Did a retailer correctly charge Florida sales tax on the full face value of manufacturer-funded coupons even when aggregate reimbursement could be reduced?

Plain-English summary

The retailer correctly charged sales tax on the full face value of the vendor-funded coupons.

Although the coupons also said “store coupon,” the manufacturer reimbursed the retailer for redeemed coupons, so the ruling treated them as manufacturer coupons rather than unreimbursed store discounts. The Department required tax on the full face value at each sale even when later aggregate reimbursement could be reduced by sales-volume caps, incentive discounts, or shared promotional costs.

What this means for you

The funding arrangement mattered more than the coupon's store-only redemption label. A genuine store coupon with no manufacturer reimbursement reduced the taxable selling price; a manufacturer-funded coupon did not under the law applied here.

Common questions

Q: Why was the coupon's full face value included in the sales price?
A: The customer paid part of the price and the manufacturer funded the coupon amount, giving the retailer compensation from two sources.

Q: Did less-than-100% aggregate reimbursement change the tax on individual sales?
A: No. Tax was imposed on each transaction at the moment of sale, before the final aggregate reimbursement was known.

Q: Were unreimbursed store coupons treated the same way?
A: No. The ruling distinguished true store coupons, for which the retailer receives no manufacturer payment, as reductions in selling price.

Citations and references

• Fla. Stat. §§ 212.02(17), 212.05, 212.06, and 212.07 — sales price and collection at sale
• Fla. Admin. Code r. 12A-1.018 — trade discounts and manufacturer coupons
• Gaulden v. Kirk, 47 So. 2d 567 (Fla. 1950) — sales tax measured by dealer compensation
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95A-011

Original ruling text

Mar 29, 1995

Re: TAA 95A-011
Sales Tax - Trade Discounts and Manufacturers Coupons
Rule 12A-1.018, F.A.C.
ss. 212.02, 212.05, 212.06, and 212.07, F.S.

Dear :

Your letter of September 16, 1994, supplemented by a second
letter dated October 25, 1994, requested a Technical Assistance
Advisement on the application of the sales tax to the above
referenced matter. This response to your request constitutes a
Technical Assistance Advisement under Chapter 12-11, Florida
Administrative Code (F.A.C.), and is issued to you under the
authority of s. 213.22, Florida Statutes (F.S.).

SUMMARY

The question presented is whether a nationwide store chain
("the Company" or "the dealer") properly charged sales tax on
the full face value of certain coupons redeemed by consumers at
the time of purchase of the products to which the coupons
relate. The coupons are associated with product promotional
campaigns in which both the product manufacturers and the
Company participate. The coupons at issue here are of a type
referred to as "manufacturers' coupons," a name applied when the
manufacturer reimburses the store for all, or a portion of, the
face value of the redeemed coupons. These coupons are
distinguished from "store coupons" for which the store does not
receive any reimbursement from the manufacturer. Under the
applicable statutes and rules, in the case of manufacturers'
coupons, sales tax is charged on the full retail price of the
product sold before any reduction is taken for the face value of
the coupon redeemed. With store coupons, the store receives no
payment for the coupon, so the transaction is treated as a
reduction in the sales price, and no sales tax is applied to the
face value of the coupon. In this case, the facts indicate that
the coupons, on their face, contain both the phrases "by MFR"

and "store coupon," the arrangement between the store and the
manufacturer with respect to the coupons is that the store will
be reimbursed for coupons redeemed. Thus, the coupons under
consideration are "manufacturers' coupons."

The complicating factor here is that, for some of the
coupons at issue, while the full face value of each individual
coupon is counted in the calculation of the total amount of
reimbursement due to the store, there is less than 100%
reimbursement on certain coupons when considered in the
aggregate. The reason for this is that some of the coupon
campaigns, either condition the Company's participation on the
payment of a participation fee, or have a reimbursement cap
based on expected volume of sales, or require the Company to
join in the payment of promotional activities such as
advertising. While these vendor-funded or manufacturers'
coupons can function to reduce the aggregate reimbursement to
the Company, they do not reduce the value of the credit given at
the individual coupon level for purposes of calculating the
total amount of reimbursement due to the store. Additionally,
the aggregate sales in which coupon redemptions occur are
unknown at the time of the individual sales transactions. The
aggregate sales will not be known until all coupons for a
particular promotion are redeemed. And, the redemption of the
coupons are not under the control of either the store or the
manufacturer.

