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