Were printing costs and incorporated paper and ink exempt for a free, advertising-heavy magazine mailed regularly to Florida high schools?

Plain-English summary

A publisher produced a magazine for high-school student athletes and mailed copies to athletic directors at Florida schools for free distribution to students. Each issue included local or regional sports articles designed to attract readers to paid advertisements, and advertising generally made up at least half of the content. The magazine followed the school academic and sports calendar and had documented recurring issues.

Florida held that the free copies qualified for the publication exemption. The statute required all five of these elements:

1. The item was free;
2. It was a circulated publication in an identifiable magazine format;
3. It was published regularly;
4. Its content was primarily advertising; and
5. It was distributed by mail, home delivery, or newsstands.

The magazine met every requirement. As a result, publishing and printing costs were exempt, as were purchases of paper, ink, and other items incorporated into the free publication.

The exemption did not extend to copies that were sold. Although each issue listed a $3.95 price, the TAA covered only copies distributed without charge. The publisher had to pay tax on printing costs and incorporated items for any non-free issue.

What this means for you

All five requirements must be documented

Free distribution alone is insufficient. Publishers need evidence of regular scheduling, primarily advertising content, qualifying publication format, and permitted delivery methods.

"Publication" means an identifiable printed work

The Department relied on the Val-Pak decision distinguishing a magazine or similar issue from unbound marketing pieces that may not qualify as a publication.

The exemption reaches production inputs

A qualifying distributor can give vendors an exemption certificate for printing or publishing costs and for component materials such as paper and ink.

Paid and free copies must be separated

The same title can have different treatment. Copies given away under the qualifying circulation were exempt; copies sold were not covered by this ruling.

Common questions

Q: Did the high-school sports magazine qualify?
A: Yes, for copies mailed to schools and distributed free.

Q: How much advertising was enough here?
A: The facts said paid advertising generally constituted at least 50% of every issue, and the Department found the issues primarily advertising.

Q: Were paper and ink exempt too?
A: Yes, when incorporated into qualifying free copies.

Q: What about copies sold for the listed $3.95 price?
A: Those copies were outside the free-publication exemption described in the ruling.

Citations and references

• Fla. Stat. § 212.08(7)(w) (free circulated publications and mailed subscriptions)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)
• Fla. Admin. Code r. 12A-1.008(3) (exempt periodicals and vendor certificates)
• Department of Revenue v. Val-Pak Direct Marketing Systems, Inc., 862 So. 2d 1 (Fla. 2d DCA 2003)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 08A-028

Original ruling text

SUMMARY

QUESTION: Whether the directory is exempt for printing costs under the provisions of
Section 212.08(7)(w), F.S.
ANSWER: The directory meets the five discrete requirements under the statute and rule.
It is: 1) free; 2) a circulated publication; 3) published on a regular basis; 4) composed of
primarily advertising; and 5) distributed through the mail, home delivery, or newsstands.
Therefore, the directory is exempt from sales and use tax.

October 7, 2008

XXX
XXX
XXX
XXX
Re:

Technical Assistance Advisement 08A-028
Publication Exemption
Sales and Use Tax
Section 212.08, Florida Statutes (F.S.)
Rule 12A-1.008, Florida Administrative Code (F.A.C.)
XXX
FEIN: XXX

XXX:
This is in response to your letter dated May 19, 2008, requesting this Department’s
issuance of a Technical Assistance Advisement (TAA) pursuant to section 213.22, F.S.,
and Rule Chapter 12-11, F.A.C., regarding the above referenced matter and party. An
examination of your letter 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 a TAA.
FACTS
Your letter provides, in part:
Relevant facts and circumstances

Technical Assistance Advisement
Page 2 of 6
[Taxpayer], a Delaware incorporated entity whose home office is in New York
and singular branch office located in Massachusetts, is a magazine publisher. The
magazine targets high school student athletes and is distributed free of charge to
various high schools in the United States, including Florida. The magazine
contains articles of local and regional interest to the high school student athlete
and paid advertising. Paid advertising generally constitutes at least 50% of total
content of the magazine every issue. The magazine is published regularly;
coinciding with the school's academic and sports calendar

year. The true object of the magazine is advertising[;] therefore the magazine is
available free of charge. Articles of local and regional sports interest are included
in every issue and intended to draw the respective student athletes to the magazine
and thus read the paid advertisements.
The magazine is printed out of state from Florida by a third party provider who
arranges all details of printing and delivery. All issues are delivered via United
States Postal Service (USPS) to the respective Florida high school's Athletic
Director (AD). The AD makes the magazine available to interested students.
The Company does not have an office, warehouse, employees or agents in the
state of Florida. However, [Taxpayer] has filed income tax returns in Florida and
apportioned activity based upon the number of magazines delivered to schools in
Florida as this was the Company's policy (it appears income tax nexus is not
established though this is not our reason for requesting TAA). The Company is
not registered for sales tax collection in Florida and has never collected sales tax
in Florida as the magazine is distributed free, nor has [Taxpayer] paid use tax in
Florida under the assumption the magazine is exempt.
Ruling Request
Is the free, primarily advertising content, magazine described above subject to
sales or use tax in Florida?
The Taxpayer included two issues of Rise magazine (“Magazine”). One of these issues
was numbered 53 for South Florida Region, September, 2007, and the second was
numbered 16 for Central Florida Region, December, 2007.
The Taxpayer provided two documents titled “Analyzed Non-Paid Circulation.” These
documents provide the circulation for each issue. The documents provide that in 2005,
the Taxpayer’s issues were published in September, October, November and December.
In 2006, the Taxpayer issues were published in January/February, March, April,
May/June, September, October, November and December. In 2007, the Taxpayer issues
were published in January/February, March, April and May/June. The Taxpayer
provided these documents as evidence to the regular publication of the Magazine.