The law requires that sales tax be imposed to the sales
price, "as far as practicable," by the dealer, "at the moment of
sale/purchase." The manufacturers and the Company negotiate
their coupon arrangements with the intent that the coupons be
fully funded, with the exception of an unexpected sales volume,
or an instance in which promotional costs are shared.
Therefore, at the time of sale, the intention is that the store
will receive reimbursement for all or most of the full face
value of the coupons, and that the total sales price received by
the dealer for the tangible personal property sold at retail
will include the face value of the coupon.

FACTS

As ascertained from your letters, and the Appendix of
Supporting Documents containing Exhibits 1 through 31, this
advisement is based on the following facts.

XXX (the Company) is a XXX corporation which sells XXX
goods at approximately XXX stores throughout the United States.
The Company operates XXX stores in the State of Florida. The
Company is registered as a dealer with the Department, to
charge, collect and remit sales tax on each sale in Florida,
unless the tangible personal property sold is exempt from sales
tax, the customer gives the Company a resale certificate, or the
customer has a valid consumer's certificate of exemption.

As part of its normal business practices, the Company
enters into agreements with vendors and product manufacturers
(collectively referred to herein as "manufacturers") to
participate jointly in promotional campaigns of specific
products. Such promotions include the distribution of coupons
offering discounts off the regular purchase price of an item
sold or manufactured by a particular manufacturer, which
consumers can redeem only at the Company's stores.

Manufacturer reimbursements to retailers, including
Company, for coupons redeemed by consumers are known in the
trade as "vendor funding," and the coupons are known as "vendorfunded coupons." The Company participates in such vendor-funded
coupon promotions through the distribution of vendor-funded
coupons. All of the Company's vendor-funded coupons are
imprinted with the terms "Store Coupons" and "by MFR'." The term "store coupon" indicates that the coupon is not a mailorder coupon and may only be redeemed in Company stores. The term "byMFR'" indicates that the coupon redemption is funded
in whole or in part by the manufacturer of the discounted item,
and that the Company reasonably anticipates that such coupons
will be vendor funded.

Consistent with industry practice, vendor funding
agreements typically are oral in nature. Prior to the coupon
promotion(s) the Company makes estimates of the number of
coupons that would be redeemed. The Company and the
manufacturer(s) use these estimates to negotiate suitable

vendor-funded promotional agreements.

Although these vendor-funded promotions are generally oral
agreements, on occasion, such agreements are reflected in a
document referred to as a "Master Credit Allowance Sheet," which
is provided by the Company to the manufacturer in advance of the
coupon promotion. In any event, pursuant to the parties'
agreement, upon the expiration of a coupon promotion the Company
generates and sends to the manufacturer a "credit allowance
sheet" that is specific to that promotion. The credit allowance
sheet describes the total number of coupons redeemed during the
promotion and the total amount of money that will be deducted
from amounts owed to the manufacturer. Thereafter, and pursuant
to the terms of the parties' credit arrangements, the Company
remits the balance due for the goods, less the total dollar
amount of coupons redeemed (usually taken by the Company in the
form of a credit).

The vendor-funded coupon promotional agreements between the
Company and the manufacturer(s) fall into four different
categories: Categories A through D.

Category A - Category A coupons, as discussed below, are coupons
for which the Company receives, from the manufacturer,
reimbursement for 100 percent of all coupons redeemed by
customers.

Under the Category A coupon arrangement, the Company agrees
to issue and distribute a certain number of coupons offering a
discount off the purchase price of the manufacturer's products,
in consideration for which the manufacturer agrees that it will
provide 100 percent of the funding for each coupon redeemed,
regardless of the number of coupons redeemed. The Company
receives such funding in the form of a credit against monies
owed by the Company to the manufacturer for products purchased.

The XXX example, presented in the letter dated October 25,
1994, provides that Company negotiated an agreement with XXX
("Vendor A") pursuant to which the Company agreed to issue and
distribute coupons nationwide offering $1.00 off the purchase
price of Vendor A's specific themed item, in consideration for

which Vendor A agreed to provide 100 percent of the funding for
each coupon redeemed, in the form of a credit against money owed
by the Company for goods purchased. The coupon was to be
included in an in-store advertising circular for that particular
themed item, along with nine other coupons for various of the
manufacturer's products.

