Could a cruise line avoid or recover Florida's former advance disposal fee on containers used aboard voyages to foreign ports?

Subject

Advance Disposal Fee

Plain-English summary

The cruise line could recover the advance disposal fee on containers carried out of Florida and could avoid the recurring pay-and-refund cycle by supplying vendors the prescribed affidavit. The Department first treated the cruise line as the Florida consumer when it took possession of containers in the state, but then found that the containers were exported from Florida aboard interstate or foreign-commerce voyages.

Refunds had to run through the vendor or distributor, not directly from the Department. Because export occurred on every voyage, the ruling allowed fee-free purchases when the cruise line certified exclusive use aboard a qualifying vessel. The program later expired on October 1, 1995.

What this means for you

This ruling no longer governs an active fee program. Historically, it distinguished initial Florida possession from later export and required documentation before vendors could omit the fee at sale.

Common questions

Was the fee initially imposed when the cruise line took possession in Florida? Yes.

Could the cruise line obtain a refund or credit after export? Yes, through its vendor.

Could future purchases be made without the fee? Yes, with the vessel-use affidavit described in the ruling.

Did the TAA automatically cover all association members? No. Their identifying information had not been provided.

Citations and references

• Fla. Stat. §§ 212.08(8)(a), 213.22, and 403.7197
• Fla. Admin. Code rr. 12-11.003(2)(a), 12A-1.064, 12A-18.007(2), and 12A-18.010

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94A-038

Original ruling text

Note: The ADF program expired 10-1-95 per s. 72, ch. 88-130

Jun 22, 1994

Re: TAA 94A-038
Advance Disposal Fee
Section 403.7197, F.S.

Dear :

This is in response to your letter of April 1, 1994,
wherein you requested a Technical Assistance Advisement for the
purpose of determining XXX (hereinafter Cruise Line) liability
for the advance disposal fee as imposed by Section 403.7197,
F.S. You have also requested that this advisement be extended
to members of the Florida XXX (hereinafter Association) which
are similarly situated. Your letter provides in part the
following:

"Individual cruise lines purchase containers within the
State of Florida, the contents of which are consumed during
voyages of three or more days. In the course of each of
these voyages the vessels call on one or more ports outside
the State and are therefore, engaged in `transportation' as
that term is defined in Rule 12C-1.0151(2), F.A.C.

"As a general matter, the goods shipped in containers which
are the subject of the tax are delivered by the vendor
directly to the vessel. A portion of the goods may be
received at an intermediate warehouse for verification of
the quantities received, consolidation, and arrangement in
loading order prior to containerized delivery to the
vessel. In these latter instances, the goods are delivered
to the vessels within seven days of receipt.
...
"Consistent with the general purpose for the program, I
present the following for your consideration.

"1. As long as a container is removed from the State of

Florida, the person removing it is entitled to a credit
for, or refund of, the advance disposal fee paid.

"The credit and refund provision of the advance disposal
fee, [s. 403.7197(6)(f), F.S.], provides that a refund is
due to any person' whoexports from this state'
containers upon which the fee has been assessed. From the
standpoint of grammatical construction, the prepositional
phrase from this state' serves to modify and define the scope of the verbexports' and therefore, becomes an
inseparable part of the action required for entitlement to
a credit or refund....

"While it is correct that, standing alone, the term
`export' is not defined in section 403.7197, F.S., the
Florida rule of statutory construction is that an undefined
term must be given its plain and ordinary meaning unless it
is a legal term and, in that case, is to be given its legal
meaning....

"In summary, once the containers are removed from the
territorial limits of the State of Florida by a cruise
line, the cruise line is entitled to a refund of, or credit
for, any advance disposal fee paid with respect to the
containers removed. To require inquiry concerning the
destination of the goods in question, emasculates a portion
of the statute and institutes an additional requirement for
rebate of the fee not contemplated by the legislature.

"The fact that containers may be stored in a warehouse
pending consolidation and delivery to the vessel does not
affect their taxability. Where goods are exempt as a
result of their use on board a vessel, storage prior to
delivery does not eliminate the exemption. Klosters Rederi
A/S v. Department of Revenue, 348 So.2d 656 (Fla. 3rd DCA
1977).

"2. Assuming, arguendo, that a specific destination for the
containers is required, the cruise industry satisfies the
requirements for a credit or refund.

