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