Prior to the coupon promotion, the Company estimated that
8,000 of the themed item coupons would be redeemed nationwide,
for a total dollar value of $8,000.00. In actuality a total of
5,958 of the themed item coupons were redeemed nationwide, for a
dollar value of $5,958.00. Upon expiration of the coupon
promotion, the Company generated and sent to Vendor A a credit
allowance sheet showing that $5,958.00 was to be deducted from
amounts owed by the Company to Vendor A, and indicating that the
amount deducted was for the themed item coupon promotion.
Thereafter, the Company remitted the balance due for goods
received, less $5,958.00, the total dollar amount of coupons
redeemed.

Category B - Category B coupons, as discussed below, are coupons
for which the Company receives, from the manufacturer,
reimbursement for 100 percent of all coupons redeemed by
customers, subject to a previously agreed "cap."

Under the Category B coupon arrangement, the Company will
issue and distribute a certain number of coupons offering a
discount off the purchase price of the manufacturer's product,
in consideration for which the manufacturer agrees that it will
provide 100 percent funding for coupons redeemed, up to a
previously agreed upon maximum amount, or cap. In many
instances the funding cap is arrived at by the manufacturer and
the Company jointly, based on the Company's advance estimates of
the number of coupons it anticipates customers will redeem, with
the intention that the manufacturer ultimately will fund 100
percent of all coupons redeemed. In the event that the actual
number of coupons redeemed exceeds the cap, the Company assumes
the difference by funding all redemptions in excess of the cap.

In the letter of October 25, 1994, two examples were
presented: XXX ("Vendor B"), and XXX ("Vendor C"). For the

Vendor B vendor-funded coupon agreement, the parties agreed that
Company would issue and distribute a coupon nationwide offering
a $.50 discount off the purchase price of a specific themed food
item, in consideration for which XXX would provide 100 percent
of the funding for each coupon redeemed, up to a maximum, or
cap, of $10,000.00. Such promotional funding from Vendor B was
to be taken by Company in the form of a credit against money
owed by the Company for goods purchased. A total of 5,196
coupons were redeemed nationwide, for a dollar value of
$2,598.00. Thereafter, the Company remitted to Vendor B the
balance due for goods received, less $2,598.00, the total dollar
amount of coupons redeemed.

For the Vendor C vendor-funded agreement, the Company would
issue and distribute a coupon nationwide offering a $5.00
discount off the purchase price of a specific themed item, in
consideration for which Vendor C agreed to provide 100 percent
of the funding for each coupon redeemed, up to a maximum, or
cap, of $200,000.00. Such promotional funding from Vendor C was
to be taken by Company in the form of a credit against money
owed by the Company for goods purchased.

The Company had estimated (and the parties had agreed) that
22,000 of the coupons would be redeemed nationwide, for a dollar
value of $110,000.00. In actuality, 37,492 coupons were
redeemed nationwide, for a dollar value of $240,685.00. Upon
expiration of the coupon promotion, the Company generated and
sent to Vendor C a credit allowance sheet showing that
$200,000.00 was to be deducted from amounts owed by the Company
to Vendor C, and indicating that the amount deducted was for
redemptions of the specified themed item coupon that appeared in
the Catalog. Thereafter, Company remitted to Vendor C the
balance due it for goods received, less $200,000.00, which was
the maximum dollar amount agreed to be funded by the
manufacturer. The remaining $40,685.00 in coupon redemptions
was funded by the Company.

Category C - Category C coupons, as discussed below, are coupons
for which the Company receives reimbursement, from the
manufacturer, for 100 percent of all coupons redeemed in excess
of a "coupon incentive discount" provided to the manufacturer by

the Company.

Under the Category C coupon arrangement, the Company agrees
to issue and distribute a certain number of coupons offering a
discount off the purchase price of the manufacturer's product,
in consideration for which the manufacturer agrees that it will
provide 100 percent funding for coupon redemptions, less a
"coupon incentive discount" provided to the manufacturer by the
Company. Under such agreements, the manufacturer is obligated to
fund 100 percent of coupon redemptions in excess of a
predetermined, fixed deductible amount, typically $25,000.00 in
coupons redeemed at the Company's stores throughout the United
States. Based on the Company's projections of the anticipated
response to those promotions, it typically is the Company's
expectation that it will receive from the manufacturer funding
for at least 51 percent, and as much as 95 percent, of the
particular promotion.

The XXX ("Vendor D") vendor-funded coupon agreement, was
presented in your letter of October 25, 1994, as an example. In
that agreement Company would include seven Vendor D coupons in
the Catalog, in consideration for which Vendor D agreed to
provided 100 percent of the funding for each coupon redeemed, in
the form of a credit against monies owed by the Company for
goods purchased, less a $25,000.00 "coupon incentive discount"
for each particular coupon promotional campaign.

