the
    Taxpayer and its client.

20. You set out additional facts for consideration:

In order to avoid any issue on whether Florida sales taxes
are not due and payable on any portion of an Interior
Design Agreement which would otherwise fall within the
scope of a "real property contract" or "mixed contract" for
the provision of real property improvements, as such terms
are defined under the Florida Administrative Code, the
Interior Design Agreement is revised to contain the
following recital:

The Designer and Client agree that all purchases of
tangible personal property made by the Client from the
Designer are subject to Florida sales tax,
notwithstanding any exemption from sales tax that may
otherwise be extended to the Client in accordance with
Florida law. Accordingly, Designer shall collect from
Client, the applicable sales tax percentage, i.e., 6%
on all of its design fees and charges from Phase II
and III services based on the gross sales price.

21. In the situation set out in question 20, the Taxpayer may
    not use a resale certificate. This transaction does not
    meet the requirements of a sale for resale. The Taxpayer
    owes use tax on all materials consumed in its real property
    improvement contracts whether or not it mistakenly charges
    tax to its clients that they do not owe.

22. If the client enters into a contract for design services
    that is exclusively for real property improvement and
    design services only, i.e. wallcoverings, carpet, built-in,
    murals, etc., the cost of each item is not taxable to the
    client. The Taxpayer is required to pay use tax on each
    item. No resale certificate should be used since this is
    not a sale for resale. The design fees are not taxable. Any
    markup charged to the client would simply be another of the
    costs that determine the total cost of the real property
    improvement to the client, just as the use tax that the
    Taxpayer has paid on the materials that it consumed in the
    real property improvement , i.e. wallcoverings, carpet,
    built-in, murals, etc., are costs the make up the contract

price.

This response constitutes a Technical Assistance Advisement
under Article 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 Article 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 Article 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.

Sincerely,

Karen Kugell
Senior Attorney
Technical Assistance and Dispute Resolution
(850) 922-4834

KK/
Enclosure: Rule 12A-1.039, F.A.C.
Control #: 45232

12A-1.039 Sales for Resale.
(1)(a) It is the specific legislative intent that each and

every sale, use, storage, consumption, or rental is taxable,
unless such sale, use, storage, consumption, or rental is
specifically exempt. The exempt nature of the transaction must
be established by the selling dealer.
(b) A sale for resale is exempt from the tax imposed by
Chapter 212, F.S., only when the sale for resale is in strict
compliance with the provisions of this rule. For purposes of
this rule, a "sale for resale" includes the following sales,
leases, or rentals when made to a person who is an active
registered dealer. This is not intended to be an exhaustive
list.

1. The sale of tangible personal property to a dealer when
   such property will be resold to the dealer's customers.
2. The sale, lease, or rental of tangible personal property
   to a dealer when such property will be held exclusively for
   leasing or rental purposes, pursuant to Rule 12A-1.071(2)(a),
   F.A.C.
3. The sale of taxable services identified in Rule 12A1.0161(1), F.A.C., to a dealer when such services are being
   resold to the dealer's customers under the conditions stated in
   Rule 12A-1.0161(4), F.A.C.
4. The lease or rental of real property to a dealer when
   such property will subsequently be leased, rented, or licensed
   by the dealer's tenants.
5. The lease or rental of real property to a dealer when
   such property will subsequently be leased, rented, or licensed
   as transient accommodations by the dealer's tenants.
6. The sale of tangible personal property to a dealer when
   such property will be incorporated as a material, ingredient, or
   component part of tangible personal property that is being
   produced for sale by manufacturing, processing, or compounding.
7. The sale of inserts of printed materials that are
   distributed as a component part of a newspaper or magazine, as
   provided in s. 212.05(1)(h), F.S.
8. The sale of tangible personal property to a repair
   dealer, when such property will be incorporated into and sold as
   part of a repair of tangible personal property by such dealer.
9. The alteration, remodeling, maintenance, adjustment, or
   repair of tangible personal property (when labor and materials
   are provided) that is held in inventory for resale or
   exclusively for leasing purposes by a dealer.

