Were purchases from an airport duty-free store exempt from Florida sales tax when international passengers took possession inside a restricted departure area?

Plain-English summary

The duty-free retailer's sales remained exempt export sales even after it expanded into books, newspapers, magazines, gifts, and confectionery. Only ticketed international passengers could enter the secured departure area and make purchases. Packages were sealed, the area was monitored, and passengers could not leave except to board an international flight.

If a flight could not depart and passengers had to leave the restricted area, their duty-free goods were taken back and stored until the replacement departure. The Department found a continuous and highly certain export process, so customers' physical possession inside the restricted area did not make the sales taxable Florida deliveries.

The exemption required the goods to be actually removed from the country and not consumed on the premises. The product-line change did not alter the earlier result in TAA 96A-051 because that analysis did not depend on the type of goods sold.

What this means for you

Customer possession in Florida normally supports a presumption of Florida delivery. This ruling overcame that presumption through unusually strong controls showing that the goods had already entered a continuous foreign-export journey with little realistic chance of domestic use.

Calling a store “duty free” is not enough. The retailer's restricted location, ticket verification, sealed packaging, exit controls, disrupted-flight procedures, and proof of actual export all mattered.

Common questions

Q: Could passengers carry the goods away from the store? Yes, but only within the restricted international-departure area, in sealed packages, while security prevented them from leaving for domestic use.

Q: What happened if a flight was canceled or delayed overnight? The goods were surrendered and stored in the restricted area until the passenger's later international departure.

Q: Did adding books, magazines, gifts, and candy change the result? No. The prior export analysis did not depend on the product type.

Q: Could the goods be consumed before departure? No. The holding required actual removal from the country and no consumption on the premises.

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 shipment methods describe certainty of export, and the contrary presumption can arise when none is used
• Great Lakes Dredge & Dock Co. v. Department of Revenue, 381 So. 2d 1078, 1084-85 (Fla. 1st DCA 1979) — continuous foreign journey with high certainty and remote domestic diversion
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-075

Original ruling text

Nov 12, 1997

Re: Technical Assistance Advisement 97A-075
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 August 15, 1997, wherein it 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 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.

This issue was previously addressed in TAA #96A-051, which was
also written to your client. However, since one of the facts
presented in the previous TAA has changed, you have asked that
we issue a second TAA holding that the taxability of the
transactions has not changed.

Facts

In the original request for TAA #96A-051 you described the
transaction, in pertinent part, in the following manner:

[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 in a
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.

In your request for a new, revised TAA, you state that:

Recently, [Client] has expanded its operations at the
[Airport] in that is has diverted the sale of newspapers,
magazines and books to be sold at a separate free standing
facility in the same area as the existing shop, yet under
the advertised name of Books news + gifts. This diversion
is merely an expansion of this line of products from the
existing shop along with a few minor additions of
miscellaneous gifts and countline confectionery. Both
facilities have the same mailing address and operate as a
single entity.

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

[T]he expanded facility is located in the same federally
restricted and regulated area which is under the control of
United States Customs. Only departing international
airline passengers are ever allowed to enter the area, and
once they have entered these individuals are not allowed to
exit the restricted area before boarding their flight,
ensuring continuity and certainty of export.

Finally, in the supplemental letter dated September 29, 1997, it
was further explained that the only difference between the prior
operations and the current operations was in the type of goods
being sold. You stated that:

... [A]ll of the products coming out of the [expanded]
facility are, in fact, currently being placed in sealed
bags and must be surrendered in the event that the
purchaser has to exit the restricted area due to mechanical
difficulties with the airplane. [Your client] has informed
that the goods at the expansion facility are being handled
on the exact same manner that the goods are handled out of
the primary duty-free store and shall continue to be
handled in that same manner.

Department Response

Based on all the information provided the Department in the

original TAA request, the Department determined that while none
of the criteria stated in s. 212.06(5)(a)1., F.S., were present,
the sales to ticketed international passengers otherwise
qualified as export sales under Florida law. In that TAA we
stated that:

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.

Based on the information you have provided, the only difference
in the facts presented in the first request for a TAA and the
facts being presented in this request for a TAA, is a change in
the type of goods being sold. Since the original TAA was not
dependent on the type of goods, an expansion of your client's
product line will not affect the decision presented in TAA #96A051.

Thus, as long as your client is selling goods in the described
manner, and the goods are actually removed from the country and
not consumed on the premises, your client's sales will qualify
as sales for export and will not be subject to sales tax.

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: 30622