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Sales and Use Tax – TAA 15A-005 – Exemptions, Non-Manufacturing

QUESTION: WHETHER A SALE OF POSTAGE AND AN ENVELOPE, AS A SINGLE ITEM IN A SINGLE NON-ITEMIZED TRANSACTION, IS SUBJECT TO TAX?

ANSWER: TAX IS NOT DUE ON THE POSTAGE IF TAXPAYER MAINTAINS SUFFICIENT ACCOUNTING RECORDS PROVIDING SUBSTANTIAL EVIDENCE OF THE COSTS OF THE POSTAGE AND ENVELOPE.

May 19, 2015

Re: Technical Assistance Advisement 15A-005 Florida Sales and Use Tax Postage/Envelope Tax Implications
Section 212.05, Florida Statutes (“F.S.”)
Rule 12A-1.027, Florida Administrative Code (“F.A.C.”)

Dear XXXX:

This letter is a response to your petition received on XXXX, for the Department of Revenue’s (“Department”) issuance of a Technical Assistance Advisement ("TAA") concerning the above- referenced petitioner 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 Section (“s.”) 213.22, F.S.

FACTS PRESENTED

The following facts are based on documents and statements provided by Taxpayer.

Taxpayer has contracted with the State to sell various items in correctional institutions (“CI”) around the State. One of the items sold to the inmates at the CI are envelopes with postage pre- printed. As part of the contract with the State, Taxpayer is informed what rates shall be charged for various items via a pricing schedule, which may only be updated with the express written permission of the State. This pricing schedule specifically itemizes the charge for the postage and the charge for the envelope.

Taxpayer purchases the envelopes and pre-printed postage directly from the United States Postal Service (“USPS”). According to Taxpayer, the USPS does not charge sales tax to Taxpayer on this transaction. The USPS calls the transaction “postage.” Through the CI commissary, Taxpayer sells the envelope and pre-printed postage, which it identifies on receipts as a single item (e.g., “stamp/envelope”), directly to the inmates of the CI, while charging sales tax on the total charge of a typically multi-item transaction. Taxpayer provided an invoice as an example. Relevant to our discussion is the line: “(qty) 2 ... stamp/envelope ... (price) $0.62 ... (amount) $1.24”.

REQUESTED ADVISEMENTS

Taxpayer inquires as to whether the transaction with the inmates is subject to tax.

LAW & DISCUSSION

Generally, Section 212.05, F.S., provides every person is engaged in a taxable privilege when engaging in the business of selling, at retail, tangible personal property. In order to exercise such a privilege tax is levied at 6 percent (6%).1 212.05(1)(a)1.a., F.S. Tangible personal property is “property which may be seen, weighed, measured, or touched or is in any manner perceptible to the senses ....” See s. 212.02(19), F.S.

Charges for postage that are separately stated on a customer’s invoice, bill, or other tangible evidence of sale are not subject to Florida Sales Tax. See Rule 12A-1.027(2)(b), F.A.C. The Department takes the position that when an envelope with pre-printed postage is sold to a customer and the charges for the postage and envelope are not separately stated on the sales invoice, sales tax is not due on the postage, so long as the seller keeps sufficient accounting records providing substantial evidence of the costs of both the envelope and postage. In the example provided, sales tax would be due on the $0.13 charge for the envelope ($0.62 total charge minus the current $0.49 postage charge).

CONCLUSION

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, your request and related backup documents are public records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions of s. 213.22, F.S. Confidential information must be deleted before public disclosure. In an effort to protect confidentiality, we request you provide the undersigned with an edited copy of your request for Technical Assistance Advisement, the backup material and this response, deleting names, addresses and any other details which might lead to identification of the taxpayer. Your response should be received by the Department within 10 days of the date of this letter.

Sincerely,

David J. Brennan, Jr., Esq.
Senior Attorney
Technical Assistance & Dispute Resolution

Record ID: 194075

End Notes

1 On the sale of personal property, counties are authorized to impose a county discretionary. See ss. 212.054 and 212.055, F.S.

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