"Pursuant to the terms of the statute, the item to be
exported for a credit or refund to accrue is the
`container.' Thus, if the proper interpretation of the
statute is to impose a requirement that the container be
exported to a specific place, rather than merely exported
from the state, a cruise line is entitled to [a] rebate of
the fee paid if the container reaches a port outside the
State of Florida.

"As a general matter, the containers on which it has been
tentatively concluded to impose the fee are delivered to
the cruise lines at ports within the state. The vessels
then depart with the containers for a port or ports outside
the state. Thus, the place to which the containers are
exported is the first foreign port of call on the vessels'
published itineraries.

"Thus, the delivery of containers within the state occurs
at the same time they are committed to export. As noted by
the Supreme Court in A.G. Spalding & Bros. v. Edwards `The
very act that passed the title and that would have incurred
the tax had the transaction been domestic, committed the
goods to the carrier that was to take them across the
sea....' 262 U.S. 66, 69, 43 S.Ct. 485, 486 (1923).

"In the case of cruise ships, there is no common carrier
used to deliver the containers outside the state. Instead,
the containers are transported by the cruise line
purchaser. This is of no consequence.

"It is true, as the Supreme Court of California
observed, that at the time of the delivery the vessel
was in California waters and was not bound for its
destination until it started to move from the port.
But when the oil was pumped into the hold of the
vessel, it passed into the control of a foreign
purchaser and there was nothing equivocal in the
transaction which created even a probability that the
oil would be diverted to domestic use. It would not
be clearer that the oil had started upon its export
journey had it been delivered to a common carrier at

an inland point. The means of shipment are
unimportant so long as the certainty of the foreign
destination is plain.

"Richfield Oil Corp. v. State Board of Equalization, 329
U.S. 69, 83, 67 S.Ct. 156, 163-164 (1946).

"There is no less certainty that the containers acquired by
the cruise lines which are the object of the advance
disposal fee will be transported to a foreign destination,
thereby entitling the purchasing cruise line to a rebate of
the tax paid.

"It is important to recognize that the export requirement
applies only to the containers and not to the contents.
Thus, the case at hand is distinguishable from cases such
as Department of Revenue v. Air Jamaica Ltd. where the
object for which export exemption from taxation was sought
was consumed prior to its arrival at a destination outside
the state. 455 So.2d 324 (Fla. 1984) (jet fuel). See
also, Air Jamaica, Ltd. v. Department of Revenue, 374 So.2d
575 (Fla. 3rd DCA 1979) (in-flight meals).

"Accordingly, even if the [section 403.7197(6)(f), F.S.,]
is properly read to include a destination requirement, it
is satisfied by the cruise lines with respect to containers
on which the fee has been imposed.

"3. If the cruise lines are entitled to a credit or refund
of advance disposal fees paid, efficient administration of
the fee requires that the purchases by the cruise lines be
exempt ab initio.
...

"ADVICE REQUESTED

"Pursuant to Section 213.22, F.S., the taxpayers
respectfully request the following advice.

"1. Cruise lines which call on foreign ports after
departing the State of Florida are entitle[d] to a refund

of the advance disposal fee assessed on containers
purchased within the State.
"2. The export exemption contained in Rule 12A-18.007(2)[,
F.A.C.,] can be utilized by cruise lines if they provide
documentation to their vendors similar to the affidavit
prescribed for use for sales tax exemption for purchases
which is contained in Rule 12A-1.064(5)(e)[, F.A.C.]"

RELEVANT AUTHORITY

The following passages from the Florida Statutes (F.S.) and
the Florida Administrative Code (F.A.C.) are pertinent to your
request for a determination.

Section 403.7197, F.S., provides in part:

"(2) As used in this section, the term:
"(a) Consumer' means any person who purchases a container for consumption of its contents with no intent to resell such contents.... "(d)Dealer' means a person who sells containers to
consumers and includes retailers and operators of vending
machines. The term does not include a common carrier in
the conduct of interstate passenger service who sells,
offers for sale, or distributes to its passengers
containers, the contents of which are consumed on the
premises.
...
"(f) `Distributor' means any person who sells or otherwise
provides containers to a dealer in this state. The term
does not include a manufacturer, but does include any
alcoholic beverage distributor.
...
"(6)(a) ... beginning October 1, 1993, there shall be
imposed on each container sold in this state an advance
disposal fee... Such fees shall be collected by
distributors from dealers... If a manufacturer sells
containers or products packaged in containers, which are
subject to the fee, directly to consumers, the fee is
imposed on such containers....
"(f) Any person who has produced, imported, or purchased

containers on which the fee imposed by this section has
been paid and who subsequently exports from the state said
containers may deduct the amount of the fees paid thereon
from the amount owed to the state and remitted pursuant to
this section or may apply for a refund of the amount of the
fees paid."

