Did F.O.B.-shipping-point terms and buyer-paid freight prevent Florida's export exemption when goods left by common carrier?

Plain-English summary

A multistate retailer bought resale inventory and business supplies from a registered Florida distributor. The invoices said F.O.B. shipping point and did not list delivery destinations. The retailer hired and paid common carriers to pick up goods in Jacksonville and deliver them to stores inside and outside Florida.

Florida separated the transactions:

• Inventory for resale: Exempt when the retailer gave the distributor its current Florida Annual Resale Certificate.
• Supplies for the retailer's own Florida use: Taxable because the goods were delivered to Florida locations for consumption.
• Supplies for use outside Florida: Exempt exports when the retailer directed the distributor to deliver them to a common carrier for certain and uninterrupted shipment out of state, and the distributor documented the export.

The Department expressly held that F.O.B.-shipping-point terms and buyer-paid freight did not by themselves create a Florida taxable sale. The statutory test was whether the Florida seller delivered the goods to a common carrier for shipment outside the state.

Intent alone was not enough. The export path had to remain continuous and unbroken, without diversion or Florida possession by the buyer, and the seller needed records identifying the goods and ultimate destination—such as carrier receipts and bills of lading.

What this means for you

Title and freight terms do not control the export exemption

Who bears shipping cost or risk at origin is not the statutory test. Delivery to a qualifying carrier for out-of-state shipment is what mattered.

The Florida seller needs destination evidence

An invoice that merely says F.O.B. shipping point and omits the destination is not enough by itself. The distributor must retain carrier and delivery documentation.

Resale and export are distinct exemptions

Inventory qualified because it would be resold and was supported by a resale certificate. Supplies used by the retailer qualified only if the export requirements were met.

Diversion back into Florida makes tax due

If goods are diverted in transit to the purchaser or its agent in Florida, or never reach the out-of-state destination, the export exemption fails.

Common questions

Q: Did buyer-paid freight make the sale taxable?
A: No. It did not defeat export treatment when the seller delivered the goods to a common carrier for documented shipment outside Florida.

Q: Were supplies used in Florida exempt?
A: No. Supplies bought for the retailer's own Florida locations were taxable.

Q: What records should the seller keep?
A: Documents such as carrier receipts, bills of lading, delivery orders, or comparable records showing the property and out-of-state destination.

Q: What if the goods are diverted to the buyer in Florida?
A: The sale becomes taxable because the continuous export process was broken.

Citations and references

• Fla. Stat. §§ 212.02(14)(a), 212.05, and 212.06(5)(a)1. (resale, retail tax, and export)
• Fla. Stat. §§ 95.091(3) and 213.22 (record period and Technical Assistance Advisements)
• Fla. Admin. Code r. 12A-1.0015(2) (continuous export and records)
• Fla. Admin. Code r. 12A-1.039 (resale purchases)
• Linder Industrial Machinery Co. v. Berry, 385 So. 2d 742 (Fla. 2d DCA 1980)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 08A-023

Original ruling text

SUMMARY
QUESTION: Whether Dealer’s purchases of tangible personal property from Distribution are
subject to Florida sales tax, when the purchases are sold “FOB Shipping Point” and Dealer pays
for the shipping charges.
ANSWER: Dealer’s purchases of tangible personal property from Distribution for export to a
location outside this state are not subject to Florida sales tax, when the sales conform to the
requirements of s. 212.06(5), F.S., and Rule 12A-1.0015, F.A.C. The facts that Dealer purchases
the property “FOB Shipping Point” and pays for the shipping charges will not negate an exempt
sale for export.
August 29, 2008
XXX
XXX
XXX
XXX
Re:

Technical Assistance Advisement 08A-023
Sales and Use Tax – Sales for export
Section 95.091, Florida Statutes (F.S.)
Section 212.02, F.S.
Section 212.05, F.S.
Section 212.06, F.S.
Rule 12A-1.0015, Florida Administrative Code (F.A.C.)
Rule 12A-1.039, F.A.C.
XXX [Dealer]
FEIN: XXX
XXX [Distribution]
FEIN: XXX