(c) For purposes of this rule, "active registered dealer"
means a person who is registered with the Department as a dealer
for sales tax purposes and who is required to file a sales and
use tax return during each applicable reporting period, as
provided in s. 212.11(1), F.S.
(2) ANNUAL RESALE CERTIFICATES ISSUED BY THE DEPARTMENT.
(a) For each calendar year, the Department of Revenue will
issue to each active registered dealer an Annual Resale
Certificate (form DR-13). A newly registered dealer will receive
a Sales and Use Tax Certificate of Registration (form DR-11) and
an Annual Resale Certificate. The business name and location
address, the registration effective date, and the certificate
number will be indicated on the Annual Resale Certificate.
(b) Dealers who lose their Annual Resale Certificate may
request a replacement by contacting the Department at 1-800-3523671. Persons with hearing or speech impairments may call the
Department's TDD, at 1-800-367-8331. Written requests should be
addressed to Central Registration, Florida Department of
Revenue, 5050 West Tennessee Street, Building E, Tallahassee,
Florida 32399-0100.
(3) Except as provided in subsection (4), a dealer making a
sale for resale is required to document the exempt sale by
CHOOSING ONE of the following three methods:
(a) COPIES OF ANNUAL RESALE CERTIFICATES OBTAINED BY THE
SELLING DEALER. The selling dealer who makes a tax exempt sale
for the purposes of resale must obtain a copy of the purchaser's
current Annual Resale Certificate, or a Transaction Resale
Authorization Number or Vendor Resale Authorization Number
issued by the Department.

1. The copy of the Annual Resale Certificate must be signed
   by the purchaser or the purchaser's authorized representative.
2. A selling dealer may make sales for resale to a
   purchaser whose current Annual Resale Certificate is on file
   without seeking a new Annual Resale Certificate for each
   subsequent transaction during that calendar year. A new Annual
   Resale Certificate must be obtained each calendar year. Except
   for sales made to purchasers who purchase on account from the
   dealer on a continual basis, a selling dealer may only make
   exempt sales for resale to purchasers during the calendar year
   for which the purchaser's Annual Resale Certificate appears
   valid on its face.

3. For sales made to purchasers who purchase on account
from a dealer on a continual basis, the selling dealer may rely
upon the Annual Resale Certificate beyond the expiration date of
the certificate and is not required to obtain a new Annual
Resale Certificate each calendar year. For purposes of this
paragraph, the phrase "purchase on account from a dealer on a
continual basis" means that the selling dealer has a continuing
business relationship with a purchaser and makes recurring sales
on account to that purchaser in the normal course of business.
For purposes of this paragraph, a sale "on account" refers to a
sale where the dealer extends credit to the purchaser and
records the debt as an account receivable, or where the dealer
sells to a purchaser who has an established cash or C.O.D.
account, similar to an "open credit account." For purposes of
this paragraph, purchases are made from a selling dealer on a
"continual basis" if the selling dealer makes sales to the
purchaser no less frequently than once in every twelve month
period in the normal course of business.
(b) TRANSACTION RESALE AUTHORIZATION NUMBER ISSUED AT
POINT-OF-SALE - VALID FOR SINGLE TRANSACTION ONLY. When making a
tax exempt sale for the purposes of resale, the selling dealer
may obtain a Transaction Resale Authorization Number from the
Department in lieu of obtaining a copy of an Annual Resale
Certificate from the purchaser or a Vendor Resale Authorization
Number from the Department.

1. A "transaction resale authorization number" must be
   obtained by the selling dealer at the point-of-sale through use
   of an automated nationwide toll-free telephone verification
   system. The nationwide toll-free number to access the system is
   1-877-357-3725.
2. The selling dealer must key in the purchaser's sales tax
   certificate of registration number through use of a touch-tone
   phone. The system will either issue a 13 digit transaction
   resale authorization number or alert the selling dealer that the
   purchaser does not have a valid resale certificate. Callers who
   do not have a touch-tone phone will be connected to a live
   operator. Persons with hearing or speech impairments may call
   the Department's TDD, at 1-800-367-8331.
3. A transaction resale authorization number is not valid
   to exempt subsequent resale purchases or rentals made by the
   same purchaser. A selling dealer must obtain a new transaction

resale authorization number for each and every resale
transaction.

