Did a registered out-of-state dealer owe Florida sales tax when it drop-shipped goods by common carrier for nonresident buyers with no Florida nexus?

Plain-English summary

A dealer incorporated outside Florida had two salespeople in Florida and was registered as an out-of-state Florida dealer. Two unregistered nonresident customers bought goods from it and directed it to ship the property to their own customers in Florida.

The Department assumed—as the taxpayer asserted—that the two buyers had no Florida nexus. On that assumption, the dealer's sales to them were not Florida sales-tax transactions when all three of these facts were present:

• The dealer and nonresident buyer were outside Florida at the time of sale.
• The goods were also outside Florida at that time.
• A common carrier delivered the goods into Florida.

The dealer did not have to collect Florida sales tax from the nonresident buyers or their Florida customers. It could retain the buyers' home-state resale or exemption documents to support why its sales were not subject to Florida tax.

That did not make the property tax-free. A Florida customer that was the final consumer ordinarily incurred Florida use tax on the property's cost price. A registered Florida dealer buying the property for resale did not owe use tax at that point, but would collect sales tax on its later Florida retail sale.

What this means for you

The no-nexus assumption was essential

The Department expressly warned that it had not verified the buyers' Florida activities. If either buyer had Florida nexus, the conclusion could change.

The delivery method controlled the seller's result

The favorable answer applied to shipment by common carrier from outside Florida. The ruling identified three situations that would make the transaction a taxable Florida sale: shipment from the dealer's Florida facility, delivery using transportation the dealer owned or leased, or delivery terms requiring the dealer to collect some or all of the price from the Florida customer at delivery.

Seller collection and customer use tax are separate

The dealer's lack of a collection duty did not eliminate the Florida end customer's use-tax obligation. Final consumers and registered resellers had different responsibilities.

Treat this as a historical, fact-specific nexus ruling

This advisement was issued in 2009 and rests on the buyers having no Florida nexus. Confirm current registration, marketplace, remote-seller, and use-tax rules before applying it to present-day drop shipments.

Common questions

Q: Did the registered out-of-state dealer collect Florida tax from the nonresident buyers?
A: No, when the sale and goods were outside Florida and a common carrier made the Florida delivery under the stated no-nexus assumption.

Q: Did the dealer collect tax from the Florida end customers?
A: No under these facts, but a final consumer in Florida ordinarily owed use tax on the cost price.

Q: What facts would change the answer?
A: Buyer nexus, shipment from the seller's Florida facility, delivery in seller-owned or leased vehicles, or collection of the sales price from the Florida customer at delivery.

Q: What if the Florida recipient bought the goods for resale?
A: A registered Florida reseller would not owe use tax on that receipt, but would collect Florida sales tax on its eventual retail sale.

Citations and references

• Fla. Stat. § 212.05(1)(a)1.a. (Florida retail sales of tangible personal property)
• Fla. Stat. § 212.21(2) (tax applies unless specifically exempt)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 09A-010

Original ruling text

SUMMARY
QUESTION: Whether sales of tangible personal property drop shipped into Florida from a registered
non-Florida dealer, at the request of an unregistered nonresident purchaser, are subject to Florida
sales tax.
ANSWER: The registered non-Florida dealer’s sales of tangible personal property to an unregistered
nonresident purchaser, which are drop shipped into Florida, are not subject to Florida tax.

March 2, 2009

XXX
XXX
XXX
Re:

Technical Assistance Advisement 09A-010
Sales and Use Tax – Drop Shipments
Section 212.05, Florida Statutes (F.S.)
XXX [Taxpayer]
FEIN: XXX
XXX [Buyer 1]
FEIN: XXX
XXX [Buyer 2]
FEIN: XXX

Dear XXX:
This is a response to your letter of September 25, 2008, requesting a Technical Assistance
Advisement (TAA) regarding the above-referenced matter. This response to your request constitutes
a TAA under Chapter 12-11, Florida Administrative Code (F.A.C.), and is issued to you under the
authority of Section 213.22, Florida Statutes (F.S.).
ISSUE
Whether sales of tangible personal property drop shipped into Florida from a registered non-Florida
dealer, at the request of an unregistered nonresident purchaser, are subject to Florida sales tax.
FACTS

