Were duty-free goods tax-exempt exports when ticketed international passengers took possession inside a secured Florida departure area before boarding?

Plain-English summary

Florida treated the duty-free shop's sales to ticketed international passengers as tax-exempt export sales even though customers took possession inside the Florida airport.

The shop did not use any of the statute's three specified shipment methods—a licensed exporter, common carrier, or U.S. mail—so the normal presumption was that the goods were not bought for export. The Department found that the shop rebutted that presumption by proving a continuous export journey and a high degree of certainty that the merchandise would leave the country.

Only ticketed international passengers could enter the restricted area and complete a purchase. The register required valid ticket and passenger information; packages were sealed with an outside inventory; security personnel and cameras controlled the area; and the practical exit was through the jetway to the international flight. If a flight could not depart and passengers had to leave, the duty-free goods were taken back and stored in the restricted area until the rescheduled departure.

Those controls made domestic diversion remote. Handing the sealed goods to a passenger immediately beside the point of departure was a necessary step in exportation rather than a transaction that placed the merchandise into Florida's general property market.

What this means for you

Duty-free and airport retailers

Customer possession in Florida did not automatically defeat export treatment. The retailer needed operational controls that tied each sale to an imminent international departure and prevented domestic use.

Compliance and security teams

Ticket validation, restricted access, sealed and inventoried packages, surveillance, controlled exits, and canceled-flight recovery procedures were central facts—not incidental safeguards.

Accountants and tax professionals

When the statutory safe shipment methods are absent, document the entire export chain. The ruling applied a facts-intensive rebuttal based on continuity and certainty, not a general exemption for every airport duty-free sale.

Common questions

Q: Did passengers take possession of the merchandise in Florida?
A: Yes, inside the restricted international-departure area.

Q: Why were the sales still exports?
A: The goods had begun a continuous, highly certain foreign journey, and domestic diversion was remote under the security controls.

Q: Could anyone enter the shop and buy duty-free goods?
A: No. Sales required a valid international ticket and matching passenger information.

Q: What happened if a flight was canceled or delayed overnight?
A: The goods were taken from passengers and stored in the restricted area until they returned for departure.

Q: Did the shop satisfy one of the statute's three listed shipment methods?
A: No. The Department instead found that the shop rebutted the resulting presumption against export.

Q: Can another duty-free retailer rely on this TAA?
A: Not automatically. The advisement states that it binds the Department only under the facts and controls described, and a different airport layout, access rule, delivery process, diversion risk, or later law could change the result.

Citations and references

• Fla. Stat. § 212.06(5)(a)1. — export-sale presumption and specified shipment methods
• Fla. Admin. Code r. 12A-1.064 — sales in interstate and foreign commerce
• Fred McGilvray, Inc. v. Askew, 340 So. 2d 475 (Fla. 1976)
• Great Lakes Dredge & Dock Co. v. Department of Revenue, 381 So. 2d 1078 (Fla. 1st DCA 1979)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-051

Original ruling text

Nov 18, 1996

Re: Technical Assistance Advisement 96A-051
Sales Tax - Duty Free Export Sales
Section 212.06(5)(a)1., F.S.
Rule 12A-1.064, F.A.C.

Dear:

This is a response, styled a Technical Assistance Advisement
(TAA), to a letter dated July 12, 1996, wherein it asked the
Department to issue an expedited TAA to your client, XXXX
(hereinafter "Client"), concerning whether certain duty free

sales made to airline passengers departing the United States are
subject to Florida sales tax under Chapter 212, Florida

Statutes.

At issue is whether the statutory presumption under s.
212.06(5)(a)1., F.S., interpreted by Rule 12A-1.064, F.A.C.,
that a retail sale made to a person physically present, who
takes possession of the tangible personal property at the time
of the sale, has been delivered in this state, has been rebutted
due to the continuousness and certainty of the exportation

process.

The transaction is described, in pertinent part, in the

following manner:

... In May, 1996, [Client] commenced operations for its
first U.S. duty free shop at the XXXX (hereinafter
Airport") in Florida. [Client's] operations as a duty

free shop meet all U.S. federal requirements for duty free
shops. [Client's] duty free shop is located in the
‘restricted’ portion of the [Airport]. Only necessary
airport personnel and passengers with international air

tickets are permitted in the restricted area....

... Purchases are only made after the salesperson has

confirmed the passenger's name and has ascertained that the
person is scheduled to depart from the United States within
a few hours. The [Airport's] restricted zone differs from
departure lounges of other international airports in

Florida which are not restricted solely to airport

personnel and passengers with international air tickets.
Consequently, while duty free shops at other airports are
required to deliver passenger goods to the passenger at the
aircraft door to ensure their exportation, this precaution

is unnecessary for duty free shops located within the
[Airport's] restricted area. Accordingly, [Client's]

customers are permitted to take the merchandise they have
purchased with them when they leave the store. The
purchased goods are placed in a bag or box which is stapled
shut or sealed with an inventory of all purchases on the
outside. Security cameras sweep the entire restricted area
to ensure that customers do not open the packages
containing the purchased goods until they leave the

country.

