Were optional delivery charges taxable, and which county's discretionary sales surtax applied when nursery stock was delivered across county lines?

Plain-English summary

Florida gave the nursery two favorable answers. First, delivery charges arranged through unrelated carriers were not part of the taxable sales price when customers could avoid them by picking up the nursery stock and the seller separately stated the charges on the invoice.

Second, the county discretionary sales surtax followed where the nursery stock was actually delivered. The seller's F.O.B.-origin terms and the passage of title at the seller's location did not move the surtax to the seller's county because delivery and passage of title were separate concepts.

That meant no surtax on delivery to a county with no discretionary surtax, the destination county's rate on delivery to another surtax county, and the seller's county rate when the customer picked up the stock at the seller's premises or received delivery in that county.

What this means for you

Sellers charging for transportation

A separately stated delivery charge was nontaxable here because the purchaser alone could avoid it by choosing pickup. A mandatory delivery charge would not fit those facts.

Businesses selling across Florida counties

Do not source discretionary sales surtax solely from F.O.B. terms or the legal passage of title. This ruling applied the rate at the actual delivery location.

Common questions

Were the nursery's delivery charges taxable? No, because customers could avoid them through pickup and the seller separately stated them.

Which county's surtax rate applied to third-party delivery? The rate in the county where the nursery stock was delivered. No surtax applied if that county imposed none.

What rate applied to customer pickup? The seller's county rate, because the customer took possession at the seller's premises.

Could the seller recover surtax it had overpaid? The ruling said the seller could seek a credit or refund, but section 213.756 required proof that the overpaid funds had first been refunded to the purchaser.

Citations and references

• Fla. Stat. §§ 212.02(16), 212.05(1)(a)1.a.
• Fla. Admin. Code r. 12A-1.045(3)(a), (4)(a)
• Fla. Stat. § 212.054(2)(a), (3)(a)
• Fla. Admin. Code r. 12A-15.003(2)
• Fla. Stat. §§ 672.401 and 213.756
• Department of Revenue v. B & L Concepts, 612 So. 2d 720 (Fla. 5th DCA 1993)
• Linder Industrial Machinery Co. v. Berry, 385 So. 2d 742 (Fla. 2d DCA 1980)
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99A-009

Original ruling text

SUMMARY

A determination that sales tax is not due upon delivery
charges imposed upon a purchaser, when such charges are
incurred at the option of the purchaser and separately
stated by the seller on the purchaser's invoice.

A determination that the discretionary sales surtax is to
be imposed at the rate in effect for the county to which
the goods sold are delivered. The fact that the seller's
terms of sale are "F.O.B. shipping point," and title to the
goods sold would pass to the purchaser in the county of the
seller's location, does not require that the discretionary
sales surtax be imposed at the rate in effect for the
county of the seller's location.

Feb 26, 1999

Re: Technical Assistance Advisement - TAA 99A-009
Sales and Use Tax
Applicability of Sales Tax to Delivery Charges
Appropriate Rate for Discretionary Sales Surtax - Multiple
County Transactions
Sections 212.02(16), 212.054(2)(a), and 212.054(3)(a), F.S.
Rules 12A-1.045 and 12A-15.003, F.A.C.
XXX ("Seller")

Dear :

This letter is a response to your request dated XX, for the
Department's issuance of a Technical Assistance Advisement
("TAA") concerning the above referenced party and matter. Your
request 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 section
213.22, F.S.

I. FACTS PRESENTED

Your client, Seller, is a nursery operating out of XX.
Seller markets "ornamental nursery stock to customers located in
[XX] counties that have differing surtax rates." Seller's
standard invoice indicates, under the terms and conditions
section, that all sales are made F.O.B. Seller's location.
Seller's customers have the option of picking up their nursery
stock from Seller's premises, or of requesting that Seller
arrange transportation on their behalf. If the latter option is
chosen, Seller arranges for delivery by unrelated, third party
carriers. These carriers deliver the nursery stock to the
location specified by the customer; however, they do not off
load the nursery stock or plant it. Off loading and planting is
the responsibility of the customer.

Seller invoices the customer for the retail price of the
nursery stock, applicable sales tax and delivery charges. In
your letter, you state that it is your client's practice to list
the delivery charges "as a separate item on the customer's
invoice." Seller subsequently remits the delivery charges to the
appropriate third party carrier.

You have stated that Seller charges, on all sales, a
discretionary sales surtax at the rate in effect for the county
in which such Seller is located, regardless of the rate
applicable in the county to which the product will be delivered.
This has been done under the assumption that "delivery takes
place when title to the property passes to the customer, not
when the product is actually delivered by a third party carrier
to a location outside of their [Seller's] surtax jurisdiction."

II. REQUESTED ADVISEMENT

You have raised the following questions on behalf of your
client, Seller.

