Could a two-newspaper publisher exclude independent-carrier delivery charges when subscribers could choose pickup or mail instead?

Plain-English summary

Florida allowed the publisher to exclude its independent-carrier delivery charge from taxable sales price when subscribers could avoid the charge and it was separately stated. The ruling did not exempt the carrier-delivered newspaper subscription itself; it separated the optional transportation fee from the underlying sale.

The publisher offered three choices at the beginning or renewal of a subscription: independent-carrier delivery, pickup at one of its distribution centers, or delivery by mail.

Florida required three specific conditions

The delivery charge was nontaxable only if the publisher:

1. Disclosed the carrier delivery charge and mail delivery charge at initial signup or renewal.
2. Told the subscriber at that time that choosing pickup or mail avoided the carrier charge.
3. Separately stated the carrier delivery charge on the invoice.

The subscription notice showed the total amount due, transportation charge, and sales tax. When the subscriber alone could choose an option avoiding the charge, Rule 12A-1.045 allowed the transportation amount to be excluded.

Separate statement and customer choice worked together

An invoice line by itself was not sufficient. The cited transportation rule taxed a delivery charge when the seller agreed to deliver and the purchaser could not avoid the charge, even if separately stated.

Conversely, an avoidable charge also needed to appear separately rather than being buried in the taxable product price.

Mail and carrier subscriptions had different treatment

The ruling quoted Florida's periodical rule: subscriptions delivered in Florida by carrier or another nonmail method were taxable, while subscriptions designated for mail delivery at the beginning of the subscription period were exempt.

The TAA's central holding addressed the carrier transportation charge, not a blanket exemption for newspaper sales.

What this means for you

Newspaper and periodical publishers

Offer the delivery choice at signup and renewal, disclose the prices and avoidance options clearly, and separately state the carrier fee on the billing document.

Subscription businesses

Preserve evidence that the customer could act unilaterally to avoid transportation. A theoretical alternative not communicated to the subscriber may not satisfy the ruling's conditions.

Accountants and tax professionals

Analyze the subscription and delivery charge separately. Confirm the elected delivery method at the start of each subscription period and the invoice presentation.

Common questions

Q: Was a carrier-delivered newspaper subscription taxable?
A: The quoted rule treated Florida carrier-delivered subscriptions as taxable.

Q: Was the independent-carrier fee taxable?
A: No, when the three disclosure, choice, and separate-statement conditions were met.

Q: Could subscribers avoid the carrier fee through pickup?
A: Yes. They could use a distribution center.

Q: Did mail delivery receive the same treatment as carrier delivery?
A: No. A subscription designated for mail at the beginning of the period was exempt under the quoted rule.

Citations and references

• Fla. Stat. § 212.02(16) — sales price includes services that are part of the sale
• Fla. Stat. § 212.05 — sales tax on retail sales of tangible personal property
• Fla. Stat. § 212.07(2) — dealer collection and invoice duties
• Fla. Stat. § 212.08(7)(w) — mailed-newspaper exemption referenced by the taxpayer
• Fla. Admin. Code r. 12A-1.008(1) — periodical subscriptions by delivery method
• Fla. Admin. Code r. 12A-1.045 — transportation-charge separate-statement and customer-choice rules

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 04A-033

Original ruling text

QUESTION 1: Are newspaper delivery charges subject to sales
tax when the charge is separately stated and can be avoided
by the customer?

ANSWER 1 - Based on Facts Below: No. The Company is not
required to collect sales tax on the charge for newspaper
delivery by independent carriers if: 1) at the time of the
initial subscription or subsequent renewal, the subscriber
is informed of the carrier delivery charge and mail
delivery charge; 2) at the time of the initial subscription
or subsequent renewal, the subscriber is informed that the
delivery charge can be avoided by an election to either
pick up the newspapers at a distribution center or to
receive the newspapers by mail; and 3) the carrier delivery
charge is separately stated on the invoice.

