Were lump-sum charges to firms participating in a promotional financial or legal book taxable in Florida?

Plain-English summary

The publisher offered firms paid participation in financial or legal books that promoted the participating firms. The Department treated the publisher's creative work as advertising services but treated the printed books as taxable promotional goods.

The agreement required one lump-sum payment and promised the client up to 2,000 copies without separately stating the printing charge. Because taxable promotional goods were bundled with exempt advertising services, the Department ruled that the entire client charge was taxable when the books were delivered to a Florida location.

The Department separately said Florida tax would not be collected if, at the time of sale, the publisher agreed to deliver the books outside Florida through the qualifying export process described in section 212.06(5)(a)1.

What this means for you

Labeling printed copies "free" did not remove them from the paid agreement. For advertising agencies that provide promotional goods with exempt services, separately stating the taxable production charge can determine whether only that component or the entire lump sum is taxed.

Common questions

Were the creative advertising services exempt? The Department treated them as advertising services, but the bundled billing prevented the exempt component from being separated from the taxable promotional goods.

Why was the full Florida-delivery charge taxable? The contract combined the services and printing in one charge while promising up to 2,000 books.

What if the books were delivered outside Florida? The advisement allowed export treatment when qualifying out-of-state delivery was agreed to at the time of sale.

Citations and references

• Fla. Stat. §§ 212.02, 212.05, 212.06, 212.08(7)(vv), and 212.18 and Fla. Admin. Code r. 12A-1.072, as cited in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 09A-052

Original ruling text

SUMMARY
QUESTION:
Are Taxpayer’s charges to contributing firms to participate in the publication of financial / legal
books subject to sales tax?
ANSWER – Based on the Facts Below:
Based on the information provided, the Taxpayer is providing an advertising service as defined
in Rule 12A-1.072(1)(g), F.A.C. However, review of the included agreement provides that the
Taxpayer is not separately stating the printing charges when billing its clients. Therefore, the
entire charge to the contributing firms would be subject to tax when the promotional goods are
delivered to a Florida location.
October 9, 2009
XXX
Re:

Subject: Technical Assistance Advisement (TAA) 09A-052
Sales and Use Tax – Publication Agreement
Sections 212.02, 212.05, 212.06, and 212.18, Florida Statutes (F.S.)
Rule 12A-1.072, Florida Administrative Code (F.A.C.)
XXX (Taxpayer)
FEI # XXX

Dear XXX:
This is in response to your letter dated July 9, 2009, 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., concerning the taxability of certain publication agreements. An examination of
your letter has established 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 dated July 9, 2009, provides the following in part:
I am in the business of publishing financial / legal books. The first book that my
company will be publishing is a book in cooperation with the New York Stock Exchange,
entitled XXX. My role [as] publisher is to work with the NYSE and all other
contributing firms in devising the content[;] I then oversee all aspects of the book[’]s
editing, design, production, printing and distribution.
For this book, I am working with nine additional firms, including firms like XXX
(“Accounting Firm”), XXX (“Bank”) etc. . . .

Technical Assistance Advisement
Page 2 of 8
My books are distributed free of charge. For a book like this, all contributing firms pay
to participate in the guide. Meaning, they pay to write content (usually in the form of a
chapter) that goes in the guide. Sometimes the also get their logo on the cover of the
guide. The guide itself is a way for these firms to promote themselves.
So, on a book like this I will reach out to the various firms and offer them an opportunity
to be involved in the book and we then come to an agreement on how much they will
pay.
So, to be clear, the transaction is for participation in the book. That said, and at a later
date, they are offered copies of the guide for their own distribution, but this is not part of
the transaction. They can request 2,000 books, or they can request zero books; it has no
influence on the price they have already agreed to pay.

Included with your request for technical advice is a copy of an agreement between your
company, Taxpayer (Publisher), and Accounting Firm (Client), one of the contributing firms for
the XXX.
The Agreement, dated July 7, 2009, provides the following in part:
. . . The Publisher intends to publish a guide with a working title of “XXX” (the
‘Publication’) which [Client] agrees to sponsor on the following terms and conditions:

1. The Publisher will prepare, edit, design and produce the Publication with an intended
   publication date of January 2010 . . . .
2. [Client] will provide content detailing the role which an accounting firm plays in
   helping companies to list on the NYSE. . . .

7. The Publisher confirms that the [Client] name/logo will appear on the outside front
   cover of the Publication. [Client] will also provide the Publisher with contact details and
   150-word biographies of the authors of its chapter.

9. The Publisher will provide [Client] with up to 2,000 free copies of the Publication,
   delivered to one address in the United States, free of any delivery or other charges, costs
   or expenses.

Requested Advisement
You request an advisement regarding the taxability of the charge to a contributing firm to
participate in the publication.