Dear :
This is a response to your letter of May 19, 2008, 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’s purchases of tangible personal property from Distribution are subject to Florida

sales tax.
FACTS
Dealer is a retailer located in multiple states. Dealer purchases both inventory for resale and
supplies for its own use from Distribution, a registered Florida dealer located in Jacksonville,
Florida. Dealer states that it has no written purchase agreements with Distribution. Dealer states
that Distribution generates a monthly billing invoice for these purchases. The invoice states that
shipping is “FOB – shipping point” and does not list a specific delivery destination for the goods.
Dealer hires common carriers to pick up the inventory and supplies from Distribution’s facility
and to deliver them to its various stores within and without Florida, including locations in XXX.
The terms of these arrangements are FOB shipping point. Dealer pays all shipping charges and
is responsible for all supplies and inventory once they are received by the common carrier.
Dealer states that Distribution collects a copy of Dealer’s Florida resale certificate, in lieu of
collecting applicable sales tax, when Dealer purchases inventory for resale. Dealer states that
Distribution collects Florida sales tax when Dealer purchases supplies for its own use.
TAXPAYER’S POSITION
In its letter of May 19, 2008, Dealer takes no position on the tax issues presented.
Although Dealer references an ongoing issue in XXX, this TAA will not address or interpret
XXX law and should not be construed as applying XXX tax law to the facts presented. This
TAA will strictly analyze the laws of Florida as applied to Dealer’s particular facts and
circumstances.
APPLICABLE LAW
Section 212.02(14)(a), F.S., provides, in part:
"Retail sale" or a "sale at retail" means 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, and includes all such transactions that may be
made in lieu of retail sales or sales at retail….

Rule 12A-1.039, F.A.C., provides, in part:
(1)(b) A sale for resale is exempt from the tax imposed by Chapter 212, F.S., only when
the sale for resale is in strict compliance with the provisions of this rule. For purposes of
this rule, a “sale for resale” includes the following sales, leases, or rentals when made to a
person who is an active registered dealer….

***

1. The sale of tangible personal property to a dealer when such property will be
   resold to the dealer’s customers.
   (3)(a) COPIES OF ANNUAL RESALE CERTIFICATES OBTAINED BY THE
   SELLING DEALER. The selling dealer who makes a tax exempt sale for the
   purposes of resale must obtain a copy of the purchaser’s current Annual Resale
   Certificate, or a Transaction Resale Authorization Number or Vendor Resale
   Authorization Number issued by the Department.

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.

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 …. Every retail sale made
to a person physically present at the time of sale shall be presumed to have been
delivered in this state.
Rule 12A-1.0015, F.A.C., provides, in part:
(2)(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 Dealer 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….

(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 Dealer or the Dealer'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.

