Must an out-of-state Florida dealer collect tax on a third-party drop shipment into Florida?

Subject

Drop Shipments

Plain-English summary

The registered out-of-state vendor did not have to collect Florida sales tax from the out-of-state buyer on the described drop shipments. The Department assumed the buyer had no Florida nexus. Because both parties were outside Florida when the sale occurred and a common carrier transported the goods into Florida, the vendor-to-buyer sale was not a Florida retail sale.

The Florida customer receiving the goods would ordinarily have a use-tax liability. If that customer was itself a reseller, it would instead collect tax on its Florida retail sale. A resale certificate from a buyer that was not a registered Florida dealer did not change taxability, although retaining available certificates was advised as transaction documentation.

What this means for you

This was a narrow sourcing and nexus result. The Department expressly warned that a finding of Florida nexus for the buyer would produce a different conclusion.

Common questions

Q: Did the vendor owe Florida sales tax on its sale to the buyer? No, on the stated out-of-state sale and common-carrier facts.

Q: Did the ruling assume the buyer lacked Florida nexus? Yes.

Q: Could tax still arise when the goods reached Florida? Yes. The Florida customer ordinarily owed use tax unless it was a reseller.

Citations and references

• Fla. Stat. § 212.05(1)(a)1.a. — tax on retail sales in Florida
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00A-079

Original ruling text

SUMMARY

QUESTION: Is a drop shipper, who is a registered Florida
dealer, but located outside Florida, obligated to collect
sales tax on the sale of goods to an unregistered buyer who
is also located outside of Florida who directs that the
goods be drop shipped by common carrier to the buyer's
customer in Florida?

ANSWER - Based on Facts Below: The drop shipper is not
obligated to collect sales tax from the buyer in the
instance when the goods are shipped into Florida by common
carrier. The transaction is not a Florida sale when the
drop shipper and the buyer are out of the state and the
goods are shipped into the state by common carrier.

Dec 05, 2000

Re: Technical Assistance Advisement 00A-079
Drop Shipments
XXX (herein Vendor)
FEIN XX
Section 212.05(1)(a)1.a., F.S.

Dear :

This is a response, styled a Technical Assistance Advisement, to
your letter dated September 25, 2000, in which you ask about the
Florida sales tax implications on a transaction commonly known
as a third party drop shipment.

You state that Vendor is located outside the state of Florida,
but is a registered Florida dealer for the purposes of the
collection and remittance of Florida sales tax. Vendor sells
goods, which are manufactured outside Florida, to clients
(Clients) who are located in Florida and are the ultimate
consumers of the goods. Vendor also sells goods to independent
business firms, located outside Florida, who are distributors of

the goods (herein Buyers), who then resell the goods to
customers who may be in, or outside of, Florida. The Buyers,
who are not registered Florida dealers, direct the Vendor to
ship the goods to Buyers' customers in Florida. The goods are
transported into Florida by common carrier. The sales by the
Vendor to the Buyers are solely at issue.

You have provided the Department with copies of sales invoices
issued by the Vendor which describe sales made by the Vendor to
Buyers located outside the state but which contain shipping
instructions whereby the goods are shipped by the Vendor by
common carrier to Buyers' customers in Florida.

Department Response

You are alerted that the following discussion is premised on the
assumption that the Buyers have no nexus with Florida. The
Department has no knowledge of the business activity of the
Buyers in Florida. A determination that the Buyers have nexus
with Florida will result in different conclusions than those
expressed in the following paragraphs.

Section 212.05(1)(a)1.a., F.S., levies sales tax on the "...
sales price of each item or article of tangible personal
property when sold at retail in this state...." However, there
are no Florida sales within the fact pattern you have provided
the Department as to sales made to the Buyers.

Florida sales tax is not imposed on such transactions because
the Vendor and the Buyers are outside Florida at the time of the
sales. The sales were outside the state, and the goods were
shipped into Florida by common carrier.

Thus, the sales of the goods by the Vendor to the Buyers are not
Florida sales. There is no sale at retail as required by s.
212.05(1)(a)1.a., F.S., cited above. The transport of the goods
by the Vendor into this state by common carrier preserves the
sale as not within the jurisdiction of Florida.

Thus, there is no Florida sales tax liability, that arises
between the Vendor and the Buyers on the sales, which you

describe. The arrival of the goods into Florida would
ordinarily create, in the Buyers' customers, a Florida use tax
liability. However, if such a Buyers' customer were a reseller,
then no use tax would be owed. Rather, sales tax would be
collected by the Buyers' customer on a Florida retail sale and
the tax applicable to such a sale would be remitted to the
Department.

If a resale certificate was tendered to the Vendor by a Buyer,
such a certificate would have no effect on the taxability of the
sale because Florida does not recognize resale certificates
issued by persons who are not registered Florida dealers.
However, it would be advisable that the Vendor retain such a
resale certificate from the Buyers, or, if it is presented, a
resale certificate from a Buyers' customer in Florida, but
solely for the purpose of documenting that the sales to the
Buyers were not subject to Florida tax.

In sum, no Florida sales tax is applicable to the sale of the
goods by Vendor to the Buyers.

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 and
related backup documents 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. 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,

Robert G. Parsons
Tax Law Specialist
Technical Assistance and Dispute Resolution

Ctrl. No. 42576