Technical Assistance Advisement
Page 3 of 8
Applicable Authority and Discussion
Section 212.02, F.S., provides in part:
(14)(a) “Retail sale” or a “sale at retail” means a sale to a consumer or to any person for
any purpose other than for resale in the form of tangible personal property or services
taxable under this chapter, and includes all such transactions that may be made in lieu of
retail sales or sales at retail. . . .
(15) “Sale” means and includes:
(a) Any transfer of title or possession, or both, exchange, barter, license, lease, or rental,
conditional or otherwise, in any manner or by any means whatsoever, of tangible
personal
property for a consideration.

(16) “Sales price” means the total amount paid for tangible personal property, including
any services that are a part of the sale . . . .

Section 212.05, F.S., which levies tax on the sale, use, or consumption of tangible personal
property, provides, in part, the following:
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 . . . .
(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 . . . .

Section 212.06(5)(a)1., F.S., provides in part:
. . . [I]t is not the intention of this chapter to levy a tax upon tangible personal property
imported, produced, or manufactured in this state for export, provided that tangible
personal property may not be considered as being imported, produced, or manufactured
for export unless the importer, producer, or manufacturer delivers the same to a licensed
exporter for exporting or to a common carrier for shipment outside the state or mails the
same by United States mail to a destination outside the state . . . .

Technical Assistance Advisement
Page 4 of 8
Section 212.08(7)(vv), F.S., provides in part:

1. As used in this paragraph, the term “advertising agency” means any firm that is
   primarily engaged in the business of providing advertising materials and services to its
   clients.

the

2. The sale of advertising services by an advertising agency to a client is exempt from
   tax imposed by this chapter. Also exempt from the tax imposed by this chapter are items
   of tangible personal property such as photographic negatives and positives, videos, films,
   galleys, mechanicals, veloxes, illustrations, digital audiotapes, analog tapes, printed
   advertisement copies, compact discs for the purpose of recording, digital equipment, and
   artwork and the services used to produce those items if the items are:
   a. Sold to an advertising agency that is acting as an agent for its clients pursuant to
   contract, and are created for the performance of advertising services for the clients;
   b. Produced, fabricated, manufactured, or otherwise created by an advertising agency for
   its clients, and are used in the performance of advertising services for the clients; or
   c. Sold by an advertising agency to its clients in the performance of advertising services
   for the clients, whether or not the charges for these items are marked up or separately
   stated.

Rule 12A-1.072, F.A.C., provides in part:
(1)(a) “Advertising” is the expression of an idea created and produced for reproduction
and distribution through means such as television, radio, Internet, newspapers,
newsletters, periodicals, trade journals, publications, books, magazines, standardized
outdoor billboards, direct mail, point-of-sale displays, leaflets, brochures, fliers, or
package design, and which is designed to promote sales of a particular product or service
or to enhance the image of the advertiser. . . .

in
and

(1)(b)2.a. Firms that are primarily engaged in consulting with their clients about
marketing and advertising products or services, formulating a marketing plan intended to
improve their image or increase their market share, and executing those plans, are
considered to be advertising agencies.

(d)1. “Primarily engaged in the business of providing advertising materials and services”
means more than 50 percent of its gross receipts in the firm's previous tax year were, or
the first tax year are budgeted to be, from receipts for the sale of advertising materials
services to clients. For purposes of determining whether the firm qualifies under this
definition, there shall be deducted from gross receipts amounts paid by the agency on
behalf of its client to a third party for charges such as printing, imprinting, reproduction,
publishing of tangible personal property, broadcasting advertisements, media placement,

Technical Assistance Advisement
Page 5 of 8
or other out-sourced activities before applying the 50 percent test.

(e) “Advertising materials” means tangible personal property sold to an advertising
agency, created by an advertising agency, or sold by an advertising agency during the
course of providing advertising services. . . .
(f) “Raw materials” means materials or media used to create advertising materials. . . .
(g) “Advertising services” means services rendered by an advertising agency when
designing and/or implementing an advertising campaign to promote a product, service,
idea, concept, issue, or the image of a person. This includes services rendered to design
and produce advertising materials . . . .
(h) “Promotional goods” means tangible personal property used for promotional
purposes. Examples of promotional goods include displays, display containers, exhibits,
newspaper inserts, brochures, catalogues, direct mail letters or flats, shirts, hats, pens,
pencils, key chains, audio tapes, videotapes, compact discs, business cards, or other
printed goods or materials.

(2) Sales of Services. The sale of advertising services by an advertising agency is exempt
from tax. The professional service fee charged by an advertising agency for services is
exempt from tax. An advertising agency’s professional fee includes agency time or
hourly charges, retainer fees, agency mark-up on exempt advertising materials, and media
commissions.
(3) Sales of Advertising Materials.
(a)1. The charge by an advertising agency to clients for advertising materials is exempt
from sales tax. The exemption applies regardless of the advertising agency’s method of
billing, whether the contract reflects a lump sum or separately states the costs of exempt
advertising materials and other services and professional fees.

