Did a terminated Florida facility lease or a Florida-based internal process consultant require a mail-order retailer to collect Florida sales tax?

Plain-English summary

Florida ruled that an out-of-state mail-order retailer's former Florida facility and current home-based process consultant did not require it to collect tax on present mail-order sales.

The retailer terminated its sublease, vacated the premises, removed its property, and no longer maintained Florida offices, inventory, employees, sales agents, or other business locations. Florida read the cited facility and property provisions as requiring a present in-state presence, so the former lease no longer created nexus.

The consultant worked from a Florida home on business analysis, workflows, employee and systems training, and procedure writing for headquarters personnel outside Florida. The consultant had no customer or vendor contact, did not solicit or accept orders, handle payments, deliver or service goods, or otherwise help establish and maintain a Florida market. Those internal process services did not create nexus either.

What this means for you

Ending physical presence requires more than signing a termination: vacate, remove property, and confirm no continuing office, inventory, employee, or representative activity. Separately classify any remaining Florida contractors by their actual market-facing functions.

Common questions

Did the former lease keep creating nexus? No, after the retailer terminated it and permanently vacated.

Did the process consultant create nexus? No, under the internal-only facts.

Citations and references

• Fla. Stat. § 212.0596, as quoted and discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 09A-058

Original ruling text

SUMMARY
QUESTION 1: Whether the taxpayer’s former sublease and use of a facility in Florida creates in the
taxpayer an obligation to collect and remit tax on its mail order sales.
ANSWER 1: The taxpayer has terminated its sublease of the facility and vacated the premises. The
taxpayer’s former sublease and use of the facility does not create in the taxpayer an obligation to
collect and remit tax on its present mail order sales.
QUESTION 2: Whether the taxpayer’s use of an independent consultant in Florida, who performs
“process improvement services” for the taxpayer, obligates the taxpayer to collect and remit tax on
its mail order sales.
ANSWER 2: The taxpayer’s use of the independent consultant in Florida does not obligate the
taxpayer to collect and remit tax on its mail order sales.

November 9, 2009
XXX
XXX
XXX
Re:

Technical Assistance Advisement No. 09A-058
Sales and Use Tax – Nexus
Section 212.0596, Florida Statutes [F.S.]
Rule 12-11.003, Florida Administrative Code [F.A.C.]
XXX [Taxpayer]

Dear:
This is a response to your letter of June 15, 2009, requesting a Technical Assistance Advisement
[TAA] regarding the above-referenced matter. This response to your request constitutes a TAA
under Chapter 12-11, F.A.C., and is issued to you under the authority of Section 213.22, F.S.
FACTS
Taxpayer is a XXX limited liability company that makes interstate sales of general merchandise
through the mail to customers located in Florida and other states. Taxpayer is a registered Florida
dealer and is principally located in XXX.
Taxpayer advertises its merchandise by mailing or otherwise distributing catalogs and other
advertising materials throughout the United States. Customers purchase merchandise from Taxpayer

online, by telephone, by fax, or by U.S. mail. Taxpayer processes and accepts or rejects all sales
orders at its corporate headquarters in XXX. Accepted sales orders are filled by Taxpayer via
common carrier or U.S. mail, from the inventory that Taxpayer maintains at its distribution center in
XXX.
Taxpayer states that it utilizes the services of an “independent contractor consultant” [the
Consultant], who “provides process improvement services with respect to the process by which
[Taxpayer] researches and adopts new products to offer for sale in its mail order business.”
Taxpayer states that this Consultant works out of her home in Florida and presents her advice to
Taxpayer personnel in XXX. Taxpayer states that the Consultant does not have any contact with
Taxpayer’s customers or vendors. Taxpayer states that the Consultant does not provide any services
that are visible to Taxpayer’s customers.
In 2003, Taxpayer consolidated with a separate limited liability company [Sister]. As part of the
consolidation, Taxpayer acquired Sister’s sublease of a facility [the Facility] located in XXX,
Florida.
In June 2009, Taxpayer terminated its sublease of the Facility. Under the terms of the “Lease and
Sublease Termination Agreement” [the Termination Agreement], Taxpayer agreed to vacate the
premises and remove all property from the facility on June 30, 2009. 1 Taxpayer paid a “Lease
Cancellation Fee” of $140,357.07 at that time.
Taxpayer states that it no longer maintains any office, distribution center, or other place of business
in Florida. Taxpayer states that it does not maintain any inventory or other property in Florida.
Taxpayer states that it does not have any employee, agent, or representative in Florida soliciting
sales orders or conducting any other business activities on behalf of Taxpayer in Florida.
TAXPAYER’S POSITION
Taxpayer believes that it no longer has Florida sales and use tax nexus as a result of the leased
Facility, because Taxpayer terminated the lease in June 2009 and vacated the Facility.
Taxpayer also believes that it has not established Florida sales and use tax nexus “as a result of its
utilization of the Florida-based independent contractor consultant …, who provides her services to
[Taxpayer] personnel at its XXX corporate headquarters and does not help [Taxpayer] develop a
market for its products in Florida." Taxpayer states that this Consultant “does not interact with
[Taxpayer’s] customers or vendors and any work that the consultant performs in Florida on
[Taxpayer’s] process improvement projects is invisible to [Taxpayer’s] customers.” Taxpayer has
provided a copy of the “Independent Contractor Service Agreement” [the Agreement] between
Taxpayer and the Florida-based consultant to support its position.
Taxpayer has provided a copy of its Agreement with its Florida consultant. The Agreement
specifically lists the consultant’s job duties as follows:
1 Paragraph Two of the Termination Agreement provides that “[s]aid Lease and Sublease are hereby terminated,
effective June 30, 2009….” Paragraph Four of the Termination Agreement provides that “[a]ny items not removed from
the [Facility] by the date of this … Agreement shall become the property of the Lessor as if by bill of sale.”

