Could a seller initially rely on a nonresident dealer's export statement instead of charging Florida tax?

Subject

Nonresident Dealers; Export to Foreign Countries

Plain-English summary

Florida allowed the manufacturer to accept a nonresident dealer's export statement and initially ship without charging sales tax. One statement could cover multiple shipments, and it could be used by dealers unable to issue a Florida resale certificate, including dealers outside the United States.

The statement also covered delivery to a licensed customs broker or freight forwarder and temporary Florida warehouse storage directed by the dealer before export. It did not replace final proof: the manufacturer still had to obtain proper export documentation for every shipment.

What this means for you

The ruling distinguished initial evidence of an irrevocable export commitment from the later records proving that export actually occurred. Temporary consolidation or marshaling in a separately labeled Florida storage area did not interrupt the export stream on the stated facts, because the goods were not used or redirected in Florida.

Common questions

Q: Could one dealer statement cover multiple shipments? Yes.

Q: Could the goods pause at a Florida warehouse before export? Yes, when the dealer directed the temporary storage for consolidation and the export process remained continuous.

Q: Did the statement eliminate shipment-level export records? No. Proper export documentation still had to be obtained for each shipment.

Citations and references

• Fla. Stat. § 212.02(21) — definition of use
• Fla. Stat. § 212.05 — taxable storage, use, or consumption
• Fla. Stat. § 212.06(5) — property produced or imported for export
• Fla. Admin. Code r. 12A-1.064(1)(a), (1)(b)5. — irrevocable commitment and a continuous export process
• McGilvary v. Askew, 340 So. 2d 475 (Fla. 1976) — statutory export presumption
• Great Lakes Dredge & Dock Co. v. Department of Revenue, 381 So. 2d 1078 (Fla. 1st DCA 1979) — limited storage and handling during export
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00A-028

Original ruling text

SUMMARY

QUESTION: Can a taxpayer accept a statement that goods are
in the exempt export stream on goods shipped directly to
licensed customs brokers and freight forwarders in lieu of
requiring proper export documentation?

ANSWER - Based on Facts Below: A company may accept a
statement from a nonresident dealer, and is not required to
charge tax on the invoices. The statement may cover
multiple shipments to the same nonresident dealer. However,
the export documentation must subsequently be obtained on
each shipment. The statement may be used by any dealer who
is unable to issue a Florida Resale Certificate, including
nonresident dealers located outside the United States.
Furthermore, the statement may be used for shipments sent
to a temporary storage warehouse in Florida at the
direction of the nonresident dealer prior to export, as
well as for shipments sent directly to a licensed broker or
freight forwarder. The statement is valid indicia of a
commitment to export.

Jun 12, 2000

Re: Technical Assistance Advisement 00A-028
Sales to Nonresident Dealers; Export to Foreign Countries
Statutes: 212.02(21), 212.05, 212.06(5), F.S.
Rules: 12A-1.064(1)(a), (1)(b)5., F.A.C.

Dear :

This response is in reply to your letter dated March 22, 2000,
requesting the Department's issuance of a Technical Assistance
Advisement ("TAA") pursuant to s. 213.22, F.S., and Chapter 1211, F.A.C., regarding the referenced matter and parties. An
examination of your petition 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 for issuance of a TAA.

FACTS

XXX ("Taxpayer"), manufactures consumer electronics including,
but not limited to, televisions, VCR's, telephones, and digital
satellite systems. Although licensed in the State of Florida,
Taxpayer's manufacturing facilities are located in a foreign
state. The company's sales are made throughout the United States
and foreign countries through dealers and distributors.

For sales to dealers who will be exporting the products to
foreign countries, Taxpayer ships F.O.B. from its non-Florida
warehouses via common carrier to the Florida location specified
by the dealer or distributor. The location is a bonded
warehouse, licensed broker, freight forwarder, or other
transportation terminal.

Taxpayer is currently charging its Florida dealers and
distributors sales tax on all shipments unless the dealers or
distributors provide a valid resale certificate. If Taxpayer
ships directly to a licensed customs broker or freight
forwarder, Taxpayer charges the dealer or distributor Florida
sales tax. However, after the dealer or distributor provides
proper proof of export, Taxpayer issues a Florida sales tax
credit to the dealer or distributor for that invoice.

REQUESTED ADVISEMENT

Florida sales tax that is charged on the invoices for goods
shipped directly to licensed customs brokers and freight
forwarders, causes the dealers and distributors to pay higher
duties and taxes in foreign countries. Since many dealers are
simply deducting the sales tax from their invoices, charging and
crediting the tax is an administrative burden. Rule 12A1.064(2)(b), F.A.C., allows a nonresident dealer to furnish the
seller a statement stating that the tangible personal property
will be transported outside of Florida by the dealer for resale
and no other purpose. Taxpayer inquires whether it can accept
this statement in lieu of requiring proper export documentation;
whether the statement can cover multiple shipments on behalf of

the same nonresident dealer and eliminate the need for proper
export documentation on a shipment to shipment basis; whether a
nonresident dealer located outside the United States can use the
statement; and whether the statement can be used for shipments
sent to temporary storage warehouses, owned by third parties,
and under the direction of the nonresident dealer for
consolidation prior to export.

