What did the original, now-obsolete Florida TAA 96A-024 say about a bundled car-dealer promotion?

Plain-English summary

The original TAA treated the bundled new-car-dealer promotion as a taxable retail sale, but the Department has marked that ruling obsolete.

The marketer arranged flyers, personalized promotional checks, envelopes, mailing, gifts, sale tags, event staffing, and dealer-sales training for one fee based on the number of flyers. The original ruling said the printed items and licensed mailing list were consequential rather than incidental. It therefore allowed resale certificates for the printer and direct-mail provider but required tax on the full contract price charged to the dealer.

The official PDF now directs readers to revised TAA 96A-024R. That September 19, 1996 revision reached the opposite result: it treated the package as an exempt professional service and the marketer as the taxable consumer of printing and direct-mail materials. The obsolete original holding should not be applied.

What this means for you

• This page records the original historical analysis, not the Department's replacement conclusion.
• The revised ruling states the Department's replacement treatment of the same contract.
• Do not use the original resale-certificate and full-contract-tax conclusion for current planning.

Common questions

Q: What did the original ruling say?
A: It said the marketer made a taxable retail sale and had to collect tax on the full dealer contract price.

Q: Could the marketer give vendors resale certificates under the original ruling?
A: Yes, but that conclusion was part of the ruling later marked obsolete.

Q: What did the revised TAA say?
A: TAA 96A-024R treated the transaction as an exempt professional service and the marketer as the consumer of the printed and direct-mail materials.

Citations and references

• Fla. Stat. § 212.08(7)(v)1. — professional-service transactions
• Fla. Stat. § 212.05 — retail sales of tangible personal property
• Fla. Stat. § 212.02(14)(a), (15)(a), (16) — retail sale, sale, and sales price
• Fla. Admin. Code r. 12A-1.072(3) — component expenses
• Florida Association of Broadcasters v. Kirk, 264 So. 2d 437 (Fla. 1st DCA 1972)
• Green v. Sgurovsky, 113 So. 2d 663 (Fla. 3d DCA 1961)
• Southern Bell v. Department of Revenue, 366 So. 2d 30 (Fla. 3d DCA 1978)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-024
• Revised advisement: TAA 96A-024R

Original ruling text

Status: Obsolete; Reference TAA 96A-024R (Revised) issued
September 19, 1996

Apr 15, 1996

Re: Technical Assistance Advisement 96A-024
Sales and Use Tax - Marketing Services to New Car Dealers
Sections: 212.02, 212.05, 212.08, F.S.
Petitioner: XXX (herein "Taxpayer")
FEl: XXX

Dear:

This is a response to your petition received October 13,
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

At issue is whether the contract between Taxpayer and its
customers, car dealers, provides for the taxable sale of
tangible personal property. The following information was
provided either in your letter or in the contract which

accompanied your letter:

Taxpayer helps new car dealers sell cars at a promotional
event. To do this, taxpayer meets with the car dealer to
determine the number of vehicles that the dealer wishes to
sell. Taxpayer then enters into a contract with the car
dealer, a copy of which has been provided for review. The
car dealer is charged a fee based upon the number of flyers
sent out. The fee is represented to be two and one-half
times the amount that would be charged for direct mail

alone.

Taxpayer provides a "refined" mailing list for the car

dealer's marketing area, has a flyer and a personalized
promotional check printed and hires a company to mail these
items. Taxpayer also agrees to provide pre-sorted #10
window envelopes, one gift per attendee to the promotion,

and sale tags.

The "promotion contract" permits the car dealer to specify
the contents of a flyer. The exact degree to which the
flyer may be customized is unclear, since Taxpayer agrees
to provide a "market tested" flyer. However, the contract
provides space for the parties to agree on specific letter
contents, rebates and tag lines. It also specifies that the
car dealer may obtain custom flyers and second flyers for

additional amounts.

The contract specifies that a "printed copy of list" is
provided, depending upon the flyer selected. The list is

the mailing list which Taxpayer uses to generate attendance
at the promotional event. The contract provides that the

car dealer may express a preference for certain zip code(s)
for mailing. Contract language specifies that the list of
names and addresses supplied by Taxpayer is strictly for
use in connection with the sale and is the sole property of

Taxpayer.

On the date of the promotional event, Taxpayer's employees
greet attendees. They also meet with sales managers and
salespersons to train them on procedures related to the

event and on how to close sales generated by the mailing.
The car dealer agrees to cooperate with Taxpayer employees,
to have a specified number of sales people on hand, to
comply with the "pre-sale success list" and to provide a

meeting room for the training.

Taxpayer guarantees that if the event does not produce a
gross profit of at least the amount paid, Taxpayer will
either reimburse the car dealer for the difference or
remail a sale at no charge. If the car dealer cancels

within 72 hours of signing the contract, it gets a full

refund. After 72 hours, the refund is 50%. Once the
second payment has been made (it is due 15 days prior to
the sale), only 10% - plus any recoverable postage - will

be refunded.

Taxpayer states that the flyer is prepared by a third party
printer hired by Taxpayer. The direct mail activity is

also contracted out to an unrelated direct mail company.
The cost of these items is not separately stated to the car
dealer. Taxpayer has been paying sales tax to these

vendors.

REQUESTED ADVISEMENT

Does the contract between Taxpayer and its customers, car

dealers, provide for the taxable sale of tangible personal

property?

DISCUSSION, ANALYSIS AND CONCLUSION OF LAW

Section 212.08(7), F.S., provides in part:

(v) Professional services.

1. Also exempted are professional, insurance, or personal
   service transactions that involve sales as inconsequential

elements for which no separate charges are made....

Section 212.05, F.S., 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 "sale" as:

(15) "Sale" means and includes:

(a) 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.

