Sales and Use Tax TAA 13A-015 - Taxability of Drop Shipments
QUESTION: Are sales from a non-Florida dealer to a non-Florida buyer taxable if drop
shipped via common carrier to the non-Florida’s buyer’s customer
in Florida?
ANSWER: No.
August 14, 2013
Re: Technical Assistance Advisement – TAA 13A-015
Taxability of Drop Shipments Sales and Use Tax
Section 212.05, Florida Statutes (F.S.)
XXX (“the Taxpayer”)
FEI #: XXX
Dear XXX:
This is in response to your letter dated XXX, requesting this Department’s
issuance of a Technical Assistance Advisement (“TAA”) pursuant
to s. 213.22, F.S., and Rule Chapter 12-11, Florida Administrative Code
(F.A.C.), regarding the taxability of drop shipments to 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 of certain drop shipments of tangible
personal property in Florida.
FACTS
You assert the following facts:
• Taxpayer is a distributor of used equipment and parts headquartered in XXX.
• 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].
• Florida registration is current under number XXX.
• All sales shipped into Florida are done so by common carrier.
You further indicate 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. [The Taxpayer] is clear on its understanding when it sells directly
to a Florida customer that either sales tax is charged and collected or
a Florida resale certificate is obtained from the customer.
You seek guidance on taxing implications of sales to non-Florida dealers,
with no legal obligation to be registered in the State of Florida, who
direct the Taxpayer to ship goods to the non-Florida dealer’s customer
in Florida. You indicate the goods are shipped via common carrier from
a non-Florida location.
TAXPAYER POSITION
It is your position the Taxpayer is not required to collect tax on sales
made pursuant to the facts as stated above, however, you are “unclear
on the documentation that is required . . . to substantiate the exempt
sale and to what extent [the Taxpayer] has a legal obligation to verify/validate
that a purchaser is not registered or required to be so in the [State]
of Florida.”
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. Whether the purchaser is registered
(or should be registered due to other business activities) in Florida
is not the relevant point.
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. 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. The Taxpayer is under no obligation to determine if a customer
should be registered for sales tax in Florida.
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 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,
R. Clay Brower
Revenue Program Administrator
Technical Assistance and Dispute Resolution
(850) 717-6306
RCB/ Ctrl# 147969