Did a property manager resell goods to its clients when it ordered items that vendors delivered directly to them?

Plain-English summary

The property manager was not reselling the ordered goods and services to its clients. On the stated facts, it acted as the clients' purchasing agent, so no sale occurred between the manager and the clients and the manager should not issue resale certificates to the third-party vendors.

The manager handled commercial properties under two contract forms: one expressly called it an agent, while the other described it as an independent contractor. The Department reached the same sales-tax result for both because the operating facts were materially the same:

• vendors delivered goods and services directly to a specific client's property for immediate use;
• the manager never held the goods as inventory and never took title or possession;
• the manager presented vendor invoices, including applicable retail tax, to the client for approval;
• each client funded a segregated operating account used to pay its vendors; and
• the manager did not pay from its own funds and generally was not liable if the client did not fund payment.

Who paid and remitted tax

The third-party dealer was responsible for collecting and remitting Florida sales tax and any applicable county surtax. The surtax depended on the county where the taxable tangible personal property was delivered.

If a dealer lacked sufficient Florida nexus or failed to collect the tax, the end consumer was responsible for remitting use tax when the property was used, consumed, or commingled with other goods in Florida.

Because the client was the end consumer and the property manager did not resell the property, the manager was not entitled to give the vendor a resale certificate for these transactions.

What this means for you

Property managers and procurement companies should align contracts with actual performance. Direct delivery to the client, client ownership and approval, separate client funds, vendor-paid tax, and the absence of manager title, possession, inventory, or ordinary payment liability supported the agency result here. This TAA does not decide arrangements with materially different facts.

Common questions

Q: Did the contract label alone control?
A: No. The Department applied the same result to the express-agency and independent-contractor arrangements because their delivery, invoicing, ownership, and payment facts were the same.

Q: Should the manager issue a resale certificate?
A: No. The Department found no resale by the manager to the client.

Q: Who owed use tax if the vendor did not collect sales tax?
A: The end consumer using the taxable property in Florida.

Citations and references

• Fla. Stat. § 212.02(14)-(15) — retail sale and sale
• Fla. Stat. §§ 212.05 and 212.06 — sales/use tax and dealer collection
• Fla. Stat. § 212.07(8) — consumer liability when tax was not paid
• Fla. Admin. Code r. 12A-1.039 — sales for resale
• Fla. Admin. Code r. 12A-1.091(14)(a) — use tax
• Fla. Admin. Code r. 12A-15.003(4)(a) — county surtax

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 05A-011

Original ruling text

SUMMARY

QUESTION: How is Florida sales and use tax to be collected and remitted when tangible personal property is ordered

on behalf of the end consumer by its agent and/or independent contractor?

ANSWER - Based on Facts Below: Florida sales tax is due on sales made by dealers to persons within the State of

Florida. In Florida, sales tax is actually imposed on the dealer for the privilege of doing business within the State, and
the cost is passed on to the purchaser. The dealer is responsible for collecting and remitting the appropriate state

sales tax and local county surtaxes (if any).

In situations wherein the dealer does not have sufficient nexus to the State of Florida, or fails to collect sales tax, the
end consumer is responsible for remitting "use tax" to the State of Florida when the tangible personal property

purchased is used, consumed, or commingled with other goods within the State of Florida.

February 9, 2005

Re: Technical Assistance Advisement 05A-011

Florida Sales and Use Tax

Goods and Services Ordered by a Property Manager for Its Clients

Sections 212.02, 212.05, 212.06, and 212.07, F.S. ("Florida Statutes")

Rules 12A-1.039, 12A-1.056, 12A-1.091 and 12A-15.003, F.A.C. ("Florida Administrative Code")

Dear:

This response is in reply to your letter dated November 4, 2004, requesting the Department's issuance of a Technical
Assistance Advisement ("TAA") pursuant to Section 213.22, F.S., and Chapter 12-11, F.A.C., regarding the payment
of Florida sales and use tax on purchases made pursuant to property management contracts. 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 for issuance of a TAA.

