Did a registered out-of-state drop shipper have to collect Florida tax from an out-of-state dealer when goods went by common carrier to Florida?

Plain-English summary

An unregistered out-of-state dealer with no stated Florida nexus bought merchandise from an out-of-state supplier that was registered as a Florida dealer. At the purchasing dealer's direction, the supplier shipped the goods by common carrier to the dealer's customer in Florida.

Florida concluded that the supplier did not have to collect sales tax from the out-of-state dealer. Both contracting parties were outside Florida, the goods were outside Florida at the time of sale, and the supplier used a common carrier to deliver them into Florida. The supplier's invoice showing an out-of-state buyer and common-carrier shipment into Florida was sufficient documentation of that nontaxable sale.

The ruling did not erase tax consequences at the Florida end of the transaction. It stated that a Florida customer reselling the goods would collect tax on resale, while a consumer would remit use tax on cost. Because the Department did not know the customer's activities, it did not decide that customer's actual liability.

What this means for you

The supplier's registration as a Florida dealer did not by itself make this particular out-of-state sale taxable. The result depended on both seller and buyer being outside Florida, the property being outside Florida when sold, delivery by common carrier or U.S. mail, and the purchasing dealer's assumed lack of Florida nexus.

Common questions

Did the drop shipper collect Florida tax from the out-of-state dealer? No, under the stated facts.

What facts supported that answer? Both parties were outside Florida, the goods were outside Florida at sale, and a common carrier transported them to the Florida recipient.

What documentation did Florida accept? The supplier's sales invoice noting the out-of-state buyer and shipment into Florida by common carrier.

Was the Florida customer's tax liability decided? No. The ruling described possible resale or consumer use-tax duties but expressly said it lacked the customer's facts and did not address that customer's liability.

Would the same result necessarily apply if the purchasing dealer had Florida nexus? No conclusion was given for that situation. The ruling expressly assumed that the dealer lacked the nexus requiring Florida registration.

Citations and references

• Fla. Stat. § 212.02(15)(a) (definition of sale)
• Fla. Stat. § 212.05 (taxable privilege of retail selling)
• Fla. Stat. § 212.06(1)(a) (sales and use tax levy)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 07A-008

Original ruling text

SUMMARY
QUESTION: Is a vendor/drop shipper, located outside Florida but
registered as a Florida dealer, obligated to collect sales tax
on a sale to a customer that is an unregistered dealer located
outside Florida, with no tax nexus with this state, in the
instance where the vendor/drop shipper ships the merchandise by
common carrier to the customer’s buyer in Florida?
ANSWER – Based on Facts Below: The vendor/drop shipper is not
obligated to collect tax from the out-of-state dealer in the
instance where the merchandise is shipped into Florida by common
carrier. The transaction is not a Florida sale when the
vendor/drop shipper and the dealer are both out of the state and
the goods are shipped into the state by common carrier.

March 29, 2007

Re:

Technical Assistance Advisement 07A-008
Sales and Use Tax – Drop Shipment
Sections 212.02(15)(a), 212.05, and 212.06(1)(a), F.S.
XX(“Dealer”)
d/b/a XX
EIN: XX
XX(“Vendor/Drop Shipper”)

Dear:
This is a response to your letters dated August 9, 2006, and August 14, 2006, requesting the
issuance of a Technical Assistance Advisement (TAA) concerning the above referenced parties
and matter. Your letters and supporting documents have been carefully examined, and the
Department finds your request to be in compliance with the requisite criteria set forth in Chapter
12-11, F.A.C. This response to your request constitutes a TAA, and is issued to you under the
authority of section 213.22, Florida Statutes.
Facts
You state that your company, an unregistered out-of-state dealer that has no nexus with the State
of Florida [Dealer], purchases merchandise from a registered out-of-state supplier [Vendor/Drop
Shipper], but directs [Vendor/Drop Shipper] to ship the merchandise to its customer in Florida
[Florida Customer.]
With your request, you have provided the Department with a copy of a purchase order from
Dealer to Vendor/Drop Shipper (Purchase Order No. XX). Also provided is a copy of the sales

invoice from Vendor/Drop Shipper, which describes the sale made by Vendor/Drop Shipper,
located outside Florida, to Dealer, also located outside Florida, with instructions to ship the
product to Florida Customer, via XX (“Common Carrier”), a common carrier (Invoice No. XX).
Issue
Is a vendor/drop shipper, located outside Florida but registered as a Florida dealer, obligated to
collect sales tax on a sale to a customer that is an unregistered dealer located outside Florida,
with no tax nexus with this state, in the instance where the vendor/drop shipper ships the
merchandise by common carrier to the customer’s buyer in 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 . . . .”
Section 212.02(15)(a), F.S., defines the term “Sale” to mean and include: “Any transfer of title or
possession, or both, . . . in any manner or manner whatsoever, of tangible personal property for a
consideration.”
Section 212.06(1)(a), F.S., levies sales tax at the rate of 6 percent on the "retail sales price as of
the moment of sale, 6 percent of the cost price as of the moment of purchase, or 6 percent of the
cost price as of the moment of commingling with the general mass of property in this state . . . .”
Thus, tax is due on the sales price of each item of tangible personal property, unless otherwise
exempt, when the property is delivered to the purchaser or the purchaser’s representative in this
State.
On third-party drop shipments, where a dealer purchases merchandise from a vendor and, then,
instead of taking possession of the merchandise, directs the vendor to drop-ship the merchandise
to its customer in Florida, the drop shipment of the merchandise into Florida would not be
considered a Florida sale if: 1) both the dealer and the vendor are located outside Florida; 2) the
property, at the time of sale, is outside Florida; and 3) the vendor ships the merchandise from a
point outside Florida by common carrier, or sends the goods through the U.S. Postal Service, to
the dealer’s customer.
Based upon the information provided in your request and the above cited statutory authority,
Vendor/Shipper would not be required to collect Florida sales tax. Vendor/Drop Shipper makes
no actual entry into Florida during the course of the transaction, since it merely delivers the
goods to a common carrier for delivery into Florida; the Vendor/Shipper is not selling
merchandise in this State or, selling merchandise directly to Florida Customer.
Accordingly, the sale between Dealer and Vendor/Drop Shipper does not come within the
jurisdiction of Florida’s sales and use tax laws. Sufficient documentation of evidence of this
nontaxable sale to Dealer from Vendor/Drop Shipper would be the sales invoice from

Vendor/Drop Shipper, on which it is noted that the property was sold to an out-of-state buyer and
then shipped into Florida by common carrier.
The taxability of the third party transaction occurs when the goods are drop-shipped to Dealer’s
Customer in Florida. Since Dealer is not a registered Florida dealer, it may not collect Florida
sales tax from Florida Customer. The assumption is that Dealer does not have substantial nexus
with the State to require the company to register as a dealer for purposes of Florida’s sales and
use tax. If Florida Customer is a reseller of the goods, then Florida Customer is responsible for
collecting tax when the merchandise is resold. If Florida Customer is the consumer of the goods,
then Florida Customer is responsible for remitting use tax on the cost of the goods.
In the instant case, the Department has no knowledge of the business activities of the Florida
Customer; therefore, this advisement does not address the Florida Customer’s liability for the
tax.
Conclusion
The vendor/drop shipper is not obligated to collect tax from the out-of-state dealer in the instance
where the merchandise is shipped into Florida by common carrier. The transaction is not a
Florida sale when the vendor/drop shipper and the dealer are both out of the state and the goods
are shipped into the state by common carrier.
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 from that which is
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,
Dee Overcash
Technical Assistance and Dispute Resolution
Record ID: 24890