Were consignment and loaner fees for surgical instruments and implant sample kits taxable rentals in Florida?

Plain-English summary

The Florida Department of Revenue treated a medical-device company's transfers of consignment surgical instruments, implant sample kits, and loaner surgical instruments to distributors for fees as rentals of tangible personal property.

Unless a distributor supplied a properly documented resale certificate, the company had to collect and remit tax on the gross rental proceeds. Florida tax applied only to instruments and kits located in Florida during their rental periods, not to property located elsewhere in the United States.

Removing the items from resale inventory and preparing them for shipment did not create a separate taxable use on these facts because the company was entering rental transactions and collecting tax on the rental consideration.

What this means for you

Medical-device suppliers

Calling equipment "consignment" or "loaner" property does not prevent rental treatment when possession is transferred for consideration.

Distributors and tax teams

Keep valid resale certificates and location records for every rental period.

Common questions

Q: Were the consignment instruments and sample kits rentals?
A: Yes.

Q: Were loaner instruments rentals when a rental charge applied?
A: Yes.

Q: Did Florida tax equipment located outside Florida during the rental period?
A: No, under this ruling.

Q: Did removing the items from resale inventory create separate use tax?
A: No, because the items were prepared for taxable rental transactions.

Citations and references

• Fla. Stat. §§ 212.02(10)(g), 212.05, 212.07(1)(b), 212.18, 212.21(2), and 213.22
• Fla. Admin. Code rr. 12A-1.071 and 12A-1.091

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 15A-001

Original ruling text

Executive Director
Marshall Stranburg

QUESTION 1. WHETHER THE TRANSFER OF POSSESSION OF “CONSIGNMENT”
SURGICAL INSTRUMENTS, SUBJECT TO CONSIDERATION IN THE FORM OF
CONSIGNMENT FEES AS SET FORTH IN THE MANUAL, CONSTITUTES A “RENTAL”
OF THE INSTRUMENTS TO TAXPAYER’S DISTRIBUTORS FOR PURPOSES OF
CHAPTER 212, F.S.
ANSWER: THE TRANSFER OF POSSESSION OF CONSIGNMENT SURGICAL
INSTRUMENTS TO TAXPAYER’S DISTRIBUTORS IN EXCHANGE FOR RENTAL
CONSIDERATION IS CONSIDERED TO BE RENTALS OF THE INSTRUMENTS
BY TAXPAYER. CONSEQUENTLY, ABSENT A PROPERLY DOCUMENTED
RESALE CERTIFICATE OBTAINED FROM THE DISTRIBUTOR, TAXPAYER
SHOULD COLLECT AND REMIT TAX ON THE “GROSS PROCEEDS” DERIVED
FROM THE RENTALS OF THE CONSIGNMENT SURGICAL INSTRUMENTS.
QUESTION 2. WHETHER THE TRANSFER OF POSSESSION OF “CONSIGNMENT”
IMPLANT SAMPLE KITS, SUBJECT TO CONSIDERATION IN THE FORM OF
CONSIGNMENT FEES AS SET FORTH IN THE MANUAL, CONSTITUTES A “RENTAL”
OF THE SAMPLES TO TAXPAYER’S DISTRIBUTORS FOR PURPOSES OF CHAPTER
212, F.S.
ANSWER: THE TRANSFER OF POSSESSION OF CONSIGNMENT IMPLANT
SAMPLE KITS TO TAXPAYER’S DISTRIBUTORS IN EXCHANGE FOR RENTAL
CONSIDERATION IS CONSIDERED TO BE RENTALS OF THE KITS BY
TAXPAYER. CONSEQUENTLY, ABSENT A PROPERLY DOCUMENTED RESALE
CERTIFICATE OBTAINED FROM THE DISTRIBUTOR, TAXPAYER SHOULD
COLLECT AND REMIT TAX ON THE “GROSS PROCEEDS” DERIVED FROM
THE RENTALS OF THE CONSIGNMENT SURGICAL INSTRUMENTS.
QUESTION 3. WHETHER THE TRANSFER OF POSSESSION OF “LOANER” SURGICAL
INSTRUMENTS, SUBJECT TO CONSIDERATION IN THE FORM OF THE “RENTAL
CHARGE” AS SET FORTH IN THE MANUAL, CONSTITUTES A “RENTAL” OF THE
INSTRUMENTS TO TAXPAYER’S DISTRIBUTORS FOR PURPOSES OF CHAPTER 212,
F.S.
ANSWER:
THE TRANSFER OF POSSESSION OF LOANER SURGICAL
INSTRUMENTS TO TAXPAYER’S DISTRIBUTORS IN EXCHANGE FOR RENTAL
CONSIDERATION IS CONSIDERED TO BE RENTALS OF THE INSTRUMENTS
BY TAXPAYER. CONSEQUENTLY, ABSENT A PROPERLY DOCUMENTED
Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Howard Moyes, Interim Director  Information Services – Damu Kuttikrishnan, Director

