Did a Florida tour operator collect sales tax on an unitemized vacation package, vehicle subleases, and gift-shop sales?

Plain-English summary

Florida did not require the registered travel seller to collect tax on its unitemized vacation-package price, but it did tax the operator's package inputs, stand-alone vehicle subleases, and gift-shop retail sales.

The fixed-price package combined a vehicle, hotel, T-shirt, transfers, and a guided tour without itemizing components. The operator paid tax when buying taxable components and did not collect tax from the package customer. If a related leasing company charged the operator below the normal price charged to unrelated travel sellers, however, the operator would have to itemize and tax the components.

When excess vehicles were subleased outside a package, the operator had to collect tax from the sublessee even though it had paid tax on the main lease. It could take a prorated credit for the tax previously paid during the sublease period.

Gift-shop inventory could be purchased with a resale certificate, followed by collection of tax on taxable retail sales unless the customer supplied a valid exemption or resale certificate.

What this means for you

• Keeping the qualifying vacation package unitemized prevented tax collection on the package sale.
• The seller still paid tax on taxable package components.
• A vehicle used for packages was not leased solely for sublease, so both lease stages had tax consequences.
• Gift-shop resale rules applied separately from the package.

Common questions

Q: Did the operator collect tax on the unitemized vacation package?
A: No.

Q: Did it pay tax on hotel, vehicle, T-shirt, and other taxable inputs?
A: Yes.

Q: Were stand-alone vehicle subleases taxable?
A: Yes, with a prorated credit for tax paid on the main lease.

Q: Were gift-shop sales taxable?
A: Yes, unless a specific exemption or resale certificate applied.

Citations and references

• Fla. Stat. § 212.02(15), (16), (20) — retail sales, sales, and tangible property
• Fla. Stat. § 212.05 — retail-sales tax
• Fla. Stat. § 559.927 — seller of travel
• Fla. Admin. Code r. 12A-1.005(7) — vacation packages
• Fla. Admin. Code rr. 12A-1.007(14), 12A-1.071(7) — vehicle leases and subleases
• Fla. Admin. Code r. 12A-1.038(1) — resale certificates
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-015

Original ruling text

Feb 07, 1996

Re: Technical Assistance Advisement 96A-015
Sales and Use Tax - Vacation Package
Sections: 212.05, 212.02, 559.927, F.S.
Rules: 12A-1.007, 12A-1.005, 12A-1.038, 12A-1.071, F.A.C.
Petitioner: XXXX (herein "Taxpayer")
FEI: XXX

Dear :

This is a response to your petition received June 19, 1995,
for the Department's issuance of a Technical Assistance
Advisement ("TAA") concerning the above referenced party and
matter. Your petition has been carefully examined and the
Department finds it to be in compliance with the requisite
criteria set forth in Chapter 12-11, F.A.C. This response to
your request constitutes a TAA and is issued to you under the
authority of s. 213.22, F.S.

DISCUSSION OF FACTS

You provided the Department with a copy of the agenda and
brochure labeled Exhibit A and a lease agreement labeled Exhibit
B. Your letter and the above exhibits impart the following
discussion concerning the matter under advisement:

The Taxpayer operates a vacation package tour business in
the State of Florida. The vacation package currently being
offered by the Taxpayer includes a XXXX (hereafter
vehicle), double occupancy hotel accommodations, a t-shirt,
all airport and local transfers, and a guided group tour
through the Miami and Florida Keys area for a fixed price.
The vacation package does not include airfares, lunch,
dinner or any beverages. The Taxpayer does not itemize the
taxable components of the vacation package.

The Taxpayer leases the vehicles from a leasing company,

which is related to the Taxpayer, and is paying Florida
sales tax on the rental charged under the lease agreement.

The Taxpayer is also paying any applicable taxes on other
purchases of taxable components of the vacation package.
The Taxpayer is not charging the customer Florida sales tax
on the sale of the vacation package.