The first Vendor D coupon included in the Catalog offered
$3.00 off the purchase price of Vendor D's XXX ("Themed Item
One"). The Company had estimated (and the parties agreed) that
37,000 of the Themed Item One coupons would be redeemed
nationwide, for a dollar value of $110,000.00. In actuality,
57,219 Themed Item One coupons were redeemed nationwide, for a
total dollar value of $168,657.00. Thus, after the $25,000.00
coupon incentive discount, Vendor D paid $143,657.00 (i.e., 85%)
of the total redemptions for this coupon.

The second coupon offered $5.00 off the purchase price of
Vendor D's XXX ("Themed Item Two"). The Company had estimated
(and the parties agreed) that 11,000 of the Themed Item Two
coupons would be redeemed, for a dollar value of $55,000.00. In

actuality 25,837 Themed Item Two coupons were redeemed
nationwide, for a total dollar value of $129,185.00. Thus,
after the $25,000.00 coupon incentive discount, Vendor D paid
$104,185.00 (i.e., 80%) of the total redemptions for this
coupon.

The third coupon offered $3.00 off the purchase price of
Vendor D's XXX ("Themed Item Three"). The Company had estimated
(and the parties agreed) that 37,000 of these coupons would be
redeemed nationwide, for a dollar value of $111,000.00. In
actuality, 10,888 of the Themed Item Three coupons were redeemed
nationwide, for a total dollar value of $32,664.00. Thus, after
the $25,000.00 coupon incentive discount, Vendor D paid
$7,664.00 (i.e., 23%) of the total redemptions for this coupon.

The fourth coupon offered $5.00 off the purchase price of
Vendor D's XXX ("Themed Item Four"). The Company had estimated
(and the parties agreed) that 11,000 of the Themed Item Four
coupons would be redeemed nationwide, for a dollar value of
$55,000.00. In actuality, 51,766 of the Themed Item Four
coupons were redeemed nationwide, for a total dollar value of
$258,830.00. Thus, after the $25,000.00 coupon incentive
discount, Vendor D paid $233,830.00 (i.e., 90%) of the total
redemptions for this coupon.

The fifth coupon offered $2.00 off the purchase price of
Vendor D's XXX ("Themed Item Five"). The Company had estimated
(and the parties agreed) that 26,000 of the Themed Item Five
coupons would be redeemed nationwide, for a total dollar value
of $52,000.00. In actuality, as evidenced by Exhibit 17, 17,799
Themed Item Five coupons were redeemed nationwide, for a total
dollar value of $35,598.00. Thus, after the $25,000.00 coupon
incentive discount, Vendor D paid $10,598.00 (i.e., 30%) of the
total redemptions for this coupon.

The sixth coupon offered $3.00 off the purchase price of
Vendor D's XXX ("Themed Item Six"). The Company had estimated
(and the parties agreed) that 30,000 coupons would be redeemed
nationwide, for a total dollar value of $90,000.00. In
actuality, 42,039 Themed Item Six coupons were redeemed
nationwide, for a total dollar value of $126,117.00. Thus, after

the $25,000.00 coupon incentive discount, Vendor D paid
$101,117.00 (i.e., 80%) of the total redemptions for this
coupon.

Finally, the seventh coupon offered $7.00 off the purchase
price of Vendor D's XXX ("Themed Item Seven"). The Company had
estimated (and the parties agreed) that 7,000 Themed Item Seven
coupons would be redeemed nationwide, for a dollar value of
$49,000.00. In actuality, 3,569 Themed Item Seven coupons were
redeemed nationwide, for a total dollar value of $24,983.00.
Since that amount did not exceed the $25,000.00 coupon incentive
discount, Vendor D did not provide any funding for that coupon.

The redemptions for all seven of the Vendor D coupons
combined totalled $776,034.00. The Company funded $174,983.00
of those redemptions by way of coupon incentive discounts, and
Vendor D provided a total of $601,051.00 in funding for the
seven coupons in the Catalog. Upon expiration of the Catalog
promotion, a credit allowance sheet, showing that $601,051.00
was to be deducted from amounts owed by the Company to Vendor D
for the coupon reductions, was generated by the Company and sent
to Vendor D. Thereafter, the Company remitted to Vendor D the
balance due for goods received, less $601,051.00.