www.myflorida.com/dor
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
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RESALE CERTIFICATE OBTAINED FROM THE DISTRIBUTOR, TAXPAYER
SHOULD COLLECT AND REMIT TAX ON THE “GROSS PROCEEDS” DERIVED
FROM THE RENTALS OF THE CONSIGNMENT SURGICAL INSTRUMENTS.
QUESTION 4. BASED ON THE ANSWERS TO THE FIRST THREE QUESTIONS ABOVE,
WHETHER
TAXPAYER’S
REMOVAL
OF
“CONSIGNMENT”
SURGICAL
INSTRUMENTS, “LOANER” SURGICAL INSTRUMENTS, AND SAMPLE IMPLANTS
FROM TAXPAYER’S INVENTORY HELD FOR RESALE, AND ACCOMPANYING
HANDLING OF THESE ITEMS TO PREPARE THEM FOR SHIPMENT TO
DISTRIBUTORS OR CUSTOMERS, CONSTITUTES A TAXABLE “USE” OF THESE
ITEMS BY TAXPAYER, FOR WHICH TAXPAYER MUST ACCRUE AND REMIT USE
TAX TO FLORIDA.
ANSWER:
TAXPAYER’S REMOVAL OF CONSIGNMENT SURGICAL
INSTRUMENTS, LOANER SURGICAL INSTRUMENTS, AND SAMPLE
IMPLANTS FROM TAXPAYER’S INVENTORY HELD FOR RESALE, AND
ACCOMPANYING HANDLING OF THESE ITEMS TO PREPARE THEM FOR
SHIPMENT
TO
DISTRIBUTORS
OR
CUSTOMERS
FOR
RENTAL
TRANSACTIONS, DOES NOT CONSTITUTE A TAXABLE “USE” OF THESE
ITEMS BY TAXPAYER, FOR WHICH TAXPAYER MUST ACCRUE AND REMIT
USE TAX TO FLORIDA BECAUSE THE TRANSACTION IS A RENTAL
TRANSACTION WHEREIN TAXPAYER IS COLLECTING AND REMITTING TAX
ON THE RENTAL CONSIDERATION RECEIVED.
QUESTION 5. WHETHER TAXPAYER SHOULD COLLECT AND REMIT CHAPTER 212
TAX ON CONSIGNMENT FEES RECEIVED FROM DISTRIBUTORS AS
CONSIDERATION FOR THE RENTAL OF “CONSIGNMENT” SURGICAL
INSTRUMENTS AND SAMPLE IMPLANT KITS, ONLY AS TO INSTRUMENTS AND
SAMPLE KITS THAT ARE LOCATED IN FLORIDA DURING THEIR RENTAL PERIODS,
OR WHETHER TAXPAYER SHOULD COLLECT AND REMIT CHAPTER 212 TAX ON
SUCH INSTRUMENTS AND SAMPLE KITS LOCATED ANY PLACE IN THE UNITED
STATES DURING THEIR RENTAL PERIODS.
ANSWER: ABSENT A PROPERLY DOCUMENTED RESALE CERTIFICATE
OBTAINED FROM THE DISTRIBUTOR, TAXPAYER SHOULD COLLECT AND
REMIT FLORIDA SALES TAX ON CONSIGNMENT FEES RECEIVED FROM
DISTRIBUTORS
AS
CONSIDERATION
FOR
THE
RENTALS
OF
“CONSIGNMENT” SURGICAL INSTRUMENTS AND SAMPLE IMPLANT KITS,
ONLY FOR INSTRUMENTS AND SAMPLE KITS THAT ARE LOCATED IN
FLORIDA DURING THEIR RENTAL PERIODS.
QUESTION 6. WHETHER TAXPAYER SHOULD COLLECT AND REMIT CHAPTER 212
TAX ON RENTAL CHARGES RECEIVED FROM DISTRIBUTORS AS CONSIDERATION
FOR THE RENTAL OF “LOANER” SURGICAL INSTRUMENTS, ONLY AS TO
INSTRUMENTS THAT ARE LOCATED IN FLORIDA DURING THEIR RENTAL

