Did Florida sales or use tax apply to materials received briefly in Florida for packaging and shipment to foreign installation sites?

Plain-English summary

A Florida dealer bought materials to perform water-storage-system installation contracts outside the United States. Large specialty tanks went directly to the foreign sites, while smaller parts and materials came to the dealer's Florida facility for packaging before export.

Possession in Florida ordinarily created a presumption that the property was taxable. The dealer overcame that presumption because its records showed a continuous export journey: every purchase order identified the foreign contract, goods went into contract-specific pallets or containers, the dealer inventoried and sealed them, and a licensed freight forwarder documented receipt. Materials stayed in Florida for less than one week on average and no more than two weeks.

The Department concluded that the goods remained in the export stream and were protected by the federal Import-Export Clause and section 212.06(5)(a), Florida Statutes. The dealer still had to give vendors proper exemption certificates or affidavits; without that documentation, a registered Florida vendor would have to collect tax.

What this means for you

A plan to export property is not enough by itself. If goods pass through Florida, the records should connect each purchase to a definite foreign obligation and document every step from receipt and packaging through transfer to the exporter or freight forwarder. A short, necessary stop for packaging may remain part of a continuous export journey when the evidence shows the goods were committed to export.

Common questions

Does taking possession in Florida automatically make exported goods taxable? It creates a presumption of taxability, but adequate evidence of continuous commitment to export can rebut that presumption.

Did temporary packaging and storage in Florida break the export journey? No, on these facts. The stop was brief and necessary to inventory, package, and seal the goods before delivery to the freight forwarder.

What records supported the exemption? The ruling relied on the foreign installation contracts, contract-numbered purchase orders, invoices tied to shipment dates, internal package inventories, and freight-forwarder documentation.

Must the purchaser give vendors exemption paperwork? Yes. The taxpayer had properly used a certificate or affidavit and had to continue providing documentation substantially conforming to Rule 12A-1.038(5).

Citations and references

• U.S. Const. art. I, § 10, cl. 2 (Import-Export Clause)
• Fla. Stat. § 212.05 (sales and use tax)
• Fla. Stat. § 212.06(5)(a) (exports and federally protected sales)
• Fla. Admin. Code r. 12A-1.0015(2)(a) (Florida-delivery presumption)
• Fla. Admin. Code r. 12A-1.038(5) (exemption certificates)
• Great Lakes Dredge & Dock Co. v. Department of Revenue, 381 So. 2d 1078 (Fla. 1st DCA 1979)
• Fred McGilvray, Inc. v. Askew, 340 So. 2d 475 (Fla. 1976)
• Kosydar v. National Cash Register Co., 417 U.S. 62 (1974)
• Carson Petroleum Co. v. Vial, 279 U.S. 95 (1929)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 05A-013

Original ruling text

SUMMARY
Question: Whether section 212.06(5)(a)1., F.S., which provides that it is not the intent of the Florida Legislature to
impose tax upon certain imports, nor to impose tax in contravention of the United States Constitution, applies where a
purchaser receives tangible personal property within Florida, but where the purchaser purchased the tangible
personal property pursuant to a contract for the installation of that material overseas.
Answer - Based on Facts Below: Whenever a purchaser of tangible personal property takes possession of the
property within the State of Florida, that tangible personal property is presumed taxable unless another provision of
law exempts or excludes that property from tax. Section 212.06(5)(a)1., F.S., will operate to disallow imposition of tax
if a provision of the United States Constitution prevents taxation. Where a purchaser takes possession of the property
within Florida, but such is done in furtherance of exporting the property out of the country, the Import-Export Clause of
the United States Constitution may apply to the activities of the purchaser, and if such purchaser can adequately
document the transaction, the taxpayer may be able to overcome the presumption of taxation through the ImportExport Clause.

