Which advertising inserts and insert envelopes distributed with a free mailed shopper qualified for Florida's publication sales-tax exemption?

Plain-English summary

The Florida Department of Revenue exempted inserts and insert-envelope packages that displayed the Shopper publication's branding statement. Inserts showing only an in-home date, or an in-home date plus an internal Version ID, did not qualify because they were not labeled as part of the designated publication.

The taxpayer published a free four-page advertising shopper distributed weekly or biweekly by mail across Florida markets. It also arranged several kinds of advertising inserts: taxpayer-facilitated inserts, multi-client inserts, client-supplied inserts, and envelopes assembled by a subsidiary's franchisees.

The Shopper itself qualified as an exempt publication

Section 212.08(7)(w) exempted regularly published, free-circulation publications whose content was primarily advertising and that were distributed by mail, home delivery, or newsstands.

The Department found the Shopper met those requirements. It was regularly mailed and contained 100% advertising for unrelated businesses.

Branding—not internal distribution data—satisfied the labeling test

Rule 12A-1.008(4) required an insert to be labeled as part of the designated shopper in its masthead, logo, gang logo, or supplement line.

Samples displaying the Shopper branding statement met that test, including branded individual inserts, branded envelopes, and envelopes containing branded inserts.

An in-home date only identified when the insert should arrive. A Version ID distinguished the insert and restricted it to a particular Shopper edition. Neither item, alone or together, branded the insert as part of the publication, so those samples were taxable.

Delivery and certification requirements also applied

Qualifying inserts had to be printed by the publisher or delivered directly by another printer to the publisher for inclusion in the distributed Shopper.

When an advertiser bought an insert from someone other than the publisher, it also had to give the seller an Annual Resale Certificate or exemption certificate stating that the publication was exempt under section 212.08(7)(w).

What this means for you

Publishers and direct-mail companies

Put the publication name or recognized branding in the insert's masthead, logo, gang logo, or supplement line. Internal production codes and mailing dates are not substitutes.

Advertisers and commercial printers

Deliver qualifying inserts directly to the publisher for inclusion and retain the resale or exemption certificate supporting the transaction.

Multi-client and envelope programs

The exemption can apply to an assembled insert envelope, but the envelope or included inserts must carry the publication branding and satisfy the other component-part requirements.

Common questions

Q: Was the free advertising Shopper exempt?
A: Yes. It was regularly published, mailed, and entirely advertising.

Q: Did an in-home date make an insert exempt?
A: No.

Q: Did adding a Version ID make it exempt?
A: No. The ruling required publication branding.

Q: What labeling qualified?
A: The Shopper branding statement in a masthead, logo, gang logo, or supplement line.

Q: Was a certificate required?
A: Yes, when the purchaser acquired the insert from a dealer other than the publisher.

Citations and references

• Fla. Stat. § 212.05(1)(g) — tax on periodicals and exemption conditions for component inserts
• Fla. Stat. § 212.08(7)(w) — free advertising-publication exemption
• Fla. Stat. § 212.02(16) — sales price
• Fla. Admin. Code r. 12A-1.008(4) — direct delivery, publication labeling, and certificate requirements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 05A-015

Original ruling text

SUMMARY
QUESTION 1: Are the provided Inserts exempt under the provisions of Rule 12A-1.008, F.A.C?
ANSWER 1 - Based of Facts Below: Yes. The Inserts envelope packages and Inserts that display the Shopper
branding statement do meet the requirements of the rule. However, Inserts and Insert envelope packages that only
contain the Shopper in-home date or the Shopper in-home date and Version ID do not meet the requirements of the
rule. Those items do not display the branding statements that are required by Rule 12A-1.008, F.A.C.

