When are a Florida mailing service's labeling, folding, inserting, inkjet printing, and postage charges subject to sales tax?

Plain-English summary

The Florida Department of Revenue concluded that the mailing service's tax result depended on whether it supplied meaningful tangible property or printed on the customer's mailing pieces. When the customer supplied all mailing elements and the mailer only performed services, the transaction could be exempt. When the mailer supplied consequential materials or performed imprinting, the entire transaction was taxable.

Applying that rule to five invoices, the Department found the labeling job taxable because the mailer attached labels; the folding-and-inserting job taxable if the mailer supplied the envelopes; and the database/inkjet job taxable because the mailer printed on the mailing material. Two jobs involving folding, inserting, sealing, or retraying were exempt where the mailer apparently supplied no tangible property and did no imprinting.

Uncancelled postage was not taxable when separately itemized on the customer's bill. The ruling treated postage separately from taxable mailing and printing charges.

What this means for you

Mailing-service and lettershop operators

The customer's ownership of the paper or statements does not automatically make the whole job exempt. Supplying labels or envelopes, or adding inkjet-printed information, can turn the transaction into a taxable sale or processing service.

Direct-mail marketers and print shops

Invoice detail matters. Separate postage from production and service charges, and identify who supplied every label, envelope, insert, and other mailing component. The Department resolved doubt against the personal-service exemption.

Accountants and tax professionals

Analyze the transaction by what the mailer actually provides, not by a general label such as "mailing service." The cited rule expressly taxes addressing, stamping, sealing, inserting, or wrapping connected with direct-mail advertising, while separately itemized uncancelled postage is excluded.

Common questions

Q: Are folding, inserting, sealing, and sorting always taxable?
A: No. The Department found service-only jobs exempt when the customer supplied the materials and the mailer supplied no consequential tangible property or imprinting.

Q: What made the labeling invoice taxable?
A: The Department said the invoice was taxable because the mailer attached labels to the mail pieces.

Q: Is inkjet addressing or printing taxable?
A: Yes on the facts presented. The Department said printing information on the mailing material made the entire transaction taxable.

Q: What if the mailer supplies envelopes?
A: The ruling said the folding-and-inserting invoice was taxable if the envelopes were supplied by the mailer.

Q: Is postage taxable?
A: Uncancelled postage was exempt when separately itemized on the customer's invoice.

Q: Can another mailer 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 court interpretations may produce a different result.

Citations and references

• Fla. Stat. § 212.02(16) (sales price)
• Fla. Stat. § 212.02(15)(c) (producing, processing, printing, or imprinting tangible personal property)
• Fla. Stat. § 212.08(7)(v)1. (personal-service transactions with inconsequential sales elements)
• Fla. Admin. Code r. 12A-1.027(4), (5) (separately itemized postage and direct-mail services)
• Fla. Stat. § 213.22 and Fla. Admin. Code ch. 12-11 (technical assistance advisements)
• Fla. Stat. ch. 119 (public records)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-061

Original ruling text

45ú

Dec 17, 1996

Re: Technical Assistance Advisement 96A-061
Sales & Use Tax - Mailing Services
Sections: 212.02, 212.08, F.S.
Rule: 12A-1.027(5), F.A.C.
Petitioner: XXXX
FEI: XXXX

Dear :

This is a response to your petition received September 10, 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

XXXX (Client) is engaged in the mailing service business. You
indicate the following facts with regard to the nature of
Client's business activity:

1. Inkjet addresses (customer's addresses) on envelopes,
   applying stamps, bundle and bag, mail drop fees and
   presorting.

2. Lettershop services. Client defines lettershop
   services as machine labeling, meter and tray for first
   class presort.

REQUESTED ADVISEMENT

You request advisement with regard to certain categories of

services performed by Client. You submitted five invoices
indicating various services for which you request the tax
ramifications.

The first invoice involves services which include machine
labeling, metering and sorting for 1st class mailing. You
assert that no tangible personal property is created by the
taxpayer and that accordingly, these services should be treated
as wholly service.

The second invoice involves the machine folding of statements,
collating, nesting statements, inserting statements into
envelopes, sealing, metering and traying. You indicate that no
tangible personal property is created by the taxpayer.

The third invoice involves the same as above; however, no
mention is made of any envelopes.

The fourth invoice involves pulling names from a database,
presorting and inkjet printing the data.

The fifth invoice involves machine folding, machine inserting,
sealing and retraying.

DISCUSSION AND ANALYSIS OF LAW

Section 212.02(16), F.S., provides in pertinent part:

`Sales price' means the total amount paid for tangible
personal property, including any services that are a part
of the sale....

Rule 12A-1.027(5), F.A.C., provides:

Charges for addressing, stamping, sealing, inserting or
wrapping in connection with the operation of a direct mail
advertising service are taxable.

Rule 12A-1.027(4), F.A.C., states:

Uncancelled postage is not a part of the sales price of

printed matter and is exempt when separately itemized on
the customer's bill.

Section 212.02(15)(c), provides:

"Sale" means and includes:

The producing, fabricating, processing, printing, or
imprinting of tangible personal property for a
consideration for consumers who furnish either directly or
indirectly the materials used in the producing,
fabricating, processing, printing, or imprinting.

Section 212.08(7)(v)1., F.S., provides:

Professional services.-

Also exempted are professional, insurance, or personal
service transactions that involve sales as inconsequential
elements for which no separate charges are made.

The Department has long held that when all mailing elements are
provided the mailer by the customer, the mailer is not engaged
in a taxable activity. For this exemption to apply, it must be
clearly established that the tangible personal property sold is
inconsequential, and that the transactions at issue are
professional, insurance, or personal services.

Any doubt must be resolved against the exemption applying.
Therefore, in order for the subject transactions to be exempt,
the elements themselves must be inconsequential, that is to say,
of no consequence to the transaction. There is no statutory
definition of the term "inconsequential," and its judicial
interpretation has been inconsistent. It is beyond debate that
none of the materials could be mailed without the existence of
labels, envelopes or imprinting. It is therefore, difficult to
conclude that such ingredients are "inconsequential."

The taxability of a transaction will be determined by the nature
of the transaction. Should any tangible personal property be
transferred to Client's customer of a consequential nature,

which was not originally provided by such customer, then the
transaction will be subject to the tax. In addition, should
Client print any information by inkjet printer or other means on
the mailing material, then the entire transaction will be
subject to the tax. The postage component is not subject to tax
if it is separately stated on the customer's invoice.

CONCLUSIONS OF LAW

Client's business activity is subject to Rule 12A-1.027(4) and
(5), F.A.C., if consequential elements are supplied by Client or
if imprinting is performed by Client (pursuant to Sections
212.02 and 212.08, F.S.). The Department's finding with regard
to the submitted invoices is as follows. Invoice number one
would be subject to tax as labels are attached by Client to the
mailouts. Invoice number two would be subject to tax also if the
envelopes are supplied by Client. Invoice number three would be
exempt, as apparently no tangible personal property is supplied
by Client. Invoice number four would be subject to the tax
pursuant to section 212.02(15)(c), F.S. (see above), as the
mailing material is printed via the inkjet printer. Invoice
number five does not appear to charge for any taxable activity,
as no tangible property is provided by Client. In addition
(with regard to invoice five), supplied materials are not
imprinted. The postage is not subject to tax on any of the
invoices submitted.

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.

Should you have any further questions concerning this matter,
please do not hesitate to contact me.

Sincerely,

R. Clay Brower
Tax Law Specialist
Tax Policy & Dispute Resolution
904-922-4837

RCB/
Control #: 26488