Did a glossy monthly publication distributed mostly free, but also sold by annual subscription, qualify for Florida's shopper or community-newspaper exemption?

Plain-English summary

The glossy monthly publication did not qualify as an exempt shopper or community newspaper.

About 60% to 70% of each issue was advertising, and the balance included community news and features. Most copies were distributed locally without charge, but the publisher also sold annual subscriptions.

The Department emphasized that the publication appeared monthly rather than daily or weekly, was repeatedly described as a magazine, used glossy paper associated with magazines, and offered annual subscriptions. It therefore failed the stated shopper and community-newspaper criteria.

The publisher had to collect sales tax on subscriptions delivered to Florida destinations and owed use tax on the printing cost of copies distributed free in Florida.

What this means for you

Advertising percentage alone did not establish the exemption. Publication frequency, format, subscriptions, and the publication's own presentation all mattered.

Common questions

Q: Did the publication contain enough advertising? A: It reported 60% to 70% advertising, but that did not overcome the other failed criteria.

Q: Why did the Department call it a magazine? A: It was monthly, sold annual subscriptions, called itself a magazine, and used glossy paper.

Q: Were Florida subscriptions taxable? A: Yes.

Q: Were free copies tax-free to the publisher? A: No. The publisher owed use tax on their cost.

Citations and references

• Fla. Stat. §§ 212.05(1)(a)1.a. and (b), 212.08(7)(w) — sales and use tax and publication exemption
• Fla. Admin. Code r. 12A-1.008(2), (3), (4), and (10) — magazines, subscriptions, and shoppers
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95A-018

Original ruling text

May 04, 1995

Re: TAA 95A-018
Free Circulated Publication
Sections 212.05(1)(a)1.a. and (b), 212.08(7)(w), F.S. Rule 12A-1.008(2),(3) and (10), F.A.C.

Dear

This is in response to your letter of March 15, 1995, in which you requested the issuance of a technical advisement on behalf of XXXX (hereinafter "Taxpayer"), as to whether the publication styled XXXXX (copies of which were enclosed with your letter; hereinafter "Publication") qualifies for the exemption from sales and use tax provided by section 212.08(7)(w), F.S., for "shoppers" and "community newspapers."

Your letter provides in part:

"FACTS:

"Taxpayer, a Florida corporation, is the publisher and distributor of [Publication]. Taxpayer distributes approximately 60,000 copies of each issue of [Publication], on a monthly basis, free of charge, primarily to restaurants, hotels, retail outlets and residential areas in and around XXXXX. Notwithstanding the fact that
[Publication] is distributed locally free of charge,
[Publication] offers an annual subscription of twelve monthly issues for $28.00. There are currently 1,763 paid subscribers of [Publication] in the United States and 60 foreign subscribers, The $28.00 annual subscription fee is used solely to reimburse Taxpayer for costs of handling and postage of the issues sent to subscribers. In addition to a nominal allocation of the subscription fee to in-house administrative costs, the remaining subscription fee is paid directly to an outside mailing house and for postage. Attached hereto as Exhibit 'A', is a Schedule setting forth

an allocation of the costs of postage and handling of subscriptions, which indicates that the annual subscription fee is expended by Taxpayer solely for costs of handling and postage.

"Each issue of [Publication] contains approximately 60% to 70% of paid advertising of a broad range of products and services offered by numerous unrelated businesses including but not limited to: local real estate developers and brokers; retail clothing, home furnishing and accessories stores; malls; night clubs; entertainment attractions; restaurants; and hotels. The balance of each issue of
[Publication] contains reports of current events and matters of general interest which appeal to a wide spectrum of the general public, including news of general and community interests, editorial comments and articles, including but not limited to: celebrity interviews with personalties in the world of film, social events and popular spots in and around XXXXX including parties, clubs, restaurant openings, gallery openings and special events; articles introducing new businesses and trends; features dealing with international fashion; environmental reports on the country's most current issues, including those topics most relevant to Florida; a mini planner for the month, giving readers information on events, new places, music, food, books, etc[.]; and articles containing a sampling of the best gifts from XXXX most popular shops and boutiques.

"Analysis.

"Based upon the foregoing facts, Taxpayer respectively requests a determination that [Publication] qualifies as a
shopper' and as acommunity newspaper' under FAC 12A1.008(10) and therefore the costs of printing and all taxable purchases for the exclusive purpose of incorporation into each issue are exempt from Florida sales and use taxes.

"FAC Section 12A-1.008(10) provides an exemption from sales tax for publications which qualify as either a 'shopper' or

'community newspaper.'

"The term `shopper' means a community newspaper made available to its coverage area by way of distribution through the mail, home delivery, or news stands, free of charge, which is published on a regular basis (usually daily or weekly) and which consists primarily of advertising of a broad range of products and services offered by several unrelated types of businesses or individuals, and which has a conformity as to title and general nature of content from issue to issue, and may contain in each issue at least some news of general or community interest, community notices, and also contain editorial comments or articles by different authors. FAC 12A-1.008(10)(a).

