Was a bundled car-dealer promotion taxable when the marketer supplied flyers, mailing services, event staff, training, gifts, and sales tags for one fee?

Plain-English summary

Florida treated the bundled new-car-dealer promotion as an exempt professional service, not a taxable retail sale of the materials used to deliver it.

The marketer planned and staffed promotional sales events, refined a mailing list, arranged printing and mailing of flyers and personalized checks, greeted attendees, and trained dealership staff. It also supplied envelopes, attendee gifts, and sale tags. Dealers paid a fee based on the number of flyers, but printing and direct-mail costs were not separately stated.

The Department concluded that the tangible items were part of the professional service. The marketer was the ultimate consumer of the printed and direct-mail materials and correctly paid sales tax to the third-party printer and mailing company. It did not collect sales tax from the dealer on the bundled service fee.

This ruling is the revised version of TAA 96A-024.

What this means for you

Marketing agencies

Bundled tangible items may remain incidental to an exempt professional service when they support a broader event-planning, staffing, training, and performance-based engagement. Tax still applies to the agency's own purchases used to perform that service.

Automobile dealers

The fee was not treated as a purchase of flyers or mailing pieces even though its amount was based on flyer volume. The complete contract and service package controlled the result.

Accountants and tax professionals

Review whether materials are separately sold or charged, who consumes them, how customizable they are, and what substantive services accompany them. Preserve vendor invoices showing tax paid by the service provider.

Common questions

Q: Was the dealer charged sales tax on the promotional fee?
A: No. The Department classified the transaction as an exempt professional service.

Q: Were flyers and direct-mail materials ignored for tax purposes?
A: No. The marketer was their ultimate consumer and paid tax on its vendor charges.

Q: Did the marketer provide more than mailing services?
A: Yes. It planned the event, staffed it, trained dealer personnel, supplied other materials, and guaranteed a minimum gross-profit result or a remedy.

Q: Were printing costs separately stated to dealers?
A: No.

Q: Did this ruling replace an earlier advisement?
A: It states that it revises TAA 96A-024, issued April 15, 1996.

Q: Can another marketer rely on this TAA?
A: Not automatically. The advisement binds the Department only for the specific contract, fee, materials, staffing, training, vendor-tax, and guarantee facts described.

Citations and references

• Fla. Stat. § 212.08(7)(v)1. — professional and personal service transactions with inconsequential sales elements
• Fla. Admin. Code r. 12A-1.001(16) — service transactions involving tangible property or information
• Fla. Admin. Code r. 12A-1.034(1) — sales of direct-mail advertising pieces
• Fla. Admin. Code r. 12A-1.008(2)(c)1. — use tax on printed advertising materials
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

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

Original ruling text

Status: Revises TAA 96A-024, issued April 15, 1996

Sep 19, 1996

Re: Technical Assistance Advisement 96A-024R
Sales and Use Tax - Marketing Services to New Car Dealers
Section: 212.08, F.S.
Rules: 12A-1.001, 12A-1.034, 12A-1.008, F.A.C.
Petitioner: XXXX (herein "Taxpayer")
FEI: XXXX

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, which are car dealers, provides for the taxable sale
of tangible personal property to the customers. 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, which
are car dealers, provide for the taxable sale of tangible
personal property to such customers?

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....

Rule 12A-1.001, F.A.C., provides in part:

(16) SERVICE TRANSACTIONS.

(a) Professional, insurance or personal service
transactions which involve sales as inconsequential
elements for which no separate charges are made are exempt.

(b) The exemption described in paragraph (a) does not apply
to personal service transactions which involve sales of
tangible personal property, whether or not as

inconsequential elements, when the service provided is an
information service involving the furnishing of printed,
mimeographed, multigraphed matter, microfiche, microfilm,
or matter duplicating written or printed matter. The
furnishing of information, including a written report to a
person of a personal or individual nature and which is not
or may not be substantially incorporated in reports
furnished to other persons, is not an information service
within the meaning of the law and is exempt. In such cases
the person furnishing the information is required to pay
the tax on the purchases of tangible personal property used
by him in connection therewith....

Rule 12A-1.034, F.A.C., provides in part:

(1) Upon final sales to ultimate consumers of direct mail
advertising pieces, circulars, hand-outs, throw-aways and
similar advertising matter, the dealer shall collect the
sales tax upon the selling price thereof from his
purchaser.

Rule 12A-1.008(2)(c), F.A.C., provides in part:

(2)(c)1. Use tax is payable on the cost price of magazines,
handbills, circulars, flyers, advertising supplements, and
other printed materials when not sold but used, consumed,
or distributed by means other than being distributed as a
component part of a newspaper or magazine, or stored for
use or consumption in this state.

Based on the facts presented, the transaction in question
is a professional service which is exempt from tax. Pursuant to
the above statutory and regulatory cites, Taxpayer is the
ultimate consumer of the printing and direct mail promotional
materials and is correctly paying tax on the charges for the
printing and the direct mailing of these materials used to
perform its service.

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 #26134