May 26, 2004

Subject: Technical Assistance Advisement 04A-033
Newspaper Delivery Charges
Sales and Use Tax
Sections 212.02 and 212.05, F.S.
Rule 12A-1.045, F.A.C.

Dear :

This response is in reply to your petition dated April 15, 2004,
requesting the Department's issuance of a Technical Assistance
Advisement pursuant to s. 213.22, F.S., and Chapter 12-11,
F.A.C., regarding the above referenced matter and party. An
examination of your petition has established that you have
complied with the statutory and regulatory requirements for
issuance of a TAA. Therefore, the Department is hereby granting
your request for issuance of a TAA.

ISSUE

Whether newspaper delivery charges are subject to sales tax when
the charge is separately stated and can be avoided by the
customer.

FACTS

You have provided a letter and four documents (the "Documents")
proposed to be used by the Taxpayer. Your letter provides in
part:

... The Taxpayer, a newspaper publisher, publishes two
daily newspapers commonly known as [Newspapers]. The
Taxpayer has its principal offices in ... Florida. The
Taxpayer sells newspapers through various means, including
subscriptions whereby a subscriber agrees to receive and
pay for the newspaper for a specified period of time,
typically 4, 8, 13, 26 or 52 weeks. Delivery of the
newspaper is made to the subscriber's residence or business
by independent contractors who have written agreements with
the Taxpayer to deliver newspapers within a specified
geographic territory. The Taxpayer pays the independent
contractor for this service. Subscribers may, upon request,
have the newspaper mailed to them rather than have the
paper delivered by a carrier.

Historically, subscribers who had their paper delivered by
the independent carrier were charged appropriate Florida
sales tax (including local option taxes where applicable)
based upon the total amount charged, which effectively
included the delivery charge incurred by the Taxpayer and
which was not separately stated on the subscriber's
invoice.

On March 1, 2004, the Taxpayer changed its delivery and
billing practices. Subscribers will now pay a separate
price for the newspaper and a charge for delivery.
Pursuant to the new procedure, subscribers will have three
delivery options at the commencement or renewal of a
subscription period. These options are:

(1) A subscriber may elect to have the paper delivered

by carrier.

(2) A subscriber may elect to pick up the paper at a
distribution center operated by the Taxpayer.

(3) A subscriber may elect to receive the paper by
mail delivery.

... Subscribers are free to choose their delivery options
at the commencement of the initial subscription period or
at the commencement of any renewal period....

In the case of new subscriptions or renewals, all
subscribers will be sent a subscription notice confirming
the subscription or renewal. The subscription notice sets
forth the amount due for a subscription and separately
states the charge for delivery (referred to as
transportation costs in the notice) and the amount of sales
tax that is imposed on the price for the newspaper.
Although the subscription price may vary for customers
depending on service type and delivery area, the
transportation cost remains the same, and is reflected on
the document. The specific amount for the newspaper cost
is not separately stated. Under the new procedure,
appropriate sales tax (including local option taxes where
applicable) will be charged on the implicit sales price of
the newspaper but not the delivery charge, because the
subscriber has the option to receive the paper by carrier
delivery or to pick up the newspaper at a distribution
center and avoid the delivery charge. Consistent with the
Taxpayer's existing practice, sales tax will not be imposed
on the sale price of a newspaper when the subscriber elects
to receive the newspaper by mail at the beginning of a
subscription period. See, Section 212.08(7)(w), Fla. Stat.

TAXPAYER POSITION

In your letter, dated April 15, 2004, you further state:

... Finally, in Case No. 02-2-DS, the Department recently
issued a Declaratory Statement to the Miami Herald

Publishing Company, and concluded that the Miami Herald was
not required to collect sales tax for newspaper
delivery.... The Documents provided by the Taxpayer are
consistent with the foundation on which this Declaratory
Statement stands, and the Department should issue an
advisement to the Taxpayer that the procedures it employs,
as reflected in the Documents, [result] in no sales tax
being imposed on the transportation costs.