The Taxpayer may, from time to time, sub-let excess
vehicles which are not being used in conjunction with the
sale of vacation packages. The Taxpayer also has a retail
gift shop at the vacation package tour business location.
The Taxpayer sells merchandise to the general public as
well as customers coming to the business location for the
vacation package. The sale of merchandise is unrelated to
the sale of vacation packages in that such merchandise is
not included as a part of the vacation package and such
merchandise may be purchased by the general public.

REQUESTED ADVISEMENT

Your petition poses three questions in regard to the above
facts. I will restate your questions and follow with the
Department's position, which is predicated on the Florida
Statutes (F.S.) and the Florida Administrative Code (F.A.C.).

DISCUSSION, ANALYSIS AND CONCLUSION OF LAW

Question #1:

Is the Taxpayer required to collect and remit tax on the
sale of vacation packages if it does not itemize the
taxable components, whether or not such taxable components
are sold for more than the Taxpayer paid for them?

Response

Section 559.927, F.S., defines "seller of travel" as
follows:

(1)(a) "Seller of travel" means any resident or nonresident

person, firm, corporation, or business entity maintaining
or purporting to maintain a business location or branch
office in this state who offers for sale, directly or
indirectly, at wholesale or retail, prearranged travel,
tourist-related services, or tour-guide services for
individuals or groups, through vacation or tour packages,
or through lodging or travel certificates in exchange for a
fee, commission, or other valuable consideration....

Rule 12A-1.005(7), F.A.C., provides in part:

(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.

Pursuant to Rule 12A-1.005(7), F.A.C., there is an
exception from tax on tour packages as long as: (1) each of the

components is incorporated as a part of a package sold by a
travel agent, which may include, but not be limited to,
admissions, transient rentals, rental cars, meals, and
transportation; and (2) no separate itemization of the
admissions, transient rentals, rental cars, meals, and
transportation occurs in the package. There is no statutory
definition of a "travel agent". However, "sellers of travel"
offer for sale tour-related services for individuals or groups,
through vacation or tour packages and are required to be
registered with the Department of Agriculture. The Taxpayer
meets the definition of "sellers of travel" and is registered as
a "seller of travel", registration number ST23694. Furthermore,
Taxpayer is not itemizing the components of the vacation
packages. Therefore, Taxpayer is not required to collect and
remit tax on the sales of vacation packages. However, pursuant
to Rule 12A-1.005(7)(a), F.A.C., the Taxpayer should pay tax
when purchasing the taxable components of the vacation packages.
Such components would include items such as t-shirts, transient
living accommodations, and the lease of the vehicles. Also,
please note that if the actual price charged the Taxpayer by the
related leasing company for the motorcycles is an amount less
than the price charged to unrelated "sellers of travel" or
"travel agents" under normal industry practices, then the
Taxpayer will be required to itemize the components of the
package, collect tax on the itemized taxable components, and may
take a credit for taxes previously paid.

Question #2:

Is the Taxpayer required to collect and remit tax on the
sub-let of a vehicle which is not part of a vacation
package and on which the Taxpayer is paying tax to the
owner on the main lease?

Response

Rule 12A-1.007(14), F.A.C., provides in part:

(a) The rental or lease of an aircraft, boat, mobile home,
or motor vehicle, which is used or stored in this state,
shall be taxable without regard to its prior use or tax

paid on the purchase outside this state....
Rule 12A-1.071(7), F.A.C., provides:

The lease payments on tangible personal property which is
leased solely for the purpose of leasing it to a third
party are exempt. The prime lessee is required to register
with the Department as a dealer and issue the prime lessor
a resale certificate in lieu of tax. (Emphasis Supplied)

Section 212.02(20), F.S., defines "tangible personal
property" as:

... personal property which may be seen, weighed, measured,
or touched or is in any manner perceptible to the senses,
including... motor vehicles.