(1). Are the delivery charges billed by Seller to its
customers, under the terms and conditions described above,
subject to sales tax when separately stated on Seller's invoice?

(2). What discretionary sales surtax rate should Seller be
charging its customers when delivery is made to a county outside
the county in which Seller's business premises are located?

Applicability of Sales Tax to Delivery Charges

Statutory and Code Authority

Section 212.05, F.S., provides, in pertinent part, as
follows.

(1) ..., a tax is levied on each taxable transaction or
incident, which tax is due and payable as follows:

(a)1.a. At the rate of 6 percent of the sales price of each
item or article of tangible personal property when sold at
retail in this state,.... (E.S.)

Sales price is defined in subsection 212.02(16), F.S., as
follows.

"Sales price" means the total amount paid for tangible
personal property, including any services that are a part
of the sale,.... (E.S.)

Rule 12A-1.045(3)(a), F.A.C., provides as follows.

Where the seller agrees to deliver tangible personal
property to some designated place and the purchaser cannot
elect to avoid the charge for transportation services, the
charge for the transportation services is subject to tax,
even if separately stated on an invoice or bill of sale.
(E.S.)

Rule 12A-1.045(4)(a), F.A.C., provides as follows.

The charge for transportation services is not subject to
tax when both of the following conditions have been met:

The charge is separately stated on an invoice or bill of
sale; and

2. The charge can be avoided by a decision or action solely
on the part of the purchaser.... (E.S.)

Discussion

Subsection 212.02(16), F.S., includes delivery charges in
the "sales price" of tangible personal property, thereby
subjecting such charges to taxation, when the charges are "a
part of the sale" of the underlying tangible personal property.
Section 212.05(1)(a)1.a., F.S. The charges for delivery
services arranged by a seller will be considered "a part of the
sale" of the underlying tangible personal property when the
purchaser is unable to "avoid" such charges. If the purchaser
is unable to "avoid" the delivery charges, such charges will be
taxable even though separately stated by the seller on the
purchaser's invoice. When the purchaser is able to avoid the
delivery charges, by making a decision or taking an action that
is "solely" within such purchaser's control, and the charges are
separately stated by the seller on the purchaser's invoice, such
charges will not be considered "a part of the sale" of the
underlying tangible personal property. Rule 12A-1.045(3)(a) and
(4)(a), F.A.C.

The rule provisions cited above are consistent with the
conclusions of the court in the case of Department of Revenue v.
B & L Concepts, 612 So.2d 720 (Fla. 5th DCA 1993). In that
case, the court held that delivery charges were not a part of
the sales price and, therefore, not taxable, when such charges
were separately itemized and could have been avoided by an
action or decision solely within a purchaser's control.

You have represented that Seller's customers have the
option of picking up their nursery stock from the Seller's
premises or of requesting that Seller arrange transportation on
their behalf. Under these circumstances, Seller's customers
would be able to avoid the imposition of delivery charges by
making decisions or taking actions solely within their control.

Conclusion

Based upon the foregoing representations, statutes, rules
and case law, delivery charges incurred by Seller on behalf of
its customers would not be taxable when such charges are
separately stated by Seller on the customer's invoice.

Appropriate Rate for Discretionary Sales Surtax - Multiple
Counties

Statutory and Code Authority

Section 212.054(2)(a), F.S., provides, in pertinent part,
as follows.

... If the surtax is levied on the sale of an item of
tangible personal property or on the sale of a service, the
surtax shall be computed by multiplying the rate imposed by
the county within which the sale occurs by the amount of
the taxable sale. The sale of an item of tangible personal
property or the sale of a service is not subject to the
surtax if the property, the service, or the tangible
personal property representing the service is delivered
within a county that does not impose a discretionary sales
surtax. (E.S.)

Section 212.054(3), F.S., provides as follows.

For the purpose of this section, a transaction shall be
deemed to have occurred in a county imposing the surtax
when:

(a)1. The sale includes an item of tangible personal
property, a service, or..., and the item of tangible
personal property, the service, or... is delivered within
the county.... (E.S.)

Rule 12A-15.003(2), F.A.C., provides, in pertinent part, as
follows:

For purposes of the surtax, a transaction,..., shall be
deemed to have occurred in a county imposing the surtax
when:

(a)1. The selling dealer is located in the county imposing
the surtax, delivery is made to a location within the
county, and the sale includes tangible personal
property;....

2. The selling dealer is located within or without a county
   imposing the surtax and delivery of the tangible personal
   property is made to a location within a county not imposing
   the surtax, the selling dealer is not required to collect
   the surtax....

3. If the selling dealer is not located in a county
   imposing the surtax, including out-of-state dealers, and
   delivery of tangible personal property, a taxable service,
   or... is made to a location within a county imposing the
   surtax, the selling dealer is required to collect the
   surtax at the rate imposed in the county where the tangible
   personal property or services are delivered....

