Title: Taxability of Charges/Tours Packages, Admissions, Hotel Accommodations and Tangible Personal Property Jul 15, 1994 Re: TAA 94A-044 Sales and Use Tax; Taxability of charges made to customers purchasing tour packages, admissions, hotel accommodations, and tangible personal property Sections 212.04(1)(b)(c)(d), 212.08(7)(v)1., 212.03(1)(2), 212.05(1)(a)1.a., (e)1.a. Chapter 203, F.S. Rules 12A-1.005, 12A-15.003, F.A.C. Dear : This is in response to your original request for a Technical Assistance Advisement (TAA) dated November 10, 1993, and additional correspondence dated March 29, 1994, April 1, 1994, and May 11, 1994. Your client, XXX (hereinafter "Vendor"), wishes to know whether sales tax is due on its charges to customers for additional tour packages, hotel accommodations, and admission tickets. Your letter dated November 10, 1993, provided in pertinent part: "`Vendor' is a Florida corporation authorized to do and doing business in the State of Florida. `Vendor' provides local services to customers of tour operators located in the XXX... These customers buy tour packages in the XXX from the tour operators, and `Vendor' offers additional services to the customers in the State of Florida in the form of: "1. Arranging individual tickets to various attractions in XXX; "2. Arranging transportation services between lodging facilities and attractions; "3. Arranging additional vacation packages (including transportation, hotel rooms and attraction tickets); and "4. Arranging individual hotel rooms...
"A. Individual Attraction Tickets "In most cases, `Vendor' uses a voucher (Exhibit `A') to authorize individual admissions by customers at various attractions. `Vendor' acquires these admission rights under contract with the attraction operators, who charge `Vendor' a discounted rate from the posted admission price and charge `Vendor' sales tax (i.e., admissions tax) on the discounted price. Attached hereto as Composite Exhibit `B' are copies of a representative contract between `Vendor' and an attraction operator, and an invoice from the attraction operator to `Vendor' showing the payment of admissions tax by `Vendor'. `Vendor' then charges the customer the amount paid to the attraction operator, plus a service charge to cover `Vendor's' services in arranging the transaction. "Occasionally, `Vendor' will purchase actual admission tickets from an attraction operator, which will be conveyed to the customer in the manner set forth above. "B. Transportation Services "`Vendor' may arrange for transportation services to be provided to customers by third-party vendors for transport between their hotels and attractions. `Vendor' earns a commission for arranging these services. `Vendor' may directly provide transportation services to customers between hotels and attractions, which are sold as a package (using the Exhibit A voucher) with attraction tickets and a service charge, all for a single price. "C. Vacation Packages "`Vendor' may arrange for additional vacation packages sold to customers. These packages would include hotel rooms, attraction tickets and transportation services. `Vendor' pays tax to the vendor on acquiring these items, and billing to the customer is in a single price using the Exhibit A voucher. `Vendor' will include in that price a service charge to the customer.
"D. Hotel Rooms "`Vendor' uses a voucher system for attraction tickets (sic), similar to the method described above for attraction tickets, in arranging for individual hotel rooms for the customers. `Vendor' uses the same voucher (Exhibit A) in authorizing occupancy by the customer, and charges the customer an amount based on the price (including tax) charged to `Vendor' by the hotel operator plus a service charge for `Vendor's' services in arranging the transaction. "In addition to providing these services, `Vendor' receives from the tour operators a handling fee' based on a per customer charge, as compensation for presenting an orientation session and for making the services described above available to customers. `Vendor' also arranges local transportation for these customers to and from airports located in Florida, the charges for which are billed by the vendors to `Vendor' and by `Vendor' to the tour operators, and are sold by the tour operators as part of their vacation packages. "The orientation sessions are conducted by `Vendor' on premises rented by `Vendor' at convenient locations, such as a hotel or dinner theater. `Vendor' will pay to the owner/operator of the location any applicable tax on the rental. "At the orientation session offered by `Vendor' to customers, `Vendor' also offers for sale `tea kits', which include an electric kettle, cups, saucers, tea bags and biscuits. The kettle, cups and saucers represent over 25 percent of the value of the tea kit, and `Vendor' charges a single price for the entire package. `Vendor' does not pay sales tax on the tea kit when it is purchased. In addition, at the orientation sessions, `Vendor' offers for sale electrical adaptors for use of non-u.s. electrical appliances. "At the orientation sessions, `Vendor' promotes the availability of various amenities to customers, including telephone cards, refrigerators, suntan products and video cameras. These transactions are consummated in the following