Rule 12A-18.007(2), F.A.C., provides:

"(2) The advance disposal fee will not be imposed on those
sales of containers made by a Florida distributor to an
out-of-state purchaser when such containers are irrevocably
committed to the exportation process at the time of sale
and such process is continuous and unbroken. See Rule 12A1.064(1) and (2), F.A.C."

Rule 12A-18.010, F.A.C., provides in part:

"(2) A distributor who makes a refund of the advance
disposal fee to a dealer may apply to the Department of
Revenue for a refund of the fee if such application is made
within 36 months from the date the fee was paid to the
state by the distributor or may take a credit for such
amount on any subsequent return filed by the distributor
for payment of the advance disposal fee within 36 months
from the date the fee was paid to the state by the
distributor. Such credits must be supported by records
maintained by the distributor.
"(3) Whenever a distributor credits a dealer with the
advance disposal fee on returned containers or for fees
erroneously collected, the distributor must refund such fee
to the dealer before the claim to the State for credit or
refund will be approved.
"(4) Any person who has overpaid the advance disposal fee
to a distributor, or who has paid the advance disposal fee
to a distributor when no fee is due, must secure a refund
of the advance disposal fee from the distributor and not
from the Department of Revenue."

DETERMINATION

Overview on the imposition of the fee

The advance disposal fee is to be imposed on the sale of
containers in this state. "Container" is defined in Section
403.7197(2)(b), F.S. The fee is to be collected by distributors
from dealers (retailers). The distributor must separately
charge and identify the fee on the invoice to the dealer. The
distributor may not absorb or relieve the dealer of payment of
the fee. Dealers may absorb the fee or pass it on to the
consumer (retail customer). If the dealer passes the fee on to
the consumer, the dealer may increase the price of the product
by the amount of the fee or the dealer may separately state the
fee on the invoice or sales slip given to the customer.
Manufacturers are not required to collect the fee when a
container is sold to a distributor or dealer. However,
manufacturers must collect the fee when a container is sold
directly to a consumer.

Status of Cruise Line and purchases

Cruise Line is the purchaser of a wide range of products in
containers which are consumed during the voyage to foreign
ports. As such, Cruise Line is a "consumer" as defined in
Section 403.7197(2)(a), F.S. Due to the large quantities of
products being purchased, Cruise Line purchases items at the
manufacturer or distributor level. Generally, the supplier
delivers products directly to the vessel at a dockside facility.
Cruise Line takes possession of the products and immediately
loads the products on the vessel. Some goods may be delivered
to an intermediate warehouse where the products are processed
and containerized for subsequent delivery to a vessel within
seven days of receipt.

Since Cruise Line takes possession of containers "within
this state," the transaction is subject to the advance disposal
fee. Further, since manufacturers and distributors may not
absorb the fee and Cruise Line has bypassed the retail dealer in
the overall distribution chain, the imposition of the advance
disposal fee will be upon Cruise Line.

Cruise Line has not purchased the containers "for export."

In Air Jamaica, Ltd. v. State, Department of Revenue, 374 So.2d
575 (Fla. 3rd DCA 1979), the court held that the airline's
purchase of in-flight meals from a caterer for distribution to
passengers was not a sale for export. The court based this
decision upon the determination by the United States Supreme
Court and other courts that goods shipped as "exports" must be
delivered to another country. Although containers may in fact
reach a foreign port, Cruise Line does not deliver or discharge
the containers as cargo.

However, Section 403.7197(6)(f), F.S., provides that any
"person" who purchases containers on which the fee has been
imposed and who subsequently "exports from the state" those
containers may obtain a refund of the amount of the fee paid.
The advance disposal fee was created as a program to address the
solid waste and litter problem in this state. Since the statute
provides that the containers must be exported "from the state"
in order to be eligible for a refund of the fee, it is clear
that the legislative intent is only that the containers leave
this state, not that containers must be export goods.

