Were duty-free goods exempt from Florida sales tax when an international passenger received them on the jetway at the aircraft door?

Plain-English summary

The duty-free goods qualified as exempt export sales when delivered to international passengers at the aircraft door. The retailer verified each passenger's name and international ticket, and its registers would not allow a sale without that information. Passengers received the merchandise only after surrendering their boarding passes and walking down the jetway toward the plane.

Those controls rebutted the normal presumption that customer possession in Florida means Florida delivery. The Department found a continuous export journey with a high degree of certainty and only a remote chance of domestic diversion.

If a flight could not depart and passengers had to leave, the retailer took back all duty-free merchandise and held it in a restricted area until the passengers' later international departure.

What this means for you

The exemption rested on the timing and control of delivery. The customer did not receive the goods in an ordinary retail area; delivery occurred at the immediate point of departure after the boarding pass had been surrendered.

Duty-free status by itself is insufficient. Retailers need facts that demonstrate a continuous export process and prevent the goods from entering domestic use.

Common questions

Q: When did the passenger receive the goods? After surrendering the boarding pass, on the jetway at the aircraft door.

Q: Why was domestic diversion considered remote? The passenger was already proceeding to the international aircraft, and the retailer reclaimed the goods if the flight did not depart.

Q: Did the usual statutory export shipment methods apply? No. The ruling said none of the listed methods was present, but the retailer rebutted the resulting presumption through proof of continuous and certain export.

Citations and references

• Fla. Stat. § 212.06(5)(a)1. — Florida-delivery presumption and export shipment methods
• Fla. Admin. Code r. 12A-1.064 — interstate and foreign-commerce sales
• Fred McGilvray, Inc. v. Askew, 340 So. 2d 475 (Fla. 1976) — statutory methods describe certainty of export and the presumption can be rebutted
• Great Lakes Dredge & Dock Co. v. Department of Revenue, 381 So. 2d 1078, 1084-85 (Fla. 1st DCA 1979) — continuous foreign journey and remote domestic diversion
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-074

Original ruling text

Nov 12, 1997

Re: Technical Assistance Advisement 97A-074 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 your letter dated August 15, 1997, wherein you asked the Department to issue an expedited TAA to your client, XXX (hereinafter "Client"), concerning whether certain duty free sales made to airline passengers departing the United States from the XXX (hereinafter "Airport") 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.

Facts

In your letter you state that:

[Client's] operations as a duty free shop meet all U.S. Federal requirements for duty-free shops. Purchases from
[Client's] duty free shop at the [Airport] are only made after the sales person 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 purchases are not delivered to the passenger until they reach the aircraft door to ensure exportation. 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 areas to spend the night in an area hotel, all of the duty-free goods are taken from the passengers on the flight and placed in a restricted or duty-free area. The goods can then be retrieved by the passengers in the manner in which they first received them when [they] board their 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. Again, no one may purchase duty-free goods from [Client's] store unless they possess an airline ticket showing that they are departing on an international flight. 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.

In a supplemental letter, dated September 2, 1997, you added that:

[D]eparting international passengers are delivered their duty-free goods only after they have given their boarding pass to the gate agent and traveled down the ramp which leads to the aircraft door.

Department Response

Based on all the information provided the Department has determined 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 country, 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 have already surrendered their boarding passes and are already on the jetway leading to the aircraft which is to transport those passengers out of the United States. If for some unforeseen reason the aircraft is unable to depart as scheduled and the passenger are forced to disembark the plane without leaving the country, all duty free merchandise, purchased by the passengers from Client, is taken from the passengers and stored in a 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,

Kama Schultz
Tax Law Specialist
Tax Policy Dispute Resolution

Ctrl No: 30623