March 2, 2005

Re: Technical Assistance Advisement No. 05A-013
Sales and Use Tax -- Export Sales
Section 212.05, Florida Statutes (F.S.)
Section 212.06(5)(a), F.S.
Rule 12A-1.0015, Florida Administrative Code (F.A.C.)
Rule 12A-1.038, F.A.C.
Dear
This correspondence is in response to your letter of July 16, 2004, requesting that the Florida Department of Revenue
("Department") issue a Technical Assistance Advisement ("TAA") pursuant to section 213.22, F.S., and Rule Chapter
12-11, F.A.C. Your request and supporting documentation establish compliance with the requirements for issuance of
a TAA. Thus, the Department grants your request and issues this TAA under the authority of section 213.22, F.S.
ISSUE
Whether Chapter 212, F.S., imposes a tax upon the purchase/possession of tangible personal property purchased by
a registered dealer for export from the United States.
FACTS
XXX ("Taxpayer") is a Florida corporation engaged in the business of selling and installing water storage tanks and

related systems, which are primarily used in water and wastewater storage plants. Taxpayer is an exclusive dealer of
an Illinois specialty tank manufacturer, and Taxpayer's exclusive dealership rights extend to sales and installations
throughout Florida, XXX. Although Taxpayer does perform some Florida installations, the majority of Taxpayer's sales
and installations are performed outside the United States. Taxpayer solely requests review of these foreign sales and
installations.
All of Taxpayer's sales and installations are controlled by formal contracts entered into by Taxpayer and its customers.
In performance of its contractual duties, Taxpayer purchases the specialty storage tanks and other custom-designed
components from the XXX manufacturer, and Taxpayer also purchases other needed materials from other suppliers
within and without Florida.
Each purchase order placed by Taxpayer is annotated with the name or number of the contract for which the item is
purchased. Once designed and ordered, the large specialty storage tanks are manufactured by the XXX
manufacturer, then shipped directly from the XXX manufacturer to the foreign installation site. The smaller parts and
materials, however, are sent to Taxpayer's Florida location. When Taxpayer receives an item at its Florida location,
the item is placed on a shipping pallet(s) or in a shipping container dedicated for the appropriate contract.
Once the required parts or materials are received, the pallets and/or shipping containers are inventoried, sealed, and
delivered to a licensed freight forwarder that delivers the pallets and containers to the foreign installation site. On
average, the materials marshaled at Taxpayer's Florida location remain at the location for less than one week, with
two weeks being the maximum time before the materials are sealed and delivered to the freight forwarder. The freight
forwarder provides an inventory and stuffing report of the pallets, containers, and items received. Once the materials
have arrived in the foreign port, Taxpayer's installation team receives the items and performs the installation required
under the contract.
REQUESTED ADVISEMENT
Taxpayer requests that the Department issue a TAA stating that the purchase and receipt of tangible personal
property under the above-stated circumstances is exempt from Florida sales and use tax pursuant to section
212.06(5)(a), F.S.
TAXPAYER’S POSITION
Taxpayer asserts that its purchase and receipt of the materials which it purchases from within and without Florida, and
accepts possession of within the state solely to package and ship to a foreign country, are tangible personal property
imported, produced, or manufactured in this state for export, and as such qualify for the exemption found in section
212.06(5)(a), F.S.
APPLICABLE LAW
U.S. Const. art. I, s. 10, cl. 2, provides, in part:

No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what
may be absolutely necessary for executing its inspection Laws....
Section 212.05, F.S., provides, in part:
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....
(1) For the exercise of such privilege, a tax is levied on each taxable transaction or incident, which tax is due and
payable as follows:
(a)1.a. At the rate of 6 percent of the sales price of each item or article of tangible personal property when sold at
retail in this state, computed on each taxable sale for the purpose of remitting the amount of tax due the state, and
including each and every retail sale.