4. The selling dealer must document the transaction resale
   authorization number on the sales invoice, purchase order, or a
   separate form that is prepared by either the purchaser or the
   selling dealer. The sales invoice, purchase order, or separate
   form must contain the following statement: "The purchaser hereby
   certifies that the property or services being purchased or
   rented are for resale." This statement must be followed by the
   signature of the purchaser. The signature may be obtained by the
   selling dealer through use of an electronic signature pad or
   other electronic method.
5. Alternatively, in lieu of meeting the requirements of
   subparagraph 4., the transaction resale authorization number may
   be documented on a properly completed Uniform Sales and Use Tax
   Certificate-Multijurisdiction, as provided in subsection (8) of
   this rule.
   (c) VENDOR RESALE AUTHORIZATION NUMBER FOR REGULAR
   CUSTOMERS WHO HAVE PREVIOUSLY SUBMITTED DOCUMENTATION TO THE
   SELLING DEALER - VALID FOR CALENDAR YEAR ISSUED. When making a
   tax exempt sale for the purposes of resale, the selling dealer
   may obtain a Vendor Resale Authorization Number from the
   Department, in lieu of obtaining a Transaction Authorization
   Number or a copy of the purchaser's Annual Resale Certificate.
   This option is available to selling dealers throughout the
   calendar year without limitation.
6. The "Vendor Resale Authorization Number" is a customerspecific authorization number that will be valid for all sales
   for resale made to a particular customer during the calendar
   year.
7. To obtain vendor resale authorization numbers, the
   selling dealer must send to the Department, using an electronic
   medium, a list of the dealer's regular customers for which the
   dealer has a resale certificate number or outdated Annual Resale
   Certificate on file. The request may be submitted on form DR600013, Request for Verification that Customers are Authorized
   to Purchase for Resale, or by providing the following
   information: date of request; name of the dealer's business;
   return address; name and telephone number of a contact person.
   The written request, or completed form DR-600013, should be
   forwarded to: Florida Department of Revenue, Production Control,

G30 Carlton Building, Tallahassee, Florida 32399-0100. The
electronic format for sending the customer data is provided in
form DR-600013 and may be obtained from the Department's web
site at http://www.myflorida.com/dor/ or by calling the
Department at (850)488-3516. In response to this request, the
Department will issue to the selling dealer, using the same
electronic medium, a list containing a unique vendor resale
authorization number for each customer who is an active
registered dealer.

3. The selling dealer may make exempt sales for resale to a
   customer during the period in which the vendor resale
   authorization number for that customer is valid. Vendor resale
   authorization numbers are valid for the remainder of the
   calendar year during which they are issued. However, vendor
   resale authorization numbers issued by the Department in
   November or December shall be valid for the remainder of the
   current calendar year and the next calendar year.
   (4) SALES OF ALCOHOLIC BEVERAGES AND CERTAIN MOTOR
   VEHICLES; SALES TO OUT-OF-STATE DEALERS.
   (a) The sale of alcoholic beverages by distributors
   licensed by the Division of Alcoholic Beverage and Tobacco,
   Department of Business and Professional Regulation, to others
   who are also licensed by the Division of Alcoholic Beverage and
   Tobacco, Department of Business and Professional Regulation, are
   deemed to be sales for resale. The distributors are not required
   to meet the documentation requirements provided in subsection
   (3) of this rule.
   (b) The sale of motor vehicles or recreational vehicles
   through a motor vehicle auction licensed by the Department of
   Highway Safety and Motor Vehicles, pursuant to s.
   320.27(1)(c)4., F.S., to other motor vehicle dealers licensed by
   the Department of Highway Safety and Motor Vehicles under s.
   320.27(2), F.S., are deemed to be sales for resale. The motor
   vehicle auction is not required to meet the documentation
   requirements provided in subsection (3) of this rule.
   (c) A sale to a nonresident dealer who is not required to
   be registered in this state for resale outside this state is
   governed by Rule 12A-1.064(2)(b), F.A.C., or Rule 12A-1.007(6),
   F.A.C. However, blanket resale affidavits from out-of-state
   motor vehicle dealers are acceptable in lieu of individual
   affidavits in Rule 12A-1.007(6), F.A.C., for each sale of each

