Who handled Florida tax when an out-of-state dealer sold through an unregistered out-of-state buyer and goods were drop-shipped to Florida?

Plain-English summary

Florida considered two drop-shipment structures involving a Florida-registered out-of-state dealer, an unregistered out-of-state buyer with no Florida nexus, and the buyer's Florida customer.

When merchandise was at a vendor's Florida facility and was shipped to the Florida customer, the registered dealer had to collect tax from that Florida customer. The unregistered buyer could not issue a Florida resale certificate or collect and remit the tax. If the dealer could not determine the buyer's resale price, it could calculate tax using its own selling price to the buyer, subject to an applicable exemption, resale certificate, or direct-pay authority from the Florida customer.

When both dealer and buyer were outside Florida and the goods were also outside Florida when purchased, their sale was outside Florida sales-and-use-tax jurisdiction. Tax responsibility arose at the Florida customer level: a reseller collected tax on resale, while a consumer remitted use tax on the cost of the goods.

What this means for you

Drop-shipment tax treatment can change with the goods' location at the time of sale and the registration status of each party. A Florida resale certificate cannot be accepted from an out-of-state buyer that is not registered as a Florida dealer.

Common questions

Who collected tax when the goods shipped from a Florida facility? The Florida-registered dealer collected from the Florida customer under the ruling's structure.

Could the unregistered out-of-state buyer issue a Florida resale certificate? No.

Was the dealer's sale taxable when the goods were purchased outside Florida? No. That dealer-buyer sale was outside Florida's jurisdiction under the stated facts.

Did the second structure eliminate all Florida tax? No. The Florida customer had resale-collection duties if it was a reseller or use-tax responsibility if it was the consumer.

Citations and references

• Fla. Stat. §§ 212.02(14)(a), 212.05, 212.06(1)(a) and (3)(a), and 212.07(1)(b)
• Fla. Admin. Code r. 12A-1.039(1)(c) (registered-dealer requirement for resale certificates)
• Fla. Stat. § 213.22 (Technical Assistance Advisements and no precedential value for other taxpayers)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 07A-043

Original ruling text

SUMMARY
QUESTION: Is an out-of-state dealer, registered in Florida for sales and use tax purposes,
obligated to collect sales tax on a sale to an unregistered out-of-state buyer with no nexus with
the State, where the merchandise will be drop-shipped to the out-of-state buyer’s customer in
Florida from a vendor/drop shipper’s facility in Florida, and the Florida dealer has submitted its
Annual Resale Certificate to the vendor/drop shipper?
ANSWER: The dealer is required to collect the sales tax from the out-of-state buyer’s Florida
customer, since the merchandise is in Florida at the time of sale, and the unregistered out-of-state
buyer cannot collect the tax and remit it to the State when the merchandise is resold to the
Florida customer.
QUESTION: Is an out-of-state dealer, registered in Florida for sales and use tax purposes,
obligated to collect sales tax on a sale to an unregistered out-of-state buyer with no nexus with
the State, where an out-of-state vendor drop ships the merchandise to the out-of-state buyer’s
Florida customer via common carrier?
ANSWER: The sale between the dealer and the out-of-state buyer does not come within the
jurisdiction of Florida’s sales and use tax laws, since both the dealer and the out-of-state buyer
are located outside Florida, and the goods, when purchased, are outside the State.
November 8, 2007
XXX
XXX
XXX
XXX
Re:

Technical Assistance Advisement 07A-043
Sales and Use Tax – Drop Shipment
Sections 212.02(14)(a), 212.05, and 212.06(1)(a), (3)(a), Florida Statutes (F.S.)
Section 212.07(1)(b), Florida Statutes (F.S.)
Rule 12A-039(1)(c), Florida Administrative Code (F.A.C.)
XXX (“Dealer”)
FEIN: XXX
XXX (“Vendor/Drop Shipper”)