***
Section 95.091(3), F.S., provides, in part:
(a) …[T]he Department of Revenue may determine and assess the amount of any
tax, penalty, or interest due under any tax enumerated in s. 72.011 which it has
authority to administer …:
1.a. For taxes due before July 1, 1999, within 5 years after the date the tax is due,
any return with respect to the tax is due, or such return is filed, whichever occurs
later; and for taxes due on or after July 1, 1999, within 3 years after the date the
tax is due, any return with respect to the tax is due, or such return is filed,
whichever occurs later ….
DISCUSSION AND RESPONSE
Florida law provides that every person is exercising a taxable privilege who engages in the
business of selling tangible personal property at retail in Florida. Retail sales of tangible
personal property are subject to tax at the rate of 6 percent of the sales price, unless specifically
exempt by Chapter 212, F.S. See s. 212.05(1)(a)1.a., F.S.
Section 212.02(14)(a), F.S., provides that a sale for resale (Footnote #1) is not a taxable “retail
sale” in the State of Florida. See also Rule 12A-1.039, F.A.C. Thus, when Dealer purchases
inventory from Distribution for resale to its customers, the sale is exempt from Florida sales tax.
To receive the benefit of this exemption, Dealer should provide a copy of its Annual Resale
Certificate (Form DR-13) to Distribution at the time of sale, in lieu of paying any applicable
Florida sales tax. See Rule 12A-1.039(3)(a), F.A.C.
If Dealer purchases supplies from Distribution for its own use in Florida, Distribution must
collect applicable sales tax at the time of purchase, because the goods are delivered to Dealer’s
Florida locations. However, if Dealer purchases supplies from Distribution for use in another
state, then these purchases may qualify as exempt sales for export. Section 212.06(5)(a)1., F.S.,
and Rule 12A-1.0015(1)(a), F.A.C., provide an export exemption from the sales tax for dealers
who sell items to customers (either retailers or end users) located outside Florida, when such
items will be delivered to the customers’ locations outside this state.
These provisions indicate that a seller is not required to collect and remit tax to the Department
when the seller is required by the terms of the sales contract to deliver the item:
▪ to a licensed exporter for exporting;
▪ to a common carrier or forwarding agent for shipment outside Florida;
▪ to the U.S. mail for mailing to a destination outside Florida; or
▪ using its own mode of transportation to a destination outside Florida.

Accordingly, if Dealer purchases supplies from Distribution, and Dealer directs Distribution to
deliver the property to a common carrier for delivery to a location outside Florida, then the
transaction may qualify as an exempt sale for export.
To enjoy the protection of the exemption, Distribution is required to keep sufficient records to
document that the supplies were exported outside Florida in a continuous and unbroken
exportation process, such as the nonexhaustive list of examples provided in Rule 12A1.0015(2)(c), F.A.C. Examples of records to document sales for export to points outside Florida
include common carriers’ receipts, bills of lading, or similar documentation that evidences the
delivery destination, receipts from a licensed customs broker, and proof of export signed by a
customs officer. Distribution must maintain these records for three years after the date the tax is
due, any return with respect to the tax is due, or such return is filed, whichever occurs later. See
s. 95.091(3), F.S.
Dealer questions whether it may purchase supplies tax-exempt for export when the delivery out
of state is made “FOB shipping point” and the Dealer pays for the shipping charges. Linder
Industrial Machinery Company v. Berry, 385 So.2nd 742, 744 (Fla. 2nd DCA 1980), answered
this question unequivocally in the affirmative, stating that “[t]he Legislature did not specify as to
the test whether the sale was ‘complete’ or whether title passed or who is responsible for
shipment. The test stated is whether the ‘importer, producer or manufacturer delivered same to a
common carrier for shipment outside the State.’”
Thus, it is clear that the Department cannot assess Florida sales tax on Distribution’s sales to
Dealer solely on the basis that the sales were made "FOB Shipping Point” and Dealer paid for
the shipping charges. If Dealer instructs Distribution to deliver the supplies to a common carrier
for certain and uninterrupted shipment to a location outside Florida, and Distribution documents
the exportation process as required in Rule 12A-1.0015, F.A.C., then the transaction will qualify
as an exempt sale for export.
CONCLUSION
Dealer’s purchases of tangible personal property from Distribution for export to a location
outside this state are not subject to Florida sales tax, when the sales conform to the requirements
of s. 212.06(5), F.S., and Rule 12A-1.0015, F.A.C. Dealer’s purchases of tangible personal
property for its own use in Florida are subject to Florida sales tax.
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
Tax Law Specialist
Technical Assistance & Dispute Resolution
ID: 48394
Footnote#1 – A sale for resale includes a sale of tangible personal property to a registered
Florida dealer when the property will be resold to the dealer’s customers. See Rule 12A1.039(1)(b)1., F.A.C.