Did a Florida retailer owe tax on free, one-time-use gift boxes and wrapping paper that accompanied purchased merchandise?

Plain-English summary

Florida required the retailer to pay use tax on its cost of gift boxes and wrapping paper supplied free to customers.

The retailer argued that the materials were exempt because customers were not charged, the boxes and paper were intended for one-time use, and they accompanied the purchased items to their final destination. The Department found those facts insufficient.

Under the rule applied in the advisement, no-charge containers and wrapping qualified when they accompanied the sold product and delivery without them was impracticable because of the product's character. The retailer's merchandise could still be delivered without gift wrapping, so the Department treated the retailer as using the materials rather than reselling exempt packaging.

What this means for you

Retailers offering complimentary gift wrapping

Calling boxes or paper “free” does not by itself eliminate tax. The ruling focused on whether the packaging was needed to make delivery of the merchandise practical, not merely whether the customer requested it or paid a separate charge.

Purchasing and accounts-payable teams

Track complimentary gift-wrapping supplies as retailer-use items when they do not meet the packaging exemption. The tax base in this ruling was the retailer's cost of the paper and boxes.

Accountants and tax professionals

Distinguish functional product packaging from optional presentation packaging. The one-time-use language in section 212.02(14)(c) did not override the rule's delivery-practicality requirement on these facts.

Common questions

Q: Were the boxes and wrapping paper given to customers free?
A: Yes.

Q: Did one-time use make the materials exempt?
A: No. The Department still required the rule's conditions to be met.

Q: Did it matter that the packaging accompanied the purchased goods?
A: That fact alone was not enough because the goods could practicably be delivered without the gift packaging.

Q: Who owed the tax?
A: The retailer owed use tax on its cost of the boxes and wrapping paper.

Q: Can another retailer rely on this TAA?
A: Not automatically. The advisement states that it binds the Department only under the facts and circumstances described in the request, and later legal changes or judicial interpretations may produce a different result.

Citations and references

• Fla. Stat. § 212.02(14)(b), (c) — retail-sale treatment and one-time packaging materials
• Fla. Admin. Code r. 12A-1.040(1) — containers, wrapping, and packing materials
• Fla. Admin. Code r. 12A-1.091 — use tax
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-058

Original ruling text

Nov 27, 1996

Re: Technical Assistance Advisement 96A-058
Sales and Use Tax
Imposition of Sales Tax on Wrapping Paper and Boxes
Section: 212.02(14), F.S.
Rules: 12A-1.040, 12A-1.091, F.A.C.

Dear :

This is in response to your letter of June 27, 1996,
wherein you requested a technical assistance advisement
concerning the imposition of sales and use tax on wrapping paper
and boxes purchased by the retailer and provided to the customer
at no charge. You seek confirmation of a letter of technical
advice previously rendered by the department on this subject
matter. Your request is on behalf of XXXX and its subsidiaries.

According to your letter, it is your understanding that
section 212.02(14)(c), Florida Statutes (F.S.), provides that no
sales tax is imposed if no charge is made for packaging
materials and the materials are intended for one time use only.
In addition, you state, the purchase and subsequent distribution
of wrapping paper and gift boxes by retailers is not subject to
sales or use tax if these items are furnished free of charge and
they accompany the purchased goods to their final destination.

DISCUSSION OF FACTS

You provided with and subsequent to your letter of June 27,
1996, dated and executed copies of a Letter of Technical Advice
previously rendered by the department. The Letter of Technical
Advice addressed the issue of whether wrapping paper and boxes
given to the customer for no charge was taxable to the retailer
at the time of purchase.

In addition, you provided the following as factual matter:

(1) Your client sells tangible personal property at retail
at various locations within the State of Florida.

(2) Your client provides free of charge, at the request of
the purchaser, boxes, and wrapping paper, in utilizing the
service of wrapping the purchased items.

(3) The boxes and wrapping paper are intended for a one
time use by your client.

(4) The boxes and wrapping paper are intended to accompany
the purchased items to the customer's final destination.

DISCUSSION OF LAW

STATUTORY AUTHORITY:

The following passage quoted from the Florida Statutes
(F.S.) is particularly germane to the matter under
consideration:

Section 212.02(14), F.S.
(b) The terms "retail sales," "sales at retail," "use,"
"storage," and "consumption" include the sale, use,
storage, or consumption of all tangible advertising
materials imported or caused to be imported into this
state. Tangible advertising material includes displays,
display containers, brochures, catalogs, price lists,
point-of-sale advertising, and technical manuals or any
tangible personal property which does not accompany the
product to the ultimate consumer.