Dear XXX:
This is a response to your letter dated August 15, 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.
Technical Assistance Advisement
Page 2
Facts
The Dealer, an out-of-state XXX, has employees in Florida and is registered with the State for
sales and use tax purposes. Dealer has a Vendor/Drop Shipper, also headquartered out-of-state,
that has a XXX facility in Florida.
Dealer makes sales to Florida customers, and either collects the sales tax from the customer or
accepts the customer’s Annual Resale Certificate. Dealer also makes sales to customers who
have no nexus with Florida and are not registered with the State for sales and use tax purposes
(“Non-Resident Customers”). The Non-Resident Customer will sometimes direct Dealer to ship
the merchandise directly to its customer in Florida.
Dealer also has an out-of-state vendor that is not registered as a Florida dealer for sales and use
tax purposes. The out-of-state vendor will ship the merchandise from outside Florida by
common carrier to Dealer’s customer in Florida.
Issue I
Is an out-of-state dealer, registered in Florida for sales and use tax purposes, obligated to collect
sales tax on a sale to an unregistered out-of-state buyer with no nexus with the State, where the
merchandise will be drop-shipped to the out-of-state buyer’s customer in Florida from a
vendor/drop shipper’s facility in Florida, and the Florida dealer has submitted its Annual Resale
Certificate to the vendor/drop shipper?
Taxpayer’s Position
Your letter states in part:
“[T]he physical presence of [Vendor/Drop Shipper] requires it to register as a Florida dealer.
Such status, in turn, obligates [Vendor/Drop Shipper] to collect sales tax whenever
appropriate . . . . [Dealer] should be able to extend a resale certificate to [Vendor/Drop
Shipper] in lieu of collecting tax[,] because [Dealer] is registered in the State of Florida for
sales tax purposes. However, Rule 12A-1.039, F.A.C., prohibits [Dealer’s] Non-Resident
Customer from extending a resale certificate[,] because it is not registered in the State of
Florida for sales tax purposes.
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(14)(a), F.S., defines the terms “Retail sale” or “sale at retail” to mean “a sale to a
consumer or to any person for any purpose other than for resale in the form of tangible personal
property or services taxable under this chapter . . . .”
Technical Assistance Advisement
Page 3
Under the provisions of section 212.06(3)(a), F.S., “ . . . every dealer making sales, whether
within or outside the state, of tangible personal property for distribution, storage, or use or other
consumption, in this state, shall, at the time of making sales, collect the tax imposed by this
chapter from the purchaser.”
Section 212.07(1)(b), F.S., requires that a resale be in strict compliance with section 212.18, F.S.,
and the rules and regulations of the Department. Under the provisions of section 212.18, F.S.,
every person desiring to engage in or conduct business in Florida as a dealer must file with the
Department an application for a certificate of registration. An out-of-state dealer who has no
nexus with Florida may also choose to register as a dealer for the purpose of collecting tax on
retail sales in the State.
In your letter, you cite two previous Technical Assistance Advisements issued by the Department
(TAA 04A-44 and TAA 07A-008) regarding drop shipments. We would point out that
“[t]echnical assistance advisements shall have no precedential value except to the taxpayer who
requests the advisement . . . .” (Section 213.22(1), F.S.)
We agree, however, that, if the Non-Resident Customer does not have nexus with Florida, and
does not elect to register as a dealer with the State, it would not be able to collect the tax or
extend a Florida Certificate of Resale to Dealer. Rule 12A-1.039(1)(c), F.A.C., prohibits the
acceptance of resale certificates by Florida dealers, unless the resale certificate is issued in turn
by a dealer who is "registered with the Department as a dealer for sale tax purposes . . . ."
Where an out-of-state dealer, registered in Florida for sales and use tax purposes, sells
merchandise to an unregistered, out-of-state buyer with no nexus with the State, and the
merchandise will be drop-shipped to the out-of-state buyer’s customer in Florida from a
vendor/drop shipper’s facility in Florida, the registered, out-of-state dealer should extend its
Annual Certificate of Resale to the vendor/drop shipper. In turn, since the out-of-state buyer is
not a registered Florida dealer and, thus, cannot collect sales tax from the Florida customer, the
responsibility for collecting the tax from the Florida customer falls upon the registered, out-ofstate dealer.
If the registered out-of-state dealer cannot ascertain the out-of-state buyer’s selling price to its
Florida customer, the registered out-of-state dealer should collect sales tax from the Florida
customer, based on the dealer’s selling price to the out-of-state buyer. In lieu of collecting the
tax, the registered out-of-state dealer may accept any exemption certificate, resale certificate, or
direct pay authority from the Florida customer, applicable to the transaction.

Conclusion
The Dealer, being registered with Florida as a dealer for sales and use tax purposes, is required to
collect the sales tax from the Florida buyer, since the merchandise is in Florida at the time of
Technical Assistance Advisement
Page 4

sale, and the unregistered Non-Resident Customer cannot collect the tax and remit it to the State
Technical Assistance Advisement
when the merchandise is resold to its Florida customer.
Issue II
Is an out-of-state dealer, registered for Florida sales and use tax purposes, obligated to collect
sales tax on a sale to an unregistered out-of-state buyer with no nexus with the State, where an
Technical Assistance Advisement
Page 4
out-of-state vendor drop ships the merchandise to the out-of-state buyer’s Florida customer via
common carrier?
Taxpayer’s Position
It is your contention that neither Dealer nor its out-of-state vendor should be required to collect
the sales tax, since neither of them, nor the property itself, is located in Florida at the time of
sale.
Law and Discussion
Section 212.06(1)(a), F.S., levies sales tax “at the rate of 6 percent of 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 . . . .”
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. The taxability of the thirdparty 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

Conclusion
The sale between Dealer and the out-of-state buyer does not come within the jurisdiction of
Florida’s sales and use tax laws, since both the dealer and the buyer are located outside Florida,
and the goods, when purchased, are outside the State.
Technical Assistance Advisement
Page 5

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: 34783