Did a monthly Florida magazine made up primarily of advertising qualify for the sales-tax exemption for free-circulation shopper publications?

Plain-English summary

Florida concluded that the magazine's free-distribution copies qualified for the sales-tax exemption for “shopper” publications. The magazine came out monthly, was distributed mostly without charge, and consisted primarily of advertising.

The publisher printed about 25,000 copies. Most were given away or mailed free to potential advertisers; 286 went to paid mail subscribers and 200 were sold through a bookstore. The publisher reported that 59% of the magazine was advertising and submitted three sample issues for Department review.

Why the free copies qualified

Section 212.06(16) generally treated a publisher's free or self-consumed copies as taxable based on printing cost. Section 212.08(7)(w) and Rule 12A-1.008(3), however, exempted a periodical when it was:

1. Published regularly.
2. Distributed free by mail, home delivery, rack machine, newsstand, or a similar method.
3. Primarily advertising.

Based on the samples and stated distribution, the Department found those conditions satisfied for the copies distributed free.

The exemption required continuing compliance

The conclusion depended on the submitted issues being representative. Future editions had to remain primarily advertising and continue to meet the regular-publication and free-distribution requirements.

The publisher also had to give its printer the annual resale certificate and affidavit required by Rules 12A-1.008(6)(b) and 12A-1.038(5).

The ruling's express conclusion addressed the free copies. Although the facts mentioned paid mail subscriptions and bookstore sales, it did not give the bookstore copies the same express holding.

What this means for you

Advertising and community publishers

Measure both content and circulation. A free shopper can qualify when advertising is the primary content and free distribution is regular and documented.

Printers

Keep the publisher's required exemption documentation. The ruling did not treat a publisher's assertion alone as enough for the printer's records.

Accountants and tax professionals

Separate free-circulation copies, mailed subscriptions, and retail copies. They can fall under different provisions even when they are copies of the same magazine.

Common questions

Q: Were the magazine's free copies exempt?
A: Yes, based on the submitted samples and facts.

Q: How much of the magazine was advertising?
A: The publisher stated that 59% was advertising.

Q: Did the publication have to be entirely free?
A: The ruling involved mostly free circulation but also some subscriptions and bookstore sales. Its express shopper-publication conclusion covered copies distributed free.

Q: What had to be given to the printer?
A: The annual resale certificate and affidavit required by the cited rules.

Q: Was the exemption permanent?
A: No. The Department warned that the publication had to continue meeting the statutory conditions.

Citations and references

• Fla. Stat. § 212.05 — sales tax on retail tangible-personal-property sales
• Fla. Stat. § 212.06(16) — publisher use of free or self-consumed copies and printing cost
• Fla. Stat. § 212.08(7)(w) — qualifying subscriptions and free advertising publications
• Fla. Admin. Code r. 12A-1.008(3), (6)(b) — periodical exemption and printer documentation
• Fla. Admin. Code r. 12A-1.038(5) — exemption documentation
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 04A-024

Original ruling text

SUMMARY

QUESTION 1: Is the provided Publication exempt under the
provisions of Section 212.08(7), F.S.?

ANSWER 1 - Based on Facts Below: Yes. The Publication is
distributed on a regular basis, through the mail and free
of charge. It consists primarily of advertising. Based on
the information provided and on a review of the included
sample copies, the Publication satisfies the exemption
requirements of s. 212.08(7)(w), F.S.

Mar 31, 2004

Re: Technical Assistance Advisement 04A-024
Sales and Use Tax - Shoppers
Section, 212.08(7)(w), F.S.
Rule 12A-1.008(3), F.A.C.

Dear :

This is in response to your letter dated March 2, 2004, and
other correspondence provided requesting a technical assistance
advisement (TAA) regarding the above referenced party and
matter. Your letter has been carefully examined and the
Department finds it to be in compliance with the requisite
criteria set forth in Chapter 12-11, F.A.C. This response to
your request constitutes a TAA and is issued to you under the
authority of section 213.22, F.S.

FACTS

You state in your letter referenced above that your client
publishes XXX (Magazine) on a monthly basis. You state that
most of the 25,000 copies are printed and distributed for free
or mailed free to potential advertisers. 286 copies are
delivered by mail as paid subscriptions and 200 are sold through
a bookstore. You have enclosed three copies of the publication

for our review.

ISSUE PRESENTED

Whether the Magazine is exempt under the provisions of Section
212.08(7)(w), F.S.

TAXPAYER POSITION

You state in your letter:

... The [Magazine] is published on a regular basis, is
distributed mostly free of charge to the recipient by mail,
home deliver, rack machines, newsstands, or similar method,
and fifty-nine percent of [the Magazine] is composed of
advertisements. Therefore, we believe that [the Magazine]
qualifies for the sales tax exemption on the cost of
printing each of its editions, and no sales tax need be
paid to [the Magazine's] printer for the printing of each
edition....

