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Sales and Use Tax TAA 18A-015 Newspapers, Magazines and Periodicals

QUESTION:

Is sales or use tax owed on the materials encompassed within the publications submitted for review that are distributed free of charge?

ANSWER:

Based upon the facts provided, Taxpayer’s publications submitted for review that are distributed free of charge are exempt from sales and use tax on the publishing or printing costs of the publications or on items purchased, such as paper and ink, that are incorporated into and become a component part of the publications, as provided in section 212.08(7)(w), F.S., and Rule 12A-1.008, F.A.C.

QUESTION:

Is sales or use tax owed on the distribution of the publications submitted for review that are distributed free of charge?

ANSWER:

Based upon the facts provided, the charges for fabricating the publications submitted for review that are distributed free of charge are exempt from sales tax, pursuant to the exemption in s. 212.08(7)(w), F.S., for free, circulated publications that are published on a regular basis, the content of which is primarily advertising, and that are distributed through the mail, home delivery, or newsstands.

QUESTION:

Are sales of digital only subscriptions of the publications submitted for review subject to sales and use tax?

ANSWER:

Based on the facts provided, the sale of a digital only subscriptions of the publications submitted for review are not subject to sales tax, as there is not a transfer of a tangible item as part of the transaction.

QUESTION:

Are sales of digital and hardcopy subscriptions of the publications submitted for review
subject to sales tax only on the allocable charges for the hardcopy portion of the sales
price so long as Taxpayer maintains sufficient accounting records to support the charges?

ANSWER:

Based on the facts provided, hard copies of the publications submitted for review are available only through subscription and are delivered via mail to the Taxpayer’s clients. As such, charges for the sale of hard copy subscriptions are exempt from sales tax pursuant to s. 212.08(7)(w), F.S., and Rule 12A-1.008(3)(b), F.A.C. The sale of a digital only subscription of the publications submitted for review are not subject to sales tax, as there is not a transfer of a tangible item as part of the transaction.

August 31, 2018

Subject: Technical Assistance Advisement
STATUTE CITE(S): Sections 212.02, 212.05, and 212.08, Florida Statutes (F.S.)
RULE CITE: Rules 12A-1.008 and 12A-1.038, Florida Administrative Code (F.A.C.)
XXX, ("Taxpayer")
FEIN XXX

Dear XXX:

This is in response to your letter dated May 23, 2018, requesting this Department’s issuance of a Technical Assistance Advisement (“TAA”) pursuant to section 213.22, F.S., and Rule Chapter 12-11, F.A.C., concerning the taxability of the publications submitted for review. An examination of your letter has established you have complied with the statutory and regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting your request for a TAA.

Facts and Requested Advisement

Your letter provides the following in part:

. . . Taxpayer engages in the business of providing business to business newspapers. The publication is sent on a regular bi-weekly basis and is available electronically and/or via hardcopy nationwide. There are two types of newspapers sent. The first is called XXX, which is sent free of charge to businesses that have a pharmacy . . .(e.g., XXX). The second is called XXX, which is sent free of charge to various entities that are retailers (XXX). The publication is only sent free of charge if the entity meets certain criteria. The hardcopy version of the publication is printed in Wisconsin.

Taxpayer earns revenue from two sources. First, revenue is earned from advertisements in the publications. This accounts for almost all of the revenue received by Taxpayer. Second, revenue is earned from subscriptions by entities not meeting the criteria to qualify to receive the publication free of charge, although this only accounts for less than one percent of total revenues. Examples of entities not meeting the criteria to qualify for a free subscription include banks and schools. The subscriptions available are: (1) a digital only subscription, which is $119; (2) a digital/physical subscription for manufacturers only, which is $149; or (3) a digital/physical subscription for any other type of subscriber, which is $199.
* * *
. . . Taxpayer mails, by way of the United States Postal Service, the hardcopy subscriptions to its clients. . . .
* * *
In response to the Department’s request for publication schedules, you provided copies of the 2016, 2017, and 2018 editorial calendars for both publications.