(b) If the selling dealer is located in a county imposing
the surtax, and delivery of tangible personal property, a
taxable service, or... is made to a location within a
county imposing the surtax, the selling dealer is required
to collect the surtax imposed in the county where the
delivery is made.... (E.S.)

Discussion

Section 212.054(2)(a), F.S., and section 212.054(3), F.S.,
read together, provide that, for purposes of determining the
applicability of the discretionary sales surtax and the
appropriate rate thereof, a dealer should focus on the county to
which the taxable tangible personal property or service is being
delivered. This position is also taken in Rule 12A-15.003(2),
F.A.C., as set out above. Application of the rule's provisions
may be illustrated by the following summary of certain examples
contained therein.

Legend: A = County imposing surtax at rate "X"
B = County imposing surtax at rate "Y"

C = County that does not impose a surtax

Location Location Surtax
of
Example

of
Seller Delivery Imposed

12A-15.003(2)(a)1.,F.A.C.,Ex.a.

A

A

Yes - Rate X

(County A)
12A-15.003(2)(a)2.,F.A.C.,Ex.a

A

C

No

(County C)
12A-15.003(2)(a)2.,F.A.C.,Ex.b

C

C

No

(County C)
12A-15.003(2)(b),F.A.C.,Ex.1

A

B

Yes - Rate Y

(County B)

Notice that in each of the foregoing examples, application
of the surtax is controlled by the county to which the tangible
personal property being sold was delivered.

You indicate that Seller has applied a surtax to all sales,
and at the rate in effect for the county in which Seller is
located, based upon the assumption that delivery has occurred at
the point in time when title passes from the Seller to his
customer. In Seller's situation, you assert that title passes
when the tangible personal property being sold is tendered to
the carrier at Seller's business premises, since Seller's terms
and conditions of sale provide for F.O.B. origin. Under this
line of reasoning, delivery is "deemed" to have occurred, for
Seller, when the nursery stock is tendered to the carrier at
Seller's business premises.

The problem with Seller's assumption is that "delivery" and
the "passage of title" are different concepts. One is not
necessarily controlled by the other, although they may occur at
the same "point in time." Section 672.401, F.S. For example,
in Seller's situation, if a customer exercises his option to
pick up the nursery stock at the Seller's business premises,
"delivery" and "passage of title" would generally occur
simultaneously. However, if a customer has Seller arrange for
the nursery stock to be delivered to him at a location in a
different county, delivery would occur at the "point in time"

when the carrier, after arriving at the customer's location in
that different county, makes the nursery stock available to the
customer for off loading.

In the case of Linder Industrial Machinery Co. v. Berry,
385 So.2d 742 (Fla. 2nd DCA 1980), the proper interpretation of
the term "delivers", as used by the legislature in section
212.06(5)(a)1., F.S., an exemption provision for exported goods,
was at issue. The court indicated that by using the term
"delivered," the Legislature did not intend the test for
exportation to include considerations as to the passage of title
of the tangible personal property or as to which party bears the
responsibility for the shipment. Thus, the court recognized
that "delivery" of tangible personal property is separate and
distinct from the passage of title of, or shipment terms
regarding, such property. Id., at 744.

We find no indication, statutory or otherwise, that the
Florida Legislature intended delivery, for the purposes of
section 212.054, F.S., to be "deemed" to have occurred when
title to the goods being sold passes.

Conclusion

When Seller delivers nursery stock to a customer in a
county not imposing a discretionary sales surtax, no
discretionary sales surtax should be charged or collected. When
Seller arranges for the delivery of nursery stock to a customer
in a county other than the county of Seller's location, and such
other county does impose a discretionary sales surtax, Seller
should charge and collect discretionary sales surtax at the rate
in effect in such other county. When Seller delivers nursery
stock to a customer located in Seller's county, a county which
does impose a discretionary sales surtax, or when a customer
exercises his option to pick up the nursery stock being sold at
the business premises of the Seller, thereby taking possession
of such stock at Seller's premises, Seller should charge and
collect discretionary sales surtax at the rate in effect in
Seller's county.

Based upon statements made in your letter, it appears that

Seller may have charged and paid over to the Department of
Revenue a greater amount of discretionary sales surtax than was
due. If that has been the case, Seller may wish to seek a
credit or refund for the overpayment of this tax. We are
enclosing a copy of Rules 12-26.001, 12-26.002 and 12-26.003,
F.A.C., as general guidelines for the refund process. Seller
should be aware that section 213.756, F.S., provides that any
overpaid tax is "not subject to refund [to the dealer] absent
proof that such funds have been refunded previously to the
purchaser."

III. CLOSING REMARKS

This response constitutes a Technical Assistance Advisement
under section 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 section 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 section 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.

Sincerely,

Anne Townsend
Senior Tax Specialist
Technical Assistance and
Dispute Resolution

AT
Control No. 36156
Enclosures