manner: "1. The telephone cards are credit cards which allow the customer to pre-purchase credit for use in making local or long distance telephone calls. Applicable tax on these telecommunication services would be charged by the telecommunications company when a call is made. `Vendor' purchases the cards from the telecommunications company and sells them to customers for more than it paid for the cards. "2. `Vendor' will arrange for customers to rent a small refrigerator for their hotel room from a third-party vendor. `Vendor' collects the rental from the customer and remits the money to the vendor, less a 10 percent commission. The vendor delivers, sets up and removes the unit. "3. A representative of the suntan product vendor sells the products directly to customers at the orientation session and is responsible for collecting and remitting applicable sales tax. "4. Video camera rentals are arranged between the vendor and customer directly at the vendor's premises and the vendor is responsible for collecting and remitting applicable sales tax. `Vendor' receives a commission from the vendor on each rental. "`Vendor' also offers to arrange for hot-air balloon rides, which are sold by the vendor to the customer. `Vendor' earns a commission for arranging this transaction, and the vendor is responsible for any sales tax due on the transaction..." Your request seeks a response to the following issues: "1. Whether the vacation packages arranged by `Vendor' for customers are subject to sales tax; "2. Whether transportation services arranged by `Vendor' for customers are subject to sales tax; "3. Whether the `handling fee' earned by `Vendor' is subject to sales tax; "4. Whether the service charge earned by `Vendor' for arranging individual attraction tickets for customers is subject
to sales tax; "5. Whether the service charge earned by `Vendor' for arranging individual hotel rooms for customers is subject to sales tax; "6. Whether the sale by `Vendor' of tea kits, adaptors, and phone cards is subject to sales tax; "7. Whether the commissions earned by `Vendor' on the sale by third-party vendors of suntan products, or the rental of refrigerators and video cameras, are subject to sales tax; and "8. Whether the commissions earned by `Vendor' in arranging for the sale of hot air balloon rides by third-party vendors are subject to sales tax..." Your letter dated March 29, 1994, presented copies of the following additional documentation: an agreement entered into by Vendor and XXX on July 27, 1993, which evidences that the hotel operator will charge Vendor sales tax on the rooms rented by it at a wholesale rate; a statement dated February 11, 1994, in which the hotel operator bills Vendor for hotel charges, inclusive of tax; a completed voucher evidencing a customer's purchase of a "2 Night Bahamas Getaway"; an agreement entered on March 18, 1994, between Calling Card and Owners Abroad Group; a copy of Vendor's internal memorandum regarding its arrangement with the refrigerator rental company; and an agreement signed by Vendor on January 13, 1994, with XXX. Additionally, your letter dated April 1, 1994, contained a copy of a document which transferred the balance due on one of Vendor's customer's for a two night stay at XXX, inclusive of tax, to a receivables account. This amount ($55.50) was then billed to Vendor by XXX on a statement dated February 11, 1994. DETERMINATION As provided in your original letter dated November 10, 1993, the sample voucher identified as Exhibit A is used by your client to bill its customers for attraction tickets, hotel accommodations, and sales of vacation packages. Space is identified on the voucher where your client is to insert the number of adults and children entitled to use the voucher. Additionally, spaces are identified on the voucher for your
client's insertion of the adult price and child price on its sales of attraction tickets, hotel accommodations, and vacation packages. There is a column which provides for the insertion of the total amount due for the adults in the party as well as the total amount due for any children in the party. Question #1: As correctly cited in your letter, section 212.04(1)(d), F.S., provides that no additional tax is due on an admission if the admission is incorporated as part of a package sold by a travel agent; if the package includes admissions and transient rentals, transportation, or meals; and if there is no separate itemization of the admission, transient rental, transportation, or meal in the sales price of the package. Exhibit C (which accompanied your letter dated November 10, 1993) is a copy of Vendor's pamphlet entitled "The Best of Florida". This document has been submitted in support of your argument that Vendor does not separately itemize charges for meals (when provided), hotel accommodations, transportation and admission to various attractions (identified as "Day Time Trips" on Exhibit C) when it sells vacation packages. For example, for a single charge, Vendor offers a tour of XXX, a buffet lunch, and a gospel cruise. As evidenced by Exhibit B in your correspondence, dated November 10, 1993 (Travel Industry Sales Agreement), Vendor correctly pays tax when it purchases admission tickets at a discounted rate from XXX. Since the blank voucher submitted for review does not allow for the separate itemization of the sales price charged for the admission, transportation, and/or meal, no sales tax is due on Vendor's sales of "Day Time Trips" or "Night Time Trips" (i.e., vacation packages) as identified in its pamphlet entitled "The Best of Florida". In regards to Vendor's activities listed under "Something Completely Different" in the referenced pamphlet entitled "The Best of Florida", please be advised that charges for ski lessons