(b) At the rate of 6 percent of the cost price of each item or article of tangible personal property when the same is not
sold but is used, consumed, distributed, or stored for use or consumption in this state....
Section 212.06(5)(a), F.S., provides, in part:
(5)(a)1. ...[I]t is not the intention of this chapter to levy a tax upon tangible personal property imported, produced, or
manufactured in this state for export... nor is it the intention of this chapter to levy a tax on any sale which the state is
prohibited from taxing under the Constitution or laws of the United States....
Rule 12A-1.0015(2)(a), F.A.C., provides, in part:
(a) A dealer is required to collect tax on sales of tangible personal property when the property is delivered to the
purchaser or the purchaser's representative in Florida, whether the disclosed or undisclosed intention of the purchaser
is to transport the property to a location outside Florida, or whether the property is actually so transported. Every sale
of tangible personal property to a person physically present at the time of sale is presumed to have been delivered in
Florida.
Rule 12A-1.038(5), F.A.C., provides, in part:
(b) Any person who is purchasing, renting, leasing, or licensing tangible personal property or services that qualify for
an exemption from tax imposed under Chapter 212, F.S., based on the use of the property or service, must extend an
exemption certificate to the selling dealer in lieu of paying tax. The exemption certificate must contain the purchaser's
name, address, the reason for which the use of the property or service qualifies for exemption based on its use, and
the signature of the purchaser or an authorized representative of the purchaser. The selling dealer is only required to
obtain one certificate for sales made for the purposes indicated on the certificate and is not required to obtain an
exemption certificate for subsequent sales made for the exempt purpose indicated on the exemption certificate. The
selling dealer must maintain the required exemption certificates in its books and records for the time period provided in

subsection (6) of this rule.
DISCUSSION AND RESPONSE
Generally, when tangible personal property is possessed in Florida and no sales or use tax has been paid in respect
to that property, Florida sales or use tax is due. This general rule of tax auditing is premised upon the existence of
Florida’s sales tax, which imposes a tax on all retail sales of tangible personal property within Florida, unless
specifically exempt, and Florida's use tax, which imposes a tax on the consumption of tangible personal property
within Florida. See section 212.05(1), F.S. There are exceptions to this general rule. For instance, Florida allows a
credit for like taxes paid to other states, see section 212.06(7), F.S., and Florida law contains a presumption that
Florida’s use tax does not apply where the tangible personal property was used outside Florida for six months or
more, see section 212.06(8)(a), F.S. However, subject to these and other exceptions, the general rule rings true for
the majority of cases.
Another exception to the general rule stated above is founded upon Article I, Section 10, Clause 2 of the United States
Constitution ("Import-Export Clause"). The Import-Export Clause generally prohibits individual states from taxing
imports and exports to and from the state. See U.S. Const. art. I., s. 10, cl. 2. Where a state law conflicts with this or
any other portion of federal law, federal law controls. See U.S. Const. art. VI., cl. 2 ("Supremacy Clause").
In order to effect the requirements imposed by the Import-Export Clause and other components of federal law, Florida
law provides that it does not intend to levy a tax in violation of the Constitution or laws of the United States. See
section 212.06(5)(a), F.S. Thus, Chapter 212, F.S., will not permit a conflict between itself and federal law; the
provisions of Chapter 212, F.S., will automatically defer to federal law. Therefore, if the tangible personal property
involved in this case is shielded from taxation by the Import-Export Clause, Chapter 212, F.S., would not impose tax
upon it. Florida law places the burden to prove export on the exporter by providing that property received by a
purchaser within Florida is presumed to be delivered in Florida, and therefore, taxable. See section 212.06(5)(a), F.S.;
Rule 12A-1.0015(2)(a), F.A.C.
As an important component of federal law, the scope of the Import-Export Clause primarily has been defined through
interpretation by the United States Supreme Court. See e.g., Coe v. Errol, 116 U.S. 517 (1886); A.G. Spalding & Bros.
v. Edwards, 262 U.S. 66 (1923); Carson Petroleum Co. v. Vial, 279 U.S. 95 (1929); Kosydar v. National Cash Register
Co., 417 U.S. 62 (1974); Department of Revenue v. Association of Washington Stevedoring Companies, 435 U.S. 734
(1978).
The Court has interpreted the Import-Export Clause to prevent state taxation of property when that property has been
sufficiently committed to the export process. Kosydar, 417 U.S. at 67. Consequently, the focus of most Import-Export
Clause cases has been to determine the point of commencement and conclusion of that export process, Kosydar, 417
U.S. at 67, and to determine whether that process was continuous and unbroken, Carson, 279 U.S. 95 (1929). The
Kosydar and Carson cases illustrate the Court's approach.
Kosydar involved an Ohio manufacturer of cash registers. Pursuant to orders for cash registers to be delivered and
used in a foreign country, the Ohio manufacturer had begun manufacturing a bulk of cash registers to meet its supply

