Which charges in a Florida nonprofit school's video and correspondence home-education programs were taxable?

Subject

Video Home School and Correspondence School

Plain-English summary

The video-home-school enrollment fee was taxable in full unless the school separately stated the value of the taxable videotape use and the exempt textbooks. The tapes remained the school's property, so the student's right to use them was treated as a taxable license of tangible personal property. The included qualifying textbooks were exempt, but their value had to be separated in the brochures and the school's records to avoid taxing the whole enrollment fee.

The refundable retainer for tapes returned in good condition was a nontaxable deposit. A $12 charge for failing to return a tape was taxable. By contrast, the correspondence-school tuition was exempt as a professional-service transaction, and qualifying K-12 textbooks sold for the described accredited home-education courses were exempt.

What this means for you

The ruling shows how bundled education charges can take the tax treatment of their taxable component when exempt books are not separately valued. It also distinguishes a genuinely refundable deposit from a charge that transfers or compensates for tangible property.

Common questions

Was the refundable videotape retainer taxable? No, if refunded when the tapes were returned in good condition.

Was the charge for an unreturned tape taxable? Yes.

Was correspondence-school tuition taxable? No, on the described facts.

Were all home-school book sales exempt? The ruling limited the exemption to qualifying K-12 books used in regularly prescribed courses required for the school's accreditation.

Citations and references

• Fla. Stat. §§ 212.02(16)(a), 212.02(17), 212.05(1)(a)1.a., 212.08(7)(o), (q), (v)1., 213.22, and 228.041(34)
• Fla. Admin. Code r. 12A-1.001(3)(a) and (15)(a)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94A-046

Original ruling text

Aug 03, 1994

Re: TAA 94A-046
Video Home School and Correspondence School
Sections 212.02(16)(a), and (17), 212.05(1)(a)1.a.,
212.08(7)(o), 212.08(7)(q), 212.08(7)(v)1., F.S.
Rule 12A-1.001(3)(a), and (15)(a), F.A.C.

Dear :

This is in response to your letter of May 24, 1994, and our
telephone conversations of June 6, and June 22, 1994. In your
letter you requested the issuance of a technical assistance
advisement regarding the taxability of XXXXX sale of A Beka
School Services Video Home School, and Correspondence School
programs, and also its sale of text books to individuals to use
in home education programs for grades K-12.

In our telephone conversations you clarified that the A
Beka Correspondence and A Beka Video school programs and the
XXXXX are all divisions of XXXXX and come under its s. 501(c)(3)
status with the Internal Revenue Service. Also, XXXXX is
accredited by the XXXXX of XXXXX and the accreditation covers
the A Beka School Services programs. Additionally, the A Beka
textbooks which are sold for home education programs are books
which are used in regular classes or courses of study required
for accreditation by the XXXXX.

For the Video Home School program, the pupil is charged an
enrollment fee and a retainer fee. The retainer fee is
refundable after the video tapes are returned in good condition
at the completion of the course. The Video tapes remain the
property of the school. In addition to the video tapes, the
pupil receives textbooks and workbooks which become the property
of the pupil and are included as part of the enrollment fee.

For the tuition fee charged for the Correspondence School,
the pupil receives textbooks, workbooks, the curriculum (lesson

manual), home work assignments and tests. The textbooks and
workbooks become the property of the pupil and the curriculum
(lesson manual) remains the property of the school and must be
destroyed by the pupil upon completion of the course.

APPLICABLE AUTHORITY

Section 212.08(7)(v)1., provides:

"(v) Professional Services
"1. Also exempted are professional, insurance, or personal
service transactions that involve sales as inconsequential
elements for which no separate charges are made."

Section 212.08(7)(o)1.a. and b., F.S. provides;

"(o) Religious, charitable, scientific, educational, and
veterans' institutions and organizations."1. There are exempt from the tax imposed by this part
transactions involving:
"a. Sales or leases directly to churches or sales or leases
of tangible personal property by churches;
"b. Sales or leases to nonprofit religious, nonprofit
charitable, nonprofit scientific, or nonprofit educational
institutions when used in carrying on their customary
nonprofit religious, nonprofit charitable, nonprofit
scientific, or nonprofit educational activities, including
cemeteries;...."

Rule 12A-1.001(3)(a), F.A.C., provides in part:

"(3)
"(a) A sale or lease directly to... nonprofit educational
institutions,... for use in the course of their
customary... activities,... are exempt from the tax imposed
by Part I, Chapter 212, F.S.... However, such institutions
or organizations desiring to qualify for the exemption must
obtain from the Department of Revenue a consumer's
certificate of exemption, and payment must be made directly
to the dealer by the exempt entity...."

Section 212.08(7)(q), F.S., provides:

"(q) School books and school lunches -- This exemption
applies to school books used in regularly prescribed
courses of study, and to school lunches served to students,
in public, parochial, or nonprofit schools operated for and
attended by pupils of grades 1 through 12. School books
and food sold or served at community colleges and other
institutions of higher learning are taxable."