You also provided copies of the following documents: (1) "Short Form Service Agreement" that would establish the
relationship between the Taxpayer, its client and third-party businesses providing services; (2) "Short Form (Non-
Agency) Service Agreement that would establish the relationship between the Taxpayer, its client and third-party
businesses providing services; and (3) and (4) which are "Facilities Management Agreements" between the Taxpayer
and clients/facility owners, one of which establishes an "agency" relationship, the other an "independent contractor"

relationship.

ISSUE

How is Florida sales and use tax to be collected and remitted when tangible personal property is ordered on behalf of

the end consumer by its agent and/or independent contractor?

FACTS

Your letter of November 4, 2004, provides, in part:

KKK

[The Taxpayer], a [non-Florida] corporation with offices in Florida and throughout the country, performs property
management services in Florida for owners and occupiers of commercial real estate in Florida. For each client
engagement, [the Taxpayer] operates under one of two types of arrangements, as determined by marketplace

conditions:

IC Engagement: In an IC Engagement, [the Taxpayer] operates as an independent contractor under a Facilities
Management Agreement. Unless expressly stated, [the Taxpayer] does not operate with express agency authority

from the client in an IC Engagement.

Agency Engagement: In an Agency Engagement, [the Taxpayer] acts as an agent for the client under an express

grant of authority given in the Property Management Agreement entered into between [the Taxpayer] and the client.

KKK

In the normal course of a property management engagement, whether an IC Engagement or an Agency Engagement,
[the Taxpayer] procures all goods and/or services from third-party vendors necessary to operate the properties being
managed for a particular client. Examples of such goods and services include: landscaping services; washroom
supplies; and elevator maintenance services. The goods and services provided by third-party vendors are provided
directly to a specific client's property for immediate use on that property to satisfy an immediate need. The third-party
provided goods are never held as inventory of [the Taxpayer] for use at a later time, or for performing property
management services for any of its other clients. [The Taxpayer] never takes title to, or possession of, any goods

provided by third-party vendors.

[The Taxpayer] receives invoices for these goods and services from the third-party vendors, and presents the invoices
to the subject client for approval. All invoices include applicable retail sales and use taxes. Once an invoice is
approved, the client deposits funds into a segregated bank account, from which [the Taxpayer] is authorized to
withdraw funds to pay the invoice, including all applicable retail sales and use taxes. It is agreed to by the third-party
vendor and [the Taxpayer] that the vendor will only be paid from funds deposited by the client into the segregated
bank account, and [the Taxpayer] does not pay the vendors using its own funds. It is further agreed between the third-
party vendor and [the Taxpayer] that [the Taxpayer] will have no liability in the event of non-payment by the client.
eR
The only differentiating feature between IC Engagements and Agency Engagements is the way that a third-party
vendor makes its contract. In an IC Engagement, the third-party vendor makes its contract directly with [the Taxpayer].
In an Agency Engagement, due to the express agency [the Taxpayer] obtains from its client, the third-party vendor
makes its contract with [the Taxpayer] as agent for [the Taxpayer's] client. All of the attributes summarized in the

preceding paragraphs are the same with either an IC Engagement or an Agency Engagement.

KKK

Your email of February 2, 2005, provides, in part:

KKK

For every facility management agreement between [the Taxpayer] and its client there is an operating account funded
by the client to be used by [the Taxpayer] for the payment of purchase orders and service contracts, i.e., [the
Taxpayer] has a "segregated bank account" for [named, individual clients]. If [the Taxpayer] manages the facilities for
a client that has multiple facilities in multiple states, there is only one operating account provided by the client for
payment of all the 3d party vendor invoices. [The Taxpayer] does not have one "global" operating account for all its

clients.

KKK

The "Short Form Service Agreement" (i.e. “agency") provides, in part:

KKK

3. Compensation: ... The Contractor acknowledges that no compensation shall be paid to Contractor unless and until

Owner approves such Services and Owner is invoiced for Services completed by Contractor... [emphasis supplied]
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15. Agent: ... No reference to Agent [i.e., the Taxpayer] in this Agreement shall be construed as creating any liability

on behalf of Agent for any obligation hereunder in any capacity other than as the duly authorized agent of the Owner.