are exempt from tax in accordance with section 212.08(7)(v)1., F.S., which governs personal, insurance, or professional service transactions that involve sales as inconsequential elements. Additionally, sales tax is not due on Vendor's sales of cruises to the Bahamas. However, in accordance with Rule 12A- 1.005(4)(p), F.A.C., tax is due on Vendor's sales of admissions for rides in helicopters. Question #2: As cited in your letter, Rule 12A-1.005(4)(p), F.A.C., provides that charges made for chartered or regularly scheduled aircraft, bus, taxi, trolley, or train travel are not subject to tax. Charges made by Vendor to transport its customers to and from airports or to and from various attractions are not subject to sales tax, whether Vendor uses vehicles it owns and operates or Vendor charters the appropriate vehicles from a third party. Question #3: The compensation received by Vendor for providing orientation sessions is not subject to tax. The transaction is exempt pursuant to s. 212.08(7)(v)1., F.S., which exempts from tax personal, professional, and insurance transactions that involve sales of tangible personal property as inconsequential elements for which no separate charges are made. Vendor owes use tax on any tangible personal property used by it in presenting the seminar. Question #4: As presented in your correspondence dated November 10, 1993, Exhibit B (Travel Industry Sales Agreement), Vendor is charged a reduced admission price by XXX. Vendor pays sales tax to the attraction on the reduced admission price. Exhibit C (which is a pamphlet given by Vendor to its customers) has sections identified as "Go As You Please" and "Florida Fun By Night". These sections list the gate admission charged to enter various attractions located in Florida. Next to the gate charges are slightly reduced prices which are charged by Vendor for each adult or child admission ticket sold to its
customer(s). The blank voucher (Exhibit A) submitted for review contains areas where Vendor is to insert the adult price and child price charged to enter the attraction. For those transactions which solely involve the sale of admission tickets ("Go As You Please" section and "Florida Fun By Night" section on Exhibit C of November 10, 1993, correspondence) the prices inserted on the voucher are itemized since no other services or products were purchased. Section 212.04(1)(c), F.S., which became effective July 1, 1991, provides in pertinent part: "The provisions of this part that authorize a tax exempt sale for resale do not apply to sales of admissions. However, if a purchaser of an admission subsequently resells the admission for more than the amount paid, the purchaser shall collect tax on the full sales price and may take credit for the amount of tax previously paid..." Since the admission charges made to Vendor's customers are greater than the admission charges paid by Vendor to the applicable attractions, Vendor must be guided by the above statutory provision. Vendor is required to pay sales tax when it purchases admissions to the various Florida attractions. Vendor is also required to collect sales tax on the total sales price billed to its customers for the admission vouchers. Vendor may then take a credit on Line 6 of its sales and use tax return for the taxes previously paid on the admissions. In addition to the sales tax, Rule 12A-15.003(2)(e), F.A.C., requires Vendor to also charge discretionary sales surtax on its sales of attraction tickets or vouchers for attractions located within a county imposing the surtax. Question #5: As presented in your letter, there are instances where the only transaction entered into by Vendor and its customer is the acquiring of hotel accommodations. Your request provides that Vendor pays sales tax to the hotel operator on the amount it is
