Was a distributor's separately stated flat fuel surcharge exempt from Florida sales tax when taxable products were delivered?

Plain-English summary

A distributor imposed a flat fuel surcharge on every delivery after fuel costs rose. The charge appeared as a separate invoice line. The company said customers could decline delivery and pick up products at warehouse "will call" windows, but it supplied no documents showing that option, and its business model was built around delivery.

Florida held that the surcharge was taxable when charged with taxable products. Rule 12A-1.045 excludes a transportation charge only when both conditions are met:

1. The charge is separately stated; and
2. The purchaser alone can avoid it by a decision or action.

The distributor met the first condition but not the second. A theoretical or unsupported pickup option was not enough. Because the fuel surcharge paid for delivery connected to the product sale and could not be shown to be genuinely avoidable, it formed part of the taxable sales price.

What this means for you

A separate invoice line is only half the test

Breaking out delivery, freight, or a fuel surcharge does not automatically remove it from tax. The customer must also have a real, documented way to avoid the charge.

Put pickup rights in customer-facing records

The taxpayer's assertion about will-call pickup failed because nothing in the submitted documentation established it. Contracts, ordering terms, invoices, or other records should show the buyer's delivery choice.

Business practice matters alongside written terms

The Department noted that the distributor's entire business model was based on delivering products. A nominal option that customers cannot realistically exercise may not satisfy the rule.

The ruling answered the taxable-product scenario

The request specifically asked about the surcharge when taxable products were sold. The advisement did not separately decide how the charge should be handled on an invoice containing only exempt or resale items.

Common questions

Q: Was the fuel surcharge taxable?
A: Yes, when imposed with taxable product sales under the facts presented.

Q: Didn't separately stating it make it exempt?
A: No. Florida also required proof that the purchaser could avoid the transportation charge through the purchaser's own decision or action.

Q: Why did the claimed will-call option fail?
A: The distributor provided no documentation supporting the option, and the Department found that a merely theoretical choice was insufficient.

Q: What rule controlled?
A: Florida Administrative Code Rule 12A-1.045(4)(a), which requires both separate statement and purchaser avoidability.

Citations and references

• Fla. Stat. § 212.02(16) (sales price includes services that are part of a sale)
• Fla. Stat. § 212.05 (sales tax on taxable retail transactions)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)
• Fla. Admin. Code r. 12A-1.045(4)(a) (transportation-charge exclusion)
• Department of Revenue v. B & L Concepts, Inc., 612 So. 2d 720 (Fla. 5th DCA 1993)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 09A-006

Original ruling text

SUMMARY
QUESTION:
When taxable products are sold, will Taxpayer’s separately stated fuel surcharge fee be
exempt from Florida sales and use tax?
ANSWER:
Since Taxpayer’s separately stated fuel surcharge fee is for delivery service in
conjunction with the sale of its products, and there is no indication or evidence presented
that the fee may truly be avoided or declined by an action on the part of the customer; the
fuel surcharge fee does not meet the exemption requirements under Rule 12A-1.045(4),
F.A.C., and is therefore subject to Florida sales tax.

January 28, 2009
XXX
Re:

Technical Assistance Advisement 09A-006
Florida Sales and Use Tax
Delivery – Fuel Surcharge Fee
Sections 212.02(16), 212.05, Florida Statute (F.S.)
Rule 12A-1.045(4)(a), Florida Administrative Code (F.A.C.)
Petitioner: XXX (“Taxpayer”)

Dear XXX:
This letter is a response to your petition dated May 22, 2008, for the Department's
issuance of a Technical Assistance Advisement ("TAA") concerning the above
referenced petitioner 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 1211, F.A.C. This response to your request constitutes a TAA and is issued to you under the
authority of Section (S.) 213.22, F.S.
FACTS
Taxpayer is a distributor of XXX and related products, mainly to the XXX industry.
Taxpayer’s customer base purchases mostly items for resale. Generally, less than XXX%
of Taxpayer’s sales are taxable. Most of Taxpayer’s invoices include no taxable items or
very few taxable items.
In response to rising fuel costs, Taxpayer in March of 2008 notified its customers that,
effective with deliveries made on or after April 1, 2008, it was instituting a flat fuel
surcharge fee of XXX on each delivery of its products. The fuel surcharge fee of XXX
per delivery is listed as a separate line item charge on the customer’s invoice.

Technical Assistance Advisement
Page 2
Taxpayer asserts that its customers have the option to decline Taxpayer’s delivery
services, and instead pick up products from “will call” windows at one of Taxpayer’s
distribution warehouses. However, nothing in the documentation provided, beyond the
Taxpayer’s mere assertion, indicates that this option exists. Moreover, it is not enough
for Taxpayer’s customers to have some theoretical “option” to decline delivery services.
Taxpayer’s entire business model is based upon the delivery of its products to its
customers.
REQUESTED ADVISEMENTS
When taxable products are sold, will Taxpayer’s separately stated fuel surcharge fee be
exempt from Florida sales and use tax?
ANALYSIS and DISCUSSION
Section 212.05, F.S., provides the legislative intent that every person is exercising a
taxable privilege who engages in the business of selling tangible personal property at
retail in Florida. For exercising such a privilege, a tax is levied on each taxable
transaction or incident. The tax is due and payable at the rate of 6 percent, plus any
applicable surtaxes imposed under S. 212.055, F.S., on the total consideration received
for each item or article of tangible personal property when sold at retail in this state.
Section 212.02(16), F.S., defines sales price, in part, as follows:
(16) "Sales price" means the total amount paid for tangible personal
property, including any services that are a part of the sale . . . .
Rule 12A-1.045, F.A.C., concerning transportation charges, provides in part, as follows:
(1) "Transportation charges" include carrying, delivery, freight, handling,
pickup, shipping, and other similar charges or fees. (Emphasis Supplied)

(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. (See subsection (5) for shipping of tangible personal
   property F.O.B. origin.)
   The Court provided in Department of Revenue v. B&L Concepts, 612 So. 2d 720 (Fla.
   5thDCA 1993), concerning separately itemized fees that are at the option of the vendee or
   lessee, as follows:
   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

Technical Assistance Advisement
Page 3
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.
The fuel surcharge fee is imposed on all sales transactions to customers who receive
delivery of Taxpayer’s products and is separately stated on each invoice issued to its
customers.
Since Taxpayer’s separately stated fuel surcharge fee is for delivery service in
conjunction with the sale of its products, and there is no indication or evidence presented
that the fee may truly be avoided or declined by an action on the part of the customer; the
fuel surcharge fee does not meet the exemption requirements under Rule 12A-1.045(4),
F.A.C., and is therefore subject to Florida sales tax.
CONCLUDING STATEMENT
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 10 days of the date of this letter.
If you have any further questions with regard to this matter and wish to discuss them, you
may contact me directly at 850-488-8026.
Kind Regards,

Alan R. Fulton
Tax Law Specialist
Technical Assistance & Dispute Resolution
ARF\lp
Record ID:

46216