Could a GPS-device seller accept automobile dealers' resale certificates when dealers activated and used the devices before vehicle resale?

Plain-English summary

The Florida Department of Revenue concluded that the GPS-device seller could not accept automobile dealers' resale certificates in good faith under the stated facts.

Dealers wired the devices into inventory vehicles, activated them, and retained access to location information for repossession or loss-prevention purposes. That exercise of control was a taxable use rather than holding the devices solely for resale.

The seller's contract also said devices could not be resold or transferred without prior written approval. The seller's practice of usually allowing transfers did not replace the contract's written-approval requirement. The ruling therefore treated the device sales as taxable, while expressly leaving the taxability of subscription services and other products undecided.

What this means for you

Device sellers

Do not accept a resale certificate when you know the customer activates or uses the property before resale or when the contract restricts transfer.

Automobile dealers

Installing and using tracking devices for inventory control or repossession can defeat resale treatment even if the device later passes with the vehicle.

Accountants and tax professionals

Review both actual use and contract terms. Written permission and good-faith certificate standards matter.

Common questions

Q: Did dealers use the devices before selling the vehicles?
A: Yes.

Q: Could the seller accept the resale certificates in good faith?
A: No.

Q: Did the ruling decide the tracking subscription's taxability?
A: No.

Citations and references

• Fla. Stat. §§ 212.02, 212.05, 212.06, 212.07, 212.18, and 213.22
• Fla. Admin. Code rr. 12A-1.0092 and 12A-1.039

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 16A-007

Original ruling text

Executive
Director
Leon M. Biegalski

QUESTION: MAY A SELLER OF CAR TRACKING DEVICES ACCEPT, IN GOOD FAITH,
A RESALE CERTIFICATE FROM CAR DEALERS UNDER THE FACTS PRESENTED?
ANSWER: NO, SUCH SALES ARE NOT SALES FOR RESALE AND THE RESALE
CERTIFICATE CANNOT BE ACCEPTED IN GOOD FAITH UNDER THE FACTS
PRESENTED.
June 9, 2016
RE: Technical Assistance Advisement 16A-007
Sales and Use Tax
Sections: 212.02, 212.05, 212.06, 212.07, and 212.18, Florida Statutes (F.S.)
Rules: 12A-1.0092 and 12A-1.039, Florida Administrative Code (F.A.C.)
XXXX (herein “Taxpayer”)
Dear XXXX:
This letter is in response to your request dated February 5, 2016, for issuance of a Technical
Assistance Advisement (“TAA”) pursuant to Section 213.22, F.S., and Rule Chapter 12-11,
F.A.C. An examination of your request has established you complied with the statutory and
regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting
your request for a TAA.
Facts
Taxpayer’s request for issuance of TAA provides, in part:

Taxpayer sells GPS tracking devices and provides tracking information to car dealers and
purchasers of automobiles on a subscription basis (i.e., information service). Upon the
sale of the GPS tracking device to the car dealer, the car dealer offers, and Taxpayer
accepts, a Florida [resale certificate]. The car dealer then takes the GPS tracking device
and wires it into the vehicle. The car dealer provides Taxpayer with a resale certificate
because the GPS tracking device is integrated into, and sold with, the automobile. In the
majority of instances, the GPS unit is not tracked or utilized by the automobile dealer
prior to the transfer of the unit’s possession to a third party via the purchase of an
automobile. Rather, it merely becomes a component of an inventory item maintained for
resale by the automobile dealer.
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

http://dor.myflorida.com/dor/
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Letter of Technical Advice
Page 2

