How did Florida's $5,000 discretionary-surtax limit apply to a combined direct-mail coupon campaign?

Subject

Discretionary Surtax on a Combined Coupon Mailing

Plain-English summary

All coupons included in one combined mailing and billed on one invoice counted as one item for Florida's $5,000 discretionary-surtax limit. The franchisee—not the coupon recipients—was the ultimate consumer of the advertising pieces.

The franchisor designed, produced, and distributed coupons for multiple businesses. Those coupons were inserted into a single envelope, and the franchisor billed the franchisee for the complete mailing. Because the pieces were sold together in bulk and supported by one invoice, the surtax limit applied to the total invoice for that mailing.

Thus, the discretionary surtax applied to the first $5,000 of the combined mailing's total charge, rather than restarting for every advertiser's coupon.

What this means for you

For the surtax cap, transaction structure mattered. Multiple printed pieces could be one item when normally sold in bulk to one purchaser at one time and documented as one sale.

Separate campaigns or invoices could present different facts. This ruling did not analyze destination sourcing or whether out-of-state deliveries were taxable.

Common questions

Q: Were direct-mail advertising pieces taxable property? Yes. The cited rule treated their final sale to the ultimate consumer as taxable.

Q: Who was the ultimate consumer? The franchisee that bought and used the coupons to deliver advertising.

Q: Did every coupon have its own $5,000 surtax limit? No. All coupons in the combined envelope and invoice were one item for the limit.

Q: What amount formed the surtax base? The total amount invoiced for the particular mailing, with the $5,000 limitation applied to that total.

Q: Did the ruling decide tax based on where recipients lived? No. Its requested issue was the discretionary-surtax item limitation.

Citations and references

• Fla. Stat. § 212.054(2)(b)1 — discretionary-surtax $5,000 item limitation
• Fla. Admin. Code r. 12A-1.034(1), (2) — direct-mail advertising pieces
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-085

Original ruling text

Dec 04, 1997

Re: Technical Assistance Advisement 97A-085
Sales & Use Tax - Direct Mail Advertising
Section: 212.054, F.S.
Rule: 12A-1.034(1) and (2), F.A.C.
Petitioner: XXX ("Franchisor")
FEI: XX

Dear :

This is a response to your petition received September 15, 1997
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

Your company, Franchisor, is a franchisor that distributes
direct mail advertising materials for franchisees located in
Florida. Franchisor designs, produces and distributes the
advertising materials throughout Florida and the United States.
The mailed materials consist of advertising coupons for various
businesses. The coupons of the various businesses are inserted
into a single envelope and mailed to selected Florida residents.
The franchisee sells the ad and the franchisor produces and
distributes the coupons. The franchisor bills the franchisee
for a mailing which will include numerous coupons. A sample
invoice was provided which itemizes all charges for a particular
mailing. The total for the invoice provided was $221,709.30.

REQUESTED ADVISEMENT

You request a determination concerning the application of the
$5,000 limitation for the discretionary sales surtax provided in

Section 212.054, F.S., with regard to Franchisor's sales to
franchisee.

DISCUSSION AND ANALYSIS OF LAW

Rule 12A-1.034(1) and (2), F.A.C., provides in full:

(1) Upon final sales to ultimate consumers of direct mail
advertising pieces, circulars, hand-outs, throw-aways and
similar advertising matter, the dealer shall collect the
sales tax upon the selling price thereof from his
purchaser.

(2) Advertising pieces, circulars, hand-outs and similar
advertising matter are taxable.

In this case the ultimate consumer of the coupons is the
franchisee. The franchisee is selling the advertising and using
the coupons as the vehicle to provide such advertising. The
mailouts are billed to the franchisee inclusive of all coupons
for a particular mailout. As all of the coupons for the various
customers of the franchisee are included in one envelope and the
billing for such mailout is directly mailed to the franchisee,
such mailouts constitute a single transaction for the purpose of
Section 212.054, F.S., which provides in Subparagraph (2)(b)1.,
in pertinent part, the following:

... For purposes of administering the $5,000 limitation on
an item of tangible personal property, if two or more
taxable items of tangible personal property are sold to the
same purchaser at the same time and, under generally
accepted business practice or industry standards or usage,
are normally sold in bulk or are items that, when
assembled, comprise a working unit or part of a working
unit, such items must be considered a single item for
purposes of the $5,000 limitation when supported by a
charge ticket, sales slip, invoice, or other tangible
evidence of a single sale or rental....

CONCLUSIONS OF LAW

We find that such total amounts found on invoices provided to
the franchisee constitute the tax base for which calculation of
the discretionary surtax should be calculated. The $5,000
limitation would apply to the total invoiced for a particular
mailing.

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
Technical Assistance & Dispute Resolution

RCB/

Control #: 30907