Pursuant to Section 212.08(8)(a), F.S., items that are
appropriate to carry out the purpose for which a vessel is
designed or equipped and used shall be deemed to be parts of the
vessel. Containers subject to the advance disposal fee are items
which are necessary for Cruise Line to carry out its purpose of
transporting persons or property in interstate and foreign
commerce (voyages to foreign ports). Therefore, it follows that
the containers purchased by Cruise Line for use in interstate or
foreign commerce are concurrently exported from this state.
Accordingly, since Cruise Line exports containers "from this
state," Cruise Line (a "person") is entitled to a refund of
previously paid advance disposal fees.

Refunds and exemption from the advance disposal fee

Pursuant to Rule 12A-18.010(4), F.A.C., persons seeking a
refund of previously paid advance disposal fees must secure a
refund from the distributor and not from the Department of
Revenue. Accordingly, Cruise Line may seek a refund of, or
credit for, advance disposal fees which it paid to its various

vendors. Pursuant to Rule 12A-18.010(2), F.A.C., once the vendor
has refunded or credited the advance disposal fee to Cruise
Line, the vendor may seek a refund or take a credit for advance
disposal fees currently owed to the Department of Revenue on its
next Solid Waste & Surcharge Return, Form DR-15SW.

Section 403.7197(6)(f), F.S., contemplates an occasional
situation where containers are subsequently exported from this
state. Cruise Line exports containers from this state on every
voyage that it makes. It follows, therefore, that a perpetual
cycle of payments and refunds is administratively inefficient
and unnecessarily burdensome for all parties.

Notwithstanding the provisions of Rule 12A-1.064(1),
F.A.C., or Section 212.06(5)(a)1., F.S., containers delivered to
Cruise Line are for export from this state at the time of
delivery to the vessel or the dockside facility. In Richfield
Oil v. State Board of Equalization, supra, the court determined
that oil placed in the hold of the customer's ship was no less
certain of being exported than if the oil was delivered to a
common carrier. In the same way, containers delivered to Cruise
Line's ship or dockside facility are no less certain of being
exported from this state than if they were delivered to a
commercial carrier. Accordingly, the advance disposal fee
should not be charged to Cruise Line at the time of sale.

Before Cruise Line may purchase containers exempt from the
advance disposal fee, it will be necessary for Cruise Line to
extend a copy of an affidavit to its vendors stating that the
containers purchased are for exclusive use aboard a vessel
engaged in interstate or foreign commerce. The following is a
suggested format for such an affidavit.

AFFIDAVIT FOR PURCHASING CONTAINERS
EXEMPT FROM THE ADVANCE DISPOSAL FEE
FOR EXCLUSIVE USE ABOARD A VESSEL
ENGAGED IN INTERSTATE OR FOREIGN COMMERCE

I, ___, as owner, owner's agent, or
operator of the commercial vessel, ____, Home
Port of _____.

CERTIFY THAT:

1. The items purchased from ___ are to be
   used only on the above named vessel to transport persons or
   property in interstate or foreign commerce and are
   appropriate to carry out the purpose for which the vessel
   is designed, equipped, and used.
2. These items are purchased for use only on board this
   vessel.
3. This vessel has not and will not operate on the canals,
   inland waterways or within the territorial waters of
   Florida.
   This statement is issued in compliance with Rule 12A18.007, Florida Administrative Code, in order to exempt
   this purchase from the Advance Disposal Fee as imposed by
   Section 403.7197, Florida Statutes. This certification
   will continue in force until revoked by written notice to
   the vendor and the Department of Revenue.

Signed

Date

Sworn to and subscribed before me this __ day of
__, A.D., 19____.

Notary Public
(Seal)

My Commission Expires

Transactions of Association

Pursuant to Rule 12-11.003(2)(a), F.A.C., requests for
technical assistance advisements must disclose the names,
addresses, and taxpayer identifying numbers of all interested
parties. Since that information has not been provided for
Association, this advisement will only be applicable to Cruise

Line, until such time as the required information for
Association has been provided.

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 advise 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 advise is based, may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response and your request
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 by the
Department before disclosure. In an effort to protect the
confidentiality of such information, we request you notify the
undersigned in writing within 15 days of any deletions you wish
made to the request or response.

Sincerely,

Jeffery L. Soff
Tax Law Specialist
Statutory Compliance

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