When a customer returned a used battery and received the lead-acid battery core fee back, was that a trade-in and did sales tax also have to be refunded?

Plain-English summary

At the initial sale, the retailer charged sales tax on the battery price, the state battery fee, and the battery core fee because all three formed part of the taxable sales price.

A customer could later present a used battery and the original receipt to recover the core fee. Although the retailer rang the sale and refund as separate register transactions, the receipt requirement linked them, so the used-battery transfer was not a separate independent sale.

The Department treated the core-fee refund as a trade-in allowance and adjustment to the original selling price. The retailer therefore also had to refund the sales tax attributable to the refunded core fee.

What this means for you

Register form did not override the connected economic transaction. Documentation linking the returned core to the original battery sale supported both trade-in and tax-refund treatment.

Common questions

Was the core fee taxable when charged? Yes.

Was returning the used battery a trade-in? Yes, under the described process.

Did the retailer refund sales tax too? Yes, based on the core-fee amount refunded.

Citations and references

• Fla. Stat. §§ 212.02(16), 212.06(1)(a), and 403.7185 and Fla. Admin. Code rr. 12A-1.014(1), 12A-1.074(1), and 12A-12.0011(5), as cited in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 12A-007

Original ruling text

SUMMARY
QUESTIONS:

1. Whether the return of the battery core fee to the customer should be considered a trade-in
   allowance.
2. Whether the customer is entitled to a refund of any sales tax when a refund of the battery core
   fee is given.
   ANSWERS:
3. The presentation of a used battery to the retailer and the refund of the battery core fee by the
   retailer to the customer is a trade-in allowance under the provisions of Rule 12A-1.074(1),
   F.A.C.
4. When the retailer refunds the battery core fee to the customer, the customer is entitled to
   receive a refund of the sales tax that was charged, as based on the amount of the battery core fee
   that is refunded, under the provisions of Rule 12A-1.014(1), F.A.C.

February 21, 2012

XXX
XXX
XXX

Re: Technical Assistance Advisement 12A-007
Sales and Use Tax
Refund of lead-acid battery core fee
Sections 212.02(16), 212.06(1)(a), and 403.7185, Florida Statutes (F.S.)
Rules 12A-1.014(1), 12A-1.074(1), and 12A-12.0011(5), Florida Administrative
Code (F.A.C.)
Dear
This is in response to your request dated November 29, 2011, for a Technical Assistance
Advisement (TAA) pursuant to section 213.22, F.S., and Rule 12-11, F.A.C., regarding a sales
tax refund issue for XXX (“Retailer”) at its retail merchandise stores in Florida. An examination
of your letter has established that you have complied with the statutory and regulatory

Technical Assistance Advisement
Page 2 of 5
requirements for issuance of a TAA. Therefore, the Department is hereby granting your request
for a TAA.
Background
Retailer operates retail merchandise stores throughout Florida. One of the types of
merchandise that is sold by Retailer is lead-acid batteries that are subject to the state battery fee
as imposed by Section 403.7185, F.S. When a new battery is sold to a customer, Retailer’s cash
registers charge the customer the state battery fee as a separate line item charge. In addition to
the state battery fee, the customer is also automatically charged a battery core fee. Sales tax is
computed and charged on the total selling price of the battery, the state battery fee, and the
battery core fee.
Retailer’s stated purpose of the battery core fee is to encourage environmental
responsibility and to provide proper disposal by offering the customer a full refund of the battery
core fee upon presentation of a used battery and the original sales receipt showing the battery
core fee charge. In the event the customer brings in the old battery at the same time he or she is
purchasing the new battery, two separate cash register transactions, one for the purchase and a
second for the refund, are still made.
The used batteries are returned to Retailer’s battery vendors for disposal. There is no
additional income or expense associated with this return as the disposal cost is already built into
the price that the vendors charge Retailer for the new batteries.
Issues

1. Whether the return of the battery core fee to the customer should be considered a
   trade-in allowance.
2. Whether the customer is entitled to a refund of any sales tax when a refund of the
   battery core fee is given.
   Applicable Authority
   The following passages from the Florida Statutes (F.S.) and the Florida Administrative
   Code (F.A.C.) are pertinent to the issues under consideration.
   Section 212.02(16), F.S., provides in part:
   “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 . . . . Trade-ins or discounts allowed and taken at the time of sale shall not be
   included within the purview of this subsection. . . .