March 4, 2005

Re: Technical Assistance Advisement 05A-015
Sales & Use Tax - Inserts
Sections 212.02(16), 212.05, 212.08(7)(w), F.S.
Rule 12A-1.008, F.A.C.
Dear:
This is in response to your letter dated December 8, 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 XXX (Taxpayer) is in the business of providing a variety of direct mail
services to customers desiring to distribute direct mail materials to Florida recipients. You have also provided
additional information regarding the XXX (herein Shopper). You also state:
In addition to mailing services, the Taxpayer publishes [Shopper], a publication identified by its name - which is a
registered mark printed on the front banner of every issue. [Taxpayer's] two distribution facilities in Florida prepare
[Shopper] for distribution through the US Postal System to residential addresses spread across 14 regional markets in
Florida. In most markets, [Shopper] is distributed weekly. In certain smaller regional markets, [Shopper] is distributed
bi-weekly. The [Shopper] consists of four pages and is distributed through sixteen different markets in Florida. The
content of [the Shopper] is 100% advertising in every issue for a broad range of products and /or services offered by
unrelated types of businesses....
As part of its direct mail offerings, [the Taxpayer] contracts with customers to insert advertising supplements into its

[Shopper] publication. The inserts are 100% advertising in all instances and over a broad range of products and /or
services. These inserts are of four types: [Taxpayer]-facilitated inserts, multi-client inserts, client-supplied inserts, and
SuperCoupsTM (herein Subsidiary) insert packages.(FN 1)

1. [Taxpayer]-Facilitated Inserts - [Taxpayer's] customer contracts with [Taxpayer] to facilitate the production of
   advertising inserts via third parties. Each insert contains a unique Version ID(FN 2) and in-home date in the
   supplemental line that restrict the insert for the specific [Shopper] publication in which it is distributed. In addition,
   [Taxpayer]-facilitated inserts contain [Taxpayer] branding statements. [Taxpayer] will be expanding these branding
   statements to include a reference to the [Shopper] trademark. Once these inserts are produced, [the Taxpayer's]
   subcontracted printer delivers the completed inserts directly to [the Taxpayer's] facility for distribution.
2. Multi-Client Inserts - Two or more [Taxpayer] customers contract with [the Taxpayer] to facilitate the production of
   an advertising insert that advertises different products or services for the different companies on the same insert.
   Each insert contains a unique Version ID and in-home date in the supplemental line that restrict the insert to the
   specific [Shopper] publication in which it is distributed. In addition, multi-client inserts contain [Taxpayer] branding
   statements. [The Taxpayer] will be expanding these branding statements to include a reference to the [Shopper]
   trademark. Once these inserts are produced, [the Taxpayer's] subcontracted printer delivers the completed inserts
   directly to [the Taxpayer's] facility for distribution.
3. Client-Supplied Inserts - [Taxpayer's] customer contracts directly with third parties to develop client-supplied
   advertising inserts. These inserts specifically identify the [Shopper] in-home date. However, some clients include a
   Version ID that is unique to the [Shopper] publication on their inserts, and other clients do not. Some clients plan to
   include [Shopper] branding statements on their inserts in the future, and other clients do not. Once the inserts are
   produced, the client's printer delivers the completed inserts directly to [the Taxpayer] for distribution.
4. [Subsidiary] Inserts Packages - A [Subsidiary] Franchisee assembles an envelope containing advertising inserts for
   many unrelated companies. The inserts are all produced by [the Taxpayer] pursuant to franchisee specifications. After
   assembling the insert envelopes, [the Subsidiary] forwards the envelopes to [the Taxpayer] to be inserted into [the
   Shopper] at [the Taxpayer's] facility. [The Taxpayer] then inserts the [Subsidiary] packages into [the Shopper]
   publication for distribution. [The Subsidiary] is planning to display [the Shopper] branding statements on their
   envelopes in the future. In addition, all of the inserts included in the [Subsidiary] envelope itself will contain [Shopper]
   branding statements in the future.
   You have also indicated that the Shopper is distributed through the mail on a regular basis. You have included nine
   sample package inserts and envelopes for our review.
   ISSUE PRESENTED
   You have asked if the sale of the Taxpayer's Shopper and related inserts are exempt. You have provided a copy of
   the Shopper, along with six types of inserts, in nine attachments. Your list of advertising inserts is as follows:
5. Inserts that contain the Shopper in-home date