Category D - Category D coupons, as described below, are coupons
for which the Company receives reimbursement from the
manufacturer in the form of co-op monies that are available for
the Company's use with respect to a variety of promotional
activities, including coupon redemptions, and which the Company
reasonably believes at the beginning of a fiscal year will be
sufficient to cover 100 percent of all coupon redemptions.

Under the Category D coupon arrangement, the manufacturer
agrees to provide the Company with "co-op" monies that are
available to be used by the Company for various promotional
activities relating to the manufacturer's products, including
coupon redemptions, television and print advertising and instore announcements. Such co-op funds are taken by Company in
the form of a credit against monies owed by the Company to the
manufacturer for products purchased. In arriving at the total
amount of co-op funds that will be available for the Company's

use, the Company's Purchasing Department and the manufacturer
jointly formulate projections as to anticipated sales volume
(the "sales plan"), based on prior experience concerning
consumer purchases. However, depending on actual results
achieved during the course of a fiscal year, on occasion the
amount of co-op funds available may be revised to reflect actual
volume.

At the start of each fiscal year, after the sales plan is
prepared, and before any promotional activities take place, the
Company's Purchasing and Promotions Departments jointly prepare
a "spending plan," which is reviewed and approved by the
manufacturer. The spending plan allocates the co-op monies made
available by the manufacturer to the various planned promotional
activities for a manufacturer's products, based on internal
estimates as to how much the Company anticipates each activity
will require. In each instance, the sales plan allocates
sufficient funds to cover 100 percent of the cost of the all
promotions, including coupon redemptions for the manufacturer's
products. For example, if the Company were to estimate that
customers will redeem 100,000 of a $1.00 coupon, the spending
plan will reflect a $100,000.00 allocation for coupon redemption
out of the co-op funds provided by the manufacturer.
In accordance with the agreement between the Company and
the manufacturer, during the course of the fiscal year, the
Company has discretion to reallocate funds among the different
planned promotional activities on an "as needed" basis. Thus,
for example, if the actual cost of a particular promotional
activity in fact exceeds the Company's projections (because, for
example, customers redeemed more coupons than anticipated), the
Company may create a revised spending plan and reallocate
funding originally budgeted for a different activity and apply
it toward the under funded activity. In the event that the
Company has reallocated all or some of the co-op funds
originally designated to fund a particular promotion (thus
leaving a shortfall in the funding available for that promotion)
the Company typically negotiates with the manufacturer for
additional funding sufficient to cover that shortfall. In the
event that the Company cannot obtain additional funding from
that manufacturer, and no other funds are available for
reallocation from another promotional activity, the Company

assumes the expenses of the over-budget promotional costs
itself.

In the letter of October 25, 1994, the XXX ("Vendor E"),
and the XXX ("Vendor F") vendor-funded coupon agreements were
provided as examples.

First, in the Vendor E vendor-funded coupon agreement,
Vendor E agreed to provide the Company with a total of
$1,500,000.00 in co-op funding to pay for all 1993 promotional
programs for Vendor E's products, including coupon redemptions,
in the form of a credit against money owed by the Company for
goods purchased. A master credit allowance sheet reflects
Vendor E's agreement to allow the Company to make debits to its
account in the amount of $375,000.00, per quarter.

During the course of the fiscal year, the Company spent a
total of $1,496,200.00 on Vendor E promotions, including nine
different coupon promotions. At the close of each quarter of
the fiscal year the Company remitted to Vendor E the balance due
for goods received that quarter, less $375,000.00. Thus, by the
close of the fiscal year, Vendor E had provided a total of
$1,500,000.00 to the company in co-op funding and the Company
actually spent $1,496,200.00 for all Vendor E promotions
combined. Accordingly, all of the promotions for Vendor E's
products, including coupon promotions, were fully funded by the
manufacturer.

The second vendor-funded coupon agreement between the
Company and Vendor F, required that Vendor F provide the Company
with an anticipated $4,050,000.00 in co-op funding to pay for
all 1993 Vendor F XXX promotional programs, including but not
limited to coupon redemptions, based on an estimated total
volume of $45,000,000.00 (i.e., the Company planned to purchase
$45,000,000.00 worth of Vendor F products during the course of
the 1993 fiscal year). Actual co-op funding was to be
determined by debiting Vendor F's account for each billing
period as follows: 7 percent on lowest volume items purchased
during that period, 8 percent on second lowest volume items, and
9 percent on the remainder of the Vendor F product line, based
on net shipments minus returns and defective items.

