Did an out-of-state seller owe Florida sales tax when an out-of-state buyer directed common-carrier delivery to its Florida customer?

Plain-English summary

The Florida Department of Revenue concluded that the described sale between an out-of-state seller and an out-of-state buyer did not fall within Florida's sales-tax jurisdiction, even though the buyer directed common-carrier delivery to its customer in Florida.

The Florida recipient's position still mattered. A Florida reseller had to collect tax when reselling the goods, while a Florida consumer had to remit use tax on the cost of the goods.

The out-of-state seller had to retain records showing that the buyer was physically outside Florida, the sale occurred outside Florida, and common-carrier delivery went to the buyer's Florida customer. Under the stated lack of Florida physical presence, the seller was not required to determine whether its out-of-state customer should register in Florida.

What this means for you

Out-of-state sellers

Keep invoices showing the buyer's non-Florida location and the common carrier's Florida destination. Registration for direct Florida sales does not automatically change the separate drop-shipment analysis.

Florida recipients

The upstream sale's treatment does not eliminate your resale-collection or consumer use-tax duty.

Accountants and tax professionals

Document each party, sale location, delivery method, and ultimate use rather than treating every Florida delivery as the same transaction.

Common questions

Q: Did the out-of-state seller collect Florida tax on the upstream sale?
A: No, under these facts.

Q: Could the Florida recipient still owe tax?
A: Yes.

Q: What records did the seller need?
A: Evidence of the non-Florida buyer and common-carrier delivery destination.

Citations and references

• Fla. Stat. §§ 212.05 and 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 15A-020

Original ruling text

Executive
Director
Marshall Stranburg

QUESTION: ARE THIRD PARTY DROP SHIPMENTS TAXABLE (UNDER THE FACTS OF THIS
CASE)?
ANSWER: NO.
December 7, 2015
Re:

Technical Assistance Advisement 15A-020
Drop Shipments
Sales & Use Tax
Section 212.05, Florida Statutes (F.S.)
FEI #: XXXX

Dear Mr. XXXX:
This is in response to your letter dated XXXX, requesting this Department’s issuance of a Technical
Assistance Advisement (“TAA”) pursuant to Section 213.22, F.S., and Rule Chapter 12-11, Florida
Administrative Code (F.A.C.), regarding the taxability of drop shipments into Florida. 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 a TAA.
ISSUE
The issue concerns the taxability and record retention responsibilities regarding third party drop shipments
in Florida.
FACTS AS PRESENTED
• Taxpayer is a manufacturer/distributor of heavy equipment headquartered in XXXX.
• Taxpayer has no physical locations nor maintains saleable inventory within the state lines of
Florida.
• Taxpayer employs traveling sales force that does visit the State of Florida.
• Taxpayer is registered for Florida sales tax collection as a non-resident retailer on all taxable
sales shipped to Florida customers who buy directly from the taxpayer.
• All sales shipped into Florida are done so by common carrier.
Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

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

Technical Assistance Advisement
Page 2
You further provide in part:
The taxpayer has a significant number of sales whereby their customer requests/directs the
taxpayer to drop-ship the goods to the customer’s customer [in Florida].
RULINGS REQUESTED
Your inquiry poses three questions as follows:
A. Is the taxpayer liable to collect sales tax on sales to purchasers who are legally nonregistered,
non-residents of Florida when directing the taxpayer to ship the goods to the purchaser’s customer
located in Florida based upon the facts presented?
B. If taxpayer is not liable to collect sales tax on the sale noted in Question A above, what is the
required documentation necessary to substantiate the exemption upon review by the State of
Florida absent a Florida resale certificate?
C. What is the taxpayer’s legal obligation to insure that the customer is not registered in the State
of Florida and is not required to do so?
LAW AND DISCUSSION
Section 212.05, F.S., provides 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 . . . .”
On third-party drop shipments, if the dealer and the buyer are both located outside Florida, and the goods,
when purchased, are outside the State, the sale between the dealer and the buyer does not come within the
jurisdiction of Florida sales and use tax laws.
The taxability of the third-party transaction occurs when the goods are drop-shipped to the buyer’s
customer in Florida. If the Florida customer is a reseller of the goods, then the Florida customer is
responsible for collecting tax when the merchandise is resold. If the Florida customer is the consumer of
the goods, then the Florida customer is responsible for remitting use tax on the cost of the goods.
RESPONSE
The sales (resulting in drop shipments to Florida as described) do not come within the jurisdiction of
Florida sales and use tax laws. Accordingly, the answer to Question A is no.
With regard to Question B, the Taxpayer should retain documentation to establish that the subject sales
take place outside Florida’s jurisdiction and delivery is made via common carrier. The invoices to the
non-Florida dealers should indicate the non-Florida dealer’s physical location. Further, the invoices
should indicate the common carrier destination point as that of the non-Florida dealer’s customer.

Technical Assistance Advisement
Page 3
With regard to Question C, since the Taxpayer has indicated it maintains no physical presence in the State
of Florida, it is under no obligation to determine if a customer should (or should not) be registered for
sales and use tax in Florida. However, as stated above, the Taxpayer must establish that the sales do not
fall within the taxing jurisdiction of the State of Florida.
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.
If you have any further questions with regard to this matter and wish to discuss them, you may contact me
directly at (850) 717-6306.
Sincerely,

R. Clay Brower
Revenue Program Administrator
Technical Assistance & Dispute Resolution
Record ID: 205960