Were customer-modified vacation packages sold for one unitemized price subject to Florida sales tax?

Plain-English summary

Customer modifications did not make the vacation packages taxable when the revised packages still met Florida's vacation-package conditions. Each package had to contain at least two components, such as accommodations, admissions, transportation, or meals, and the customer had to receive only one lump-sum package price without separate component prices.

The seller also had to pay sales tax when acquiring every taxable component. If it bought a component from a related entity, the price had to equal the price offered to unrelated travel agents under normal industry practices. With those conditions met, the modified package's sale was not subject to additional sales tax.

What this means for you

Customer choice did not destroy package treatment. The important facts were multiple bundled components, no itemization to the customer, tax paid on taxable inputs, and arm's-length related-party pricing.

Common questions

Q: Could customers choose different package components?
A: Yes. The resulting package could remain untaxed if it still met every condition in the ruling.

Q: Could the invoice list each component's price?
A: No. The package had to be priced and billed as one lump sum.

Q: Did the seller avoid tax on the components it bought?
A: No. It had to pay tax on all taxable components it acquired.

Q: What if a related company supplied a discounted component?
A: The ruling's favorable result required the related-party price to match normal prices charged to unrelated travel agents.

Citations and references

• Fla. Stat. § 212.04(1)(d) — admissions included in vacation packages
• Fla. Admin. Code r. 12A-1.005(7) — sales of vacation packages
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-007

Original ruling text

Jan 17, 1996

Re: TAA 96A-007
Sales and Use Tax; Vacation Packages; Modified Packages.
Section 212.04(1)(d), Florida Statutes.
Rule 12A-1.005(7), Florida Administrative Code.

Dear :

Your letter of October 6, 1995, requested a Technical
Assistance Advisement on the application of sales tax to
modified vacation packages. This response to your request
constitutes a Technical Assistance Advisement under Chapter
12-11, Florida Administrative Code, and is issued to you under
the authority of Section 213.22, Florida Statutes.

FACTS

In your letter you provided the following information.

Taxpayer is in the business of selling vacation packages
which include components such as, but not limited to,
travel arrangements, hotel accommodations, meal plans, and
admissions. Taxpayer pays sales tax to its suppliers on
the acquisition of package components that are subject to
tax. Taxpayer sells its vacation packages for a lump sum
price without itemization of the package components and
does not collect sales tax on the selling price of the
packages.

Taxpayer offers a large number of vacation packages. These
packages may vary by type of accommodation, length of stay,
type of meal plan, transportation, and other activities.
Nevertheless, some customers find that none of the packages
offered meets all their needs and requirements. The issue
is not confined to Taxpayer, but also impacts Taxpayer's
competitors in the travel industry and the way they do
business. In accordance with current industry practice,

Taxpayer intends to allow customers to modify the vacation
packages to better meet the needs and requirements of such
customers.

Taxpayer will continue to purchase package components and
pay sales tax on those components which are subject to tax.
If a customer chooses to modify a selected package,
Taxpayer will determine a revised package price based on
the modified package. Although package alternatives may be
discussed, Taxpayer will only disclose package prices, not
individual component prices. The modified vacation package
will be sold for a lump sum price without itemization of
the package components to the customer. Sales tax will not
be collected on the sales price of the modified vacation
package. The customer will not be provided a price list of
any individual components but, rather, will be invoiced for
the modified vacation package in a lump sum amount.

REQUESTED ADVISEMENT

You ask if "the sale of a vacation package, which may
include some components selected at the option of the customer,
qualifies as a sale of a vacation package for sales tax purposes
under the provisions of s. 212.04(1)(d), F.S. and Rule 12A1.005(7), F.A.C.[?]"

RELEVANT AUTHORITY

Section 212.04(1), Florida Statutes, provides in part:

(1)(a) It is hereby declared to be the legislative intent
that every person is exercising a taxable privilege who
sells or receives anything of value by way of admissions.

(b) For the exercise of such privilege, a tax is levied at
the rate of 6 percent of sales price, or the actual value
received from such admissions....

(d) No additional tax is due on an admission if the
admission is incorporated as part of a package sold by a
travel agent; if the package includes admissions and

transient rentals, transportation, or meals; and if there
is no separate itemization of the admission, transient
rental, transportation, or meal in the sales price of the
package. This paragraph does not apply if the actual price
charged for the admission by the dealer to a travel agent
is less than the price charged to unrelated parties under
normal industry practices and the dealer and the travel
agent are members of the same controlled group of
corporations for federal income tax purposes....

Rule 12A-1.005(7), Florida Administrative Code, provides in
part:

(7) SALES OF VACATION PACKAGES.

(a) A dealer owes tax on purchases of any taxable
components of a vacation package which he sells. Such
taxable components may include, but are not limited to,
admissions, transient rentals, rental cars, and meals.

(b) No tax is due on the sale of a vacation package unless
the selling dealer itemizes the taxable components and
sells the taxable components for more than was paid for
them. If the itemized components are sold for more than
the dealer paid for them, he must register and collect and
remit tax on the itemized taxable components, and may take
a credit for taxes previously paid.

(c) If the itemized components are sold for the same amount
or less than was paid for each of them, the seller of the
package shall not collect any additional tax, and shall not
take credit for taxes previously paid.

(d) If the actual price charged for the admission by the
dealer to a travel agent, which is a member of the same
controlled group of corporations as the dealer, is an
amount less than the price charged to unrelated travel
agents under normal industry practices, then the related
travel agent will be required to itemize the components of
the package to his customer, collect tax on the itemized
taxable components, and may take a credit for taxes

previously paid.

DISCUSSION

As you know, in order to qualify for treatment under
Section 212.04(1)(d), Florida Statutes, and Rule 12A-1.005(7),
Florida Administrative Code, a vacation package must meet
several criteria. First, the vacation package must include
multiple components such as transient accommodations,
admissions, transportation, and meals. Second, the vacation
package must be priced and billed as a single lump sum; there
can be no separate pricing and itemization of the component
parts of the vacation package. Third, sales tax must have been
paid on the purchase price of all taxable components. Finally,
if any of the components of the vacation package were purchased
from a related entity, the price paid for those components must
be equal to the price paid by unrelated travel agents for the
components under normal industry practices. If these criteria
are met, the sale of the vacation package is not subject to tax
under Rule 12A-1.005(7), F.A.C.

Your question concerns vacation packages which have been
modified to meet the needs of individual customers. According
to your letter, the individual components of these modified
vacation packages will not be separately priced. Customers will
be billed for a lump sum that covers the entire cost of the
modified vacation package. The vacation package must have
multiple components. That is, two or more components, XXXX. In
addition, sales tax must be paid on all taxable components.
Finally, if any components are purchased from a related entity,
it must be purchased for the same price as would be offered an
unrelated travel agent. Under these circumstances, the sale of
modified vacation packages by your company would not be subject
to sales tax under Section 212.04(1)(d), F.S., and Rule 12A1.005(7), F.A.C.

CONCLUSION

The sale of a modified vacation package which contains
multiple components that are not separately priced is not
subject to sales tax if tax was paid on the purchase price of

all taxable components and no components were purchased from
related entities for amounts less than would be charged other
travel agencies under normal industry practices.

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. 23503