charged for the hotel accommodation. Vendor then charges an increased rate to its customer. Your letter dated November 10, 1993, stated that Vendor presents its customer with the same voucher (Exhibit A - November 10, 1993, correspondence) discussed throughout this response. However, correspondence dated May 11, 1994, submitted a copy of a document entitled "Accommodation Receipt" for review. As stated in your letter dated May 11, 1994, this document is "... a voucher from `Vendor' to a customer for the purchase of a hotel room only..." The Accommodation Receipt, which is retained by the guest, identifies the hotel, the customer, the arrival date, the number of nights the customer will be staying at the hotel, the number of rooms paid for, and the price paid. Vendor is required to charge sales tax on the total taxable sales price billed to its customer(s) since the amount shown on the voucher exclusively represents the charge made for the hotel accommodations. Section 212.03(1), F.S., provides in pertinent part: "... For the exercise of such privilege, a tax is hereby levied in an amount equal to 6 percent of and on the total rental charged for such living quarters or sleeping or housekeeping accommodations by the person charging or collecting the rental..." Subsection (2) further provides: "(2) The tax provided for herein shall be in addition to the total amount of the rental, shall be charged by the lessor or person receiving the rent in and by said rental arrangement to the lessee or person paying the rental, and shall be due and payable at the time of the receipt of such rental payment by the lessor or person, as defined in this chapter, who receives said rental or payment..." Regarding the imposition of sales tax on the hotel accommodations leased by Vendor for the purpose of re-rental, Vendor has two options: 1) Vendor should pay the applicable sales tax due on the initial lease of the hotel room(s) to the
hotel operator; collect sales tax from its customer(s) on the total sales price paid for the accommodations (as evidenced by the voucher); and then take a credit on its sales tax return for the tax paid to the hotel operator; or 2) Vendor may extend a properly executed resale certificate to the hotel operator in lieu of paying tax on those rooms acquired for the purpose of re-rental. Question #6: In accordance with s. 212.05(1)(a)1.a., F.S., Vendor is required to charge sales tax at the rate of 6 percent of the sales price when it sells taxable tangible personal property. Should the sale occur within a county imposing the discretionary sales surtax the surtax must also be collected by Vendor. In reference to Vendor's sales of debit phone cards (i.e., customer prepays for telecommunication service) your letter dated November 10, 1993, presents that Vendor purchases the cards from a telecommunication company. Your letter further states that the telecommunication company selling the debit cards to Vendor will charge the applicable tax when a call is made. Accompanying your correspondence dated March 29, 1994, was a copy of a Wholesale Agreement entered into on March 18, 1994, by Calling Card and Owners Abroad Group. As disclosed during our telephone conversation on May 11, 1994, Vendor assured you that this is the same arrangement under which it is operating with Calling Card. The Wholesale Agreement submitted for review merely stipulates that the purchaser (i.e., Vendor) is obligated to purchase 1,000 calling cards at $10.00 per card, to be discounted by 35%. A balance of 6,500 cards are to be purchased before March 18, 1995. As stated during our telephone conversation on Tuesday, June 7, 1994, Vendor purchases the debit cards for $6.50 and then sells the cards to its customers for $10.00 which entitles the customer(s) to $10.00 worth of telecommunication service. Customers may purchase more than one card from Vendor. Regarding the use of debit cards, a computer usually tracks the length of each call and when a call is completed an amount
is deducted from the value of the card. It is the Department's position that the entity responsible for tracking each card and its usage (i.e., makes the deductions from the card's balance for each call made) is responsible for collecting and remitting the applicable gross receipts and sales taxes due. Chapter 203, F.S., imposes a gross receipts tax at the rate of 2.5 percent on telecommunication services such as local telephone service; toll telephone service, including intrastate, interstate and international telephone service; pay telephone service; pagers and beepers; voice mail; and so forth. Section 212.05(1)(e)1.a., F.S., imposes sales tax at the rate of 7 percent on all charges for telecommunication services defined or described in ss. 203.012 and 203.012(2)(a), F.S. There is no sales tax or gross receipts tax due when the debit cards are sold by Vendor to its customers. However, should Vendor be the entity responsible for tracking the usage of the cards it would be responsible for remitting the sales tax and gross receipts tax due to this department for the total charge deducted from the value of the card for all calls that originate in Florida. Vendor would then be required to extend a properly executed resale certificate to the telecommunications provider which would allow the provider to sell the telecommunication service to Vendor tax exempt since the service is purchased for resale. Purchases of the debit cards by the telecommunication company are subject to tax. Question #7: Commissions earned by Vendor when taxable goods are sold or leased by third parties to its customers are not subject to sales tax. Using the examples in your request, no sales tax is due on the commission paid to Vendor when its customers rent video cameras from a particular camera shop; nor is sales tax due on the commission paid to Vendor when its customers purchase tanning products from a merchant attending the orientation seminar.
