SUMMARY

QUESTION: Are the Taxpayer’s purchases of automobiles for its collection exempt from sales tax as a sale for resale?

ANSWER – Based on Facts Below: Yes. Under the terms and conditions of the Taxpayer's Membership Agreement, the Taxpayer is leasing, or renting, each of its specifically identified vehicles, to a specifically identified member, for a specific period of time, for a consideration. The Taxpayer will collect and remit Florida Sales Tax on the initiation fee, the annual dues, and the daily fees paid by the Club members. As stated in the Membership Agreement, club membership is not an investment, equity or ownership interest in the club, the club automobiles, or the club facilities. Thus, the Taxpayer, as a registered dealer, may purchase its vehicles exclusively for rental exempt of sales tax.

QUESTION: Are the Taxpayer’s charges for the Valet Service Fee, the Annual Valet Service Fee, and the Gas Charge Fee subject to sales tax?

ANSWER– Based on Facts Below: The Valet Service Fee and the Annual Valet Service Fee are not subject to tax, since they are delivery charges that are separately stated, and the service for which they are charged is optional to the customer.

The Gas Charge Fee is not subject to tax, since the separately stated charge for the amount of fuel used and not replaced by the member is the price of fuel on which the proper tax has been paid. Thus, as described in Rule 12A-1.007(13)(e)(2.), F.A.C., such charge is not part of the gross proceeds from the lease and is not subject to sales tax.

October 5, 2007

Re:Technical Assistance Advisement 07A-032

Membership and Leasing Agreement

Sales and Use Tax

Section212.05, Florida Statutes (F.S.)

Rules 12A-1.007, 12A-1.045,and 12A-1.071, Florida Administrative Code (F.A.C.)

XX (“Taxpayer”)

FEI #: XX

Dear XX:

This is in response to your letter datedJune 12, 2007, received by this office on June 13, 2007, 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., regarding the taxability of the purchase of automobiles by the above referenced taxpayer. An examination of your letter has established that you have complied with the statutory and regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting your request of a TAA.

ISSUE ONE

Whether the Taxpayer’s purchases of automobiles for its collection should be exempt from sales tax as a sale for resale.

FACTS

Your letter provides the following in pertinent part:

The Taxpayer is developing a club for enthusiasts of luxury automobiles. . . . One of the principal motivations to joining the club would be for the members to have access to a collection of luxury automobiles. The members will pay an initiation fee, currently in an amount of $XX. In addition, each member will pay a minimum of $XXper year in club dues. The membership program will entitle a member to the use of automobiles in the Taxpayer’s fleet. A member will pay a daily fee for the use of an automobile (the “Daily Fee”). The Daily Fee will vary, depending on the automobile chosen by the member. The Daily Fee needed to use a particular automobile depends on the type of automobile and the time of year. The more expensive the automobile, the greater the Daily Fee that will be required. . . .

In addition to the Daily Fee, there will be certain additional charges as follows:

(i) Valet Service Fee. A member can have an automobile delivered and/or picked up for the payment of a Valet Service Fee;

(ii)Annual Valet Service Fee. A member can pay an annual unlimited valet service fee that will entitle the member to unlimited valet pick-up and delivery;

(iii)Gas Charge Fee. The Taxpayer will charge an amount per gallon for gasoline consumed by a member when the member uses an automobile (the “Gas Charge Fee”). The initial Gas Charge Fee will be $XX per gallon but this is subject to change;

(iv)AdditionalMilesFee. A member will pay XX% of the Daily Fee for miles driven that exceed the XX mile per day allowance;

(v)Florida Rental Car Surcharge Fee. A member will pay the $XX.00 per day rental car surcharge per Section 212.0606 F.S.

These additional charges will be separately set out on the invoices to members.

The Taxpayer will register as a dealer for the purposes of collection of Florida Sales and Use Tax. The Taxpayer will collect and remit Florida Sales Tax on the initiation fee, as well as the annual dues and amounts paid by a member as a Daily Fee, the Additional Miles Fee and the Florida Rental Car Surcharge Fee. . . .

The [Taxpayer] will enter into a separate Marketing Agreement with a related entity (the “Marketing Company”) whereby the Marketing Company will provide marketing services to the Taxpayer, for the purpose of recruiting members. The Marketing Company will pay a fee of $XX per mile for the use of an automobile for the times that the Marketing Company will use an automobile for marketing purposes, such as test drives and automobile shows. . . .

The [Taxpayer] will not use the automobiles for any purpose other than for use by its members, or for use by the Marketing Company. In each case, the member or the Marketing Company will pay an amount for the use of an automobile that will be subject to sales tax that will be collected by the [Taxpayer].

The Membership Agreement provides the following in pertinent part:

1) CLUB MEMBERSHIP

This “Club Membership Agreement”. . . set[s] forth the terms and conditions under which [the club member] may use and enjoy the portfolio of automobiles. . . .

2) MEMBERSHIP INITIATION FEE, SECURITY DEPOSIT, AND ANNUAL DUES

A) MEMBERSHIP INITIATION FEE

A onetime, non-refundable Membership Initiation Fee of $XX, plus applicable taxes, is due upon signing the Club Membership Agreement. . . .