Section 212.02(14)(a), F.S., defines "retail sale" or "sale

at retail" as:

(14)(a) "Retail sale" or a "sale at retail" means 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 "sales price" as:

(16) "Sales price" means the total amount paid for tangible
personal property, including any services that are a part

of the sale...

The issue in the instant case is whether Taxpayer should
pay sales tax to the printer because it is the ultimate consumer
of the tangible personal property or whether Taxpayer should
provide the printer with a resale certificate and charge the car
dealer sales tax because it is selling tangible personal

property to the car dealer.

Taxpayer argues that it is providing a service and
consumes, rather than sells the tangible personal property
prepared by the printer as part of providing a professional or
personal service to the car dealer. Furthermore, Taxpayer takes
the position that its service does not constitute a sale.
Taxpayer's determinative authority for this position is
contained in Section 212.08(7)(v)1., F.S., which exempts
“professional, insurance or personal service transactions that
involve sales as inconsequential elements for which no separate

charge is made."

A "sale" as defined in Section 212.02(15)(a), F.S., has
indeed occurred. Taxpayer indicates that a benefit is received
by the car dealer, including Taxpayer's mailing list which has
been refined such that Taxpayer can accurately determine that it
can generate a specific amount of sales for each mailing. The

fact that these direct mail advertising pieces are highly

targeted permits Taxpayer to assure the car dealer of a
particular sales volume. This is indicative of the fact that
Taxpayer has licensed the use of the list - an item of tangible
personal property - for consideration. This activity meets the
definition of a sale, which is defined as "any... license... in

any manner or by any means whatsoever, of tangible personal

property for a consideration."

Now that we have established that a "sale" does indeed
occur, we must look to Section 212.05, F.S., which provides that
sales tax is imposed upon the privilege of selling tangible
personal property at retail in this state. A sale at retail is
defined in Section 212.02(14)(a), F.S., as "a sale to a consumer
or to any person for any purpose other than for resale." There
is only one retail sales transaction taking place - that between
Taxpayer and the ultimate consumer, the car dealer. Therefore,
tax should be collected on the retail sale by the Taxpayer. To
prevent double taxation, the Taxpayer should extend a valid

resale certificate to the printer.

Having determined that a retail sale occurs in the
transaction between Taxpayer and the car dealer, the question
then becomes whether these sales are inconsequential. Taxpayer
attempts to discount the role of tangible personal property in
the transaction between Taxpayer and the car dealer. However,
this is contrary to the contract between them. The contract
deals extensively with the contents of the flyer. In return for
payment, Taxpayer agrees to send out flyers with which the
parties to the contract hope to attract paying customers. The
production of the flyer appears to be central to the transaction
between Taxpayer and the car dealer. If an insufficient number
of customers are attracted, Taxpayer reserves the right to send
out more flyers, or to provide a refund. Taxpayer is causing
flyers to be prepared for the benefit of the car dealer and is
receiving consideration from the dealer for mailing these market
tested flyers to a targeted group of people. The contract
payment appears primarily to be designed to compensate Taxpayer
for the production of its market tested flyer and the licensed

use of a refined mailing list.

The fact that the price charged by Taxpayer is two and one-

half times that charged for direct mail alone is not

dispositive. Clearly, Taxpayer provides the car dealer with
services. However, Taxpayer agrees that as part of the same
transaction it will cause flyers to be created on behalf of the

car dealer and that it will license the use of the mailing list.

The contract which Taxpayer enters into with each car dealer
calls for the production of flyers (letters), checks, envelopes,
prizes and sale tags, and it measures the amount due by the
number of flyers produced. The cancellation policy - 50% refund
after 72 hours, 10% after the second payment -indicates that the
costs of producing and mailing the tangible personal property
leading up to the promotion are not insignificant in the minds

of the parties and that the items being produced are essential

to the transaction. These facts do not support Taxpayer's
conclusion that the items of tangible personal property are
inconsequential elements of the transaction. As such, the
tangible personal property provided is consequential and a
taxable retail sale occurs between Taxpayer and the car dealer.
Taxpayer is responsible for collecting tax on the total "sales

price" charged to the car dealer.

Section 212.02(17), F.S., defines "sales price" as the
total amount paid for tangible personal property, including any
services which are a part of the sale. According to the
enclosed contract, the car dealer is purchasing a package which
includes a number of components, some of which are services.
Hence, Taxpayer is responsible for charging tax to the car
dealer on the total sales price charged for the package, which

includes any services which are part of the sale.

Lastly, Taxpayer stated that Rule 12A-1.072(3), F.A.C., was
pertinent to the issue at hand. Assuming its relevance, the
rule simply makes the point that the "sales price" of tangible
personal property being sold (or the "cost price" of items being
used) includes all component expenses. Nothing in that rule is

inconsistent with the conclusion expressed here.

Based upon the facts presented and in light of the
following factors, the transaction does not qualify for
exemption as a professional service. While no "separate" charge

is made for the cost of printing and mailing, the fee charged by

Taxpayer is based upon the number of flyers produced. The
monetary value of the printed flyers, even as measured by their
cost to Taxpayer, is not inconsequential. And while it is not
essential that the car dealer take possession of the flyers,

title to these does pass to the car dealer and their creation is
essential to the transaction between Taxpayer and the car

dealer. See, Florida Association of Broadcasters v. Kirk, 264

So.2d 437 (Fla. 1st DCA 1972), Green v. Sgurovsky, 113 So.2d 663
(Fla. 3rd DCA 1961). See also, Southern Bell v. Department of
Revenue, 366 So.2d 30 (Fla. 3rd DCA 1978). Therefore, the

conclusion is reached that Taxpayer may provide the printer and
direct mail provider with a resale certificate, but must in any
event collect sales tax from the car dealer on the full price

charged under its contract.

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 #23543