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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