KKK

The "Short Form Service Agreement" (i.e., non-agency) provides, in part:

KKK

3. Compensation: ... The Contractor acknowledges that no compensation shall be paid to Contractor unless and until
   Manager [i.e., the Taxpayer] approves such Services and Manager is invoiced for Service Completed by
   Contractor... Manager shall not be liable to Contractor for failure to pay Contractor hereunder unless Manager fails
   through its own gross negligence or willful misconduct to make payments to Contractor for which funds have been

provided to Manager by Owner. [emphasis supplied]

KKK

The "Facilities Management Agreement" (i.e. "“agency") provides, in part (at page 37):

IV. Facility Management Services

A. General

KKK

At Owner's expense, Manager [i.e., the Taxpayer] shall purchase, provide and pay for all janitorial and maintenance

supplies, tools and equipment, restroom and toilet supplies, electrical supplies and light bulbs, boiler room supplies,

paints, uniforms, stationery, business cards, office supplies and all other supplies incident to performance of the
Services (and obligations of Manager), except to the extent such services and materials are provided for by Owner or
a third party. Manager shall maintain records for all supplies, tools and equipment purchased hereunder by Manager
for use in the management, operation and maintenance of the Facilities. The same shall be delivered to and stored in
the applicable Facility and shall remain the property of the Owner and shall be used only in connection with the

Facilities.

KKK

Paragraph 3.9 ("Supplies") of the "independent contractor" version of the "Facilities Management Agreement" is

identical to the paragraph immediately above.

TAXPAYER's POSITION

Your letter of November 4, 2004, also provides, in part:

KKK

... the transactions described above, wherein third-party vendors provide[] goods and services directly to [the
Taxpayer's] clients, constitute direct retail [Sic] by the third-party vendors to [the Taxpayer's] clients. All applicable
retail sales and use taxes are included on invoices issued to [the Taxpayer's] clients, and are paid directly to the third-

party vendors by [the Taxpayer] on behalf of its clients, using client provided funds.

The transactions do not constitute sales to [the Taxpayer] for resale. By definition, sales that constitute retail sales
cannot also constitute resale transactions. Because we believe that the transactions constitute retail sales, they
therefore cannot be resale transactions. As such, [the Taxpayer] does not issue, and should not be required to issue

resale certificates on the transactions.

In addition, from a policy standpoint, accuracy and efficiency are best served when vendors determine the applicable

sales and use taxes on their billings, and collect and remit those taxes.

KKK

For these reasons, [the Taxpayer] respectfully requests that the Florida Department of Revenue confirm[,] because all
applicable transaction taxes are paid on the transactions in which [the Taxpayer] serves as procurement agent for its
clients, [the Taxpayer] is in compliance with the relevant Florida sales and use tax laws, and [the Taxpayer] will not be
subject to any assessment or penalty for failure to comply with said laws by administering the sales and use tax

payments in the above described manner for both [types of Engagements].

KKK

APPLICABLE STATUTES AND RULES

Section 212.02, F.S., provides, in part:

KKK

(14)(a) "Retail sale" or a "sale at retail" means a sale to a consumer or to any person for any purpose other than for
resale in the form of tangible personal property or services taxable under this chapter, and includes all such

transactions that may be made in lieu of retail sales or sales at retail...

KKK

(15)(a) "Sale" means and includes: Any transfer of title or possession, or both, exchange, barter, license, lease, or
rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for a

consideration.

KKK

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, including the business of making mail order sales,
or who rents or furnishes any of the things or services taxable under this chapter, or who stores for use or
consumption in this state any item or article of tangible personal property as defined herein and who leases or rents

such property within the state.

(1) For the exercise of such privilege, a tax is levied on each taxable transaction or incident, which tax is due and
payable as follows:

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(b) At the rate of 6 percent of the cost price of each item or article of tangible personal property when the same is not

sold but is used, consumed, distributed, or stored for use or consumption in this state...

KKK

Section 212.06, F.S., provides, in part:

KKK

(2)(a) The term "dealer," as used in this chapter, includes every person who manufactures or produces tangible
personal property for sale at retail; for use, consumption, or distribution; or for storage to be used or consumed in this

state.

