Were a retailer's separately stated home-delivery charges taxable when customers could avoid them by picking up purchases?

Plain-English summary

Florida found the retailer's separately stated optional delivery charges were not subject to sales tax.

Customers could either pay for home delivery or pick up merchandise without a delivery charge. The seller bore risk of loss until delivery, customers could refuse delivery, and the paperwork did not clearly say where title passed.

Rule 12A-1.045 excluded transportation charges when they were separately stated and avoidable solely by the purchaser. It also presumed an F.O.B.-origin sale when documentation did not establish where title passed. Because both exemption conditions were met, the Department found no tax on the delivery charges.

What this means for you

• Delivery had to be optional at the customer's sole choice.
• The charge had to be separately stated.
• Unclear title-passage documents did not defeat the ruling's result under the cited presumption.

Common questions

Q: Were the optional delivery charges taxable?
A: No.

Q: What if the customer picked up the merchandise?
A: No delivery charge was imposed.

Q: Did unclear F.O.B. terms make the charge taxable?
A: No. The cited rule presumed F.O.B. origin when the documents were inadequate.

Citations and references

• Fla. Stat. § 212.02(16) — sales price
• Fla. Stat. § 212.05(1)(a)1.a. — retail sales tax
• Fla. Admin. Code r. 12A-1.045 — transportation charges
• Florida Hi-Lift v. Department of Revenue, 571 So. 2d 1364 (Fla. 1st DCA 1991)
• Department of Revenue v. B & L Concepts, Inc., 612 So. 2d 720 (Fla. 5th DCA 1993)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-033

Original ruling text

Apr 30, 1996

Re: Technical Assistance Advisement 96A-033
Sales and Use Tax - Transportation Charges
Sections: 212.02, 212.05, F.S.

Rule: 12A-1.045, F.A.C.
Petitioner: XXXX (herein "Taxpayer")
FEl: XXXX

Dear:

This is a response to your petition received February 8,
1996, 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

Taxpayer's customers purchasing merchandise in Taxpayer's
stores are given the option of either having merchandise
they purchase delivered to their homes for an extra charge
or picking merchandise up at Taxpayer's place of business.
The delivery charge is automatic once the customer elects

to have the item delivered. In the alternative, when
customers pick up merchandise at Taxpayer's place of

business, no delivery charge is imposed.

Taxpayer's sales slips and other documentation related to
the sale of the merchandise do not clearly indicate whether
title to merchandise delivered to customers passes to the
customer at the point at which shipment originates (F.O.B.
origin), or at the destination to which the shipment is
delivered (F.O.B. destination). However, Taxpayer bears

the risk of loss on merchandise up until delivery, and the

customer has the right to refuse delivery at the point of

destination.

REQUESTED ADVISEMENT

Are transportation charges subject to tax where: 1) the
charge is separately stated on the invoice; and 2) the charge
can be avoided by a decision or action solely on the part of the
purchaser, even where documentation accompanying shipment does
not clearly indicate whether shipments are F.O.B. origin, and
where circumstances surrounding the sale suggests that title

does not pass to the customer until delivery.

Discussion of Law
The following statutory and administrative cites, and case
law are relevant to addressing the issue under advisement

herein:

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, including the business of making mail
order sales, or who rents or furnishes any of the things or
services taxable under this chapter, or who stores for use

or consumption in this state any item or article of

tangible personal property as defined herein and who leases

or rents such property within the state.

(1) For the exercise of such privilege, a tax is levied on
each taxable transaction or incident, which tax is due and
payable as follows:

(a)1.a. At the rate of 6 percent of the sales price of each
item or article of tangible personal property when sold at
retail in this state...

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...

Rule 12A-1.045, F.A.C., provides in part:

(1) "Transportation charges" includes carrying, delivery,
freight, handling, pickup, shipping, and other similar

charges or fees.

(2) Transportation charges which are not separately stated
on an invoice or bill of sale but are included in the sales
price of taxable tangible personal property are subject to

tax.

(3)(a) Where the seller agrees to deliver tangible personal
property to some designated place and the purchaser can not
elect to avoid the charge for transportation services, the
charge for the transportation service is subject to tax,

even if separately stated on an invoice or bill of sale.

(4)(a) The charge for transportation services is not
subject to tax when both of the following conditions have

been met:

1. The charge is separately stated on an invoice or bill of

sale; and

2. The charge can be avoided by a decision or action solely

on the part of the purchaser...

(5) If the seller contracts to sell tangible personal

property F.O.B. origin, the title to the property passes at
the point of origin. Since the title to the property

passes at the point of origin, transportation services
arranged by the seller and rendered to the buyer are nota
part of the taxable selling price, provided the
transportation charges are separately stated. Where the
transportation charges are billed by the seller to the

buyer but documentation is inadequate to establish the

point at which title passed to the buyer, it is presumed

that the tangible personal property was sold F.O.B. origin
and the title to the property passes at the point of

origin. In such instances, the transportation charges are
not considered a part of the selling price of the property,

if separately stated...

In Florida Hi-Lift v. Department of Revenue, 571 So.2d 1364
(Fla. 1DCA 1991), the court found that the rental of equipment

was a "sale"; that Rule 12A-1.045, F.A.C., was applicable; and
that the transportation charges, while incidental to the sale,
were not part of the total sales prices because the equipment
was F.O.B. lessor's site, and the lessee had the option of

picking up the equipment or having delivery made by the lessor.

In Department of Revenue v. B & L Concepts, Inc., 612 So.2d
720 (Fla. 5DCA 1993), in which the court relied on Florida Hi-

Lift, supra, the delivery charges for rented home furnishings
were incidental to the sale but not part of the taxable sales
prices when the charges "... are separately itemized, and
applied at the sole option or election of the vendee or lessee,
or can be avoided by decision or action on the part of the

vendee alone...."
Discussion, Analysis, and Conclusion of Law
Rule 12A-1.045, F.A.C., which deals with sales tax on

transportation charges, has been substantially rewritten to

recognize the decisions in Florida Hi-Lift v. Department of

Revenue, supra, and in Department of Revenue v. B & L Concepts,

Inc., supra. Rule 12A-1.045, F.A.C., provides that

transportation charges are not a part of the sales price and as
such not subject to tax when both of the following conditions

are met: 1) the transportation charges are separately stated on
an invoice or bill of sale; and 2) the transportation charges

can be avoided by a decision or action solely on the part of the
purchaser. Furthermore, Rule 12A-1.045(5), F.A.C., provides:
"Where the transportation charges are billed by the seller to

the buyer but documentation is inadequate to establish the point
at which title passed to the buyer, it is presumed that the
tangible personal property was sold F.O.B. origin and the title

to the property passes at the point of origin. In such

instances, the transportation charges are not considered a part

of the selling price of the property, if separately stated."

Therefore, based on the facts presented, Taxpayer's
transportation charges would not be subject to tax, because
Taxpayer is separately stating the transportation charges and
such charges can be avoided by the purchaser. As long as the
transportation charges are separately stated and can be avoided
by the purchaser, there are no provisions in Rule 12A-1.045,
F.A.C., which require tax to be imposed on transportation

charges.

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 #24657