APPLICABLE AUTHORITY

Section 212.05, F.S., states in pertinent part as follows:

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....

(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 212.02(16), F.S., defines "sales price" as follows:

(16) "Sales price" means the total amount paid for tangible
personal property, including any services that are a part
of the sale, valued in money, whether paid in money or
otherwise, and includes any amount for which credit is
given to the purchaser by the seller, without any deduction
therefrom on account of the cost of the property sold, the
cost of materials used, labor or service cost, interest
charged, losses, or any other expense whatsoever....

Section 212.07(2), F.S., states:

(2) A dealer shall, as far as practicable, add the amount
of the tax imposed under this chapter to the sale price,
and the amount of the tax shall be separately stated as
Florida tax on any charge ticket, sales slip, invoice, or
other tangible evidence of sale. Such tax shall constitute
a part of such price, charge, or proof of sale which shall
be a debt from the purchaser or consumer to the dealer,
until paid, and shall be recoverable at law in the same
manner as other debts. Where it is impracticable, due to
the nature of the business practices within an industry, to
separately state Florida tax on any charge ticket, sales
slip, invoice, or other tangible evidence of sale, the
department may establish an effective tax rate for such
industry. The department may also amend this effective tax
rate as the industry's pricing or practices change. Except
as otherwise specifically provided, any dealer who
neglects, fails, or refuses to collect the tax herein
provided upon any, every, and all retail sales made by the
dealer or the dealer's agents or employees of tangible
personal property or services which are subject to the tax
imposed by this chapter shall be liable for and pay the tax
himself or herself.

Rule 12A-1.008, F.A.C., states in pertinent part as follows:

(1)(a) For purposes of this rule, the term "periodicals"
includes newspapers, community newspapers, shoppers,
newsletters, magazines, and other periodicals, but excludes
books, whether published in serial form or otherwise.

(b)1. The sale of copies of periodicals is subject to tax.
The sale of subscriptions to periodicals that are delivered
to a subscriber in this state by a carrier or means other
than by mail, such as home delivery, is subject to tax.
When the designation of delivery is in this state by means
other than by mail at the beginning of the subscription
period, and it is later changed to outside this state or to
be delivered by mail, the sale of the subscription is
subject to tax.

2. The sale of subscriptions to periodicals that are
delivered to the subscriber by mail are exempt whether
delivered to a customer in this state or outside this
state. When the destination of delivery at the beginning of
the subscription period is by mail, but it is changed
during the subscription period to be delivered in this
state by a carrier or by means other than by mail, the sale
of the subscription is exempt.... (Emphasis supplied)

Rule 12A-1.045, F.A.C., states in pertinent part as follows:

(1) "Transportation charges" include carrying, delivery,
freight, handling, pick up, shipping, and other similar
charges or fees.

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

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

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

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

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

DETERMINATION

The Taxpayer is not required to collect sales tax on the charge
for newspaper delivery by independent carriers if: 1) at the

time of the initial subscription or subsequent renewal, the
subscriber is informed of the carrier delivery charge and mail
delivery charge; 2) at the time of the initial subscription or
subsequent renewal, the subscriber is informed that the delivery
charge can be avoided by an election to either pick up the
newspapers at a distribution center or to receive the newspapers
by mail; and 3) the carrier delivery charge is separately stated
on the invoice.

The subscription notice sets forth the amount due for a
subscription and separately states the charge for delivery
(referred to as transportation costs in the subscription notice)
and the amount of sales tax. Pursuant to Rule 12A-1.045(4)(a)
2., F.A.C., the charge can be avoided by a decision or action
solely on the part of the purchaser. In the present case,
providing the above three criteria are met, no tax is due on the
newspaper delivery charge.

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 advise 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 L. Koenitzer, CPA
Senior Tax Specialist
Technical Assistance & Dispute Resolution

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Control No. 59829