Were a building-material seller's delivery and rooftop-loading charges part of the taxable sales price?

Plain-English summary

Bundled delivery charges were taxable, while separately stated optional rooftop-loading charges were not. Customers could arrange both delivery and loading themselves. But when the seller delivered materials, it folded the delivery charge into the product's unit price as one line item. That made delivery part of the taxable sales price.

The seller listed rooftop loading separately. Customers could avoid that charge by making their own arrangements, so the Department treated the optional service as nontaxable. The result did not change because third parties actually performed the loading for the seller.

What this means for you

Customer choice alone did not protect the delivery charge. Under the rule applied here, transportation had to be both separately stated and avoidable by the purchaser. The loading service met both conditions.

Common questions

Q: Why was delivery taxable? It was included in the taxable materials' unit price rather than separately stated.

Q: Why was rooftop loading not taxable? It was separately stated and optional to the customer.

Q: Did use of a third-party loading company matter? No. The ruling focused on the charge and customer choice.

Citations and references

• Fla. Stat. §§ 212.02(16) and 212.05 — sales price and tax on tangible property
• Fla. Admin. Code r. 12A-1.045 — transportation charges
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 02A-026

Original ruling text

SUMMARY

QUESTION: Are delivery/transportation charges or loading
charges are taxable as part of the sales price of the
materials sold?

ANSWER - Based on Facts Below: The delivery/transportation
charges are subject to tax, since they are not separately
stated. The loading charges are not subject to tax, since
they are separately stated, and the service for which they
are charged is optional to the customer.

May 23, 2002

Re: Technical Assistance Advisement 02A-026
Sales and Use Tax - Delivery & Loading Charges
Sections: 212.02, 212.05, F.S.
Rule: 12A-1.045, F.A.C.
Petitioner: XXX (herein "Taxpayer")
FEI: XX

Dear :

This letter is a response to your petition dated April 15, 2002,
for the Department's issuance of a Technical Assistance
Advisement ("TAA") concerning the above referenced party and
matter. Your petition has been carefully examined and the
Department finds it to be in compliance with the requisite
criteria set forth in Chapter 12-11, 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.

FACTS

The petition sets forth the following facts:

[Taxpayer] is a distributor of building materials and a
vast majority of the product it handles consists of roofing

and insulation material.... [Taxpayer] is deemed to be a
"materialman" as defined by Florida Statute s. 713.01(19)
and in the context of Florida's construction lien
scheme....

[Taxpayer] has 22 branches located throughout the State of
Florida. [Taxpayer] does business outside of Florida as
well. The business of [Taxpayer] consists primarily of the
sale of building materials to its customers which consist
almost exclusively of roofing contractors and general
contractors. These sales transactions are branch oriented.
That is to say, purchase orders received from [Taxpayer's]
customers are accepted at one of [Taxpayer's] 22 branches
through Florida and a yard ticket is prepared..., the
product is acquired either from [Taxpayer's] inventory and
delivered from the brand or direct-shipped from the
manufacturer, [Taxpayer's] vendor, to the customer's
location (typically an ongoing construction project), and
an invoice is generated....

As noted above, the product which [Taxpayer] supplies may
either be delivered by [Taxpayer] itself from inventory or
shipped by third-party shipper from the manufacturer's
inventory directly to [Taxpayer's] customer to a warehouse
or to the site of the construction project.

The typical transaction follows this model. [Taxpayer's]
customer transmits a purchase order at which point the
customer designates whether the product is to be delivered
and/or loaded onto the roof deck. If the customer does not
designate, then [it is] asked. [Taxpayer's] customers do
have the option to arrange for delivery of the product
themselves or to arrange for loading of the material onto
the roof deck themselves. If they select to have
[Taxpayer] deliver, then the delivery charges are included
in the unit cost of the product as a single line item on
the ensuing invoice. If they also [choose] to have
[Taxpayer] provide for loading, the loading charge is
included on the invoice but this is separately listed apart
from the unit cost of the goods.

Thus, while [Taxpayer] allows its customers to avoid
delivery and loading charges at option of the customer,
delivery charges, if applicable, are not separately billed
but loading charges are.

Delivery charges as the term is used herein involves
transportation charges and handling charges. Loading
charges as the term is used herein involves a service
whereby the product (typically roofing tiles or shingles)
[is] actually loaded or placed in separate stacks upon the
roof deck itself allowing the contractor to readily access
these materials. In all cases, the loading charges are
billed by [Taxpayer] to its customer but the actual loading
is performed by third-parties [whom Taxpayer] contracts
with for this service (i.e., [Taxpayer] itself does not
perform loading)....

REQUESTED ADVISEMENT

Advice is requested whether the delivery/transportation charges
or the loading charges are taxable as part of the sales price of
the materials sold.

LAW AND DISCUSSION

Section 212.05, Florida Statutes, generally imposes tax on the
sale of tangible personal property. The "sales price" of
tangible personal property is defined by section 212.02(16),
Florida Statutes, to mean the total amount paid for tangible
personal property, including any services that are part of the
sale. Services that are part of the sale are included in the
taxable sales price even though the charge for the service may
be separately stated.

Rule 12A-1.045, Florida Administrative Code, discusses the tax
treatment of transportation charges, such as delivery fees, and
states in pertinent part:

(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.

(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.... (Emphasis Supplied)

The rule is consistent with the position taken by the court in
Department of Revenue v. B&L Concepts, Inc., 612 So.2d 720 (Fla.
5th DCA 1993), where the court held:

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

In Taxpayer's case, the delivery/transportation charge is not
separately stated, but it is factored into the unit price of the
materials sold. When the charge is not separately stated, it
becomes part of the selling price of the items sold, regardless
whether the purchaser may opt to arrange its own delivery.

The loading charges, however, are in the nature of incidental
charges that are separately itemized and applied at the
purchasers' election. As such, the loading charges are not
properly included in the sales price of the materials sold.

CONCLUSION

The delivery/transportation charges are subject to tax, since
they are not separately stated. The loading charges are not
subject to tax, since they are separately stated, and the
service for which they are charged is optional to the customer.

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, your request and
related backup documents are public records under Chapter 119,
F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

Sara D. Faulkenberry
Tax Law Specialist
Technical Assistance and Dispute Resolution
850/414-9838

Control #49899