Technical Assistance Advisement
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PERIODS, OR WHETHER TAXPAYER SHOULD COLLECT AND REMIT CHAPTER 212
TAX ON SUCH INSTRUMENTS LOCATED ANY PLACE IN THE UNITED STATES
DURING THEIR RENTAL PERIODS.
ANSWER: ABSENT A PROPERLY DOCUMENTED RESALE CERTIFICATE
OBTAINED FROM THE DISTRIBUTOR, TAXPAYER SHOULD COLLECT AND
REMIT CHAPTER 212, F.S., TAX ON RENTAL CHARGES RECEIVED FROM
DISTRIBUTORS AS CONSIDERATION FOR THE RENTALS OF “LOANER”
SURGICAL INSTRUMENTS, ONLY AS TO INSTRUMENTS THAT ARE LOCATED
IN FLORIDA DURING THEIR RENTAL PERIODS.
January 16, 2015
Re:

Technical Assistance Advisement – TAA 15A-001
Florida Sales and Use Tax
Medical – Rental of surgical instruments and sample kits
Sections: 212.02, 212.05, and 212.21, Florida Statutes (F.S.)
Rules: 12A-1.071 and Rule 12A-1.091, Florida Administrative Code (F.A.C.)
Petitioner: XXXX (“Taxpayer”)

Dear XXXX:
This letter is a response to your petition dated XXXX, for the Department's issuance of a
Technical Assistance Advisement ("TAA") concerning the above referenced petitioner and
matter. Your petition has been carefully examined and the Department finds it to be in
compliance with the requisite criteria set forth in Chapter 12-11, F.A.C. This response to your
request constitutes a TAA and is issued to you under the authority of section 213.22, F.S.
General Facts
Taxpayer is a public company headquartered in XXXX, XXXX. Taxpayer manufactures
orthopedic implants that replace human joints. Taxpayer also distributes related products,
including specialized surgical instruments used by surgeons during the implantation process.
Taxpayer’s customers include health care providers (primarily hospitals) and they are located
throughout the United States and in many foreign countries worldwide. Taxpayer’s products are
marketed by a network of independent contractor sales representatives/distributors
(“Distributors”). These Distributors operate independently of Taxpayer. Distributors are not
employees of Taxpayer. The relationship between Taxpayer and Distributors is outlined in the
XXXX (“Contract”) provided as part of this TAA. In paragraph IV., labeled “Independent
Contractor”, the Contract provides that Distributors are independent contractors and not
employees of XXXX, and are solely liable for proper withholding and payment of federal
income tax, state income tax, self-employment tax, social security tax, and/or any other
applicable taxes. The Distributors are independent of Taxpayer and are not authorized to