"[Publication] qualifies as a `shopper' publication based upon the above criteria for the following reasons:

"1. [Publication] is a community newspaper made available to its coverage area by way of distribution through the mail, home deliver, and news stands.

"2. [Publication] is distributed free of charge, with the exception of a de minimis number of individual subscribers who pay an annual subscription fee which is used solely to reimburse Taxpayer for the costs of postage and handling.

"3. [Publication] is published on a regular monthly basis.

"4. [Publication] consists primarily of advertising of a broad range of products and services offered by several unrelated types of businesses.

"5. There is a conformity as to title and general nature of content from issue to issue. Copies of several successive issues of [Publication] are enclosed for your review, and marked Exhibit 'B.'

"6. Each issue of [Publication] contains news of general and local interest to the XXXX community and contains

editorial comments and articles by different authors.

"In addition to qualifying as a shopper' publication, [Publication] also qualifies as acommunity newspaper' publication.

"The term `community newspaper' means a community possessing the following attributes:

"1. Its circulation is free;

"2. It must be published at stated short intervals (usually daily or weekly);

"3. It must not, when successive issues are put together constitute a book;

"4. It must be intended for circulation among the general public;

"5. It must consist primarily of advertising of a broad range of products and services offered by several unrelated types of businesses or individuals;

"6. It must routinely [devote] a minimum of 25% of its copy to reports of current events and matters of general interest which appeal to a wide spectrum of the public; and

"7. It must be distributed through the mail, home delivery or news stands. FAC 12A-1.008(10(b).

"As stated above, [Publication's] circulation is free and
[it] is published on a regular monthly basis. Each issue is separate and does not, when successive issues are put together, constitute a book. (See the copies of
[Publication] enclosed as Exhibit `B')

"[Publication] is circulated to the general public, through the mails and direct delivery to restaurants, hotels, retail outlets and individual residences.

"Each issue of [Publication] consists primarily of advertising as described above, and routinely devotes a minimum of 25% of its copy to reports of current events and matters of general interest which appeal to a wide spectrum of the general public.

"In addition, [Publication] satisfies the primarily advertising' requirement of ashopper' or `community newspaper,' since more than 50% of each issue is devoted to advertising. FAC 12A-1.008(10)(c). Each issue of
[Publication] also satisfies the criteria to be considered a 'newspaper' since each issue contains a minimum of 25% news consisting of current events in matters of general interest which appeal to a wide spectrum of the general public."

APPLICABLE AUTHORITY

Section 212.05(1)(a)1.a., and (b), 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.... "(b) At the rate of 6 percent of the cost price of each item or article of tangible personal property when the same is not sold but is used, consumed, distributed, or stored for use or consumption in this state."

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

"(w) Newspapers, Shoppers, and Community Newspapers. Likewise exempt are newspapers. Also exempt are free,

circulated publications which are published on a regular basis, the content of which is primarily advertising and which are distributed through the mail, home delivery, or newsstands."

Rule 12A-1.008(10), F.A.C., provides in part:

"(10) Effective July 1, 1991, shoppers' andcommunity newspapers' which satisfy the criteria provided in this subsection are exempt from tax. "(a) The term shopper' means a community publication made available to its coverage area by way of distribution through the mail, home delivery, or newsstands free of charge, which is published on a regular basis (usually daily or weekly) and which consists primarily of advertising of a broad range of products and services offered by several unrelated types of businesses or individuals, and which has a conformity as to title and general nature of content from issue to issue, and may contain in each issue at least some news of general or community interest, community notices, and could also contain editorial comment or articles by different authors. "(b) The termcommunity newspaper' means a community publication possessing the following attributes: "1. Its circulation must be free; "2. It must be published at stated short intervals (usually daily or weekly); "3. It must not, when successive issues are put together, constitute a book; "4. It must be intended for circulation among the general public; "5. It must consist primarily of advertising of a broad range of products and services offered by several unrelated types of businesses or individuals; "6. It must routinely devote a minimum of 25 percent of its copy to reports of current events and matters of general interest which appeal to a wide spectrum of the general public; and "7. It must be distributed through the mail, home delivery, or newsstands. "(c) In order to satisfy the `primarily advertising'

requirement of a shopper' orcommunity newspaper,' more than 50 percent of the publication's copy must be devoted to advertising in more than one-half of the published editions during any 12-month period. However, in order to be considered a newspaper, a community newspaper must carry a minimum of 25 percent news consisting of current events and matters of general interest which appeal to a wide spectrum of the general public."