Law and Discussion
Section 212.05, F.S., provides that tax is imposed on the sales price of each item or article of tangible personal property sold at retail in this state. “Tangible personal property” is defined in s. 212.02(19), F.S., to mean “personal property which may be seen, weighed, measured, touched or is in any manner perceptible to the senses . . . .” Rule 12A-1.027, F.A.C., provides the sale of printed tangible personal property or graphic matter is subject to tax.

Printed publications are tangible personal property. The sale of a printed publication or the use of a printed publication by a publisher is subject to tax, absent a specific exemption. Section 212.06(16)(a), F.S., provides that the use by a publisher of copies of a newspaper, magazine, or periodical for its own consumption or to be given away is taxable. Use tax is due on the “cost price” of the publication, which includes printing costs.

You have provided that the subject publications are provided “free of charge” to qualifying business and that the publications are also sold via subscriptions in both digital and printed copies. Section 212.08(7)(w), F.S., provides two exemptions pertinent to your request: an exemption for certain sales of publications, as well as an exemption for certain publications given away when specified criteria are met.

First, s. 212.08(7)(w), F.S., provides an exemption for “newspaper, magazine, and newsletter subscriptions in which the product is delivered to the customer by mail.” So long as the customer purchases a subscription to a publication and receives the product by mail, an otherwise taxable newspaper, magazine, or newsletter, is not subject to sales tax.

Section 212.08(7)(w), F.S., also provides an exemption for “free, circulated publications that are published on a regular basis, the content of which is primarily advertising, and that are distributed through the mail, home delivery, or newsstands.”

In order to qualify for the latter exemption provided in s. 212.08(7)(w), F.S., the publication must satisfy all of the following five discrete requirements:

1) “free”;
2) a “circulated publication”;
3) “published on a regular basis”;
4) composed of “primarily advertising”; and
5) “distributed through the mail, home delivery, or newsstands.”
We will analyze each requirement below:

1. Free
Publications that are distributed free of charge and meet the other requirements under s. 212.08(7)(w), F.S., are exempt from sales tax. Your letter provides that the majority of the subject publications are “free of charge” to qualifying business. The first requirement is met for the portion of the publications that are distributed free of charge.

2. Circulated Publication
The court in Department of Revenue v. Val-Pak Direct Marketing Systems, Inc., 862 So.2d, 1, 3 (Fla. 2nd DCA App. 2003), discussed the second requirement dealing with the meaning of the word “publication.” The court stated:
When used as a concrete noun, publication is commonly understood to mean “a published work,” Webster’s Third New International Dictionary 1836 (1993) (emphasis supplied), or “an issue of printed material offered for sale or distribution,” The American Heritage Dictionary of the English Language 1464 (3d ed. 1992). As these definitions indicate, publication is a word commonly used to describe newspapers, magazines, and books. . . . A publication is presented in an identifiable form as a work or an issue. . . . Id. at 3-4.

XXX and XXX are circulated publications; therefore, the second requirement is met.

3. Published on a Regular Basis

Although s. 212.08(7)(w), F.S., and Rule 12A-1.008, F.A.C., do not indicate what constitutes published “on a regular basis.” The term “regularly” is defined in Black's Law Dictionary 890 (Abridged 6th ed. 1991) to mean “[a]t fixed and certain intervals, regular in point of time. In accordance with some consistent or periodical rule or practice.” In order to determine whether this criterion is met, the Department looks for a regular pattern of publication at fixed and certain intervals in accordance with some consistent practice.
Review of the publication calendar reveals that the publications are published on consistent weekly intervals from year to year. The Publications are published on a regular basis, and the third requirement is met.

4. Composed of “Primarily Advertising”

The term “advertising” is not defined in section 212.08(7)(w), F.S., or Rule 12A-1.008, F.A.C. However, the term “advertising” is defined, in part, to mean “[t]he action of drawing the public’s attention to something to promote its sale” in Black’s Law Dictionary 59 (8th ed. 2004). The term “primarily” is defined as “for the most part” in Merriam-Webster Online Dictionary (2008). Generally, the Department considers a publication to be composed “primarily” of advertising in cases where greater than 50% of the publication is made up of advertising.
Review of XXX and XXX, reveal that more than 50% of the publications are composed of advertisements. Therefore, the publications provided for review are “primarily advertising,” and the fourth requirement is met.