motor vehicle to such out-of-state motor vehicle dealers.
(5) BURDEN OF ESTABLISHING EXEMPT NATURE OF SALES FOR
RESALE
(a) A selling dealer who makes a sale for resale in good
faith, and who complies with the requirements of subsections (3)
and (4) of this rule, has met the burden of proof for
establishing the exempt nature of the sale, and is relieved from
any liability for tax due on that sale. Submission of copies of
Annual Resale Certificates to the Department that are obtained
after the sale from purchasers who were active registered
dealers at the time of the sale will be considered sufficient
compliance with subsection (3) when submitted during audit or
protest, but will not be acceptable if submitted during any
proceeding under Chapter 120, F.S. or in any circuit court
action under Chapter 72, F.S.
(b)1. A sale that is not in compliance with the
requirements of subsections (3) and (4) of this rule is presumed
to be a retail sale, and the selling dealer will be liable for
any applicable sales tax not collected and remitted on that
sale.

2. For a sale that is not in compliance with the
   requirements of subsections (3) and (4), but that is made to a
   person who was an active registered dealer at the time of the
   sale, and it would be reasonable to assume, based on the nature
   of the purchaser's business, that the sale was for the purposes
   of resale, the presumption that the sale is a retail sale can be
   overcome during an audit or protest.
3. A sale made to a person who was not an active registered
   dealer, other than a nonresident dealer, at the time of the
   transaction is a retail sale, and can never be considered a sale
   for resale. However, a selling dealer who accepts an Annual
   Resale Certificate that appears valid on its face will not be
   held liable for any tax due on this transaction, if it is later
   determined that the purchaser was not an active registered
   dealer at the time of the transaction.
   (6) RECORDS REQUIRED. Resale certificates created and
   issued by purchasers that were based on the Department's
   suggested format provided in Rule 12A-1.039, F.A.C., effective
   12-13-94, are valid only for the purpose of documenting sales
   for resale made prior to February 1, 2000. The selling dealer
   must also maintain copies of receipts, invoices, billing

statements, or other tangible evidence of sales, copies of
Annual Resale Certificates and other certificates, and Vendor
Resale Authorization and Transaction Authorization Numbers until
tax imposed by Chapter 212, F.S., may no longer be determined
and assessed under s. 95.091(3), F.S. Electronic storage by the
selling dealer of the copy of the Annual Resale Certificate or
other required documentation through use of imaging, microfiche,
or other electronic storage media will be sufficient compliance
with the provisions of this subsection.
(7) PROVISIONS APPLICABLE TO PERSONS CLAIMING THE RESALE
EXEMPTION.
(a) Annual Resale Certificates may only be used by
purchasers who hold a valid Sales and Use Tax Certificate of
Registration (form DR-11) issued by the Department, and whose
registration status is currently active. For dealers who have
been in business for less than the full calendar year, the
effective date of the Annual Resale Certificate (form DR-13)
will be the postmark or hand delivered date of the Sales and Use
Tax Application for Certificate of Registration. The effective
date is found in the block labeled "Registration Effective Date"
on the Sales and Use Tax Certificate of Registration (form DR11).
(b) A dealer whose Sales and Use Tax Certificate of
Registration has been revoked or whose registration status has
been inactivated or canceled by the Department is prohibited
from purchasing, leasing, or renting taxable property or
services for the purposes of resale exempt from tax. However, a
selling dealer who accepts an Annual Resale Certificate that
appears valid on its face will not be held liable for tax on
this transaction, if it is later determined that the purchaser
was not an active registered dealer at the time of the
transaction.
(c) A purchaser who files returns on a consolidated basis
(80 code) may extend, and the selling dealer may accept, a copy
of the Annual Resale Certificate bearing the purchaser's
consolidated sales tax registration number (80 code number), in
lieu of extending a copy of the Annual Resale Certificate for
each active location that is reported under the consolidated
sales tax registration number (80 code number).
(d) For dealers who report sales tax using a county-control
number, the Annual Resale Certificate will only be issued to the