Rule 12A-1.001(15)(a), F.A.C., provides:

"(15) SCHOOLS AND SCHOOLBOOKS
"(a) The sale of schoolbooks, including printed textbooks
and workbooks, containing printed instructional material,
and questions and answers for school purposes used in
regularly prescribed courses of study in public, parochial
or nonprofit private schools grades K through 12 are
exempt. Schools as used herein shall mean tax supported or
parochial, church, and nonprofit private schools conducting
regular classes and courses of study required for
accreditation by or membership in the Southern Association
of Colleges and Schools, State Department of Education, the
Florida Council of Independent Schools, or Florida
Association of Christian Colleges and Schools, Inc.
Yearbooks, magazines, directories, bulletins, papers and
similar publications distributed by educational
institutions to the students are classified as schoolbooks
and are treated in the same manner as other schoolbooks.
Sales of all such items by junior colleges and institutions
of higher learning, as well as by newsstands, and sales to
the general public are taxable. Sales of school materials
and supplies are taxable regardless of by whom sold;
however, for the sake of convenience, schools grades K
through 12 and their respective P.T.A.'s or P.T.O.'s have
been granted the privilege of paying tax to their suppliers
on school materials and supplies that they purchase for
resale to students and the tax is passed on to the student
as part of the selling price. All others making sales of
school supplies and materials are required to register as
dealers and collect the tax thereon from the purchaser."

Section 212.05(1)(a)1.a., F.S., provides in part:

"212.05 Sales, storage, use tax.--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 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, computed on each taxable sale
for the purpose of remitting the amount of tax due the
state, and including each and every retail sale...."

Section 212.02(16)(a), F.S., provides:

"(16) `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."

Section 212.02(17), F.S., Provides:

"(17) 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, 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.Sales
price' also includes the consideration for a transaction
which requires both labor and material to alter, remodel,
maintain, adjust, or repair tangible personal property.
Trade-ins or discounts allowed and taken at the time of
sale shall not be included within the purview of this
subsection."

DEPARTMENT RESPONSE

We will restate your questions and follow with our
responses.

Question 1:

"Should we charge sales tax on the enrollment fee of the
distance education program Video Home School? The
enrollment provides a package of video tapes and the
required textbooks that the teachers teach from. Enclosed
for your review is a 1994-95 A Beka Home School brochure
which describes the program and includes the enrollment
agreement."

Response

The Video Home School program has three areas which must be
addressed. First, is the Enrollment fee which covers the use of
the video tapes and the required textbooks. Second, is the
Retainer fee which is refundable upon return of the videotapes
in good condition at the completion of the course. Third, is
the $12 per tape charge made by the school to the student for
failure to return the tapes.

The Retainer fee which is refundable upon return of the
video tapes in good condition is viewed as a refundable deposit
and as such is not subject to tax.

The $12 charge made by the school to the student for
failure to return the tapes is subject to tax under section
212.05(1)(a)1.a., F.S., as a sale of tangible personal property
as defined in section 212.02(16)(a), F.S.

The Enrollment fee is for the use of the video tapes and
for textbooks which become the property of the pupil. The
textbooks are not subject to tax as noted in section
212.08(7)(q), F.S., and Rule 12A-1.001(15)(a), F.A.C. However,
the use of the video tapes by the student is a sale of tangible
personal property under sections 212.05(1)(a)1.a., and
212.02(16)(a), F.S., as a license to use tangible personal

property on the part of the student. The entire amount of the
Enrollment fee is subject to tax unless the value for the use of
the video tapes is expressed and separately stated from the
value of the textbooks in the brochures and in the school's
books and records regarding the various Video Home School
programs.

Question 2:

"Should we charge sales tax on tuition fees for the
Correspondence School? The tuition includes the necessary
textbooks and materials for participation in the distance-based
education program. Enclosed for your review is a 1994-95 A Beka
Correspondence School brochure which describes the program and
includes the enrollment agreement."

Response

The tuition fee is exempt from tax under section
212.08(7)(v) 1., F.S. As addressed in our response to question
1., the school would not owe use tax on the tangible personal
property supplied to the pupil as a part of the Correspondence
School program.

Question 3:

"Aside from these two programs, A Beka Books sells
textbooks to individuals to use in home education programs.
These textbooks are for grades K-12. Should sales tax be
charged to these customers?"

Response

The school's sales of textbooks to individuals for use in
home education programs under section 228.041(34), F.S., grades
K-12, are exempt from tax as noted in Rule 12A-1.001(15)(a),
F.A.C., if the books are ones which are used in regularly
prescribed courses of study required for accreditation by the
XXXXX.

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 and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 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 the response.

Sincerely,

Richard S. Harrod
Technical Assistant

RSH/h
Control No. 15897