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transact business, incur any obligations in the name or for the account of XXXX nor on XXXX’s
behalf, nor to make any promise, warranty or representation with respect to XXXX Products, or
any other matter. The Distributors are independent of Taxpayer and are not authorized to use the
name “XXXX” as part of their business or corporate name without the prior written approval of
XXXX.
Implantation of Taxpayer’s joint replacement products requires specialized surgical instruments,
unique to Taxpayer’s products. The various joint-replacement implants are manufactured in
several sizes and differing designs for differing patient requirements, and each device in each
size requires a unique set of surgical instruments for implantation. The instruments are
manufactured to Taxpayer’s specifications outside Florida by independent suppliers. The
instruments are purchased for resale by Taxpayer, shipped by the manufacturers to Taxpayer in
Florida, and placed in inventory by Taxpayer.
Taxpayer’s agreements with Distributors require that Distributors are in compliance with all
(Taxpayer) policies and procedures. Taxpayer has proposed certain revisions to its manual to
clarify that the business relationship between Taxpayer and its Distributors in the United States,
with respect to surgical instruments and “sample kits,” constitutes a rental arrangement by which
the instruments and sample kits are rented to the Distributors.
Taxpayer’s mode of doing business is to place orthopedic implants on consignment with its
customers, through it Distributors. Such inventory, belonging to Taxpayer, is termed
“consignment” inventory in the manual. When a particular implant is sold, the sale is
documented and paid for.
Under the terminology used in the manual, surgical instruments in Taxpayer’s owned inventory,
but maintained on the premises of its Distributors or customers, are likewise referred to as being
on “consignment,” even though the instruments are not generally sold to hospital customers in
the United States. Thus, when the manual refers to “consignment instruments,” it means those
instruments that have been delivered to hospitals, through Taxpayer’s Distributors, to be used in
the implantation process. The instruments are durable and made to be re-sterilized and used for
multiple surgeries. When a particular instrument wears out or becomes obsolete, it is returned to
Taxpayer through the Distributors and replaced for the customer. These “consignment”
instruments are capitalized and depreciated on Taxpayer’s books once they are removed from
inventory for this purpose.
No separate charge is made to the hospitals for the instruments, but charges for them are made to
Taxpayer’s Distributors for the rental of the instruments.
A far less common occurrence is for a set of surgical instruments to be sent to a hospital
customer, also through a Distributor, for short-term use. This typically occurs for a one-time
surgical case at a hospital that is not yet a regular customer. These instruments are referred to in
the manual as “loaner” instruments. After this short-term use, the instruments typically are
returned to Taxpayer, placed back in inventory (if still suitable for surgical use), and again held
for resale.

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Each Distributor also receives one “sample kit” that includes samples of Taxpayer’s various
“core” products, primarily joint-replacement implants. The revised manual has a listing of the
items in the sample kit, at pages 14-15. As evident from the list and from Taxpayer’s website
(XXXX.com), Taxpayer offers varying designs of hip, knee, and shoulder implants for different
patient requirements, and the sample kit contains examples of the various designs.
These samples are not given away to customers, but are retained in the possession of the
Distributors who show them to customers and prospective customers. The products in the
sample kit are rather expensive, and it is Taxpayer’s practice to capitalize and depreciate the
sample kits as is done with the “consignment” surgical instruments. The samples, constructed
from metal with specialized plastics at some friction points, are durable and remain with the
Distributors. When the design of an individual item changes, a replacement sample is sent to
each Distributor to place in the sample kit, and the obsolete samples are returned to the
Taxpayer.
Surgical instruments and sample implants that leave Taxpayer’s inventory are immediately
shipped by common carrier to Taxpayer’s Distributors (or, for instruments, occasionally directly
to a hospital as directed by a Distributor), whether in Florida or elsewhere, and the Distributors
then deliver the instruments to the hospital customers and retain possession of the samples for
their own use. Taxpayer is able to document such shipments by common carrier.
In Section 15.2.1, the manual distinguishes between implant inventory, held on actual
“consignment,” and surgical instruments which are “leased or rented to Distributors in return for
the consignment rental fees charged with respect to Core Products. The table on page 33, which
details the consignment fee calculation for hip, knee, and shoulder implants, is annotated as
follows: “For these core products, consignment fees constitute rental charges for surgical
instruments and sample kits.” The “core products” include all the implants for which surgical
instruments are necessary. The heading for the right-hand column in the same table is “Monthly
Rental Fee.”
Section 3.5 of the manual provides that there is a direct rental charge for such instruments. The
manual provides that “Distributors selling core implants are entitled to receive one initial sample
kit consigned on a rental basis.” The manual provides that the “consignment fees” paid by the
Distributors are consideration for rentals of surgical instruments and sample kits.
Manual
Taxpayer provided a copy of the manual. Relevant provisions of the manual are as follows:
Section 3.1.1 provides as follows: “[Taxpayer] will make available loaner sets of implants and
instruments for short-term rental. . . .”
Section 3.3 provides as follows: “Shipping Charges: [Taxpayer] shares the shipping cost of
loaners with Distributor. The Distributor will pay for UPS/FedEx/DHL shipping/freight charges.
. . .”

