How could a dealer not franchised for a vehicle line rebut Florida's presumption that its tax-exempt purchase became taxable use?

Plain-English summary

A franchised dealer proposed selling new vehicles tax-free for resale to dealers that were not franchised for that line. The purchasing dealer might receive the manufacturer's certificate of origin or have the vehicle titled in its own name before resale.

Florida said later resale of an untitled vehicle did not, by itself, rebut the presumption of taxable use. The Department would also examine whether the purchasing dealer used the vehicle before resale for anything beyond demonstration or display.

A titled vehicle could still satisfy the resale position if sufficient evidence showed the dealer did not use it in business operations so as to make it a used vehicle. Titling and resale alone were not decisive; the Department would consider actual use, inventory treatment, and the books and records. Demonstration or display use generally remained consistent with holding the vehicle for sale.

What this means for you

Dealers relying on resale treatment should document inventory status and every use before sale. A title record is only one piece of the analysis.

Common questions

Did resale of an untitled vehicle automatically rebut the presumption? No.

Did titling the vehicle automatically make the dealer purchase taxable? No.

What pre-resale use was allowed under the ruling? Demonstration or display; other use could create tax on the dealer's cost price.

Citations and references

• Fla. Admin. Code rr. 12A-1.007(8)(d) and 12A-1.039(5), as cited and discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 09A-024

Original ruling text

SUMMARY
QUESTION #1: Can the presumption contained in Rule 12A-1.007(8)(d), Florida
Administrative Code, be rebutted by evidence that the purchasing dealer resold an untitled
vehicle to a consumer?
ANSWER: The presumption created in Rule 12A-1.007(8)(d), F.A.C., cannot be rebutted solely
by providing evidence that the purchasing dealer resold an untitled vehicle. The Department will
also look to determine if the purchasing dealer used the vehicle for purposes other than
demonstration or display that created a taxable use of the vehicle before the dealer resold the
vehicle.
QUESTION #2: Can the presumption contained in Rule 12A-1.007(8)(d), Florida
Administrative Code, be rebutted by evidence that the purchasing dealer resold a titled vehicle to
a consumer without first having used that vehicle in its business operations so as to render it a
used vehicle?
ANSWER: The presumption created in Rule 12A-1.007(8)(d), F.A.C., can be rebutted by
providing sufficient evidence that the purchasing dealer resold a titled vehicle without having
used that vehicle in its business operations so as to render it a used vehicle. If the purchasing
dealer did not use the vehicle for purposes other than demonstration or display before it resold
the vehicle, it has rebutted the presumption created in this rule provision.

May 14, 2009

XXX
XXX
XXX
XXX
Re:

Technical Assistance Advisement 09A-024
Sales and Use Tax
Purchase of a Motor Vehicle by a Nonfranchised Motor Vehicle Dealer
Rules 12A-1.007(8)(d), and 12A-1.039(5), Florida Administrative Code (F.A.C.)

Dear XXX:
This response is in reply to your letter dated November 16, 2008, requesting the 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 Department’s position on the issue described below. 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.

Facts
In a letter dated September 11, 2008, you provided that XXX (the Taxpayer) is proposing to sell new
untitled Lexus vehicles to motor vehicle dealers who are either licensed in Florida as independent
nonfranchised motor vehicle dealers, or as franchised motor vehicle dealers that are not franchised to
sell Lexus vehicles. These sales may occur when: 1) the purchasing dealer has secured a buyer for
the vehicle; 2) the purchasing dealer purchases the vehicle to place in its inventory; or, 3) the
purchasing dealer intends to use the vehicle for demonstration or display purposes only. The
Taxpayer may not always be aware how the purchasing dealer will use the vehicle.
The Taxpayer would complete the transaction either by: 1) transferring the manufacturer's certificate
of origin to the purchasing dealer who, in turn, would apply for a title for the vehicle when it sold the
vehicle to the consumer; or 2) applying for a title for the vehicle in the purchasing dealer's name.
However, unless the purchasing dealer intends to use the vehicle for demonstration or display
purposes only, the Taxpayer would obtain a copy of the purchasing dealer's resale certificate as
evidence that the vehicles were for resale.
You asked us, based on this proposal, if Rule 12A-1.007(8)(d), F.A.C., provided for a conclusive or
rebuttable presumption. We issued you a Letter of Technical Advice, dated October 10, 2008,
concluding that the presumption provided for in Rule 12A-1.007(8)(d), F.A.C., is a rebuttable
presumption.
Requested Advisement
You now ask that the Department the following questions pertaining to the scenario presented
above:

1. Can the presumption contained in Rule 12A-1.007(8)(d), Florida Administrative
   Code, be rebutted by evidence that the purchasing dealer resold an untitled vehicle to
   a consumer?
2. Can the presumption contained in Rule 12A-1.007(8)(d), Florida Administrative
   Code, be rebutted by evidence that the purchasing dealer resold a titled vehicle to a
   consumer without first having used that vehicle in its business operations so as to
   render it a used vehicle?
   Taxpayer's Position
   The Taxpayer's position is that the answer to both questions is no. The Taxpayer provides that
   "fundamental to Rule 12A-1.007(8)(d)[, F.A.C.,] is the understanding that the sale of a new vehicle
   by a dealer not franchised to sell that line-make of vehicle is a sale that cannot be considered in the
   dealer's regular course of business." The Taxpayer offers that this would be the case regardless of
   the titling of the vehicle prior to its sale. The Taxpayer also offers that to rebut the presumption of
   the rule provision, the purchasing dealer would have to establish that the vehicle was used in its
   business operations and that it was later resold to a customer.

Discussion
Your reliance on Rule 12A-1.007(8)(d), F.A.C., to support your position is misplaced, because this
rule speaks to the purchasing dealer's responsibility after using its resale certificate to purchase a
vehicle tax-exempt that it is not franchised to sell, or does not ordinarily sell. If the purchasing
dealer uses the vehicle for any purpose other than demonstration or display, it is presumed that the
purchasing dealer is not holding the vehicle in inventory for sale in the regular course of its business,
or for operation in connection with its business, and tax is due on the cost price of the vehicle by the
purchasing dealer.
This rule provision does not require that the vehicle must be used in the purchasing dealer's business
before it is resold to rebut this presumption. To the contrary, if the purchasing dealer uses the
vehicle for any other purpose other than demonstration or display, the presumption is not rebutted
because it is presumed that the dealer is not holding the vehicle in inventory for sale, and tax is due
on the cost price of the vehicle. Further, the purchasing dealer's titling of a vehicle in its name and
subsequent sale of the vehicle alone does not rebut the presumption created in this rule provision.
The Department will look to the transaction surrounding the purchasing dealer's use of the vehicle it
has purchased for resale as a whole (i.e., how the vehicle is used, how the vehicle is recorded in the
dealer's books and records, etc.) when determining whether the purchasing dealer has rebutted the
presumption of Rule 12A-1.007(8)(d), F.A.C.
In the Taxpayer's proposed transaction, the Taxpayer provides that "unless the purchasing dealer
intended to use the vehicle for demonstration or display only, Lexus of XXX would obtain a copy of
its current annual resale certificate as evidence that the vehicles were for resale …." Even if the
purchasing dealer is using the vehicle for demonstration or display only, the selling dealer may
accept the purchasing dealer's annual resale certificate as evidence that the vehicles are for resale.
When the purchasing dealer uses the vehicle for demonstration or display only, generally the vehicle
is still in the purchasing dealer's inventory to be sold.
Conclusion

1. The presumption created in Rule 12A-1.007(8)(d), F.A.C., cannot be rebutted solely by providing
   evidence that the purchasing dealer resold an untitled vehicle. The Department will also look to
   determine if the purchasing dealer used the vehicle for purposes other than demonstration or display
   that created a taxable use of the vehicle before the dealer resold the vehicle.
2. The presumption created in Rule 12A-1.007(8)(d), F.A.C., can be rebutted by providing sufficient
   evidence that the purchasing dealer resold a titled vehicle without having used that vehicle in its
   business operations so as to render it a used vehicle. If the purchasing dealer did not use the vehicle
   for purposes other than demonstration or display before it resold the vehicle, it has rebutted the
   presumption created in this rule provision.
   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.
If you have any further questions with regard to this matter and wish to discuss them, you may
contact me directly at (850)414-6107.
Respectfully,

Kimberly McCorvey
Technical Assistance & Dispute Resolution
Record ID: 59019