Periodically throughout the fiscal year, and pursuant to
the terms of the parties' credit arrangements, the Company
remitted to Vendor F the balance due for goods purchased during
the period, less amounts owed by Vendor F in co-op funding.
During the course of the fiscal year, the Company spent
approximately $4,209,700.00 on Vendor F promotions, including
fifteen different coupon promotions. The volume of the Vendor F
purchases dropped over the course of the fiscal year from an
anticipated $45,000,000.00 to approximately $42,500,000.00. As
a result of that drop in volume co-op funding was reduced to
$3,596,064.00. Accordingly, approximately $612,936.70 of Vendor
F promotions, including but not limited to coupon redemptions,
were not vendor funded.

At the expiration of each coupon promotion, the Company
generates and sends to the manufacturer a credit allowance sheet
that is specific to each promotion, describing the total number
of coupons redeemed during the promotion and the total amount of
money that will be deducted from monies owed to the
manufacturer. Thereafter, the Company remits to the manufacturer
the balance due for goods received, less the co-op monies
previously agreed to by the manufacturer.

Collection of Tax: Categories A through D

The Company collects sales tax on the full face value of
all of the vendor-funded coupons (in Categories A through D),
and remits to the Department all sales taxes collected in
Florida.

ISSUE

Whether the Company properly collected sales tax on the
full face value amount of vendor-funded, or manufacturers'
coupons, when used by the Company's customers at the time of
purchase to reduce the amount to be paid to the Company by the
Company's customer(s).

TAXPAYER'S POSITION

The Company asserts that its current practice of collecting
sales tax on the full face value of all of the vendor-funded
coupons, and remitting to the Department all sales taxes
collected in the State of Florida, is correct.

STATUTORY AND REGULATORY PROVISIONS

The following passages from the Florida Statutes and the
Florida Administrative Code are pertinent to the issue raised in
your letter.

Section 212.02(17), F.S., defines "sales price" as follows:

"(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."
(Emphasis added.)

Section 212.05, F.S., provides, in pertinent part, as
follows:

"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 at
retail 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.

"(2) The tax shall be collected by the dealer, as defined
herein, and remitted by him to the state at the time and in

the manner as hereinafter provided." (Emphasis added.)

Section 212.06(1)(a), F.S., provides:

"(1)(a) The aforesaid tax at the rate of 6 percent of the
retail sales price as of the moment of sale, 6 percent of
the cost price as of the moment of purchase, or 6 percent
of the cost price as of the moment of commingling with the
general mass of property in this state, as the case may be,
shall be collectible from all dealers as herein defined on
the sale at retail, the use, the consumption, the
distribution, and the storage for use or consumption in
this state of tangible personal property or services
taxable under this part. The full amount of the tax on a
credit sale, installment sale, or sale made on any kind of
deferred payment plan shall be due at the moment of the
transaction in the same manner as on a cash sale."
(Emphasis added.)

Section 212.07, F.S., provides, in pertinent part, as
follows:

"(2) A dealer shall, as far as practicable, add the amount
of the tax imposed under this chapter to the sale price,
... Except as otherwise specifically provided, any dealer
who neglects, fails, or refuses to collect the tax herein
provided upon any, every, and all retail sales made by him
or his agents or employees of tangible personal property or
services which are subject to the tax imposed by this
chapter shall be liable for and pay the tax himself.

"(4) A dealer engaged in any business taxable under this
chapter may not advertise or hold out to the public, in any
manner, directly or indirectly, that he will absorb all or
any part of the tax, or that he will relieve the purchaser
of the payment of all or any part of the tax, or that the
tax will not be added to the selling price of the property
or services sold or released or, when added, that it or any
part thereof will be refunded either directly or indirectly
by any method whatsoever...." (Emphasis added.)

The Department has promulgated Rule 12A-1.018, F.A.C.,
wherein the Department interprets and incorporates into its rule
these statutory mandates, as they specifically relate to trade
cash discounts. The provisions of Rule 12A-1.018, F.A.C.,
pertinent to the issue raised herein, provide as follows:

"(1) The tax is imposed upon the total selling price of
tangible personal property sold at retail. Where a dealer
quotes the purchaser a list price with a deduction
therefrom for trade discount, the tax is to be computed on
the list price less the trade discount. A trade discount is
an expedient for adjusting list prices and is to be
deducted in arriving at the true selling price of the
property.

"(3) A coupon or refund issued directly by the manufacturer
is not to be construed as a reduction in selling price by
the dealer. In this case, as illustrated by the following
examples, the full selling price of the product is taxable.