5. Distributed through the Mail, Home Delivery, Rack Machines, Newsstands, or Similar Method

Distribution must be in a manner provided by the cited exemption. Your letter provides that the Taxpayer sends “by way of the United States Postal Service, the hardcopy subscriptions to its clients.” Therefore, the final requirement is met.

Rule 12A-1.008(3)(c), F.A.C., provides that publishers and distributors whose business activity is limited to the tax exempt distribution of periodicals may issue an exemption certificate in lieu of paying tax for “publishing or printing costs of, or for the purchase of items, such as paper and ink, that are incorporated into and become a component part of, the publication.” The distributor, if registered with the Department as a dealer, may present a copy of its Annual Resale Certificate. If the distributor is not registered, it may provide an exemption certificate pursuant to Rule 12A-1.038(5)(d)1., F.A.C.

Regarding digital copies of the publications, Florida courts have held that electronic images of financial information displayed on a screen are not "tangible personal property," as defined in s. 212.02(19), F.S. See Department of Revenue v. Quotron Systems, Inc., 615 So.2d 774 (Fla. 3rd DCA 1993); Henley Holdings Inc. v. Department of Revenue, No. 89-4381 (Fla. 2d Cir.Ct. July 22, 1991), affd. 599 So.2d 1282 (Fla. 1st DCA 1992). The Department has cited Quotron, supra, and Henley Holdings, supra, in regard to transactions involving only digital transmissions via the Internet to a customer’s computer. The Department has determined that such sales, without any other evidence of the transfer of something tangible, are not sales of tangible personal property for purposes of ss. 212.02(19), and 212.05, F.S. Sales of digital transmissions instead constitute services not subject to tax, pursuant to Chapter 212, F.S.

Conclusion

I. Is sales or use tax owed on the materials encompassed within the free [publications submitted for review]?

Based upon the facts provided, Taxpayer’s publications submitted for review that are distributed free of charge are exempt from sales and use tax on the publishing or printing costs of the publications or on items purchased, such as paper and ink, that are incorporated into and become a component part of the publications, as provided in section 212.08(7)(w), F.S., and Rule 12A-1.008, F.A.C.

2. Is sales or use tax owed on the distribution of the free [publications submitted for review]?

Based upon the facts provided, the charges for fabricating the publications submitted for review that are distributed free of charge are exempt from sales tax, pursuant to the exemption in s. 212.08(7)(w), F.S., for free, circulated publications that are published on a regular basis, the content of which is primarily advertising, and that are distributed through the mail, home delivery, or newsstands.

3. Are paid digital only subscriptions of the [publications submitted for review] subject to sales and use tax?

Based on the facts provided, the sale of a digital only subscriptions of the publications submitted for review are not subject to sales tax, as there is not a transfer of a tangible item as part of the transaction.

4. Are paid digital and hardcopy subscriptions of the [publications submitted for review subject to sales tax only on the allocable charges for the hardcopy portion of the sales price so long as Taxpayer maintains sufficient accounting records to support the charges?

Based on the facts provided, hard copies of the publications submitted for review are available only through subscription and are delivered via mail to the Taxpayer’s clients. As such, charges for the sale of hard copy subscriptions are exempt from sales tax pursuant to s. 212.08(7)(w), F.S., and Rule 12A-1.008(3)(b), F.A.C. The sale of a digital only subscription of the publications submitted for review are not subject to sales tax, as there is not a transfer of a tangible item as part of the transaction.

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 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 that 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 section 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 15 days of the date of this letter.

Sincerely,
Brinton Hevey
Brinton Hevey
Tax Law Specialist
Technical Assistance and Dispute Resolution
Record ID: 80147

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