Taxpayer is incorporated in the State of XXX. Taxpayer has two salesmen that live and work in
Florida. Accordingly, Taxpayer is registered as an out-of-state Florida dealer. Taxpayer states that
two of its nonresident, unregistered customers, Buyer 1 and Buyer 2, purchased tangible personal
property from Taxpayer and instructed Taxpayer to drop ship the property to Buyer 1’s and Buyer
2’s Florida customers.
Taxpayer states that Buyer 1 and Buyer 2 contacted the Department and were informed that Florida
tax would not be due on sales to Taxpayer, because they were nonresident entities with no nexus in
Florida. Taxpayer states that it contacted the Department and verified the information provided to
Buyer 1 and Buyer 2. Taxpayer seeks a TAA for this specific situation.
TAXPAYER’S POSITION
In its letter of September 25, 2008, Taxpayer asks the following question: “Should [Taxpayer] be
charging [S]tate of Florida sales tax on these transactions, if the Buyer cannot supply a resale or
exemption certificate?” Taxpayer provides no proposed answer to the question posed.
APPLICABLE LAW
Section 212.05(1)(a)1.a., F.S., provides:
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:
(a)1.a. At the rate of 6 percent of the sales price of each item or article of tangible
personal property when sold at retail in this state, computed on each taxable sale for
the purpose of remitting the amount of tax due the state, and including each and
every retail sale.
DISCUSSION AND RESPONSE
You are alerted that the following discussion is premised on the assumption that Buyer 1 and Buyer
2 have no nexus with Florida, per your assertion. The Department has no knowledge of the business
activity of Buyer 1 or Buyer 2 in Florida. A determination that Buyer 1 or Buyer 2 has nexus with
Florida will result in different conclusions than those expressed in the following paragraphs.
All retail sales of tangible personal property in the State of Florida are taxable, unless specifically
exempt by Chapter 212, F.S. See ss. 212.05(1) and 212.21(2), F.S. When a registered Florida dealer
located outside this state (i.e., Taxpayer) sells tangible personal property to an unregistered dealer

located outside Florida (i.e., Buyer 1 or Buyer 2), and the unregistered dealer instructs the registered
dealer to ship the property to the unregistered dealer’s Florida customer, the sales transaction will
not qualify as a taxable Florida sale unless one of the following conditions is met:
1) Taxpayer ships the property to the Florida customer from Taxpayer’s facility in Florida;
2) Taxpayer ships the property to the Florida customer from Taxpayer’s facility located
outside Florida, but uses transportation owned or leased by Taxpayer; or
3) Taxpayer ships the property to the Florida customer from Taxpayer’s facility located
outside Florida, but the terms of the delivery require Taxpayer to collect the sales price, in
whole or in part, from the Florida customer at the time of delivery of the property to the
customer.
In the present case, when Taxpayer and Buyer 1 and Buyer 2 and the property are located outside
Florida at the time of sale, and when the property is shipped into Florida by common carrier,
Taxpayer has no obligation to collect Florida sales tax from Buyer 1 or Buyer 2. Taxpayer could,
however, collect from Buyer 1 or Buyer 2 and retain in its records any exemption certificate, resale
certificate, or other similar document given to Buyer 1 or Buyer 2 by their domiciliary states, solely
for the purpose of documenting that the sales to Buyer 1 and Buyer 2 were not subject to Florida tax.
In the same manner, Taxpayer bears no obligation to collect Florida sales tax from Buyer 1’s or
Buyer 2’s Florida customers at the time of sale. The property is delivered into Florida by common
carrier. The arrival of the goods into Florida would ordinarily create, in Buyer 1’s and Buyer 2’s
customers, a Florida use tax liability. If the Florida customer is the final purchaser or consumer of
the property, then the Florida customer is responsible for remitting use tax on the cost price of the
property. However, if such customers were registered Florida dealers purchasing the property for
resale, then no use tax would be owed. Rather, the Florida customers would collect Florida sales tax
when the property is sold at retail in this state.
CONCLUSION
Taxpayer’s sales of tangible personal property to Buyer 1 and Buyer 2 are not subject to Florida
sales tax.
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, 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.
If you have any further questions with regard to this matter and wish to discuss them, you may
contact me directly at (850) 488-8565.
Sincerely,

Matt Crockett
Tax Law Specialist
Technical Assistance & Dispute Resolution
Record ID: 51885