However, there appears to be some discrepancy in your letter dated November 10, 1993, regarding the treatment of rental refrigerators. The fourth page of your request provides that Vendor collects the rental fee from the customer and remits ninety percent of the fee to a third party vendor. The tenth page of your request provides that a third party vendor is responsible for collecting and remitting the applicable sales tax. Vendor's pamphlet entitled, "The Best of Florida" (Exhibit C) provides in part: "Fridge Hire "Save money by hiring a fridge for your hotel room. Save by buying drinks in bulk from the supermarket. Your representative will arrange for it to be delivered to your room." Exhibit D in your correspondence dated March 29, 1994, is an internal memorandum which outlines the arrangement between Vendor and Mary (refrigerator rental company). As stated in your letter of the same date, there is no formal written agreement between Vendor and the refrigerator rental company. The memorandum provides in pertinent part: "Reps do not physically sell fridges, they will only need to promote at W.G.T. (Ideal opportunity - during hotel info/rooms) and by giving interested guests a flyer. Guests who contact Mary will be hired fridges direct and all responsibility for cash and collection will be hers (she will provide flyers and display card). She will inform every two weeks as to commission and relevant reps who recommended etc..." As provided in your letter and the referenced memorandum dated March 29, 1994, Vendor is not the entity leasing the refrigerators. Therefore, sales tax is not due on the commission paid by "Mary" to Vendor when Vendor's customers rent refrigerators from "Mary". Question #8:
As presented in Rule 12A-1.005(4)(q), F.A.C., charges made for hot air balloon rides are subject to sales tax. Your letter dated November 10, 1993, states that the balloon rides are sold by an independent vendor. However, Vendor's pamphlet entitled The Best of Florida (identified as "Exhibit C" in correspondence dated November 10, 1993) provides the following in reference to hot air balloon rides: "Something Completely Different Adult Child Age * * * "Hot Air Balloon $150 110.00 3-11 "Be a part of the actual balloon crew and get a birds eye view of all the attractions..." The pamphlet then instructs customers to see their representatives for details. Additionally, your correspondence dated March 29, 1994, submitted a copy of an agreement entered into by XXX and Vendor in January 1994 (Exhibit E). The referenced agreement provides in part: "... Upon signing this agreement [Vendor] agrees to continue to use XXX as their balloon company for their clients. [Vendor] will pre-book all flights using the voucher system and call in all booking with the following information: name of client, voucher number, room number if available, number of people in the party and the date of the flight. "XXX will collect the vouchers from the clients after the flight and bill [Vendor], minus 20% commission as prior agreed upon. "1994 Balloon Flight Rates: (rates include sales tax) One Adult $150.00 per person Child (under 12) $110.00 per person..." Based upon the above information, Vendor is the entity
selling the hot air balloon admissions to its customers. Tax is due on the total amount charged by Vendor to its customer(s). Please be advised that in accordance with section 212.04(1)(b), F.S., the selling dealer must display at the box office or other place where the admission charge is made a notice disclosing the price of the admission, and the tax shall be computed and collected on the basis of the actual price of the admission charged by the dealer. Since Vendor's pamphlet states that the price of the balloon ride is $150.00 per adult, this is the basis upon which sales tax is to be computed. As you know, this differs from Vendor's agreement with XXX, which states that the $150.00 per adult charge is inclusive of tax. In regards to your closing statement that your client wishes to self-disclose any sales tax liability which it may have, please be advised that the Department is amenable to abating the penalty associated with any sales tax due. Mr. Jim Johnson, Assistant Director of the Division of Taxpayer Assistance, may be contacted at 922-4744 for further information. 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 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 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, Betsy Turner Tax Law Specialist Statutory Compliance Section BT/ Control #14731