In rare instances where the aircraft is unable to depart

due to mechanical problems or due to weather conditions,
and the passengers must depart the restricted area to spend
the night in an area hotel, all of the duty free goods are
taken from the passengers on the flight and placed ina
restricted or “duty free' area. The goods can then be
retrieved by the passengers when they return to the
restricted area the following day to take another flight

out of the United States. [Client] is solely responsible

for any discrepancies between the goods sold for departure
on a flight and any goods not returned if the flight does

not depart.

In a subsequent letter of August 22, 1996, the following

additional facts were presented:

Regarding the security restrictions at the [Airport], the
[Airport] has two separate sections with separate
entrances. One entrance is for domestic travel while the
other is for international travel. Upon entering the area

for international travel, there are a number of check-in

counters for various charter airlines. Once passengers
have checked in and sent their luggage to the aircraft,
they proceed to the security checkpoint. The security
checkpoint has a metal detector and uniformed security

personnel to ensure that only ticketed international

passengers enter the restricted area, which is on the
second level of the airport. The only way passengers may
reach the stairs or elevator to the second floor of the
airport is through the security checkpoint. Once upstairs,
the only exits are through the plane jetways to departing
aircraft or back through the checkpoint, where uniformed
security personnel will prevent passengers from leaving the
restricted area. The entire restricted area is under

constant camera surveillance by the U.S. Customs Bureau.

No passenger is allowed to leave the restricted area as
U.S. Customs treats the restricted area as if the passenger

has left the United States....

... NO one may purchase duty-free goods from [Client's]
store unless they possess an international ticket. Without
proper information from a valid airline ticket and the
passenger's name, the duty free shop's computerized

registers will not permit a sale.

A copy of [Client's] approval from the U.S. Customs Service to
establish a Class 9, Customs Bonded Warehouse was provided. In
addition, support for the contention that the purchases, made by
international air passengers from [Client's] duty-free shop, are

free of Florida's sales tax was presented by an analysis of

Florida case law interpreting s. 212.06(5)(a)1., Florida

Statutes.

Department Response

Considering all the information provided the Department in the
written request and the additional information gained from the
letter of August 22, 1996, it is our determination that while

none of the criteria stated in s. 212.06(5)(a)1., F.S., are

present the sales to ticketed international passengers otherwise

qualify as export sales under Florida law.

In Fred McGilvray, Inc. v. Askew, 340 So.2d 475 (Fla. 1976), the

Florida Supreme Court considered the three criteria provided in
s. 212.06(5)(a)1., F.S., as to the mode of shipment of goods
outside the state and determined that the statutorily specified
shipment by licensed exporter, common carrier, or by the United
States mail were descriptive of the certainty of exportation,

and if any one of these modes of transportation was selected
then no statutory presumption was present that the goods were
not purchased for export. Thus, the goods were not subject to
tax. If none of the three methods of shipment is selected, then
the presumption arises in s. 212.06(5)(a)1., F.S., that the

goods were not purchased for export. Such a presumption can be

rebutted.

The First District Court of Appeal, in Great Lakes Dredge & Dock
Company v. Department of Revenue, 381 So.2d 1078 (Fla. 1DCA

1979), stated that this rebuttal can be achieved by a showing
that the "property has been started upon its foreign
transportation in a continuous route or journey with a high
degree of certainty that it is headed for its foreign

destination and will not be diverted to domestic use." Id. at
1084. The goods in that case were dedicated to a continuous and
certain process of exportation in that the property was ordered
pursuant to a foreign contract and was marked for exportation.
The court determined that the limited delays before shipment
were "... merely necessary steps in the exportation process and
did not result in the goods settling into the mass of property

of the state." Id. at 1084. The court also noted that "[a]ny
possibility that Great Lakes would divert the goods to the

domestic market was remote and did not occur." Id. at 1085.

Using the rationale in the Great Lakes decision, and considering
the specific facts in this instant case, this certain and
continuous process appears to be present. The transfer of that
property from [Client] to its customer, who is in the almost
immediate and contiguous point of departure from the [Airport's]
restricted area, is a necessary step in the exportation process
and does not result in the goods settling into the mass of
property in Florida. As also found in the Great Lakes case, the

possibility that the goods would be diverted to the domestic

market is remote in that the passengers within the restricted
area are prohibited by uniformed security personnel from leaving
that area, except by way of the jetway to the aircraft which is

to transport those passengers out of the United States, or if

for some unforeseen reason the aircraft is unable to depart as
scheduled, all duty free merchandise, purchased by the
passengers from [Client], is taken from the passengers and
stored in the restricted area by [Client] until such time as it

can be retrieved by the respective passengers upon their

departure from the United States.

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 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,

Horace Royals

Tax Law Specialist

Tax Policy Dispute Resolution

ctrl No: 26057