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Section 3.5 provides as follows: “Rental Charge for Loaner Instruments: A rental charge of $10
per instrument tray, plus any applicable taxes, will be commission deducted for each XXXX
number issued with respect to Loaner instruments and implants.”
Section 8.2.1 provides as follows: “Upon initiation of a distribution agreement with [Taxpayer],
Distributors selling core implants are entitled to receive one initial sample kit consigned on a
rental basis as detailed in Section 15 of this Handbook.”
Section 8.2.2 provides in part as follows: “The initial sample kit consists of hip, knee and
shoulder samples only. . . .”
Section 8.2.3 provides in part as follows: “The initial sample kit will remain the property of
[Taxpayer]. These samples will be part of your consignment and will be returned to [Taxpayer]
at the termination of the distribution contract. . . .”
Section 10.1 provides directions on Shipping Fees as follows: “Overview: [Taxpayer charges
shipping fees for all items sent on the Distributor’s behalf, including shipping one way
(outbound if shipped FedEx/UPS/DHL) or loaner sets. At the end of each month, these charges
are automatically deducted from the Distributor’s commissions
. . . .”
Section 15.1 provides as follows: “Scope: This policy covers all products (instruments and
implants) to be held in consignment by Distributors, hospitals, and other end users. This policy
excludes loaners.”
Section 15.2.1 defines the term “Consignment” as follows: “Consignment: Product owned by
[Taxpayer] and stored for resale, and distributed through Distributors, and hospitals. Product is
intended for long-term storage at Distributors’ independent locations and hospitals. Surgical
instrument sets are also referred to as being held on consignment; however, it is more accurate to
say that surgical instruments are leased or rented to Distributors in return for the consignment
rental fees charged with respect to Core Products, in accordance with this section of the manual.”
Requested Advisements
Question 1. Whether the transfer of possession of “consignment” surgical instruments, subject to
consideration in the form of consignment fees as set forth in the manual, constitutes a “rental” of
the instruments to Taxpayer’s Distributors for purposes of Chapter 212, F.S.
Question 2. Whether the transfer of possession of “consignment” implant sample kits, subject to
consideration in the form of consignment fees as set forth in the manual, constitutes a “rental” of
the samples to Taxpayer’s Distributors for purposes of Chapter 212, F.S.
Question 3. Whether the transfer of possession of “loaner” surgical instruments, subject to
consideration in the form of the “rental charge” as set forth in the manual, constitutes a “rental”
of the instruments to Taxpayer’s Distributors for purposes of Chapter 212, F.S.