needs. Once finished, the registers were stored in an Ohio warehouse, and sometimes remained there for years
before being shipped abroad. Ohio attempted to impose a tax on the cash registers, and the manufacturer claimed
protection under the Import-Export Clause. The Court interpreted the Import-Export Clause to require a physical
commitment to the export process before its protections applied. Since the registers had not physically begun their
journey out of the country, the Import-Export Clause did not apply.
Carson involved an oil company that purchased petroleum in certain interior states, and then transported the
petroleum across state lines via railway to New Orleans. In New Orleans, the oil was accumulated in storage tanks
owned by the purchaser. The company intended that the oil be exported, but the oil was stored in New Orleans until
enough petroleum was accumulated to justify the costs of shipment overseas. Louisiana argued that the oil became
subject to local taxation because it had come to rest in Louisiana and the export journey was broken. However, the
Court held that the Import-Export Clause shielded the oil from state taxation because a good faith and temporary
interruption of the passage in furtherance of the intended transport does not break the continuity of journey that the
Import-Export Clause requires. Carson, 279 U.S. at 103 (citing Champlain Realty Co. v. Brattleboro, 260 U.S. 366
(1922)).
Florida courts have also previously faced the issues involved in the instant case. In Fred McGilvray, Inc. v. Askew, 340
So.2d 475 (Fla. 1976), the Florida Supreme Court was presented a case wherein a subcontractor was involved in a
construction project in the Bahamas. The subcontractor purchased materials from sources within and without Florida
and received those materials at its Florida location. Eventually, the materials were loaded onto contractor-chartered
barges, and subsequently delivered to the Bahamas. However, the subcontractor was not able to present any
evidence of the property's commitment to the export process. The subcontractor did not have any bills of lading or
export declarations, and because the barges were chartered by the contractor, the subcontractor was not able to
present the statutorily-preferred method of proof of export, the use of a common carrier. See section 212.06(5)(a),
F.S. Thus, the Florida Supreme Court held that there was too little evidence of commitment to the export process to
find the goods protected by the Import-Export Clause.
Three years after the Florida Supreme Court's decision in Fred McGilvray Inc., the Florida First District Court of
Appeal was presented with another foreign installation contract case. Great Lakes Dredge & Dock Co. v. Department
of Revenue, 381 So.2d 1078 (Fla. 1st DCA 1979), review denied, 381 So.2d 765 (Fla. 1980), involved a situation
wherein a joint venture was created for the purpose of modernizing the Port of Dammam, the primary port of Saudi
Arabia.
Pursuant to the joint venture's contract with the Saudi Arabian government, the joint venture was required to provide
certain materials and equipment for use on the construction project in Saudi Arabia. In order to effectively package
and ship the materials and equipment, the joint venture had the property delivered to Dade County, Florida, where the
joint venture took possession of the property in order to prepare it for shipping, and deliver it to a transporter for ocean
transport to Saudi Arabia. The property was prepared for shipment, delivered to the transporter, and shipped by the
transporter to the foreign port. The Department attempted to impose sales tax on the property because it claimed that
the property came to rest at Dade County, Florida, and that the continuity of journey requirement was not satisfied.
The Florida First District Court of Appeal held that even while the property was being marshaled in Dade County,