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C) ANNUAL DUES

Annual Dues of $XX, plus applicable taxes, are due upon signing the Club Membership Agreement, and on each membership Anniversary Date thereafter. . . .

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6) AUTOMOBILE USAGE

A) GENERAL TERMS OF AUTOMOBILE USAGE

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Member and Approved Driver understand and agree that the Club owns the automobiles in the Collection, and that no one but the Club may transfer title of the automobiles. . . .

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G) FUEL

. . . If automobiles are checked-in with less fuel than they were checked-out, a fuel charge per gallon will be applied as per the Club’s published fee schedule. . . .

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7) CLUB MEMBERSHIP IS NOT AN INVESTMENT AND CLUB MEMBERSHIP RIGHTS ARE LIMITED

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CLUB MEMBERSHIP PERMITS MEMBER TO USE AVAILABLE CLUB AUTOMOBILES, BUT IS NOT AN INVESTMENT, EQUITY OR OWNERSHIP INTEREST OR ANY OTHER PROPERTY INTERESTIN THE CLUB, THE CLUB AUTOMOBILES OR THE CLUB FACILITIES. . . .

As stated, The Taxpayer will enter into a separate Marketing Agreement with a related entity (the “Marketing Company”) whereby the Marketing Company will provide marketing services to the Taxpayer.

The accompanying Marketing Agreement provides the following in pertinent part:

This NON-EXCLUSIVE MARKETING AGREEMENT (this “Agreement”) is made and entered into . . . between [the Marketing Company], a Florida limited liability company and [the Taxpayer], a Florida limited liability company. . . .

Whereas, [the Taxpayer] has agreed to appoint [the Marketing Company] and [the Marketing Company] has agreed to accept the appointment, as [the Taxpayer’s] non-exclusive agent for the marketing and promotion of the automobile collection run by [the Taxpayer] pursuant to which memberships are sold and the members are permitted to use the collection of automobiles (the “Business”) on the terms and conditions set forth in this Agreement. . . .

1. APPOINTMENT

1.1[The Taxpayer] hereby appoints [the Marketing Company], and [the Marketing Company] agrees to act, as the non-exclusive agent of [the Taxpayer] for the marketing and promotion of the Business during the term of this Agreement and for the solicitation and transmission to [the Taxpayer] of requests for potential memberships or purchases.

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1.3[The Marketing Company] shall have no power or authority to conclude any contract or make any form of representation, statement, warranty or guarantee with respect to [the Taxpayer] or the Business in favor of any person.

2. OBLIGATIONS OF THE MARKETING COMPANY

[The Marketing Company] agrees with [the Taxpayer] that it shall at all times during the term of this Agreement:

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2.2 diligently promote, market an solicit membership for the Business by appropriate means, including personal visits to and correspondence with potential customers, provide rides in automobiles of the collection to potential members, hosting various events to display the automobiles and attending various automobile trade shows on behalf of [the Taxpayer];

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2.7 [The Marketing Company] shall pay [the Taxpayer] for the use of automobiles that [theMarketing Company] requires in fulfillment of its marketing duties hereunder, including, but not limited to, test drives for prospective members, displays in auto shows, use of automobiles for photography, and all other marketing purposes. [The Marketing Company] shall pay the same rate for usage as offered to other members, and shall pay applicable Florida sales and use tax on such usage.

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8.GENERAL

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8.5Nothing in this Agreement shall constitute the parties as partners or joint venturers with each other nor shall anything in this Agreement create, or be deemed to create, the relationship of employer and employee.

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TAXPAYER POSITION

According to the correspondence provided, the Taxpayer will be purchasing automobiles for the purpose of making them available to its members. The members will pay annual dues which will entitle the member to the use of automobiles in the Taxpayer’s fleet. The member will also pay a daily fee for the use of an automobile. It is the Taxpayer’s view that the purchase of automobiles by the Taxpayer for use by the Taxpayer’s customers would not be subject to sales tax under the provisions of Rule 12A-1.039(1), F.A.C., which provides in part:

(b) A sale for resale is exempt from the tax imposed by Chapter 212, F.S., only when the sale for resale is in strict compliance with the provisions of this rule. For purposes of this rule, a “sale for resale” includes the following sales, leases, or rentals when made to a person who is an active registered dealer. This is not intended to be an exhaustive list. . . .

2. The sale, lease, or rental of tangible personal property to a dealer when such property will be held exclusively for leasing or rental purposes, pursuant to paragraph 12A-1.071(2)(a), F.A.C.

APPLICABLE STATUTES AND RULES

Section 212.05, F.S., provides in part:

It is hereby declared to be the legislative intent that every person is exercising a taxable privilege who engages in the business of selling tangible personal property at retail in this state. . . or who rents or furnishes any of the things or services taxable under this chapter. . . and who leases or rents such property within the state.