(c) "Retail sales," "sale at retail," "use," "storage," and
"consumption" do not include materials, containers, labels,
sacks, or bags intended to be used one time only for
packaging tangible personal property for sale or for
packaging in the process of providing a service taxable
under this part....

REGULATORY AUTHORITY:

The following provisions of the Florida Administrative Code
(F.A.C.), found in Rule 12A-1.040, F.A.C., are pertinent to the
transactions described in your letter:

Sales of Containers, Wrapping and Packing Materials and
Related Products.

(1) Items actually accompanying the product sold to the
final buyer or ultimate consumer without which delivery of
the product is impracticable on account of the character of
the contents and for which there is no separate charge are
exempt. These items include such things as cans in which
canned goods, paints and other commodities are contained,
medicine bottles, boxes in which jewelry, candy, suits,
dresses and hats are delivered to customers, wrapping
paper, paper bags, ice cream cartons and ice cream cones,
twine, milk bottle caps, paper discs, meat skewers, etc.,
crating, packing cases, excelsior, bail bindings, bulkhead
materials and the like when used in connection with the
packaging for shipment for sale of other tangible personal
property where these materials pass to the retailer or
ultimate consumer together with the tangible personal
property originally containing only directions for use when
it accompanies the article sold and where it is
impracticable to affix such printed matter to the article
sold.

Rule 12A-1.091, F.A.C., states the following in regard to use
tax:

(1) The Florida Sales and Use Tax Act imposes a tax on the
use, consumption, distribution, and storage for use or
consumption in this state of tangible personal property
purchased in such manner that the sales tax would not be
applicable at the time of purchase.

(2)(a) The use tax applies to the use in this state of
tangible personal property purchased outside Florida which
would have been subject to the sales tax if purchased from
a Florida dealer; provided, however, that it shall be

presumed that tangible personal property used in other
states, territories of the United States, or the District
of Columbia for six (6) months or longer under conditions
which would lawfully give rise to the taxing jurisdiction
of another state, territory of the United States, or
District of Columbia before being imported into this state
was not purchased for use in this state. For purposes of
the presumption set forth herein, it shall be necessary
only that the tangible personal property was used under
conditions which would allow such other state, territory of
the United States, or District of Columbia to impose a
sales or use tax on the sale or use of that property
regardless of whether any such tax was actually imposed or
paid.

(b) The rental or lease of tangible personal property which
is used or stored in this state shall be taxable without
regard to its prior use or tax paid on purchase outside
this state.

(3) The provisions of the Florida Sales and Use Tax shall
not apply to the use or consumption, or distribution or
storage of tangible personal property for use or
consumption in this state upon which a like tax equal to or
greater than the amount due this state has been lawfully
imposed and paid in another state, territory of the United
States, or the District of Columbia before use tax payable
to this state would otherwise have become due. If the
amount of tax so lawfully imposed and paid in another
state, territory of the United States, or the District of
Columbia is not equal to or greater than the amount of tax
imposed by Chapter 212, F.S., then the person from whom the
use tax is due shall pay to the Department of Revenue an
amount sufficient to make the tax paid in the other state,
territory of the United States, or the District of Columbia
and in this state equal to the amount imposed by that
Chapter.

(4) The use tax does not apply to any property of which the
retail sale is specifically exempt from payment of the
Florida sales tax. The two taxes, sales and use, stand as

complements to each other, and taken together provide a
uniform tax upon either the sale at retail or the use of
all tangible personal property....

We point out that an agency's administrative interpretation
of a statute by rule has been accorded great deference by the
courts, and will not be overturned unless the agency's
interpretation of the statutes is clearly erroneous; reviewing
court will defer to any interpretation within the range of
possible interpretation. See Pershing Industries v. Department
of Banking, 591 So.2d 991, 993 (Fla. 1 DCA 1991); Eager v.
Florida Keys Aqueduct Authority, 580 So.2d 771 (Fla. 3 DCA
1991); Natelson v. Department of Ins.; 454 So.2d 31 (Fla. 1 DCA
1984); State ex rel. Szabo Food Serv., Inc. of N.C. v.
Dickinson, 286 So.2d 529 (Fla. 1973), reh. den. Jan. 9, 1974.

CONCLUSION OF LAW

Under the circumstances you have outlined, the retailer would
not be providing packaging for sale of tangible personal
property for which the sale of the products would be
impracticable. It therefore, follows under the statute and rule
that the retailer would owe use tax on its cost of the wrapping
paper and boxes utilized in the gift wrapped merchandise.

This response constitutes a Technical Assistance Advisement
under Section 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 Section 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 Section 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,

Leola B. Carter
Senior Tax Specialist

Control #25904