The only right maintained by the car dealer with regard to the GPS unit after it is sold
along with the automobile is their ability to access the unit’s location …. When, or if, the
automobile dealer transfers this right to a finance company, it is without compensation.
The Master Contract of sale between Taxpayer and the automobile dealer indicates that
the device may not be resold, reassigned, transferred or used by other parties without the
approval of Taxpayer (see Exhibits A- “Terms and Conditions” at Section 3). While the
Master Contract does limit the transfer of the device subject the approval of Taxpayer,
experience indicates that, in the normal course of business, such approval is granted when
the GPS unit is transferred to the purchaser of the automobile.
When a consumer defaults on the car payments, the car dealer accesses Taxpayer’s
tracking information via the internet so that it can locate the vehicle for repossession
purposes. In addition, if the service is transferred to the purchaser of the automobile (i.e.,
the one who now possesses the GPS unit) the purchaser of the automobile can locate
his/her vehicle for their own purposes.

As noted above, Taxpayer also submitted a copy of a Master Agreement, which provides, in part:

STANDARD TERMS AND CONDITIONS (V1.0)

2. AGREEMENT TO PURCHASE: [Car Dealer] agree to purchase from [Taxpayer,]
   subject to the terms set forth herein, and [Taxpayer] agrees to sell to [Car Dealer], the
   Offerings identified on an applicable Agreement, or otherwise ordered by [Car Dealer], to
   be used by [Car Dealer] in accordance with this Agreement….

GPS Device Terms and Conditions (v1.0)
1. DEFINITIONS: … the term “Device” shall refer to the GPS Tracking Device sold by
[Taxpayer], together with all accessories to such Device.
2. DEVICES AND SERVICE PLANS: [Car Dealer] agrees to purchase Devices in
accordance with the Device price, Device terms, and Airtime Service Plan (“ASP”) in
effect at the date of purchase. Each Device requires an ASP. ASP’s and Device terms,
may change from time to time in the sole discretion of [Taxpayer]. ….
3. RESTRICTIONS: Device may be purchased only from authorized [Taxpayer]
employees and may not be resold, reassigned, transferred or used by the other parties
without the written approval of [Taxpayer], which approval may be granted or withheld
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

http://dor.myflorida.com/dor/
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Letter of Technical Advice
Page 3

at the [Taxpayer's] sole discretion. Any attempt at an unauthorized resale, assignment or
transfer shall be deemed a default and a material breach of this agreement. [Taxpayer]
shall not be obligated to provide services for unauthorized transferees, assignees or users.

7. LIMITED SOFTWARE LICENSE: … [Car Dealer] is hereby granted a limited, nontransferrable, non-exclusive license to use the Device Software, solely in connection with
   its use of Devices in accordance with the terms and conditions of this Agreement and any
   applicable ASP.…

Taxpayer’s website states the following:
GPS features include live email notifications, text message alerts, programmable geo fence,
24 hour daily heartbeat, safe starter interrupt, snail trail, and Geo markers. Taxpayer’s
website also includes a video demonstration of the service, which shows the customer
interface where the customer can locate the vehicle and disable the ignition.
Requested Advisement
The issue is whether Taxpayer can accept a valid Florida resale certificate on the sale of GPS
units to car dealers in good faith, thereby relieving Taxpayer of its duty to collect sales and use
tax on such sales.
Applicable Law
Florida law provides that all sales of tangible personal property are subject to sales tax unless an
exemption or exclusion from the tax applies. See sections 212.05, 212.06 and 212.18, F.S.
Tangible personal property that is purchased for resale can be purchased tax exempt under
certain circumstances. See sections 212.02(14)(a), 212.05, and 212.07, F.S.
Rule 12A-1.039, F.A.C, provides guidance regarding sales for resale under Chapter 212, F.S.,
and provides that the exemption applies only to sales in strict compliance with the Rule. A sale
for resale is exempt from tax when the sale is of tangible personal property sold to an active
registered dealer when such property will be resold to the dealer's customers, and the purchasing
dealer issues the selling dealer a valid Annual Resale Certificate (DR-13). Sales for resale
include sales of the tangible personal property (“TPP”) directly to dealer’s customers, and sales
of TPP which become a component part of the TPP resold by the dealer.
Rule 12A-1.039 F.A.C., also provides that selling dealers who accepts a valid copy of a resale
certificate, in good faith, will not be held liable for any tax due. Each dealer must make a good
faith determination that the resale certificate provided will result in a sale for resale. Rule 12A1.039(1)(a), F.A.C.
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

http://dor.myflorida.com/dor/
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Letter of Technical Advice
Page 4

