Could a Florida dealer sell components tax-free to a nonresident when it delivered them to another Florida dealer for assembly before export?

Plain-English summary

A Florida parachute-canopy manufacturer sold components to nonresident customers. At each customer's direction, the manufacturer shipped the canopies to another Florida dealer, which combined them with other components into a completed parachute system and then shipped the finished system outside Florida.

Florida required the canopy manufacturer to collect and remit sales tax. The second Florida dealer received the canopies as the customer's representative or agent, so the property was delivered to the purchaser's representative in Florida rather than committed at sale to final and certain movement outside the state.

The answer was the same whether the canopies went to a separate rigging dealer or to the harness-and-container dealer for assembly. The ruling also stated that it was issued only to the canopy manufacturer; the other parties could not rely on it as an advisement issued to them.

What this means for you

A buyer's out-of-state residence and eventual export of a finished product do not automatically make a Florida component sale exempt. Delivery to the buyer or its representative in Florida for manufacturing or assembly can break the required continuous export process and make the component sale taxable.

Common questions

Why was the sale taxable if the finished parachute left Florida? The canopies first went to a Florida dealer acting for the customer. That Florida delivery occurred before the completed system was exported.

Did separate contracts and invoices change the result? No. Although the customer contracted with and was invoiced by each dealer separately, Florida treated the receiving dealer as the customer's representative for taking possession and assembling the goods.

What would support export treatment? The quoted rule gives examples such as contractually required delivery by the seller outside Florida, mailing to an out-of-state destination, or delivery to a carrier, customs broker, or forwarding agent for final and certain movement outside Florida.

Could the other Florida dealers rely on this TAA? No. The Department expressly stated that the TAA was issued to Dealer A and quoted the rule that a taxpayer generally may not rely on an advisement issued to another taxpayer.

Citations and references

• Fla. Stat. § 212.05 (tax on retail sales of tangible personal property in Florida)
• Fla. Stat. § 212.06(5)(a)1. (property produced or manufactured for export)
• Fla. Admin. Code r. 12A-1.0015(2)(a)-(c), (e) (Florida delivery and continuous export process)
• Fla. Admin. Code r. 12-11.007(1) (reliance on another taxpayer's advisement)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 07A-018

Original ruling text

SUMMARY
QUESTION: May a Florida dealer sell tangible personal property to a nonresident customer taxexempt when the dealer ships the property to another Florida dealer, who uses the property to
manufacture a finished product and then ships the product out-of-state to the nonresident
customer?
ANSWER – Based on Facts Below: A Florida dealer must collect and remit Florida sales tax on
the sale of tangible personal property to a nonresident customer when the property is shipped to
another Florida dealer who uses the property to manufacture a finished product.

June 18, 2007

Re:

Technical Assistance Advisement 07A-018
Sales and Use Tax – Out-of-state sales
Section 212.05, Florida Statutes (F.S.)
Section 212.06, F.S.
Rule 12A-1.0015, Florida Administrative Code (F.A.C.)
Rule 12-11.007, F.A.C.
XXX [Dealer A]
FEIN: XX

Dear
This is a response to your letter of February 15, 2007, requesting a Technical Assistance
Advisement (TAA) regarding the above-referenced matter. This response to your request
constitutes a TAA under Chapter 12-11, Florida Administrative Code (F.A.C.), and is issued to
you under the authority of Section 213.22, Florida Statutes (F.S.).
ISSUE
Whether Dealer A may sell parachute components to a nonresident customer tax-exempt, when
Dealer A ships the components to another Florida dealer who uses the components to
manufacture a completed parachute system and ships the finished product to the nonresident
customer.
FACTS
A parachute system for intentional jumping consists of three main parts: 1) the main parachutes
(canopy only); 2) the reserve parachutes (canopy only); and 3) the harness/container system that
the parachutes go into. Dealer A manufactures main parachutes and reserve parachutes, but does
not manufacture harness/container systems. In order for a customer to use Dealer A’s canopies,
the customer must purchase the harness/container system from another entity.
Many of Dealer A’s customers are located outside the United States. Typically, when one of
these customers desires to purchase a parachute system, the customer enters into individual