"Example A - An automobile is sold to a customer for $5,000
with a $500 factory rebate'. The customer pays the dealer $5,000 for the automobile. The buyer in turn receives $500 refund directly from the manufacturer. The dealer actually received $5,000 for the automobile and this is the taxable base. "Example B - A box of soap powder retails for $1.50, the customer applies amanufacturers' coupon' worth $.50
toward the purchase of the box of powder. The dealer would
collect $1.00 and the full tax due on the $1.50 sale from
the customer. The manufacturer would redeem the coupon
from the dealer for $.50." (Emphasis added.)

DISCUSSION AND DETERMINATION

In direct response to Taxpayer's (i.e., Company's) inquiry,
regarding whether sales tax is to be charged, collected and
remitted to the State of Florida on the full face value amount
of vendor-funded coupons, which are used by the Company's
customers to reduce the amount paid to Company by them, the
Department responds in the affirmative.

The information provided by the Company, clarifies the
intended meaning of the terms "by MFR" and "store coupon," that
appear on the face of the coupons. The reference to "store
coupon" means that the coupons are redeemable only at the
Company's stores, and the reference to the "manufacturer" means
that the coupons are funded by the manufacturer. While the
facts indicate that the coupons, on their face, contain both the
phrases "by MFR" and "store coupon," the arrangement between the
store and the manufacturer with respect to the coupons is that
the store will be reimbursed for coupons redeemed. Thus, the
coupons are clearly vendor-funded coupons, and as such fall
squarely within the provisions of Rule 12A-1.018(3), F.A.C.,
which provides that coupons issued directly by the manufacturer
are not to be construed as a reduction in the selling price by
the dealer, and hence the full selling price (i.e., the amount
charged to and paid by the customer, and the amount paid by the
manufacturer) is subject to sales tax.

Category A coupons differ from Category B, C, and D
coupons, because the dealer (i.e., the Company) will always
receive 100% vendor funding (usually taken by the Company in the
form of a credit) for Category A coupons. While Category B, C,
and D coupons are also vendor-funded, the aggregate full vendor
funding may be offset by an undeterminable sales volume in
excess of the cap (Category B), coupon incentive discounts
(Category C), or promotional fees in the form of co-op monies
(Category D).

A. Tax is measured by the compensation received by the dealer.

Sales tax is not imposed on the value of the tangible
personal property being sold, but rather, sales tax is levied on
the "sales price." The Florida Supreme Court, in Gaulden v.
Kirk, 47 So. 2d 567, (Fla. 1950), speaking to this issue,
specifically stated that:

"The amount of tax to be paid is measured by the
compensation received for the merchandise sold or services
rendered.... Although the tax is determined on the price
charged for the merchandise or services, it is the not a

tax upon the personal property or services, but upon the
privilege of selling the same, and is measured by the
extent to which the privilege is enjoyed." Id. at 574.

Thus, as provided in s. 212.05, F.S., and as stated in
Gaulden, it is the dealer who exercises, or enjoys, the taxable
privilege of engaging in the business of making retail sales; it
is the dealer who has the obligation of charging, collecting and
remitting the sales tax; and, it is the compensation received by
the dealer selling the tangible personal property, which becomes
the taxable base, upon which sales tax must levied.

Since sales tax due is measured on the compensation
received for the merchandise, the total consideration received
by the dealer (i.e., from the customer and from the
manufacturer), is the basis for the tax, not just the amount
paid by the customer to acquire the tangible personal property.
In this sense, to the dealer of the tangible personal property,
the vendor-funded coupons represent another form of currency
which the customers use to purchase the product. As will be
discussed in more detail below, since sales tax is determined
and imposed on each individual transaction, at the moment of
purchase, rather than on an aggregation of all similar
transactions, the full face value of each coupon is subject to
tax.

B. Definition of sales price.

As provided in s. 212.05, F.S., sales tax is imposed on the
"sales price" of tangible personal property sold at retail.
Under s. 212.02(17), F.S., the definition of "sales price" is
the total amount paid for tangible personal property, valued in
money, whether paid in money or otherwise (e.g., vendor-funded
coupons). In all category coupons (A through D), whenever the
Company is provided with a manufacturer's coupon, the Company is
receiving something of value. That is, when the Company submits
the coupons to the manufacturer, the Company receives a credit
from the manufacturer, which it takes against the amount owed to
the manufacturer. Thus, the coupons do have a money value to
the dealer, the Company, and do represent part of the amount
paid for the tangible personal property, or part of the value of

the transaction to the dealer.