2. Inserts that contain the Shopper in-home date and Version ID

3. Inserts that contain Shopper branding statements
4. Insert envelope packages that display Shopper in-home date and Version ID
5. Insert envelope packages that display Shopper branding statements
6. Insert envelope packages that contain inserts that display Shopper branding statements
   TAXPAYER POSITION
   You state in your letter:
   [The Taxpayer] believes that each of the [Shopper] advertising inserts described above satisfy three of the four tests
   for an insert to qualify as a component part of an exempt shopper as detailed in TAA 95A-028. However, at the time
   that TAA 95A-028 was issued, Rule 12A-1.008[, F.A.C.] did not extend the publication exemption to [Shopper] inserts.
   The Department subsequently amended Rule 12A-1.008[, F.A.C.,] as of June 19, 2001, to recognize an exemption for
   shopper inserts. [The Taxpayer] believes these advertising inserts all readily meet the following three elements of the
   shopper insert requirements of Fla. Stat. s. 212.08(7)(w) and Rule 12A-1.008(4)[, F.A.C.]:
7. All inserts are advertising supplements distributed with the exempt [Shopper] publication.
8. All inserts (including client-supplied inserts) are delivered directly to [the Taxpayer] by third-party printers for
   inclusion in the [Shopper] publication.(FN 3)
9. [The Taxpayer's] customers who provide [the Taxpayer] with client-supplied inserts will provide their selling dealers
   with an exemption certificate, indicating that the client-supplied insert is exempt from Florida tax.
   Insert Labeling Element
   The exemption rules also require an insert to be labeled as part of the [Shopper] into which it is inserted and
   distributed. The Taxpayer] believes that certain types of inserts currently meet the labeling requirement, but is
   uncertain as to others.
   You have also stated that the Taxpayer believes that the following types of inserts currently meet the labeling
   requirement:
10. Inserts that contain the Shopper in home date
11. Inserts that contain the Shopper in-home date and Version ID

3. Inserts that contain Shopper branding statements

4. Insert envelope packages that contain the Shopper in-home date and Version ID
5. Insert envelope packages that display Shopper branding statements
6. Insert envelope packages that contain inserts that display Shopper branding
   statements
   APPLICABLE STATUTES AND RULES
   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 212.05(1)(g), F.S., provides that tax is due and payable:
   (g)1. At the rate of 6 percent on the retail price of newspapers and magazines sold or used in Florida.
7. Notwithstanding other provisions of this chapter, inserts of printed materials which are distributed with a newspaper
   or magazine are a component part of the newspaper or magazine, and neither the sale nor use of such inserts is
   subject to tax when:
   a. Printed by a newspaper or magazine publisher or commercial printer and distributed as a component part of a
   newspaper or magazine, which means that the items after being printed are delivered directly to a newspaper or
   magazine publisher by the printer for inclusion in editions of the distributed newspaper or magazine;

b. Such publications are labeled as part of the designated newspaper or magazine publication into which they are to
be inserted; and
c. The purchaser of the insert presents a resale certificate to the vendor stating that the inserts are to be distributed as
a component part of a newspaper or magazine.
Section 212.08(7)(w), F.S., provides in part:
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 1, 1997.
Rule 12A-1.008, F.A.C., states in pertinent part:
(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.
   (c) When a publisher bills or invoices the consumer directly for copies of or subscriptions to periodicals for delivery
   other than by mail, the publisher is required to register as a dealer and collect and remit tax. (See Rule 12A-1.060,
   F.A.C.)