Florida, the property was still under the protection of the Import-Export Clause. Relying on the analysis provided by
the federal case law and the Florida Supreme Court, the First District Court of Appeal weighed the factors involved in
order to determine whether the continuity of journey requirement had been satisfied.
The court found that 1) the purchaser was contractually bound to deliver the goods to Saudi Arabia, 2) the purchaser
had bills of lading, 3) export declarations were processed, 4) the purchaser maintained inventories which documented
the packaging of the property, 5) many of the purchase invoices were marked "for export," and 6) many of the
purchase invoices even required delivery by a certain date for purposes of meeting overseas shipping dates. Thus,
the court held that the goods were committed to the export process from the time they were purchased from the
original vendor, and the steps involved in the export process were steps in furtherance of transport and did not subject
the property to state taxation.
The Department argued that section 212.06(5)(a), F.S., was not satisfied because that statute requires that a common
carrier, a licensed exporter, or the United States mail service be used for the export process. However, the court
determined that section 212.06(5)(a), F.S., only created a presumption against exportation if one of the enumerated
methods of shipping were not used, but that such presumption could be rebutted by other evidence that the property
was sufficiently committed to the export stream.
In consideration of these decisions and the general taxability of the mass of property within a state, Florida law
establishes a presumption that property in possession of a purchaser within the state is taxable. See Rule 12A1.0015, F.A.C. However, this presumption can be rebutted by adequate evidence that shows the property involved
was sufficiently and continuously committed to the exportation process.
The facts involved in the instant case closely resemble those involved in Great Lakes. In the instant case, Taxpayer
has entered into a contract for installation of materials in a foreign country, and Taxpayer has executed the purchases
of tangible personal property in performance of its contractual duties. Furthermore, each purchase order indicates the
contract for which the item is purchased.
In order to prepare the items for shipment, Taxpayer has elected to receive the property at its Florida facility, where
the property is marshaled, prepared, and packaged for overseas shipment. The items remain for a relatively short
period of time, and the purchaser then delivers the packaged materials to a freight forwarder.
The Import-Export clause and section 212.06(5)(a), F.S., exempt the property involved herein from tax imposed by
Chapter 212, F.S., if the property is sufficiently identified, and its commitment to the export process is adequately
documented.
Taxpayer has provided documentation proving the existence of a contract between it and the foreign parties involved.
Taxpayer has also provided receipts of tangible personal property purchased in pursuance of the contract, and each
of the invoices provided indicate the contract for which the property was purchased. Taxpayer has also submitted
invoices which require delivery by a date certain in order to be included in the exported shipment.
Taxpayer has provided internal inventories of the property included in each package and container, and Taxpayer has

also provided documentation from the freight forwarder documenting the freight forwarder's receipt of Taxpayer's
shipping pallets, containers, and other materials within days of the property being packaged by Taxpayer.
The documentation provided by Taxpayer illustrates that Taxpayer has met its burden of proving that that purchased
goods were committed to the export process. Although the intermediate step of Taxpayer's packaging the materials at
its Florida location before its delivery to a freight forwarder creates a presumption of taxability, the Taxpayer has
provided substantial evidence showing that these steps were necessary to the overseas transportation of such
property and did not break the continuous export journey.
Taxpayer properly handled the matter with the vendors involved by issuing a certificate/affidavit of exemption.
Taxpayer needs to continue to issue the proper documentation to the vendors involved herein to satisfy the
requirements imposed on dealers for their records. If the vendor is not issued the proper documentation, a registered
Florida dealer would be required to collect sales tax on the transaction. The proper form of documentation in the
instance of a registered dealer involved in these circumstances is contained in Rule 12A-1.038(5), F.A.C. If this is not
substantially the form used by Taxpayer, Taxpayer should conform its documentation.
CONCLUSION
The unique facts of this case persuade the Department that the property was within the export stream at the time it
was received by Taxpayer in Florida and remained in the export stream throughout its transportation out of Florida. All
property purchased by Taxpayer in pursuance of a contract for installation and use overseas, and which Taxpayer has
documented in the manner described above, is exempt from the imposition of tax by Chapter 212, F.S., as it is
protected by the Import-Export Clause and section 212.06(5)(a), F.S.
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,
Robert P. Babin
Attorney
Technical Assistance & Dispute Resolution

(850) 922-4842
RPB\rpb
Control No: 61206