As discussed above, it is the compensation received by the
dealer which controls the amount of tax due; therefore, it does
not matter that the dealer (i.e., Company) is receiving the
total amount paid for the tangible personal property from two
sources -the Company's customer and the manufacturer. The
amount paid by the customer, and the amount paid by the
manufacturer combine to produce the "sales price" of the item
sold by the Company; and, likewise, combine to produce the
compensation received by the dealer (the Company) for the
merchandise.

C. Tax is due at the moment of sale or purchase.

Pursuant to s. 212.06(1)(a), F.S., sales tax is imposed at
the moment of sale, or the moment of purchase. While it may be
the case that the Company's full reimbursement for the coupons
in Categories B, C, and D, may be offset by a sales volume in
excess of the cap, coupon incentive discounts, or promotional
fees in the form of co-op monies, respectively, the manufacturer
has agreed to fund, or credit, the Company for all, or at least
a predominant part, of the aggregate face value of the coupons
that are redeemed by the Company's customers. Thus, it is the
parties' reasonable expectation, as determined by the Company's
estimates, that, at the time the sale of the product to which
the particular coupon is applied, that the vendor-funded coupons
will be part of the sales price.

At the time of sale of the merchandise to which the coupons
are applied, the Company knows that it will be receiving more
for the item than the amount it receives from its customer(s),
due to the reimbursement, or credit, it will receive from the
manufacturer. As it relates to the coupons in Categories B, C,
and D, the exact amount of this overage cannot be determined at
the time of sale, or at the time sales tax is imposed. The
total amount of reimbursement that will be received by the
Company is dependent upon the total number of coupons that are
redeemed by consumers, as determined at the end of the
particular promotional campaign, reduced by any promotional fees
that are shared. The number of total coupons redeemed can

neither be determined with certainty in advance, nor controlled
by, either the Company or the manufacturer(s).

Since a dealer is prohibited under s. 212.07, F.S., from
absorbing the sales tax, and since all, or a predominant part,
of the face value of the coupons is part of the sales price, as
discussed above, the Company must collect sales tax, at the time
of sale, from its customers on the total sales price of the
tangible personal property, including the face value of the
vendor-funded coupons. While it is true that the exact amount
of the aggregate face value of the coupons that will be redeemed
by the Company's customers may be unknown at the time the tax
must be imposed, by charging its customers sales tax on the full
face value of each individual coupon, the Company ensures that
the proper amount of tax is charged, collected and remitted on
each transaction; thus, complying with the mandate that the tax
be imposed at the moment of sale and added as far as practicable
to the sales price. See ss. 212.07(2), and 212.06(1)(a), F.S.

D. Tax must be computed on each taxable transaction, not on a
dealer's total taxable sales.

Section 212.05, F.S., provides that sales tax is levied on
each transaction or incident. As a result, sales tax cannot be
(retroactively) computed on an aggregation of a dealer's total
taxable sales of a given product.

In the present case, if at the end of any given promotional
campaign the Company were to determine that a certain percentage
of coupons were not funded by the vendor, (and, that
consequently, the actual consideration ultimately received by
the Company was reduced by the amount which was not vendorfunded), an attempt to calculate the sales tax based on an
aggregate, lesser amount, computed subsequent to the moment of
sale, would contravene the direct statutory mandate to impose
sales tax on each individual transaction or incident, at the
moment of sale, ss. 212.05 and 212.06, F.S.

Therefore, as it specifically relates to Category B, C, and
D coupons, although these coupons may not always be 100% vendorfunded, the Company must tax these coupons at the time the

coupons are redeemed, in conjunction with each individual sale,
in the same manner as the coupons in Category A.

CONCLUSION

The Department concludes that, as specifically provided in
Rule 12A-1.018, F.A.C., and as directed by Chapter 212, F.S.,
the Company must charge, collect and remit sales tax to the
Department based on the total sales price, or total compensation
received by the dealer for the merchandise, which includes the
total amount paid, "valued in money or otherwise" (i.e., face
value of the vendor-funded coupon), and "is measured by the
compensation received for the merchandise sold." The Department
hereby confirms that the Company's current collection and
remittance of sales tax on the full face value amount of the
vendor-funded coupons, as described in the letters to the
Department, dated September 16, 1994, and October 25, 1994, is
correct.

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
based 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,

Nydia Men‚ndez
Tax Law Specialist

NM/
Control No. 18219