When a Florida pub posts tax-included drink prices and sells several drinks in one round, is sales tax computed per drink or on the combined transaction?

Plain-English summary

Florida told a pub to compute sales tax separately for each drink, even when one customer bought and paid for several drinks together.

The pub posted prices stating that sales tax was included and kept detailed cash-register tapes showing the type and price of every drink. In the example, a customer bought three drinks priced at $1.00, $1.25, and $2.50 in one $4.75 transaction.

The pub argued that Rule 12A-1.003's definition of a single sale allowed it to apply the bracket system to the combined $4.75 total. The Department disagreed for this tax-included pricing method. Each drink had its own posted price and a specific tax amount embedded in that price. Purchasing several drinks together did not change either amount.

The Department did allow the pub to use its itemized records to back the tax out of receipts and establish its actual effective tax rate under Rule 12A-1.057. But the tax collected and due still had to be determined on a per-drink basis.

What this means for you

Bars and restaurants using tax-included prices

If each item has a posted tax-included price, calculate and preserve the tax attributable to each item. Do not assume grouping several items on one check lets the business recalculate tax solely from the combined total.

Point-of-sale teams

Maintain item-level records. The Department relied on detailed tapes that identified each drink even when multiple drinks were delivered and paid for together.

Accountants

The business could determine an actual effective rate from adequate records, but that did not turn itemized tax-included prices into one aggregate bracket calculation. Reconcile the amount embedded in individual prices to reported tax.

Common questions

Q: What did the pub's signs say?
A: The posted drink prices stated "sales tax included."

Q: Did the pub have item-level records?
A: Yes. Its cash-register tapes showed the quantity, type, and separate price of each drink.

Q: Could it back tax out of total receipts?
A: Yes. The Department allowed that method and an actual effective rate supported by the records.

Q: Why was the tax still computed per drink?
A: Each drink's posted price already contained a specific tax amount that did not change when several drinks were purchased together.

Q: Did the single-sale rule produce a different answer?
A: Not on these facts. The Department rejected the pub's combined-transaction approach.

Q: Can the 1998 example divisors be used today?
A: This page does not say so. Current state and local rates and current reporting rules must be checked.

Citations and references

• Fla. Admin. Code r. 12A-1.003(1) — definition of a single sale.
• Fla. Admin. Code r. 12A-1.057(1), (3)(b), and (3)(c) — alcoholic-beverage pricing, tax-included signs, receipt divisors, and actual effective rates supported by records.
• Fla. Stat. § 213.22 — Technical Assistance Advisements.
• Fla. Stat. ch. 119 — public-record disclosure with identifying details deleted.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-086

Original ruling text

SUMMARY

The facts indicate that the taxpayer/pub owner, in addition
to posting "tax included" signs, maintains detail cash
register tapes which show each drink price separately
itemized even if several drinks are sold as part of one
transaction or one sale. The Department agrees that the
taxpayer is allowed to back out the tax and to determine
its actual effective tax rate from the cash register tapes.
However, it is the Department's position that, when drinks
are priced to include tax, and signs are posted to indicate
such method, each drink has a specific price which includes
a specific amount of tax. It is the Department's position
that the drink price and the amount of tax collected (and
thus due) do not change just because several drinks are
purchased together. Thus, tax should be computed on a per
drink basis.

Nov 23, 1998

Re: Technical Assistance Advisement (98A-086)
XXX ("Taxpayer")
Sales and Use Tax
Bracket System of Sales Tax Collection

Dear :

This Technical Assistance Advisement is in response to your
letter of XX, in which you seek advice as to the correct
computation of the tax due on beverage sales made at your
client's pub.

Your letter provides in part:

Taxpayer is a bar and sells liquor, beer, wine and soft
drinks. The drink prices are posted on signs in the pub
and the signs state "sales tax included."

Taxpayer maintains adequate records through cash register
tapes and supporting records to determine the quantity and
type of drinks sold with each transaction. With these same
records, it also is able to determine total sales for the
register each day, week, and month of the tax year.
...
Question: A customer purchases a round of drinks for
himself and two friends. The drinks are delivered together
and paid for at the same time by the customer. The drink
prices are $1.00, 1.25 and 2.50 for a total of $4.75.