1) Business Analyst/Liaison;
2) Workflow improvements;
3) Training new employees;
4) Reoccurring/refresher training;
5) New systems training; and
6) Workflow procedure writing. See “Exhibit A” of the Agreement.
ISSUE #1
Whether Taxpayer’s former sublease and use of the Facility creates in Taxpayer an obligation to
collect and remit tax on its mail order sales.
DISCUSSION AND RESPONSE
Section 212.0596(2)(c), F.S., provides:
(2) Every dealer as defined in s. 212.06(2)(c) who makes a mail order sale is subject
to the power of this state to levy and collect the tax imposed by this chapter when:

(b) The dealer maintains retail establishments or offices in this state, whether the
mail order sales thus subject to taxation by this state result from or are related in any
other way to the activities of such establishments or offices;

(j) The dealer owns real property or tangible personal property that is physically in
this state….

Florida law provides that a dealer who makes mail order sales must collect and remit Florida tax on
such sales, when the dealer “maintains retail establishments or offices” in Florida, or otherwise
“owns … real property” in this state. (emphasis supplied) See s. 212.0596(2)(b) and (j), F.S. This
statutory language clearly indicates that a dealer must presently own or maintain real property in this
state, in order for the dealer to have a nexus connection to Florida under s. 212.0596(2)(b) and (j),
F.S. Since Taxpayer terminated its sublease of the Facility and permanently vacated the premises,
Taxpayer successfully severed any nexus connections to this state that were created through its use
of the Facility.

CONCLUSION
Taxpayer’s former sublease and use of the Facility does not create in Taxpayer an obligation to
collect and remit tax on its mail order sales.
ISSUE #2
Whether Taxpayer’s use of an independent consultant in Florida, who performs “process
improvement services” for Taxpayer, obligates Taxpayer to collect and remit tax on its mail order
sales.
APPLICABLE LAW
Section 212.0596(2)(c), F.S., provides:
(2) Every dealer as defined in s. 212.06(2)(c) who makes a mail order sale is subject
to the power of this state to levy and collect the tax imposed by this chapter when:

(c) The dealer has agents in this state who solicit business or transact business on
behalf of the dealer, whether the mail order sales thus subject to taxation by this state
result from or are related in any other way to such solicitation or transaction of
business, except that a printer who mails or delivers for an out-of-state print
purchaser material the printer printed for it shall not be deemed to be the print
purchaser's agent for purposes of this paragraph;

DISCUSSION AND RESPONSE
Section 212.0596(2)(c), F.S., provides that a dealer who makes mail order sales must collect and
remit Florida tax on such sales, when the dealer has agents in this state “who solicit business or
transact business on behalf of the dealer, whether the mail order sales thus subject to taxation by this
state result from or are related in any other way to such solicitation or transaction of business.”
(emphasis supplied)
Generally, the “transaction of business” on behalf of the dealer includes activities that further “the
taxpayer’s ability to establish and maintain a market in this state….”2 For example, the Department
would deem the following activities by a dealer’s representative or agent to create sales and use tax
nexus with the State of Florida: 1) the solicitation of orders; 2) the sale or acceptance of orders; 3)
the acceptance of payments; 4) the delivery of merchandise; 5) the service of merchandise; or 6) the
representation of the dealer in Florida through some other means.

2 See Tyler Pipe Industries, Inc. v. Washington Dep’t of Revenue, 483 U.S. 232, 250 (1987).

Taxpayer states that its independent consultant in Florida “provides her services to [Taxpayer]
personnel at its XXX corporate headquarters and does not help [Taxpayer] develop a market for its
products in Florida." Taxpayer states that this consultant “does not interact with [Taxpayer’s]
customers or vendors and any work that the consultant performs in Florida on [Taxpayer’s] process
improvement projects is invisible to [Taxpayer’s] customers.”
Based on the information and records provided to the Department by Taxpayer, the Department has
determined that the activities of Taxpayer’s consultant do not constitute any of the activities
described in s. 212.0596(2)(c), F.S. Rather, Taxpayer’s consultant’s activities are specifically
limited to “process improvement services” provided directly to Taxpayer’s principle place of
business in XXX. Accordingly, Taxpayer is not obligated to collect and remit Florida tax on its mail
order sales of tangible personal property, due to the use of this consultant.
CONCLUSION
Taxpayer’s use of the independent consultant in Florida does not obligate Taxpayer to collect and
remit tax on its mail order sales.
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
Record ID: 66907