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Question 4. Based on the answers to the first three questions above, whether Taxpayer’s
removal of “consignment” surgical instruments, “loaner” surgical instruments, and sample
implants from Taxpayer’s inventory held for resale, and accompanying handling of these items
to prepare them for shipment to Distributors or customers, constitutes a taxable “use” of these
items by Taxpayer, for which Taxpayer must accrue and remit use tax to Florida.
Question 5. Whether Taxpayer should collect and remit Chapter 212 tax on consignment fees
received from Distributors as consideration for the rental of “consignment” surgical instruments
and sample implant kits, only as to instruments and sample kits that are located in Florida during
their rental periods, or whether Taxpayer should collect and remit Chapter 212 tax on such
instruments and sample kits located any place in the United States during their rental periods.
Question 6. Whether Taxpayer should collect and remit Chapter 212 tax on rental charges
received from Distributors as consideration for the rental of “loaner” surgical instruments, only
as to instruments that are located in Florida during their rental periods, or whether Taxpayer
should collect and remit Chapter 212 tax on such instruments located any place in the United
States during their rental periods.
Taxpayer’s Position
Taxpayer believes that the transfers of possession of consignment surgical instruments,
consignment implant sample kits, and loaner surgical instruments for consideration constitute
“rentals” for purposes of Florida’s sales tax. Taxpayer does not believe the removal from
inventory of consignment surgical instruments, consignment implant sample kits, and loaner
surgical instruments constitutes a taxable “use” of these items and therefore does not subject
them to Florida’s use tax. Taxpayer believes that it should only collect and remit tax on Florida
rentals of consignment surgical instruments, sample implant kits, and loaner surgical
instruments.
Applicable Law and Discussion
Chapter 212, F.S., imposes sales tax on all sales of tangible personal property, unless specifically
exempt. Section 212.21(2), F.S., specifically provides in pertinent part:
It is hereby declared to be the specific legislative intent to tax each and every sale . . . or
rental levied and set forth in this chapter, except as to such sale . . . or rental as shall be
specifically exempted therefrom by this chapter subject to the conditions appertaining to
such exemption. . . .
Section 212.05, F.S., provides in part as follows:
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 . . . or who rents or furnishes any of the things or services taxable under this chapter
....

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Section 212.02(10)(g), F.S., provides as follows in part:
“Lease,” “let,” or “rental” also means the leasing or rental of tangible personal property
and the possession or use thereof by the lessee or rentee for a consideration, without
transfer of the title of such property . . . .
Section 212.07(1)(b), F.S., provides in part the following:
A resale must be in strict compliance with s. 212.18 and the rules and regulations, and
any dealer who makes a sale for resale which is not in strict compliance with s. 212.18
and the rules and regulations shall himself or herself be liable for and pay the tax. Any
dealer who makes a sale for resale shall document the exempt nature of the transaction, as
established by rules promulgated by the department, by retaining a copy of the
purchaser’s resale certificate. . . .
Rule 12A-1.071, F.A.C., provides in pertinent part as follows:
(1)(a) For the purpose of this rule, the term “lease” includes any rental or license to use
tangible personal property, unless a different meaning is clearly indicated by the context
in which it is used. The term refers to all transactions that are not bailments in which
there is a transfer of possession of tangible personal property, without regard to
limitations upon the use, for a consideration, without a transfer of title to the property. . . .
(b) Transfer of possession with respect to an operating lease means that one of the
following attributes of tangible personal property ownership has been transferred:

1. Custody or possession of the property, actual or constructive;
2. The right to custody or possession of the property; or
3. The right to use and control or direct the use of the property.
   (c) For an operating lease, tax applies to the gross proceeds derived from the lease of
   tangible personal property for the entire term of the lease . . . .
   (3) An out-of-state owner or lessor of equipment is doing business in Florida when his
   tangible personal property is located in Florida in the possession of a lessee . . . .
   Rule 12A-1.091(4), F.A.C., provides in part as follows:
   (4) . . . The two taxes, sales and use, stand as complements to each other, and taken
   together provide a uniform tax upon either the sale at retail or the use of all tangible
   personal property irrespective of where it may have been purchased.
   In Florida, the rental of tangible personal property in which there is a transfer of possession of
   tangible personal property for a consideration is subject to sales tax. Tangible personal property
   purchased exclusively for rental by a dealer registered with the Department at the time of
   purchase may be purchased tax-exempt. The purchasing dealer is required to extend a copy of
   its Annual Resale Certificate to the selling dealer at the time of purchase in lieu of paying tax on