Technical Assistance Advisement
Page 3 of 5
Section 212.06(1)(a), F.S., provides in part:
The aforesaid tax at the rate of 6 percent of the retail sales price as of the moment
of sale . . . shall be collectible from all dealers as herein defined on the sale at retail . . . in
this state of tangible personal property or services taxable under this chapter. . . .
Section 403.7185(1), F.S., provides in part:
For the privilege of engaging in business, a fee for each new or remanufactured
lead-acid battery sold at retail, including those sold to any governmental entity, is
imposed on any person engaging in the business of making retail sales of lead-acid
batteries within this state. Such fee shall be imposed at the rate of $1.50 for each new or
remanufactured lead-acid battery sold. . . . Such fee shall be subject to all applicable
taxes imposed in chapter 212. . . .
Rule 12A-1.014(1), F.A.C., provides:
When a dealer refunds the sales, lease, or rental price of admissions, tangible
personal property, transient rentals, real property, or services upon which tax has been
paid by the purchaser or lessee to the dealer and remitted by the dealer to the state, the
dealer shall also refund the tax paid by the purchaser. If, in lieu of a refund of the sale
price, the dealer credits such amount on the purchaser’s account, a corresponding credit
for sales tax previously paid by the customer shall be made.
Rule 12A-1.074(1), F.A.C., provides:
Where used articles of tangible personal property, accepted and intended for
resale, are taken in trade, or a series of trades, as a credit or part payment on the sale of
new articles of tangible personal property, the tax levied by Chapter 212, F.S., shall be
paid on the sales price of the new article of tangible personal property, less credit for the
used article of tangible personal property taken in trade. A separate or independent sale
of tangible personal property is not a trade-in, even if the proceeds from the sale are
immediately applied by the seller to a purchase of new articles of tangible personal
property.
Rule 12A-12.0011, F.A.C., provides in part:
(5) The fee is to be included in the price upon which sales or use tax or any other
tax imposed by Part I of Chapter 212, F.S., is computed, even though the fee may be
listed as a separate item on the invoice. . . .
Discussion
Pursuant to Section 212.06(1)(a), F.S., sales tax is to be charged on the retail sales price

Technical Assistance Advisement
Page 4 of 5
of tangible personal property. Pursuant to Section 212.02(16), F.S., “sales price” means the total
amount paid for tangible personal property, including any services that are a part of the sale.
Therefore, with respect to sales of batteries by Retailer, the taxable sales price includes the retail
price of the battery, the state battery fee, and the battery core fee. The state imposed battery fee
is expressly subject to sales tax as provided by Section 403.7185(1), F.S., and by Rule 12A12.0011(5), F.A.C. The battery core fee is subject to sales tax because it is part of the total
amount paid for the tangible personal property.
Florida Department of Environmental Protection Rule 62-701.300(8), F.A.C., prohibits
the disposal of any lead-acid batteries in any Florida landfill. Although Retailer may collect and
pass on the used batteries to its vendors for “disposal,” in actuality, these batteries will be
processed and the batteries’ components will be recycled. These recovered components will
then
be resold to manufacturers of new batteries and other products. Accordingly, the acceptance of a
used battery may be considered as a trade-in under the provisions of Rule 12A-1.074(1), F.A.C.,
since the components of the battery will be resold.
It is noted that Rule 12A-1.074(1), F.A.C., states that “[a] separate or independent sale of
tangible personal property is not a trade-in, even if the proceeds from the sale are immediately
applied by the seller to a purchase of new articles of tangible personal property.” Retailer’s
business practice is to ring-up one transaction for the sale of the new battery and a second
transaction for payment of the refund. However, this does not represent a “separate or
independent sale.”
Since the customer must present his or her original sales receipt along with a used battery
in order to receive a refund of the battery core fee, the two transactions are not “separate or
independent” within the meaning of the rule. Further, when the customer receives a refund of
the battery core fee, it should also be considered as an adjustment of the selling price of the
original battery transaction. Therefore, the provisions of Rule 12A-1.014(1), F.A.C., are
applicable. Based on that rule, whenever sales tax has been charged to a customer on a sale of
tangible personal property, sales tax should likewise be refunded to the customer, based on the
portion/amount of the original sales transaction that is refunded.
Conclusions

1. The presentation of a used battery to Retailer and the refund of the battery core fee by
   Retailer to the customer is a trade-in allowance under the provisions of Rule 12A-1.074(1),
   F.A.C.
2. When Retailer refunds the battery core fee to the customer, the customer is entitled to
   receive a refund of the sales tax that was charged, as based on the amount of the battery core fee
   that is refunded, under the provisions of Rule 12A-1.014(1), F.A.C.

Technical Assistance Advisement
Page 5 of 5
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 expressed in
this response.
You are further advised that this response, your request and related documents are public
records under Chapter 119, F.S., which are subject to disclosure to the public under the
conditions of Section 213.22, F.S. Your name, address, and any other details, which might lead
to identification of the taxpayer, must be deleted before disclosure. In an effort to protect the
confidentiality of such information, we request you provide the undersigned with an edited copy

of your request for Technical Assistance Advisement, backup material and response within
fifteen days of the date of this advisement.
Sincerely,

Jeffery L. Soff
Tax Law Specialist
Technical Assistance and
Dispute Resolution

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