Rule 12A-1.008(2)(a), (b)1.,and (c), F.A.C., provides:

"(2)(a) Before July 1, 1987, subscriptions to magazines entered as second class mail sold for an annual or longer period of time were exempt from sales and use taxes; but sales of single copies were taxable. Effective July 1, 1987, the purchase of or retail sale of magazines, whether by subscription or as single copies, is taxable at the retail price. "(b)1. Subscriptions to newspapers, magazines and periodicals are taxable when a copy or copies are transported to a destination in this state. Such subscriptions are not taxable when the point of destination is outside this state. When the destination at the beginning of the subscription is in this state, but is later changed to outside this state, the subscription is taxable. When the destination at the beginning of the subscription is outside this state but is later changed to inside this state, the subscription for its entire term is not taxable. "(c)1. Use tax is payable on the cost price of magazines, handbills, circulars, flyers, advertising supplements, and other printed materials when not sold but used, consumed, or distributed by means other than being distributed as a component part of a newspaper or magazine, or stored for use or consumption in this state. "2. The term `cost price' means the actual cost of printing of newspapers, magazines, and other publications, without any deductions therefrom on account of the cost of materials used, labor or services cost, transportation charges, or other direct or indirect overhead costs that are a part of printing costs of the property. However, the

cost of labor to manufacture, produce, compound, process, or fabricate expendable items of tangible personal property that are directly used by such person in printing other tangible personal property for sale or for his own use is exempt. Authors' royalties, fees, or salaries, general overhead and other costs not directly related to printing shall be deemed labor associated with the manufacturing, producing, compounding, processing, or fabricating expendable items. For determining which elements are included in cost price and how the tax is computed, see Rule 12A-1.043(1)(b), (c), and (d), F.A.C."

Rule 12A-1.008(3) and (4), F.A.C., provides:

"(3)(a) For purposes of this rule, the term, `magazine.' being a word of common usage, is to be construed in a plain and ordinary signification and not in a technical sense. "(b) Among other characteristics distinguishing a magazine from a newspaper, magazines usually: "1. are sold by subscription for longer periods of time than newspapers; "2. are published at longer intervals than newspapers, such as weekly, monthly or longer; "3. are delivered by mail or sold over the counter, but copies may also be delivered to the ultimate consumer by other means; and "4. cannot qualify as newspapers in which legal notices and process may be published pursuant to s. 50.031, F.S. "(4) The tax on the sale of a subscription or copy of a newspaper, magazine, or other publication must be separately stated as Florida sales tax on the customer's charge ticket, invoice, or other tangible evidence of sale."

DEPARTMENT RESPONSE

We have reviewed the issues of the publication together with the information contained in your letter and the applicable sections of chapter 212, F.S., and rules of the Florida Administrative Code to determine whether it qualifies for the exemption from tax for "shoppers" and "community newspapers"

under section 212.08(7)(w), F.S., and Rule 12A-1.008(10), F.A.C.

Section 212.08(7)(w), F.S., constitutes a statutory exemption, and the Department in construing its provision must adhere to and be guided by the long-standing and fundamental precept of statutory construction, established by the Florida Supreme Court, which mandates that exemptions from or exceptions to taxing statutes must be strictly construed against the taxpayer. See Asphalt Pavers v. Dept. of Revenue, 584 So. 2d 57 (Fla. 1st DCA 1991); Dade Cty. Taxing Auth. v. Cedars of Lebanon, 355 So. 2d 1205 (Fla. 1978), reh. den. April 5, 1978; Williams v. Jones, 326 So. 2d 425 (Fla. 1975), reh. den. March 4, 1976; Straughn v. Camp, 293 So. 2d 689 (Fla. 1974); United States Gypsum Company v. Green, 110 So. 2d 409 (Fla. 1959).

Focusing back on the exemption for certain free publications granted by s. 212.08(7)(w), F.S., the Florida Supreme Court's doctrine of strict construction of exemptions would operate to confine said exemption to a publication which can demonstrate under a strict construction that it naturally, logically, and by clear connection falls into the category of a "shopper" or "community newspaper".

Rule 12A-1.008(10)(a), F.A.C., provides among other things that a publication seeking an exemption from tax as a "shopper" must be circulated free of charge, and it must be published on a daily or weekly basis. XXXX is published monthly and subscriptions are offered and sold on an annual basis. Additionally, the publication is referred to as a "magazine" on the subscription order form, the masthead, TV-Radio Ads, letters from the publisher, and the contents section of the publication.

Although the publication does satisfy some of the requirements for a "shopper" as outlined in the rule, such as consisting primarily of advertising of a broad range of products and services, containing news of general or community interest and editorial comments or articles by different authors, it does not satisfy all of them. In addition to being referred to as a "magazine," it is printed on glossy paper which is commonly used by magazines companies. Therefore, it is the position of the Department that Publication is not exempt from tax as a

"shopper" under section 212.08(7)(w), F.S.

It is also the Department's position that the publication does not satisfy all the requirements of the rule in order to be considered as a "community newspaper" which is exempt from tax. Again, the publication is published monthly instead of daily or weekly and subscriptions are offered and sold on an annual basis in addition to its being referred to as a "magazine" in several areas of the publication.

Since the publication does not qualify for the exemption from tax under section 212.08(7)(w), F.S., and Rule 12A1.008(10), F.A.C., Taxpayer is responsible for charging, collecting, and remitting sales tax on the sale of its subscriptions which are transported to destinations in this state. The publication would also be liable for use tax on the cost of the copies of the publication which are distributed free of charge.

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.20424