purchase agreements with several different dealers: 1) Dealer A; 2) XXX. [Dealer B], a
parachute rigging manufacturer; and 3) XXX [Dealer C], a harness/container manufacturer.
Dealer A states that it collects no written purchase orders from its customers because “most
orders are by telephone with instruction given verbally.” Dealer A states that the remaining
orders are placed by email. The Department has received several copies of these emails,
including invoices providing shipment information. According to the email documentation,
customers purchase parachute canopies from Dealer A and instruct Dealer A to ship the canopies
to another dealer located in Florida. At the time of purchase, Dealer A charges Florida sales tax
on the purchase price of the parachute components.
Dealer A presents several alternative business scenarios to the Department and requests that the
Department analyze each scenario individually. However, the Department may limit its response
to an analysis of Dealer A’s properly documented transactions; thus, this TAA is limited to
transactions which have been documented by Dealer A’s emails. See Rule 12-11.003(2)(b),
F.A.C.
In Dealer A’s first proposed scenario, a nonresident customer orders parachute canopies from
Dealer A, orders harness/container systems from Dealer C, and instructs the dealers to ship the
goods to Dealer B to be assembled. The customer further orders that the completed parachute
systems be packaged for shipment and sent via Federal Express, UPS, DHL USPS, or some other
carrier to the customer’s out-of-state location. Each of the companies directly invoices the
customer for the components or services it provides.
In Dealer A’s second proposed scenario, a nonresident customer orders parachute canopies from
Dealer A and orders harness/container systems from Dealer C. The customer instructs Dealer A
to deliver the canopies to Dealer C to be assembled (rigged). The customer further orders that
the completed parachute systems be packaged for shipment and sent via Federal Express, UPS,
DHL USPS, or some other carrier to the customer’s out-of-state location. Each of the companies
directly invoices the customer for the components or services it provides.
TAXPAYER’S POSITION
Dealer A states that in every case the buyer enters into individual purchase agreements with the
Florida dealers, and there is no relationship between the Florida dealers except that they sell to a
mutual customer. Dealer A argues that none of the Florida dealers acts as an agent to receive
merchandise from another Florida dealer for the mutual customer. Dealer A states that the
dealers “combine their portions of the items ordered to save the mutual customer shipping,
packing and custom costs.”
Dealer A states that, in all scenarios listed in this request for Technical Assistance Advisement,
each order is given to the separate Florida dealers for their own individual product and none of
the dealers is assuming responsibility for any of the other dealers’ product.
APPLICABLE LAW
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 including the business of making mail order sales, or

who rents or furnishes any of the things or services taxable under this chapter ….
(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.

Section 212.06(5)(a)1., F.S., provides, in part:
Except as provided in subparagraph 2., it is not the intention of this chapter to
levy a tax upon tangible personal property imported, produced, or manufactured
in this state for export, provided that tangible personal property may not be
considered as being imported, produced, or manufactured for export unless the
importer, producer, or manufacturer delivers the same to a licensed exporter for
exporting or to a common carrier for shipment outside the state or mails the same
by United States mail to a destination outside the state …. (emphasis supplied)
Rule 12A-1.0015, F.A.C., provides, in part:
(2)(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….
(b) When a dealer sells tangible personal property, commits the property to the
exportation process at the time of sale, and the exportation process remains
continuous and unbroken until the property is exported from Florida, the dealer is
not required to collect tax. The intent of the seller and the purchaser to export the
property is not sufficient to establish that the property is not subject to tax in
Florida. The delivery of the property to a location in Florida for subsequent export
from Florida is insufficient to establish documentary evidence that the property
sold was irrevocably committed to the exportation process. The following are
examples of methods to commit the property to the exportation process at the time
of sale:

1. The dealer is required by the terms of the sale contract to deliver the property
   outside Florida using the dealer's own mode of transportation;
2. The dealer is required by the terms of the sale contract to mail the property by
   United States mail to a destination located outside Florida; or
3. The dealer is required by the terms of the sale contract to deliver the property to
   a carrier, licensed customs broker, or forwarding agent for final and certain
   movement of the property to a destination located outside Florida.

***
(c) Any dealer who makes tax-exempt sales of tangible personal property for
export outside Florida is required to maintain records to document that the
property is committed to the exportation process at the time of sale and that the
exportation process is continuous and unbroken until the property is exported
from Florida. The dealer is required to maintain records that identify the tangible
personal property sold and the delivery destination of the property. The
documentation must clearly establish that the property was not commingled with
the mass of property within Florida…. Examples of records to document sales for
export to points outside Florida are:

1. Internal delivery orders identifying the property sold and the destination and
   date of delivery that are supported by receipts of expenses incurred in delivering
   the property, such as trip tickets or truck logs signed by the person who delivers
   the property;
2. United States Postal Service parcel post receipts with supporting
   documentation identifying the property and the destination;
3. Common carriers' receipts, bills of lading, or similar documentation that
   evidences the delivery destination;
4. Export declaration;
5. Receipts from a licensed customs broker; or
6. Proof of export signed by a customs officer.