(b) The term "dealer" is further defined to mean every person, as used in this chapter, who imports, or causes to be
imported, tangible personal property from any state or foreign country for sale at retail; for use, consumption, or
distribution; or for storage to be used or consumed in this state.

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(3)(a) Except as provided in paragraph (b), every dealer making sales, whether within or outside the state, of tangible
personal property for distribution, storage, or use or other consumption, in this state, shall, at the time of making sales,

collect the tax imposed by this chapter from the purchaser.

Section 212.07(8), F.S., provides:

Any person who has purchased at retail, used, consumed, distributed, or stored for use or consumption in this state
tangible personal property, admissions, communication or other services taxable under this chapter, or leased tangible
personal property, or who has leased, occupied, or used or was entitled to use any real property, space or spaces in
parking lots or garages for motor vehicles, docking or storage space or spaces for boats in boat docks or marinas, and
cannot prove that the tax levied by this chapter has been paid to his or her vendor, lessor, or other person is directly

liable to the state for any tax, interest, or penalty due on any such taxable transactions.

Rule 12A-1.039, F.A.C., provides, in part:

(1)(a) It is the specific legislative intent that each and every sale, use, storage, consumption, or rental is taxable,
unless such sale, use, storage, consumption, or rental is specifically exempt. The exempt nature of the transaction

must be established by the selling dealer.

(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.

KKK

Rule 12A-1.056, F.A.C., provides, in part:

(1)(a) The total amount of tax on cash sales, credit sales, installment sales, or sales made on any kind of deferred

payment plan shall be due at the moment of the transaction....

KKK

Rule 12A-1.091, F.A.C., provides, in part:

KKK

(14)(a) Any person, whether registered or unregistered, who has purchased or leased tangible personal property
either in this state or from out-of-state for use, consumption, or distribution, or for storage to be used or consumed in
this state without having paid sales tax on such property if subject to tax, is required to remit use tax on the cost price

and on the lease of such property...

KKK

Rule 12A-15.003(4)(a), F.A.C., provides:

A dealer who makes sales of tangible personal property is required to collect surtax when the taxable item of tangible
personal property is delivered within a surtax county. The dealer is required to collect surtax at the rate imposed by
the county where the delivery occurs, whether the delivery is made directly by the dealer or by a manufacturer or
wholesaler who delivers the property to the purchaser on behalf of the dealer. When the item of tangible personal

property is delivered within a county not imposing a surtax, the dealer is not required to collect surtax.

DISCUSSION

Florida sales tax is due on sales made by dealers to persons within the State of Florida. In Florida, sales tax is actually
imposed on the dealer for the privilege of doing business within the State, and the cost is passed on to the purchaser.

See Ryder Truck Rental, Inc. v. Bryant, 170 So.2d 822 (Fla. 1964). The dealer is responsible for collecting and

remitting the appropriate state sales tax and local county surtaxes (if any). See Section 212.06(3)(a), F.S., and Rule
12A-15.003(4)(a), F.A.C.

In situations wherein the dealer does not have sufficient nexus to the State of Florida, or fails to collect sales tax, the
end consumer is responsible for remitting "use tax" to the State of Florida when the tangible personal property
purchased is used, consumed, or commingled with other goods within the State of Florida. See Section 212.07(8),
F.S. and Rule 12A-1.091(14)(a), F.A.C.

A "Resale Certificate" is extended by those persons purchasing tangible personal property who intend to "resell" that
property to other persons. Under the facts presented, no "resale" is occurring. The Taxpayer is acting as agent for its
clients when it orders the various goods and services described in your letter and is not "reselling" them to its clients.
The goods and services are delivered directly to the clients, the clients are presented with invoices, and the invoices
are paid from funds supplied by the clients. In sum, no sale is occurring between the Taxpayer and its clients, soa

Resale Certificate should not be presented by the Taxpayer to third party vendors.

CONCLUDING STATEMENT

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 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 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,

Eric R. Peate

Senior Attorney

Technical Assistance & Dispute Resolution
(850) 922-4714

Control No.: 62047