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the purchase of the tangible personal property. Please note, however, a dealer who purchases
tangible personal property for the dual purpose of renting it to others and also for his own use, or
who purchases tangible personal property exclusively for rental but subsequently uses the
property, is responsible for paying the tax on the cost price of such tangible personal property
and is also responsible for collecting and remitting the tax on all rentals of such property.
Response
Question 1. Whether the transfer of possession of “consignment” surgical instruments, subject to
consideration in the form of consignment fees as set forth in the manual, constitutes a “rental” of
the instruments to Taxpayer’s Distributors for purposes of Chapter 212, F.S.
Answer: The transfer of possession of consignment surgical instruments to Taxpayer’s
Distributors in exchange for rental consideration is considered to be rentals of the
instruments by Taxpayer. Consequently, absent a properly documented resale certificate
obtained from the Distributor, Taxpayer should collect and remit tax on the “gross
proceeds” derived from the rentals of the consignment surgical instruments.
Question 2. Whether the transfer of possession of “consignment” implant sample kits, subject to
consideration in the form of consignment fees as set forth in the manual, constitutes a “rental” of
the samples to Taxpayer’s Distributors for purposes of Chapter 212, F.S.
Answer: The transfer of possession of consignment implant sample kits to Taxpayer’s
Distributors in exchange for rental consideration is considered to be rentals of the kits by
Taxpayer. Consequently, absent a properly documented resale certificate obtained from
the Distributor, Taxpayer should collect and remit tax on the “gross proceeds” derived
from the rentals of the consignment surgical instruments.
Question 3. Whether the transfer of possession of “loaner” surgical instruments, subject to
consideration in the form of the “rental charge” as set forth in the manual, constitutes a “rental”
of the instruments to Taxpayer’s Distributors for purposes of Chapter 212, F.S.
Answer: The transfer of possession of loaner surgical instruments to Taxpayer’s
Distributors in exchange for rental consideration is considered to be rentals of the
instruments by Taxpayer. Consequently, absent a properly documented resale certificate
obtained from the Distributor, Taxpayer should collect and remit tax on the “gross
proceeds” derived from the rentals of the consignment surgical instruments.
Question 4. Based on the answers to the first three questions above, whether Taxpayer’s
removal of “consignment” surgical instruments, “loaner” surgical instruments, and sample
implants from Taxpayer’s inventory held for resale, and accompanying handling of these items
to prepare them for shipment to Distributors or customers, constitutes a taxable “use” of these
items by Taxpayer, for which Taxpayer must accrue and remit use tax to Florida.

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Answer: Taxpayer’s removal of consignment surgical instruments, loaner surgical
instruments, and sample implants from Taxpayer’s inventory held for resale, and
accompanying handling of these items to prepare them for shipment to Distributors or
customers for rental transactions, does not constitute a taxable “use” of these items by
Taxpayer, for which Taxpayer must accrue and remit use tax to Florida because the
transaction is a rental transaction wherein Taxpayer is collecting and remitting tax on the
rental consideration received.
Question 5. Whether Taxpayer should collect and remit Chapter 212 tax on consignment fees
received from Distributors as consideration for the rental of “consignment” surgical instruments
and sample implant kits, only as to instruments and sample kits that are located in Florida during
their rental periods, or whether Taxpayer should collect and remit Chapter 212 tax on such
instruments and sample kits located any place in the United States during their rental periods.
Answer: Absent a properly documented resale certificate obtained from the Distributor,
Taxpayer should collect and remit Florida sales tax on consignment fees received from
Distributors as consideration for the rentals of “consignment” surgical instruments and
sample implant kits, only for instruments and sample kits that are located in Florida
during their rental periods.
Question 6. Whether Taxpayer should collect and remit Chapter 212 tax on rental charges
received from Distributors as consideration for the rental of “loaner” surgical instruments, only
as to instruments that are located in Florida during their rental periods, or whether Taxpayer
should collect and remit Chapter 212 tax on such instruments located any place in the United
States during their rental periods.
Answer: Absent a properly documented resale certificate obtained from the Distributor,
Taxpayer should collect and remit Chapter 212, F.S., tax on rental charges received from
Distributors as consideration for the rentals of “loaner” surgical instruments, only as to
instruments that are located in Florida during their rental periods.
Closing Statement
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

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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 10 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 850-717-6363.
Sincerely,

Leigh L. Ceci
Tax Law Specialist
Technical Assistance & Dispute Resolution
Record ID: 144225