The Taxpayer must pay tax when leasing the vehicles from
the leasing company. Pursuant to Rule 12A-1.005(7)(a), F.A.C.,
the Taxpayer is required to pay tax on all of the taxable
components of vacation packages. Furthermore, pursuant to Rule
12A-1.071(7), F.A.C., the Taxpayer is not allowed to issue a
resale certificate to the lessor, because the vehicles are not
leased solely for the purpose of leasing them to third parties.
Taxpayer must collect tax from the sub-lessee and take a
corresponding credit for tax paid to the lessor (prorated over
the period of the sublease).

For example, Taxpayer enters into a lease agreement for the
lease of six (6) motorcycles for $600.00 per motorcycle per
month for one month, assuming there are 30 days in the month.
The motorcycles are being leased as a part of a vacation
package. Because all of the motorcycles are not being used in
the vacation packages during the month, the Taxpayer subleases
three (3) of the motorcycles to individuals for $50 per day per
motorcycle for (6) six days.

Upon leasing the motorcycles from the lessor, the Taxpayer
must pay the lessor tax of $234 (6 x $600 x .065). Then, the
Taxpayer must charge tax of $58.50 (3 x $50 x 6 x .065) on the
sublease. However, the Taxpayer is allowed to take a credit of
$23.40 on line 6, referred to as "less refunds and lawful

deductions", of his tax return, Form DR-15 ($234.00 total tax
lessor paid ö 30 days in month = $7.80 per day ö 6 motorcycles =
$1.30 per day, per motorcycle for tax credit. $1.30 x 6 days =
$7.80 x 3 motorcycles = $23.40, total tax credit). Therefore,
since there are two separate leases subject to tax, the taxpayer
would remit $234 in tax to the lessor. Taxpayer will also remit
an additional $35.10 (58.50 - 23.40) directly to the state on
the sublease of the vehicles, for a total of $269.10 in tax paid
to the state.

Question #3:

Is the Taxpayer required to pay tax on merchandise
purchased for resale in its gift shop which is unrelated to
the sale of vacation packages?
Response

Section 212.05, F.A.C., provides in part:

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,...

Section 212.02(15)(a), F.S., defines "retail sale" or "sale
at retail" as:

(a) [A] sale to a consumer or to any person for any purpose
other than for resale in the form of tangible personal
property or services taxable under this part, and includes
all such transactions that may be made in lieu of retail
sales or sales at retail.

Section 212.02(16), F.S., defines "sale" as:

Any transfer of title or possession, or both, exchange,
barter, license, lease, or rental, conditional or
otherwise, in any manner or by any means whatsoever, of
tangible personal property for a consideration.

Rule 12A-1.038(1), F.A.C., provides in part:

It is the specific legislative intent that each and every
sale, admission, use, storage, consumption, or rental is
taxable under Chapter 212, F.S., unless such sale,
admission, use, storage, consumption, or rental is
specifically exempt. The exempt status of the transaction
must be established by the dealer. Unless the dealer shall
have taken from the purchaser a certificate signed by the
dealer or the dealer's authorized representative to the
effect that the property or service was purchased for
resale and bearing the date, the name and address of the
purchaser, the effective date of the certificate, and the
number of the dealer's certificate of registration, or a
certificate signed by an authorized representative of the
organization bearing the number of the organization's
consumer's exemption certificate, the effective date of the
certificate, and the expiration date of the certificate,
the sale shall be deemed to be a taxable sale at retail,...

Based on the above statutory and regulatory cites, all
sales at retail of merchandise in a gift shop are taxable unless
specifically exempt. Therefore, the Taxpayer should extend a
resale certificate in accordance with Rule 12A-1.038, F.A.C.,
when purchasing merchandise that will be subsequently resold in
the gift shop. The Taxpayer is then required to charge tax on
all taxable retail sales of the merchandise unless the Taxpayer
receives a valid consumer's certificate of exemption or resale
certificate from the purchaser at the time of the sale.

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 upon 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 from that
which is 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 that 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 this response.

Sincerely,

Leigh L. Ceci
Senior Tax Specialist

Enclosure
Control #21884