Did a 50% dealer-funded discount reduce the taxable price, and were electronically delivered sales leads taxable in Florida?

Plain-English summary

The taxpayer resold a direct-mail advertising program to dealerships under a written agreement giving a 50% discount. It showed the full program amount and discount on two same-day, sequentially numbered documents and absorbed the discount without third-party reimbursement.

Florida ruled that only the discounted amount owed by the dealership was taxable. The discount was a dealer discount taken at the time of sale. The Department nevertheless recommended one invoice because two documents could confuse auditors into treating them as separate transactions.

The taxpayer also resold customer sales leads delivered only by email or direct integration into each dealership's lead-management software. Those sales were nontaxable because they involved neither tangible personal property nor a taxable information service, and no software was transferred.

What this means for you

Contemporaneous, seller-funded discounts can reduce the sales-tax base, but billing should make the net transaction unmistakable. Separately, electronic information can be nontaxable when it stays intangible and is not bundled with taxable software or property.

Common questions

Was tax due on the full list price? No, only on the price after the 50% dealer discount.

Did the two-invoice format invalidate the discount? No, but the Department warned that it created audit risk.

Were electronically delivered sales leads taxable? No, under the stated electronic-only facts.

Citations and references

• Fla. Stat. §§ 212.02(16) and 212.05 and Fla. Admin. Code rr. 12A-1.018 and 12A-1.062, as quoted or discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 10A-050

Original ruling text

SUMMARY
QUESTION ONE: What portion of the sales price of tangible personal property is subject to tax,
when the seller and purchaser’s contract provides that each sale will be discounted 50% and the
seller reflects that discount in two separate but sequentially numbered invoices issued on the same
day?
ANSWER: Only the discounted price due from the purchaser is subject to tax. The discount
qualifies as a dealer discount and is taken at the time of sale.
QUESTION TWO: Is the sale of sales leads that are delivered electronically to the customer
subject to tax?
ANSWER: The sale of sales leads that are delivered electronically are neither the sale of tangible
personal property nor the sale of a taxable information service. The sale is therefore not subject to
tax.
December 2, 2010
XXX
XXX
XXX
Re:

Technical Assistance Advisement 10A-050
Discounts; Information Services
Sections 212.02(16) and 212.05, Florida Statutes (F.S.)
Rules 12A-1.018 and 12A-1.062, Florida Administrative Code (F.A.C.)

Dear :
This is a response to your letter dated August 11, 2010, in which you have requested a Technical
Assistance Advisement on the issues of discounts and whether a specific transaction is subject to tax.
The facts and law applicable to each issue are different; therefore, each issue will be addressed
separately below.
Issue One: Stated Facts
In your letter you state the following facts:
[XXX (“Taxpayer”)] purchases a direct mail advertising program from a third-party
vendor [“Vendor”] … and [resells] it as the XXX Program … to the independent
XXX dealerships [“Dealers”] (these are customers of [Taxpayer]) in Florida that
choose to participate in the program. The end products of this program are service
reminders and service coupon mailers, directly mailed by [Vendor] to customers and
prospective customers of [Dealers]. The objective of the mailers is to promote the
dealership service business.

… [Vendor] provides detail to support their billing to [Taxpayer] based on the type
and volume of program activity for each of the [Dealers], and they also provide a
data file for use by [Taxpayer] in creating the two-part billing by [Taxpayer] to their
customers (dealers), as described below. The total amount of program fees billed to
a customer represents the combined “billed costs” … of the different parts of the
program utilized for that customer during the month …. For purposes of this inquiry,
this will also be referred to as the “list price[.”] The arrangement, which applies to
all [Dealers], is that the sales price will be discounted 50% from the “list price[.”]…
The terms also indicate that taxes are billed at 100% (meaning sales tax is charged on
the “list price”). We feel that including this statement pertaining to taxes was an
error on our part …. It is our opinion that sales tax should be charged on the
“discounted sales price[.”]
… As a way to continuously remind [Dealers] that [Taxpayer] is selling the XXX
program to them at the (50% off) discounted sales price, the monthly billing is done
in two invoices. The first invoice is for 100% of the “program fees[,”] which is the
established “list price[.”] The second invoice is a “discount coupon credit” for 50%
of the “program fees” that are billed on the corresponding invoice. The “discount
coupon credit” is absorbed entirely by [Taxpayer,] meaning [that Taxpayer] does not
receive reimbursement for the coupon from a third-party. The invoices are generated
on the same date, typically are two consecutive invoice numbers, and contain the
same description. The invoice and its corresponding discount coupon credit are
delivered to the [Dealers] together, and together they represent the discounted billing
of the monthly program activity for the customer….
Please advise whether the correct taxable sales price is the $100.00 “list price[,]” or
the $50.00 discounted amount.
Taxpayer’s Position
Taxpayer’s request states:
Our opinion is that the taxable sales price is $50.00. The definition of “sales price”
excludes discounts, including coupons that are not reimbursed by a third party, and
as such these coupons are considered a reduction of the sales price. The credits
issued simultaneously by [Taxpayer] with their corresponding invoices represent
such coupons for which the retailer ([Taxpayer]) does not have recourse to their
supplier for reimbursement, and therefore should be deducted in arriving at the
taxable discounted net sales price….
[Taxpayer cites Sections 212.02(16) and 212.05(1)(a), F.S., and Rules 12A-1.018(3)
and 12A-1.039(1)(b), F.A.C.]
Further, in this example [Taxpayer’s] cost (as invoiced by [Vendor] to [Taxpayer]) is
approximately $XXX. Based on our review of the tax code[,] there does not appear