APPLICABLE STATUTES AND RULES

Section 212.05, F.S., provides that every person is exercising a
taxable privilege who stores for use or consumption in this
state any item or article of tangible personal property. "Use"
is defined in Section 212.02(21), F.S., to include the exercise
of any right or power over tangible personal property incident
to its ownership.

Section 212.06(5), F.S., provides in part:

(a)1. Except as provided in subparagraph 2., it is not the
intention of this chapter to levy a tax upon tangible
personal property imported, produced, or manufactured in
this state for export, provided that the tangible personal
property may not be considered as being imported, produced,
or manufactured for export unless the importer, producer,
or manufacturer delivers the same to a licensed exporter
for exporting or to a common carrier for shipment outside
the state or mails the same by United States mail to a
destination outside the state....

The Florida Administrative Code further provides that sales and
use tax is not assessed on tangible personal property
"irrevocably committed to the exportation process at the time of
sale, when such process has been continuous or unbroken." See
Rule 12A-1.064(1)(a), F.A.C. A taxpayer must demonstrate a
specific commitment of the property to the exportation process
in order to avoid the use tax. Rule 12A-1.064(1)(b)5., F.A.C.,
specifically confirms that if goods are imported into Florida
for export, use tax will be due unless the importer can
demonstrate that the property was irrevocably committed to the
exportation process at the time of importation, and that the

exportation process was continuous and unbroken while the
property remained in Florida.

DISCUSSION

The Florida Supreme Court in McGilvary v. Askew, 340 So.2d 475
(Fla. 1976), established that a rebuttable presumption exists
that goods are not to be considered in the exempt export stream:
"Section 212.06(5), Florida Statutes (1969), establishes a
presumption that tangible personal property is not to be
considered as being imported, produced or manufactured for
export unless the importer, producer or manufacturer delivers
the same [i] to a licensed exporter for exporting, or [ii] to a
common carrier for shipment outside the state or [iii] mails the
same by United States mail to a destination outside the state."

The First District Court of Appeals held that the McGilvary case
"does not stand for the proposition that the statutory
presumption may be rebutted only by meeting one of the three
stated criteria. Rather, if one of the three criteria of Section
212.06(5), F.S., is met by the taxpayer, then there is no
statutory presumption created that the property sought to be
taxed is not within the stream of exportation." Great Lakes
Dredge & Dock Company v. Department of Revenue, 381 So.2d 1078
(Fla. 1st DCA 1979).

The company in Great Lakes used purchase orders requiring
suppliers to deliver the property, which was specifically marked
"for export", to Saudi Arabia. The Department claimed the
property came to rest in Florida, where items were repackaged
for loading onto ocean barges, and was subject to sales or use
tax. The court tracked the company's bills of lading and export
declarations that were prepared during the final loading, and
found that the inventory was actually exported. The court
concluded that the "limited delays or interruptions involved in
moving the property from vendor to Saudi Arabia were merely a
necessary step in the exportation process and did not result in
the goods settling into the mass of property in the state." Id.

These two cases reveal that if one of the criteria outlined in
s. 212.06(5)(a)1., F.S., is met, the goods are exempt.

Moreover, if none of the criteria are satisfied, the exemption
may be obtained if other facts show that the exportation process
was continuous and certain, notwithstanding limited delay,
limited storage, or repackaging of the goods before final
shipment.

CONCLUSION

Taxpayer may accept the statement from its nonresident dealer,
and is not required to charge tax on the invoices. The statement
may cover multiple shipments to the same nonresident dealer.
However, the export documentation must subsequently be obtained
on each shipment.

The statement may be used by any dealer who is unable to issue a
Florida Resale Certificate, including nonresident dealers
located outside the United States. Furthermore, the statement
may be used for shipments sent to a temporary storage warehouse
in Florida at the direction of the nonresident dealer prior to
export, as well as for shipments sent directly to a licensed
broker or freight forwarder. The statement is valid indicia of
a commitment to export.

The exportation process is uninterrupted by the temporary
marshaling of the equipment and materials in a warehouse prior
to shipping overseas. The taxpayer does not use the property in
Florida, nor redirect the property for use on other projects.
The taxpayer merely maintains the property in a separate storage
area specifically labeled for export. However, as reiterated
above, the statement allows Taxpayer to transfer the goods tax
free, but does not relieve Taxpayer of the liability of
subsequently securing proper export documentation. A simple
letter or bill sent to the nonresident dealer should reduce the
administrative burden of taxing and later crediting invoices.

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 and

administrative rule changes or that 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.

Sincerely,

Michael T. Cavanaugh
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 922-9411

Control No. 40885