Was a sale between an out-of-state distributor and out-of-state dealer taxable when goods were drop-shipped to the dealer's Florida customer?

Plain-English summary

The Florida Department of Revenue concluded that a sale from a non-Florida distributor to a non-Florida dealer was outside Florida sales-and-use-tax jurisdiction even though the goods were drop-shipped by common carrier to the dealer's customer in Florida.

The seller had no Florida location or inventory, and the goods were outside Florida when purchased. Whether the out-of-state buyer was registered—or should have been registered—in Florida did not control this seller-to-buyer transaction.

The Florida recipient's transaction still carried tax consequences: a Florida reseller had to collect tax on resale, while a Florida consumer had to remit use tax on the goods' cost. The distributor had to retain invoices showing the non-Florida dealer's physical location and the common-carrier destination at the Florida customer.

What this means for you

Out-of-state distributors

Keep transaction and shipping records establishing that the sale occurred outside Florida and delivery was made by common carrier.

Florida recipients

The upstream sale's exclusion does not eliminate your resale-collection or consumer use-tax responsibility.

Common questions

Q: Did the distributor have to determine whether the out-of-state dealer should register in Florida?
A: No.

Q: Was the Florida recipient free of tax obligations?
A: No.

Citations and references

• Fla. Stat. §§ 212.05 and 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 13A-015

Original ruling text

Executive Director
Marshall Stranburg

QUESTION: Are sales from a non-Florida dealer to a non-Florida buyer taxable if drop shipped
via common carrier to the non-Florida’s buyer’s customer in Florida?
ANSWER: No.

August 14, 2013

Re:

Technical Assistance Advisement – TAA 13A-015
Taxability of Drop Shipments
Sales and Use Tax
Section 212.05, Florida Statutes (F.S.)
XXX (“the Taxpayer”)
FEI #: XXX

Dear XXX:
This is in response to your letter dated XXX, requesting this Department’s issuance of a
Technical Assistance Advisement (“TAA”) pursuant to s. 213.22, F.S., and Rule Chapter 12-11,
Florida Administrative Code (F.A.C.), regarding the taxability of drop shipments to Florida. An
examination of your letter has established that you have complied with the statutory and
regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting
your request for a TAA.
ISSUE
The issue concerns the taxability of certain drop shipments of tangible personal property in
Florida.
FACTS
You assert the following facts:
•

Taxpayer is a distributor of used equipment and parts headquartered in XXX.

•

Taxpayer has no physical locations nor maintains saleable inventory within the state lines
of Florida.
Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – James McAdams, Director  Information Services – Tony Powell, Director

www.myflorida.com/dor
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
Page 2 of 3
•

Taxpayer employs traveling sales force that does visit the State of Florida.

•

Taxpayer is registered for Florida sales tax collection as a non-resident retailer on all
taxable sales shipped to Florida Customers who buy directly from [the Taxpayer].

•

Florida registration is current under number XXX.

•

All sales shipped into Florida are done so by common carrier.

You further indicate in part:
The taxpayer has a significant number of sales whereby their customer requests/directs
the taxpayer to drop-ship the goods to the customer’s customer. [The Taxpayer] is clear
on its understanding when it sells directly to a Florida customer that either sales tax is
charged and collected or a Florida resale certificate is obtained from the customer.
You seek guidance on taxing implications of sales to non-Florida dealers, with no legal
obligation to be registered in the State of Florida, who direct the Taxpayer to ship goods to the
non-Florida dealer’s customer in Florida. You indicate the goods are shipped via common
carrier from a non-Florida location.
TAXPAYER POSITION
It is your position the Taxpayer is not required to collect tax on sales made pursuant to the facts
as stated above, however, you are “unclear on the documentation that is required
. . . to substantiate the exempt sale and to what extent [the Taxpayer] has a legal obligation to
verify/validate that a purchaser is not registered or required to be so in the [State] of 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 . . . .”
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. Whether the purchaser is
registered (or should be registered due to other business activities) in Florida is not the relevant
point.
The taxability of the third-party 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

Technical Assistance Advisement
Page 3 of 3
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.
RESPONSE
The sales (resulting in drop shipments to Florida as described) do not come within the
jurisdiction of Florida sales and use tax laws. The Taxpayer should retain documentation to
establish that the subject sales take place outside Florida’s jurisdiction and delivery is made via
common carrier. The invoices to the non-Florida dealers should indicate the non-Florida dealer’s
physical location. Further, the invoices should indicate the common carrier destination point as
that of the non-Florida dealer’s customer. The Taxpayer is under no obligation to determine if a
customer should be registered for sales tax in Florida.
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.
Sincerely,

R. Clay Brower
Revenue Program Administrator
Technical Assistance and Dispute Resolution
(850) 717-6306
RCB/
Ctrl# 147969