Is the sales tax to be calculated on a per transaction
basis or a per drink basis?

Taxpayer's assertion: The taxpayer believes the correct
response to the above question is to follow the per
transaction basis. The per transaction basis is consistent
with [Rule 12A-1.003, F.A.C.]...

Discussion

Rule 12A-1.003(1), F.A.C., provides in pertinent part:

The tax shall be collected on all single sales. Single
sales are to be considered as the total sales of tangible
personal property, admissions or rentals made to customer
or combination of customers at one time, inclusive of total
sales made on any one visit to a place of sale....

Rule 12A-1.057, F.A.C., provides in part:

(1) Alcoholic beverages, including beer, ale, and wine are
taxable. The dealer shall add the tax to the sale price
(including any other state and federal taxes) of each sale
and he shall not advertise or hold out to the public in any
manner that he will absorb any part of the tax or that he
will relieve the purchaser from the payment thereof.
However, nothing herein contained shall be construed as
prohibiting a dealer from setting his prices on the sale of
alcoholic beverages in such a manner as to avoid the
handling of pennies; PROVIDED, HOWEVER, that each and every

one of the dealer's price lists shall show the price of the
beverage and the amount of tax due thereon as separate
items. For example, a dealer's price may list a bottle of
beer for 47 cents, sales tax 3 cents, total 50 cents; a
glass of wine for 80 cents plus sales tax of 5 cents, total
85 cents; or a cocktail for $1.69 plus sales tax of 11
cents, total $1.80.
...
(3) In some instances, it may be impractical for a dealer
to separately record the sales price of the beverage and
the tax thereon. In such cases, for the privilege of
deviating from the requirement of subsection (1) above, a
dealer shall remit tax in accordance with one of the
methods outlined below, and his records must substantiate
the method so elected.
...
(b) Where it can be demonstrated that the public has been
put on notice by means of price lists or signs posted
prominently throughout the establishment that the total
charge includes tax, the dealer shall report the tax
collected by deducting the tax from the total receipts
using the methods shown below:

1. Example: A package store which sells no mixed drinks and
   whose total receipts are $2,000 would divide $2,000 by
   1.0635 to compute gross sales of $1,880.58 and tax
   collected of $119.42.

2. Example: A dealer who sells drinks or a combination of
   drinks and package goods and whose total receipts are
   $2,000 would divide $2,000 by 1.0659 to compute gross sales
   of $1,876.35 and tax collected of $123.65.

(c) Notwithstanding other provisions of this subsection,
where the books and records of a dealer can clearly
demonstrate without exception a lesser tax rate, the dealer
shall apply the lesser tax rate in a manner consistent with
paragraphs (a) and (b) of this subsection. (emphasis
supplied)

The facts indicate that the taxpayer, in addition to posting

"tax included" signs, maintains detail cash register tapes which
show each drink price separately itemized even if several drinks
are sold as part of one transaction or one sale. The Department
agrees that the taxpayer is allowed to back out the tax and to
determine its actual effective tax rate from the cash register
tapes. However, it is the Department's position that, when
drinks are priced to include tax, and signs are posted to
indicate such method, each drink has a specific price which
includes a specific amount of tax. It is the Department's
position that the drink price and the amount of tax collected
(and thus due) do not change just because several drinks are
purchased together. Thus, tax should be computed on a per drink
basis.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S. which is binding on the department only
under 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 our 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,

Jonathan E. Swift
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 922-4840

Control #35322

NOTICE UNDER THE AMERICANS WITH DISABILITIES ACT

Persons needing an accommodation to participate in any
proceeding before the Technical Assistance and Dispute
Resolution Office, should contact that office at 904-4880717 (voice), or 1-800-DOR-8331 (TDD), at least five
working days before such proceeding. You may also call via
the Florida Relay System at 1-800-955-8770 (voice), or 1800-955-8771 (TDD).