(4)(a) Inserts, such as magazines, handbills, circulars, flyers, advertising supplements, and other printed materials
distributed with a newspaper, community newspaper, shopper, or magazine are a component part of the newspaper,
community newspaper, shopper, or magazine.
(b) Inserts are exempt from tax when:
1. The inserts are either printed by the publisher of the newspaper, community newspaper, shopper, or magazine or
delivered directly to the publisher by any other printer for inclusion in a distributed newspaper, community newspaper,
shopper, or magazine; and

2. The inserts are labeled as part of the designated newspaper, community newspaper, shopper, or magazine in the
masthead, logo, gang logo, or supplement line of the newspaper, community newspaper, shopper, or magazine to
which they are inserted; and

3. If the purchaser of the insert acquires the insert from a dealer other than the publisher of the periodical, the
   purchaser must present to the selling dealer a copy of the purchaser’s Annual Resale Certificate (form DR-13) or an
   exemption certificate, as provided in Rule 12A-1.038, F.A.C., stating that the publication is exempt from tax pursuant
   to s. 212.08(7)(w), F.S.
   Great weight is given to a rule that has been in effect over an extended period of time, unless it is clearly erroneous.
   State, Department of Commerce, Division of Labor v. Matthews Corp., 358 So.2d 256 (Fla. 1st DCA 1978); Pan
   American World Airways, Inc. v. Florida Public Service Commission, 427 So.2d 716 (Fla. 1983). Also, properly
   promulgated rules are presumptively valid. Agrico Chemical Co. v. Department of Environmental Regulation, 365
   So.2d 759 (Fla. 1st DCA 1978).
   RESPONSE
   Section 212.08(7)(w), F.S., exempts from tax, among other things, free, circulated publications that are commonly
   called shoppers. The Shopper - Attachment 11, in the instant case, does meet these requirements. Pursuant to Rule
   12A-1.008(4)(b), F.A.C., when inserts are labeled as part of the shopper, in the masthead, logo, gang logo, or
   supplement line of the shopper, the inserts are exempt. Per your request, the Insert, Insert envelope packages, and
   Inserts that display the Shopper branding statement do meet the requirements of the rule. As provided in your
   information, the following inserts with the branding statement are exempt:
4. Auto2 - 1/3 Sheet, "future" tag line - Attachment 3
5. Video2 - Postcard-size insert, "future" tag line - Attachment 5
6. Wireless2 - Full Sheet, "future" tag line - Attachment 7
7. Insert Envelope 2 - with ShopperTM - Attachment 9
8. Envelope Inserts - with ShopperTM - Attachment 10
9. Sample Shopper - Attachment 11

Per your request, Inserts and Insert envelope packages that only contain the Shopper in-home date or the Shopper inhome date and Version ID do not meet the requirements of the rule. The following inserts that do not have the
branding statement are not exempt:

1. Auto1 - 1/3 Sheet "current" tag line - Attachment 2

2. Video1 - Postcard-size insert, "current" tag line - Attachment 4

3. Wireless1 - Full Sheet, "current" tag line - Attachment 6
4. Insert Envelope 1 - with a ShopperTM - Attachment 8.
   The inserts with the branding statements satisfy all four elements stated in Rule 12A-1.008(4), F.A.C., and would
   qualify as a component part of an exempt shopper. These inserts are distributed with a shopper and delivered directly
   to the taxpayer. Pursuant to Rule 12A-1.008(4), F.A.C., the inserts are labeled as part of the shopper, in the
   supplement line. Rule 12A-1.008(4), F.A.C., also requires that the customers provide an exemption certificate or the
   purchaser’s Annual Resale Certificate stating that the publication is exempt from tax pursuant to s. 212.08(7)(w), F.S.
   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 L. Koenitzer, CPA
   Senior Tax Specialist
   Technical Assistance & Dispute Resolution
   (850) 922-9412
   vk/
   Control No. 62328

FOOTNOTE 1. Subsidiary is a wholly-owned subsidiary of Taxpayer. Subsidiary is a franchising operation that works
with independent franchisees to develop and distribute advertising inserts for multiple, unrelated companies.
FOOTNOTE 2. Version ID is an industry standard that distinguishes one insert from another. A [Shopper] Version ID
specifically restricts the insert to a specific [Shopper] publication.

FOOTNOTE 3. For [Subsidiary] inserts, [Subsidiary] prints the inserts, assembles the packages, and delivers the
assembled inserts for multiple clients to [the Taxpayer] for distribution.