Drop shipments are great ways for sellers to take advantage of avoiding the costs of inventory storage when selling to customers. For a drop shipment to occur, normally an individual buys from a seller a certain product. The seller, not having the product in inventory, purchases the product from a third party. The seller directs the third party to ship the product to the buyer. Sounds simple. What is often overlooked are the potential sales tax ramifications of such an arrangement.

The Florida Department of Revenue (“Department”) analyzes the transaction based upon the location of the parties and from where the goods are being shipped, among other criteria. There are several variations to the drop shipment scenario. The top three, which may be the least intuitive, are included below.

Scenario 1: The third party and seller are located outside of Florida. The goods are being shipped from outside of Florida. The buyer is located within Florida. The Department, via Technical Assistance Advisement (“TAA”) 15A-020, held tax is not due on the transaction. The reasoning was because the third party and seller were located outside of Florida and the merchandise was being shipped from outside of Florida.

Scenario 2: The third party and seller are located outside of Florida. The third party is registered with the Department for sales and use tax purposes but the seller is not registered. The goods are being shipped from a Florida location. The buyer is located within Florida. The Department, in this instance, held tax must be collected by the third party on the sale by the seller and the buyer, since the seller’s customer is located in Florida and the goods were in Florida at the time of the sale. Furthermore, the Department rationalized the seller could not collect the sales tax, since it was not registered, which left only the third party to collect the sales tax. The Department reached this conclusion in TAA 07A-043.

Scenario 3: Third party is located within Florida and is registered with the Department for sales and use tax purposes. Because the third party makes sales across the county, some sellers are in Florida while the remainder are not in Florida. The buyer is in Florida. The goods are shipped from the third party’s location in Florida to the buyer in Florida. The Department stated the third party is required by the Department, via TAA 94A-060, to collect sales tax from the seller because the seller is not registered with the Department for sales and use tax purposes and cannot extend a resale certificate.

The Department of Revenue has issued guidance on the issue of drop shipments with numerous scenarios and resulting tax outcomes. To view the diagrams and resulting tax consequences, please click on the link in the section below.

At the Law Office of Moffa, Sutton, & Donnini, PA, our primary practice area is Florida taxes, with a very heavy emphasis in Florida sales and use tax. We have defended Florida businesses against the Florida Department of Revenue since 1991 and have over 100 years of cumulative sales tax experience within our firm. Our partners are both CPAs/Accountants and Attorneys, so we understand both the accounting side of the situation as well as the legal side. We represent taxpayers and business owners from the entire state of Florida. Call our offices today for a FREE INITIAL CONSULTATION to confidentially discuss how we can help put this nightmare behind you.


Diagrams of Various Drop Shipment Scenarios


Section 212.05, F.S.

Section 212.06(3)(a), F.S.

Rule 12A-1.091(10), F.A.C.

TAA 15A-020

TAA 07A-043

TAA 94A-060


FL DOR WAITS 10 YRS TO SAY DROP SHIPMENTS NOT TAXABLE, published March 27, 2017by Moffa, Sutton, & Donnini, P.A.

FL SALES TAX ON DROP SHIPMENTS, published March 24, 2016, by Amanda Levine, Esq.

Florida Sales Tax Audit: What to Really Expect - Part 1, published October 11, 2016, by Steve Middle, MBA

FLORIDA SALES TAX - THEFT OF STATE FUNDS, published March 16, 2017, by Amanda Levine, Esq.

FLORIDA USE TAX AUDIT LETTER?, published June 14, 2015, by James Sutton, CPA, Esq. and Jerry Donnini, Esq.

GO TO JAIL FOR NOT PAYING FLORIDA SALES TAX?, published November 3, 2013, by James Sutton, CPA, Esq.

FL TAX – VOLUNTARY DISCLOSURE CAN BE THE PERFECT SOLUTION, published October 5, 2012, by Jerry Donnini, Esq.