Does Florida tax a seller's out-of-state purchase of coupon-certificate books or the later sale of those books to consumers?

Plain-English summary

The business had to pay Florida use tax on the certificate books it bought from an out-of-state company, but it did not have to collect sales tax when it sold the books to Florida customers.

The Department treated the business as the ultimate consumer of the printed booklets. If Florida sales tax had not been collected by the out-of-state seller, the business had to remit use tax on its cost.

The customer's purchase was different. A booklet merely evidenced an intangible right to obtain manufacturers' coupons and had no value apart from that right. The Department analogized it to a gift certificate and treated the sale of the booklet as nontaxable. When a customer later used a manufacturer's coupon to buy groceries, however, the coupon did not reduce the taxable selling price of the product under the rule quoted in the ruling.

What this means for you

A business can be the taxable consumer of the physical material used to deliver a nontaxable intangible right. The tax result therefore may differ at the business's purchase stage and the customer's purchase stage. Operators should also distinguish manufacturers' coupons from dealer discounts because the ruling's quoted rule taxed the full product price when a manufacturer's coupon was redeemed.

Common questions

Q: Was the out-of-state purchase of the certificate books taxable?
A: Yes. The seller of the books was the ultimate consumer and owed use tax on its cost if Florida sales tax had not already been paid.

Q: Did the business have to collect tax when it sold a book to a Florida customer?
A: No. The Department viewed the book as evidence of an intangible discount right rather than a taxable sale of tangible personal property.

Q: Did using a manufacturer's coupon reduce the taxable price of groceries?
A: No. Under the rule quoted in the advisement, the full selling price remained taxable when the manufacturer reimbursed the dealer for the coupon.

Citations and references

• Fla. Admin. Code r. 12A-1.018(3) — manufacturers' coupons
• Fla. Admin. Code r. 12A-1.027 — printing for ultimate consumers
• Fla. Admin. Code r. 12A-1.089 — gift certificates
• Fla. Admin. Code r. 12A-1.091 — use tax on out-of-state purchases
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-004

Original ruling text

Jan 12, 1996

RE: TAA 96A-004
Sales and Use Tax; Sale of Certificates Redeemable for
Coupons.
Rules 12A-1.018(3), 12A-1.027, 12A-1.089, and 12A-1.091
Florida Administrative Code.

Dear :

This response is in reply to your letter of April 2, 1995,
referring to your letter of January 22, 1995, in which you
requested a Technical Assistance Advisement ("TAA") on the
applicability of sales tax to certificate books you sell. In a
letter from Janet Young dated May 9, 1995, you were told that
your request of April 2, 1995, did not meet the requirements for
a "TAA" specified in s. 213.22, F.S. Your letter of June 5,
1995, enclosed sufficient documentation for issuance of a "TAA"
on this matter.

FACTS

Your company purchases certificate books from an out-of-state
company. Those books are then sold to Florida Customers who are
solicited through the local media. The customers may redeem the
certificates for manufacturer's coupons which are then used in
grocery stores.

REQUESTED ADVISEMENT

1. Is the purchase of the certificate book from the out-of-state
   dealer taxable?

2. Is the sale of the certificate books to Florida consumers
   taxable?

APPLICABLE LAW

Rule 12A-1.018, Florida Administrative Code, provides in part:

(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 B - A box of soap powder retails for $1.50, the
customer applies a "manufacturers' 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....

Rule 12A-1.027, F.A.C, provides in part:

(1) Sales to ultimate consumers for printing of tangible
personal property are taxable....

Rule 12A-1.089, F.A.C., provides in part:

12A-1.089 Gift Certificates. The sale of a gift certificate
is not taxable. When the owner of a gift certificate
redeems it for tangible personal property, or a part
thereof, the transaction is taxable as a sale.

Rule 12A-1.091, F.A.C., provides in part:

(2)(a) The use tax applies to the use in this state of
tangible personal property purchased outside Florida which
would have been subject to the sales tax if purchased from
a Florida dealer...

(14)(a) Any person, whether registered or unregistered, who
has purchased or leased tangible personal property either
in this state or from out-of-state for use, consumption, or
distribution, or for storage to be used or consumed in this
state without having paid sales tax on such property if
subject to tax, is required to remit use tax on the cost
price and on the lease of such property....

(b) Any person required to file and remit use tax on Form
DR-15MO is not considered, by virtue of that fact alone, as
"engaged in or conducting business in this state as a
dealer," within the meaning of section 212.18(3), F.S., and
is not required to file an application for a certificate of
registration....

DISCUSSION

The purchase of the certificate books from the out-of-state
manufacturer is taxable. Rule 12A-1.027, Florida Administrative
Code. You are considered to be the ultimate consumer of these
booklets. Thus, if Florida sales tax has not been paid on these
booklets, you will be required to remit use tax on your cost for
the books.

The certificate booklet is evidence of the right to purchase at
a discount and they have no intrinsic value apart from that
right, Thus, the sale is not a sale of tangible personal
property but rather a sale of intangible personal property. This
is similar to the treatment of "Gift Certificates" and are
governed by Rule 12A-1.089, F.A.C. Therefore, the purchase of
the certificate booklets by the Florida consumers is not
taxable. However, the value of the coupons will be taxable when
they are used under the provisions of Rule 12A-1.018(3), F.A.C.

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 confidential
information, we request you notify the undersigned in writing
within 15 days of any deletions you wish made to the request or
this response.

Sincerely,

Kama Schultz
Senior Tax Specialist

KDS
Control No. 21722