Rule 12A-1.007(13)(a), F.A.C., provides:

(a)1. The rental or lease of an aircraft, boat, mobile home, or motor vehicle, which is used or stored in this state, is subject to tax. The lessor is required to be registered as a dealer and to collect tax on the total amount of the lease or rental charges.

2. The purchase by a registered dealer of an aircraft, boat, mobile home, or motor vehicle exclusively for lease or rental purposes is exempt. The purchasing dealer is required to issue the selling dealer a copy of the purchasing dealer’s Annual Resale Certificate at the time of purchase in lieu of paying tax, as provided in Rule 12A-1.039, F.A.C.

Rule 12A-1.071(1)(a), F.A.C., provides in part:

For the purpose of this rule, the term “lease” includes anyrental or license to use tangible personal property, unless a different meaning is clearly indicated by the context in which it is used. The term refers to all transactions that are not bailments in which there is a transfer of possession of tangible personal property, without regard to limitations upon the use, for a consideration, without a transfer of title to the property.... Whether a transaction is a “sale” or a “rental, lease, or license to use” shall be determined in accordance with the provisions of the agreement.

Applying the above rule provisions to the Membership Agreement and its intent, payments of the club dues, initiation fees, and daily fees are payments for the use of the Taxpayer's automobiles, for a specified period of time. The member will pay daily fees for the “lease” of a specific vehicle.

RESPONSE TO ISSUE ONE

Under the terms and conditions of the Taxpayer's Membership Agreement, the Taxpayer is leasing, or renting, each of its specifically identified vehicles, to a specifically identified member, for a specific period of time, for a consideration. The Taxpayer will collect and remit Florida Sales Tax on the initiation fee, the annual dues, and the daily fees paid by theClub members. As stated in the Membership Agreement, club membership is not an investment, equity or ownership interest in the club, the club automobiles, or the club facilities. Thus, the Taxpayer, as a registered dealer, may purchase its vehicles exclusively for rental exempt of sales tax.

ISSUE TWO

Whether the Taxpayer’s charges for the Valet Service Fee, the Annual Valet Service Fee, and the Gas Charge Fee are subject to sales tax.

TAXPAYER POSITION

Valet Service Fee and the Annual Valet Service Fee:

Your letter asserts that the Valet Service Fee and the Annual Valet Service Fee are services not subject to sales tax. You further state that provided the fees are separately stated on the invoices submitted to members, such fees would not be subject to sales tax per Rule 12A-1.061(6), F.A.C.

Gas Charge Fee:

Your letter states that the Taxpayer will “replenish the gas tank of an automobile used by a member as a convenience to members.” The “Club Membership Agreement” specifies “[i]f automobiles are checked-in with less fuel than when they were checked-out, a fuel charge per gallon will be applied as per the Club’s published fee schedule.” The membership agreement also provides that the members can refuel the vehicles themselves, thus avoiding the Gas Charge Fee.

Your letter cites a Technical Assistance Advisement (TAA) 90A-1066, dated October 22, 1990, where the Department ruled that separately stated charges for fuel used by a rental car customer is not subject to sales tax, because the separately stated charge for the amount of fuel that is not replaced by the customer is the price of fuel on which the proper tax had been paid by the rental company, and described in Rule 12A-1.007(13)(e)2., F.A.C., and therefore such charge is not part of the gross proceeds from the rental and is not taxable. You assert that the facts set out in this TAA are the same fact pattern regarding the Taxpayer’s Gas Charge Fee,which should likewise be exempt from sales tax, provided the fee is separately stated.

APPLICABLE STATUTES AND RULES

Valet Service Fee and the Annual Valet Service Fee:

12A-1.045, F.A.C., provides in part:

(1) “Transportation charges” include carrying, delivery, freight, handling, pickup, shipping, and other similar charges or fees.

(2) Transportation charges which are not separately stated on an invoice or bill of sale, but are included in the sales price of taxable tangible personal property, are subject to tax.

(3)(a) 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 service is subject to tax, even if separately stated on an invoice or bill of sale.

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

1. 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.

Your letter provides that the Valet Service Fee and the Annual Valet Service Fee are optional to the member and that the fees will be separately stated. You cite Rule 12A-1.061(6), F.A.C., to support your assertion that these fees would not be subject to sales tax; however, thatrule relates to the rental, lease, and license to use transient accommodations.

The services you describe are more inline with delivery charges in conjunction with the rental of tangible personal property, and would not be subject to tax under the provisions of Rule 12A-1.045, F.A.C. The Valet Service Fees are in the nature of incidental charges that are separately itemized and applied at the purchasers’ election.

Gas Charge Fee:

Rule 12A-1.007(13)(e)(2.), F.A.C., provides:

Charges for Fuel. Any separately itemized charge for fuel upon which the fuel taxes imposed under Chapter 206, F.S., have been paid is not subject to tax. However, when a separately itemized charge for a fuel purchase option (e.g., "FPO - Fuel Purchase Option") is required and no allowance is made for the amount of fuel remaining in the tank, the charge is not a charge for the price of fuel upon which the fuel taxes have been paid. Such separately itemized charges required to be paid for fuel purchase options are a part of the total lease or rental charges subject to tax.