You cite s. 212.08(7)(w), F.S., and Rule 12A-1.008(3), F.A.C.,
for support of your position.

APPLICABLE STATUTES AND RULES

Section 212.05, F.S., provides in pertinent part:

It is hereby declared to be the legislative intent that
every person is exercising a taxable privilege who engages
in the business of selling tangible personal property at
retail in this state, including the business of making mail
order sales, or who rents or furnishes any of the things or
services taxable under this chapter, or who stores for use
or consumption in this state any item or article of
tangible personal property as defined herein and who leases
or rents such property within the state.

(1) For the exercise of such privilege, a tax is levied on
each taxable transaction or incident, which tax is due and
payable as follows:

(a)1.a. At the rate of 6 percent of the sales price of each
item or article of tangible personal property when sold at
retail in this state, computed on each taxable sale for the
purpose of remitting the amount of tax due the state, and
including each and every retail sale.

Section 212.06(16), F.S., provides:

(16)(a) Notwithstanding other provisions of this chapter,
the use by the publisher of a newspaper, magazine, or
periodical of copies for his or her own consumption or to
be given away is taxable at the usual retail price thereof,
if any, or at the "cost price."

(b) For the purposes of this subsection, the term "cost
price" means the actual cost of printing of newspapers,
magazines, and other publications, without any deductions
therefrom on account of the cost of materials used, labor
or services cost, transportation charges, or other direct
or indirect overhead costs that are a part of printing
costs of the property. However, the cost of labor to
manufacture, produce, compound, process, or fabricate
expendable items of tangible personal property which are
directly used by such person in printing other tangible
personal property for sale or for his or her own use is
exempt. Authors' royalties, fees, or salaries, general
overhead, and other costs not directly related to printing
shall be deemed to be labor associated with manufacturing,
producing, compounding, processing, or fabricating
expendable items.

Section 212.08(7)(w), F.S., provides:

(w) Certain newspaper, magazine, and newsletter
subscriptions, shoppers, and community newspapers.-Likewise exempt are newspaper, magazine, and newsletter
subscriptions in which the product is delivered to the
customer by mail. Also exempt are free, circulated
publications that are published on a regular basis, the
content of which is primarily advertising, and that are

distributed through the mail, home delivery, or newsstands.
The exemption for newspaper, magazine, and newsletter
subscriptions which is provided in this paragraph applies
only to subscriptions entered into after March 31, 1997.

12A-1.008(3), F.A.C., provides:

(3)(a) Periodicals that meet the following requirements are
exempt from tax:

1. The periodical is published on a regular basis;
2. The periodical is distributed free of charge to the
   recipient by mail, home delivery, rack machines,
   newsstands, or similar method; and
3. The content of the periodical is primarily
   advertising.

(b) The sale of subscriptions to periodicals that are
delivered to the subscriber by mail are exempt.

(c) Distributors of tax exempt periodicals may issue an
exemption certificate to their vendors in lieu of paying
tax on the publishing or printing costs of, or for the
purchase of items, such as paper and ink, that are
incorporated into and become a component part of, the
publication.

RESPONSE

Section 212.05, F.S., provides that tax is imposed on the sales
price of each item or article of tangible personal property sold
at retail in this state. Section 212.06(16)(a), F.S., further
provides that the use by a publisher of copies of a newspaper,
magazine, or periodical for its own consumption or to be given
away is taxable. Use tax is due on the "cost price" of the
publication.

Section 212.08(7)(w), F.S., and Rule 12A-1.008(3), F.A.C.,
provide exemptions for certain publications from the tax imposed
by Chapter 212, F.S. The Magazine is distributed on a regular
basis, free of charge, through the mail. It consists primarily

of advertising.

The exemptions provided by s. 212.08(7)(w), F.S., apply to
publications like this one. One requirement is that they be
primarily advertising. Assuming these are representative
samples of the publication, the Magazine is primarily
advertising; therefore, it does qualify for the exemption for
copies that are distributed free.

You should provide the Annual Resale Certificate and affidavit
to your printer as required by Rule 12A-1.008(6)(b), F.A.C., and
Rule 12A-1.038(5), F.A.C. Copies of Rule 12A-1.008, F.A.C., and
Rule 12A-1.038, F.A.C., are enclosed.

We must caution you, however, that this conclusion is based on
the examination of the sample copies. The exempt publication
will need to continue to meet the requirements set forth in
section 212.08(7)(w), F.S., in order for the exemption to
continue.

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 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 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,

Valerie Koenitzer, C.P.A.
Senior Tax Specialist
Technical Assistance and Dispute Resolution
(850) 922-9412

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