Technical Assistance Advisement
Page 3 of 6
Each issue has a listed price of $3.95.
ISSUE
Do the Taxpayer’s issues of its Magazine, which are given away for free, qualify for the
publication exemption under Section 212.08(7)(w), F.S.?
APPLICABLE STATUTES AND RULES
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 1, 1997.
Rule 12A-1.008(3), F.A.C., provides:
(3) PERIODICALS EXEMPT FROM TAX.
(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.
   DISCUSSION
   First, tax exemptions are to be narrowly construed, and doubtful language should be
   construed against the taxpayer. Sebring Airport Auth. v. McIntyre, 642 So.2d 1072, 1073
   (Fla. 1994) (citing Volusia County v. Daytona Beach Racing and Recreational Facilities
   District, 341 So.2d 498, 502 (Fla. 1976) and Williams v. Jones, 326 So.2d 425, 435
   (Fla.1975)); United States Gypsum Co. v. Green, 110 So.2d 409, 413 (Fla. 1959).
   The section’s exemption applies to “free, circulated publications that are published on a
   regular basis, the content of which is primarily advertising, and that are distributed

Technical Assistance Advisement
Page 4 of 6
through the mail, home delivery, or newsstands.” See Section 212.08(7)(w), F.S., and
Rule 12A-1.008(3), F.A.C. Therefore, for the item to be exempt it must satisfy all of five
discrete requirements:
1) “free”;
2) a “circulated publication[]”;
3) “published on a regular basis”;
4) composed of “primarily advertising”; and
5) “distributed through the mail, home delivery, or newsstands.”
We will analyze each requirement below:

1. Free
   Each issue has a retail price of $3.95. Your request only asks about issues that are
   distributed free to high school athletic directors. This technical assistance advisement is
   limited to only those issues that are distributed free of charge.
   Only periodicals that are distributed free of charge and meet the other requirements under
   Section 212.08(7)(w), F.S., discussed below, are exempt from sales tax. Therefore,
   issues of the Taxpayer’s Magazine that are distributed free of charge meet the first
   requirement of the statute.
2. Circulated Publication
   The court in Department of Revenue v. Val-Pak Direct Marketing Systems, Inc., 862
   So.2d 1, 3 (Fla. 2 Dist. Ct. App. 2003), discussed the second requirement dealing with the
   meaning of the word “publication.” The court stated:
   The word publication - - like most, if not all words - - has a range of meanings. In
   some contexts, publication is a noun denoting the action of disseminating
   information. . . . Section 212.08(7)(w), however, does not use publication to
   denote or describe an action. In the context of the statute, which exempts the sale
   of certain tangible items from the sales tax, the word publication can only be
   understood as a concrete noun - - that is, a noun denoting a tangible item.
   When used as a concrete noun, publication is commonly understood to mean “a
   published work,” Webster’s Third New International Dictionary 1836 (1993)
   (emphases supplied), or “an issue of printed material offered for sale or
   distribution,” The American Heritage Dictionary of the English Language 1464
   (3d ed. 1992). As these definitions indicate, publication is a word commonly used
   to describe newspapers, magazines, and books. . . . A publication is presented in
   an identifiable form as a work or an issue. . . .
   Id. at 3-4.

Technical Assistance Advisement
Page 5 of 6
This case illustrates that format can control whether issues of the Taxpayer’s Magazine
qualify for the exemption under the section. Therefore, under Val-Pak Direct Marketing
Systems, Inc., and the common understanding of the word “publication,” issues of the
Taxpayer’s Magazine are a publication, and therefore the second requirement is met.

3. Published on a Regular Basis
   Although Section 212.08(7)(w), F.S., and Rule 12A-1.008, F.A.C., do not indicate what
   constitutes published “on a regular basis,” The Merriam-Webster Online Dictionary
   (2008) defines “regular” to mean “recurring, attending, or functioning at fixed, uniform,
   or normal intervals. . . . [C]onstituted, conducted, scheduled, or done in conformity with
   established or prescribed usages, rules, or discipline. . . .”
   The two documents provided by the Taxpayer titled “Analyzed Non-Paid Circulation”
   provide that the Magazine was published in September, October, November and
   December of year 2005; January/February, March, April, May/June, September, October,
   November and December of year 2006; and January/February, March, April and
   May/June of year 2007. These documents indicate that the Magazine was published at
   fixed and certain intervals in accordance with a consistent pattern of release. The
   Magazine is published on a regular basis, and therefore, the third requirement is met.
4. Composed of “Primarily Advertising”
   The Department has determined that both issues are “primarily advertising.” Therefore,
   the fourth requirement is met.
5. Distributed through the Mail, Home Delivery, or Newsstands
   Your letter provides that the issues of Taxpayer’s Magazine are mailed to high schools.
   Therefore, the fifth requirement is met.
   CONCLUSION
   Based upon the facts provided, Taxpayer’s Magazines are exempt from sales and use tax
   on the publishing or printing costs of the Magazine or on items purchased, such as paper
   and ink, that are incorporated into and become a component part of the Taxpayer’s
   Magazine, pursuant to the provisions of Section 212.08(7)(w), F.S., and Rule 12A-1.008,
   F.A.C. The Taxpayer should pay tax on the publishing and printing costs of any issue of
   its Magazine and on any item purchased and incorporated into any issue of its Magazine
   that is not distributed free of charge.
   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
   on those facts and the specific situation summarized above. You are advised that
   subsequent statutory or administrative rule changes, or judicial interpretations of the

Technical Assistance Advisement
Page 6 of 6
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,

H. French Brown, IV
Attorney
Technical Assistance and Dispute Resolution
(850) 922-4708
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