“Good faith” is not defined in Chapter 202, F.S., or in a Rule. However, “good faith” is defined,
in Black’s Law Dictionary, as “… an intangible and abstract quality … encompass[ing], among
other things, an honest belief, the absence of malice and the absence of design to defraud or to
seek an unconscionable advantage, … and the freedom from knowledge of circumstances which
ought to put the holder upon inquiry.”1

Dealers owe tax on the cost price of TPP that is used by the dealer (i.e., not resold). See
s. 212.05(l)(b), F.S.
Section 212.02(20), F.S., defines the term "use" to include “... the exercise of any right or power
over tangible personal property incident to the ownership thereof, or interest therein, except that
it does not include the sale at retail of that property in the regular course of business.”
Section 212.07(8), F.S., provides, in relevant part, that "[a]ny person who has purchased at retail,
used, consumed, distributed, or stored for use or consumption in this state tangible personal
property ... taxable under this chapter ... and cannot prove that the tax levied by this chapter has
been paid ... is directly liable to the state for any tax, interest, or penalty due on any such taxable
transactions."
Discussion & Conclusion
It is not disputed that Taxpayer’s devices are TPP subject to sales and use tax unless subject to an
exemption.
Sales made to active registered dealers extending a valid resale certificate relieve the seller of the
duty to collect sales and use tax, when accepted in good faith. As noted above, good faith does
not include instances where Taxpayer had knowledge of circumstances where Taxpayer should
have questioned the use of the certificate or where Taxpayer knew that the sale was not for
resale.
In the instant case, Taxpayer’s contracts include language stating that the devices that the car
dealer is purchasing cannot be resold without prior written authorization of the Taxpayer.
Taxpayer argues that it has never limited or challenged such transfers, and states that its
acceptance of the resale certificate is an approval of the subsequent resale. The contract’s terms,
however, require written approval for the device to be resold, not an implicit agreement by
accepting the resale certificate, and the failure of Taxpayer to enforce the terms of the contract
do not change the nature of the agreement. Therefore, Taxpayer cannot in good faith accept
resale certificates from car dealers when the contract states that the [car dealer] cannot resell the
device, unless the [car dealer] was simultaneously given written permission to resell.
As noted above, “use” includes the exercise of any right over the TPP except resale. The car
dealers install the devices in their vehicles, activate the devices, and track the vehicle using the
devices. These devices are used by car dealers to locate and monitor the vehicles’ location or to

1

See Black's Law Dictionary, Special Deluxe Fifth Edition p. 623-24 (1979).
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

http://dor.myflorida.com/dor/
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Letter of Technical Advice
Page 5

render the vehicles inoperable. This is an exercise of control over the device. Car dealers are
using the devices to minimize and prevent loss of their property.
Please note, this Technical Assistance Advisement does not address issues beyond Taxpayer’s
ability to accept a resale certificate for its sales of devices. This Technical Assistance
Advisement does not make a determination as to the type of services that Taxpayer offers, or the
taxability of Taxpayer’s services or other products offered.
Conclusion
Taxpayer’s sales of TPP are not sales for resale, and Taxpayer cannot accept resale certificates
on such sales in good faith. Therefore, Taxpayer’s sales are subject to sales and use tax.
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 Section 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,

Timothy Surface
Senior Attorney
Technical Assistance and Dispute Resolution
(850) 717-7312
Record ID 209626

Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

http://dor.myflorida.com/dor/
Florida Department of Revenue
Tallahassee, Florida 32399-0100