(e) Regardless of the evidence maintained by the dealer to document delivery of
the property to a common carrier or a licensed customs broker for shipment to a
location outside Florida, or the mailing of the property by the United States mail
to a location outside Florida, tax is due when the property is diverted in transit to
the purchaser or the purchaser's agent or representative in Florida and such person
takes possession in Florida, or when for any other reason the property is not
delivered outside Florida.

Rule 12-11.007(1), F.A.C, provides, in part:
A taxpayer may not rely on an advisement issued to another taxpayer, except that
an advisement issued to a taxpayer association provides guidance to those
taxpayers who are members of the taxpayer association for the particular
transaction(s) discussed in the TAA….

DISCUSSION AND RESPONSE
All sales of tangible personal property in Florida are subject to sales tax, unless specifically
exempt by Chapter 212, F.S. Section 212.06(5), F.S., provides a “safe harbor” exception when a
dealer sells tangible personal property to customers located outside Florida. Rule 12A1.0015(2)(b), F.A.C., states that when a dealer sells merchandise, commits the property to the
exportation process at the time of sale, and the exportation process remains continuous and
unbroken until the property is exported from Florida, the dealer is not required to collect tax.
Rule 12A-1.0015(2)(b), F.A.C., provides examples of methods to commit property to the
exportation process at the time of sale. For example, if the dealer is required by the terms of the
sale contract to deliver the property to a carrier for final and certain movement of the property to
a destination located outside Florida, then the dealer can claim that the property was sold for
exportation.
Dealer A presents several alternative business scenarios and asks the Department to examine
each situation individually.
Scenario 1:
A nonresident customer orders parachute canopies from Dealer A, orders harness/container
systems from Dealer C, and instructs both dealers to ship the goods to Dealer B to be assembled
(rigged). The customer further orders that the completed parachute systems be packaged for
shipment and sent via Federal Express, UPS, DHL USPS, or some other carrier to the customer’s
out-of-state location. Each of the companies directly invoices the customer for the components
or services it provides.
Dealer A asks the following question in regard to the first scenario:
“Can Dealer A send the components to Dealer B and not charge Florida sales tax to the
customer?”
Dealer A is instructed to ship its parachute components to Dealer B, located in Florida. Rule
12A-1.0015(2)(e), F.A.C., states that tax is due when property is diverted in transit to the
purchaser's agent or representative in Florida and such person takes possession in Florida, or
when for any other reason the property is not delivered outside Florida. In this proposed
scenario, the property is not delivered outside Florida; it is shipped by Dealer A to Dealer B.
Dealer B, under the instruction of the customer, receives the property, constructs a parachute
system from the various components, and then ships the finished system to another location.
Thus, Dealer B acts as a representative or agent of the customer in Florida to receive the property
from Dealer A. Dealer A must collect and remit Florida sales tax on the sales of parachute
canopies to the customer.
Scenario 2:
A nonresident customer orders parachute canopies from Dealer A and orders harness/container
systems from Dealer C. The customer instructs Dealer A to deliver the canopies to Dealer C to
be assembled (rigged). The customer further orders that the completed parachute systems be
packaged for shipment and sent via Federal Express, UPS, DHL USPS, or some other carrier to
the customer’s out-of-state location. Each of the companies directly invoices the customer for
the components or services it provides.

Dealer A asks the following question in regard to the second scenario:
“Can Dealer A send the components to [Dealer] C and not charge Florida sales tax to the
customer?”
See Scenario 1. The tax implications are identical. Dealer A must collect and remit Florida sales
tax on the sales of parachute canopies to the customer.
Dealer A also asks, “Will the response to this Request for Technical Assistance be applicable to
each of the parties in these transactions?” Rule 12-11.007(1), F.A.C, states that “[a] taxpayer
may not rely on an advisement issued to another taxpayer, except that an advisement issued to a
taxpayer association provides guidance to those taxpayers who are members of the taxpayer
association for the particular transaction(s) discussed in the TAA.” This Technical Assistance
Advisement is issued to Dealer A.
CONCLUSION
Dealer A must collect and remit Florida sales tax on the sale of parachute components to a
nonresident customer when the components are shipped to a Florida dealer who uses the
components to manufacture a completed parachute system.
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.
If you have any further questions with regard to this matter and wish to discuss them, you may
contact me directly at (850) 488-8565.
Sincerely,
Matt Crockett
Senior Tax Specialist
Technical Assistance & Dispute Resolution
ID: 29159