Did a laminate manufacturer owe Florida use tax on sample chips supplied free with its products for color and texture selection?

Plain-English summary

Florida found no use tax on the manufacturer's free laminate sample chips.

The company manufactured countertop and cabinet laminates in many colors, textures, and patterns. It supplied small rectangles of the actual laminate to distributors, wholesalers, retailers, and their customers without a separate charge. The samples helped customers compare options, coordinate finishes, and visualize the completed product.

The Department compared the chips to paint color cards, which the cited rule treated like direction sheets, manuals, and other materials included with a product. Because the laminate samples performed the same product-selection function and accompanied the products sold, the Department applied the same exemption.

What this means for you

• The samples were actual product material, but their free color-and-texture display function matched exempt paint cards.
• Providing them at no separate charge and with the products was central to the result.
• Separately sold samples or materially different promotional giveaways were not decided.

Common questions

Q: Did the manufacturer owe use tax on the sample chips?
A: No, under the stated facts.

Q: Why were the chips exempt?
A: They functioned like exempt paint color cards and accompanied the product as packaging-type material.

Q: Were customers charged separately for the samples?
A: No.

Citations and references

• Fla. Stat. § 212.05(1)(b) — use tax on property used, consumed, distributed, or stored in Florida
• Fla. Stat. § 212.21(2) — taxation unless specifically exempt
• Fla. Admin. Code r. 12A-1.029(3), (4) — packaging materials and paint color cards
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-040

Original ruling text

Jul 30, 1996

Re: Technical Assistance Advisement No. 96A-040
Sales and Use Tax - Sample Laminate Chips
XXXX (hereinafter "Company")
Section: 212.05(1)(b), F.S.
Rule: 12A-1.029(4), F.A.C.

Dear :

Your letter of March 29, 1996, requested a Technical
Assistance Advisement on the application of the Sales and Use
Tax to the above referenced matter. 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 s. 213.22, Florida Statutes.

DISCUSSION OF FACTS

Company is a manufacturer of laminate products for
application to kitchen and bathroom counters and cabinets.
Company supplies sample laminate chips, which it manufactures,
with the products sold to distributors, wholesalers, or retail
merchants. Laminate chips are small rectangles of actual
laminate, and each chip depicts one of the many colors,
textures, and designs of laminate products available from
Company. Laminate products are available in a wide variety of
colors, textures, and patterns. Samples are used to illustrate
the vast array of products available for sale, and to help
customers coordinate colors and textures, and visualize of the
finished product. These samples are provided to distributors and
their customers at no additional charge.

REQUESTED ADVISEMENT

Your question concerns the potential use tax liability on
the cost of laminate chips supplied by Company to distributors,
wholesalers or retail merchants for marketing purposes.

DISCUSSION, ANALYSIS and CONCLUSION OF LAW

Section 212.05, F.S., declares it 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. Paragraph (1)(b) of the statute levies
the tax at the rate of 6 percent of the cost price of tangible
personal property when such items are used, consumed,
distributed, or stored for use or consumption in this state.

Section 212.21(2), F.S., provides that it is "the specific
legislative intent to tax each and every sale,... use,... levied
and set forth in this chapter, except as to such sale,...
use,... as shall be specifically exempted therefrom by this
chapter subject to the conditions appertaining to such
exemption."

The Department has promulgated Rule 12A-1.029(4), F.A.C.,
which interprets the Florida Statutes and provides:

Paint color cards are in the same category as direction
sheets, instruction books or manuals, and are exempt.

Under the facts you have described, laminated chips are
used in a manner similar to paint color cards. Paint color
cards are used to show variations in paint colors and to allow
the customer to coordinate colors with a specific decor. Rule
12A-1.029(4), F.A.C., provides a specific exemption for paint
color cards provided to a manufacturer, producer, or wholesaler
or retail merchant at no separate charge, which leads to the
conclusion that laminate chips provided at no separate charge
are also exempt from tax. The exemption is based on the premise
that paint color cards, like instruction manuals, direction
sheets, books, manuals, or pamphlets, are included in the
packaging of the product. See, Id. at (3). Since laminate
chips also accompany the products sold, a clear distinction
cannot be made between paint color cards and laminate chips.

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
based 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 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 the response.

Sincerely,

Joseph D. Franklin III
Senior Tax Specialist
Tax Policy and Dispute
Resolutions Section

JDF3/
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