2. When an advertising agency sells promotional goods along with exempt items or
   services, the taxable items must be separately stated in order for the exempt items to
   receive the exemption.
   (b) Example: The advertising agency prepares and prints a brochure for its client. The
   preparation of the brochure includes the concept development, design and layout,
   preparation of advertising materials, including photographs, artwork, and mechanicals,
   and the printing of the copies of the brochure. The advertising agency pays sales tax on
   all raw materials used in creating advertising materials. The following are examples of
   the proper tax treatment for each method of contracting with the charges to the client:
   as:

3. The advertising agency contract separately itemizes the components of the brochure
   design, advertising materials, and printing. Sales tax is due only on the charge for
   printing, including any mark-up. The sales tax must be separately stated.

Technical Assistance Advisement
Page 6 of 8

2. The advertising agency contract combines the charges for the design services and
   advertising materials into a single charge, but separately states the printing charge,
   including the mark-up. Sales tax is due only on the charge for printing, including the
   mark-up. The sales tax must be separately stated.
3. The advertising agency contract combines the charges for the design services,
   advertising materials, and printing in a single charge. Sales tax is due on the lump sum
   charge to the client. The sales tax must be separately stated.

Section 212.18(3)(a) F.S., provides in part:
(3)(a) Every person desiring to engage in or conduct business in this state as a dealer, as
defined in this chapter, . . . must file with the department an application for a certificate
of registration . . . .

Section 212.05, F.S., provides that tax is imposed on the sales price of each item of tangible
personal property sold at retail in this state. Section 212.02(16), F.S., provides the sales price
includes any services that are sold as part of the sale of tangible personal property. Section
212.02(14), F.S., defines “retail sale” to include any sale, for any purpose other than for resale.
The sale of a book is a sale of tangible personal property. A transfer of tangible personal
property occurs as a result of the agreement. Section 212.18(3)(a), F.S., provides you are
required to register with the Department for purposes of collecting and remitting sales tax on
sales of taxable tangible personal property delivered in this state.
Section 212.08(7)(vv)1., F.S., defines an “advertising agency” as “any firm that is primarily
engaged in the business of providing advertising materials and services to its clients.” Your
business must come within this definition of an “advertising agency” in order to take advantage
of the exemptions provided in section 212.08(7)(vv), F.S. Advertising materials would include
items of tangible personal property, created during the course of providing advertising services
to your clients, such as artwork.
Assuming that your company qualifies as an advertising agency, your company is able to take
advantage of the exemptions provided above. Your company would not be required to charge
your clients sales tax on charges for advertising services. See Section 212.08(7)(vv)2., F.S. In
addition, advertising materials and the creative services used by an advertising agency to design
the advertising for promotional items are not subject to tax. See Section 212.08(7)(vv)3., F.S.
However, the statute specifies two situations that are taxable. First, the purchase of raw
materials used to create advertising materials for sale to an advertising agency or produced inhouse by an advertising agency for its client is taxable. See Section 212.08(7)(vv)2., F.S.
Second, when promotional goods are produced or reproduced for distribution, sales tax applies
to the sales price charged to the client for the promotional items. See section 212.08(7)(vv)3.,
F.S.
Based on the information provided, you are providing an advertising service as defined in Rule
12A-1.072(1)(g), F.A.C. The books that you publish would be considered promotional goods as

Technical Assistance Advisement
Page 7 of 8
defined in Rule 12A-1.072(1)(h), F.A.C. As provided, the sale of a promotional good from an
advertising agency is subject to tax. When an advertising agency sells promotional goods along
with exempt items or services, the taxable items must be separately stated in order for the exempt
items to receive the exemption.
Your letter indicates that your clients are offered books for their own distribution, subsequent to
contracting to contribute to the publication. However, review of the included agreement
provides that the Client agrees to pay “$XXX + any applicable taxes,” and your company agrees
to provide up to 2,000 “free” copies of the Publication, at the time of the agreement. This
indicates that you are not separately stating the printing charges when billing your clients.
Therefore, the entire charge to your customers would be subject to tax.
However, you would not be required to collect Florida sales tax, if at the time of the sale you
agree to deliver the books to a location outside Florida. Section 212.06(5)(a)1., F.S., provides
that tangible personal property that is produced in this state for export is not subject to tax when
the dealer delivers the property to a licensed exporter or common carrier for delivery outside
Florida.
Conclusion
Based on the information provided, you are providing an advertising service as defined in Rule
12A-1.072(1)(g), F.A.C. However, review of the included agreement provides that you are not
separately stating the printing charges when billing your clients. Therefore, the entire charge to
your customers would be subject to tax when the promotional goods are delivered to a Florida
location.
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 statutes or rules, upon which this advice is based,
may subject similar future transactions to a different treatment than that 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 section 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.

Technical Assistance Advisement
Page 8 of 8
Your response should be received by the Department within 15 days of the date of this letter.
Sincerely,

Brinton Hevey
Tax Law Specialist
Technical Assistance and Dispute Resolution
850/488-7157
Record ID: 67725