to be anything that indicates the below-cost discounted sale would not be taxed based
on the discounted retail sales price.
Applicable Authority and Discussion
Section 212.05, F.S., imposes tax on all sales of tangible personal property, unless a specific
exemption applies. “Sales price” is defined in s. 212.02(16), F.S., as “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….” That statute goes on to provide that “[t]rade-ins or discounts allowed and taken at
the time of sale shall not be included within the purview of this subsection….” (Emphasis supplied).
Here, Taxpayer’s written agreement with Dealers specifically provides for a 50% discount off the
cost price of the monthly fee. Taxpayer issues Dealers two sequentially numbered invoices each
month, dated on the same day, showing the cost price and the 50% discount. Taxpayer does not
receive reimbursement from any party for the 50% discount, but instead absorbs the discount itself.
The discount is clearly a dealer discount and not a manufacturer discount and will reduce the taxable
sales price of the property sold so long as the discount is given at the time of sale. The written
agreement entered between Taxpayer and Dealers, together with the invoices, are adequate to show a
dealer discount given at the time of sale. Accordingly, the taxable sales price is the price owed by
Dealers after the 50% discount has been taken into effect.
Taxpayer is advised that the continued use of two invoices creates confusion and could cause a
problem in the event of an audit by the Department. The separate invoices could be viewed by audit
staff as separate transactions, so that tax would be due on the full cost price and not on the
discounted price. If Taxpayer’s business practices allow, the Department recommends that
Taxpayer issue only one invoice in the future to avoid any possible audit problems.
Advisements
Taxpayer is only required to collect and remit tax on the discounted price offered by it to
Dealers.
Issue Two: Stated Facts
In your letter you state the following facts:
[Taxpayer] contracts with third-party vendors [Vendors] that provide sales leads for
the independent XXX dealers (… “Dealers”) …). [Taxpayer] purchases the sales
leads from [Vendors] for resale to Dealers who choose to participate in the XXX
XXX Lead Management XXX Program. In order to participate in the XXX
Program, Dealers are required to have in place their own Lead Management Software
(LMS) that is configured to support the exchange of sales lead information between
their system and the third-party provider of the sales leads…. [Vendor] performs

several tasks including:
•
•
•
•
•

Obtain sales leads electronically from various [I]nternet website sources
based on certain criteria that identify them as individuals that may have an
interest in purchasing a XXX vehicle.
Perform qualify control checks and edit the sales leads as necessary.
Based on certain criteria[,] they determine to which Dealers the sales leads
apply.
Eliminate duplicates.
Deliver the sales leads electronically into the computerized [LMS] of each
participating dealer.

… The sales leads are delivered electronically by the lead providers to the [Dealers]
via email or direct integration into the [Dealers’] LMS. Sales lead data typically
include an individual’s name, phone number, email address and when available their
mailing address. These transactions do not involve the transfer of computer
software. Each of the invoices for this service contains the description “Lead
Management”.
Taxpayer’s Position
Taxpayer questions whether the sale of the sales leads is a taxable transaction. Taxpayer argues that
it is not taxable, but is instead the sale of a nontaxable service, based on s. 212.08(7)(v), F.S., and
Rule 12A-1.062, F.A.C.
Applicable Authority and Discussion
Section 212.05, F.S. provides that every person is exercising a taxable privilege who engages in the
business of selling tangible personal property at retail or furnishes any of the things or services
taxable under this chapter and that a tax is levied on each taxable transaction due and payable at the
rate of 6 percent of the sales price. Rule 12A-1.062(5), F.A.C., specifically states that the charge for
furnishing information by way of electronic images which appear on the subscriber’s video display
screen is neither the sale of tangible personal property nor the sale of a taxable information service.
Here, no tangible personal property is sold to the Dealers and all information provided by Vendors is
sent electronically. This transaction falls squarely under Rule 12A-1.062(5), F.A.C., and is therefore
not subject to tax.
Advisements
The sale of sales leads through electronic means is neither the sale of tangible personal property
nor the sale of a taxable information service. Taxpayer is not required to collect or remit any tax
on sales of these sales leads to Dealers.
Closing 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 15 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) 717-7105.
Sincerely,

Tammy S. Miller
Senior Attorney
Technical Assistance & Dispute Resolution
Control No:

87997