active reporting number(s) within each county. Dealers who
report using a county-control number must use the Annual Resale
Certificate issued to the active reporting number(s) to make
purchases for resale, except dealers who file returns under a
consolidated sales and use tax registration number (80 code).
Sales tax numbers issued to the individual locations within a
county are inactive, and will not be issued an Annual Resale
Certificate.
(e) Wholesalers and certain other sales tax dealers who are
currently on an inactive reporting status will need to contact
the Department at 800-352-3671 (Florida only) or 850-488-6800
(outside Florida) to have their sales tax registration number
activated in order to obtain the Annual Resale Certificate and
make exempt purchases for resale. By activating the sales tax
registration number, the dealer will then be required to file a
sales tax return during each applicable reporting period, as
provided in s. 212.11(1), F.S.
(f) Purchasers who are holders of a Direct Pay Permit,
Temporary Tax Exemption Permit, or other permits or exemption
certificates issued pursuant to Chapter 212, Florida Statutes,
are not required to extend or provide copies of their Annual
Resale Certificate to the selling dealer to make tax exempt
purchases authorized under the Direct Pay Permit, Temporary Tax
Exemption Permit, or other exemption certificates or permits
issued pursuant to Chapter 212, F.S.
(g) Purchasers of vessels and parts thereof used to
transport persons or property in interstate or foreign commerce
must complete the affidavit as required in Rule 12A-1.064(5),
F.A.C.
(h) A person who complied with the provisions of this rule
when making a purchase or rental of tangible personal property
that is intended for resale, but then uses, consumes,
distributes, or stores for use or consumption in this state, the
tangible personal property in a manner inconsistent with the
purposes described in paragraph (1)(b) of this rule, is required
to pay use tax as provided in s. 212.05(1)(b), F.S.
(i) Any person who, for the purpose of evading tax, uses an
Annual Resale Certificate or signs a written statement claiming
an exemption from sales tax knowing that tax is due on the
property or services at the time of purchase or rental, is
subject to the civil and criminal penalties provided in s.

212.085, F.S.
(j) The resale exemption shall also apply to the
importation of tangible personal property into this state for
resale in this state. A dealer who imports tangible personal
property into this state for resale must be an active registered
dealer at the time the property is imported into this state to
meet the resale exemption requirements. The determination
whether a particular item of tangible personal property imported
into this state is for resale is based on the same criteria
described in paragraph (1)(b) of this rule.
(8) USE OF UNIFORM SALES AND USE TAX CERTIFICATE MULTIJURISDICTION. The Department will allow purchasers to use
the Multistate Tax Commission's Uniform Sales and Use Tax
Certificate-Multijurisdiction. However, the use of this uniform
certificate must be in conjunction with the telephonic or
electronic authorization number method described in paragraph
(3)(b) or (c) of this rule.

Specific Authority 212.07(1)(b), 212.17(6), 212.18(2), 213.06
(1) FS. Law Implemented 95.091(3), 212.02 (14), 212.05(1)(b),
(j), 212.07(1), 212.085, 212.13(5)(c), (d), 212.17(6),
212.18(2), (3), 212.21(2), 213.053(10) FS, ss. 21, 22, 23, 24,
Ch. 99-208, L.O.F. History-Revised 10-7-68, 1-7-70, 6-16-72,
9-26-77, Amended 7-20-82, 4-12-84, Formerly 12A-1.39, Amended
1-2-89, 9-14-93, 12-13-94, 10-2-01.