After a corporate merger, could vendors use the surviving entity's Florida direct-pay permit for contracts and purchase orders still in the merged entity's name?

Plain-English summary

Florida allowed vendors to accept a surviving corporation's valid direct-pay permit for contracts and purchase orders that still carried the name of a company merged into it.

Both companies had held direct-pay permits before the merger. When the merger became effective, the surviving corporation acquired the merged entity's property and contract rights and assumed its debts, obligations, and liabilities. It also registered the former company's business locations under its own Florida sales-tax account.

Because the surviving entity became responsible for the inherited purchases and any related tax, vendors could accept its permit instead of collecting tax. The survivor then had to self-accrue and remit the proper Florida sales and use tax directly to the Department.

What this means for you

Companies completing mergers

Update vendor records and provide the surviving entity's valid permit, even when legacy contracts cannot immediately be renamed.

Vendors

Verify that the permit is valid and covers the authorized purchases. A direct-pay permit shifts collection and remittance responsibility to the permit holder.

Common questions

Could vendors accept the survivor's permit for legacy contracts? Yes.

Who became responsible for the tax? The surviving corporation.

Did the merged entity's name on the purchase order prevent use of the permit? No, on the stated merger facts.

Citations and references

• Fla. Stat. Sec. 212.183
• Fla. Stat. Sec. 607.1106
• Fla. Admin. Code R. 12A-1.0911

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 21A-015

Original ruling text

QUESTION: Can Merging Entity’s vendors accept Surviving Entity’s valid direct pay permit, even if the
contracts and purchase orders are in the name of Merging Entity, in order to not charge sales tax on a
transaction, and to permit Surviving Entity to directly remit the Florida sales and use tax due to the
Florida Department of revenue?

ANSWER: Merging Entity’s vendors can accept Surviving Entity’s valid direct pay permit and to permit
Surviving Entity to directly remit the Florida sales and use tax due to the Florida Department of Revenue.

November 16, 2021

XXXX
XXXX
XXXX
XXXX
XXXX
Re:

Technical Assistance Advisement 21A-015
Florida Sales and Use Tax
XXXX (“Taxpayer”)
BP#: XXXX
Sections 212.183, 607.1106, Florida Statutes (F.S.)
Rule 12A-1.0911, Florida Administrative Code (F.A.C.)

Dear XXXX:
This letter is in response to your request dated March 8, 2021, and received in this office on
March 9, 2021, for issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section
213.22, F.S., and Rule Chapter 12-11, F.A.C., concerning direct pay permit. An examination of
your request has established you complied with the statutory and regulatory requirements for
issuance of a TAA. Therefore, the Department is hereby granting your request for a TAA.
REQUESTED ADVISEMENT
Can XXXX’s (“XXXX”) vendors accept Taxpayer’s valid direct pay permit, even if the contracts and
purchase orders are in the name of XXXX, in order to not charge sales tax on a transaction, and

Technical Assistance Advisement
November 16, 2021
Florida Department of Revenue
Page 2

to permit Taxpayer to directly remit the Florida sales and use tax due to the Florida Department
of Revenue?
STATED FACTS
On January 1, 2021, XXXX legally merged with Taxpayer pursuant to Florida law. A copy of the
Florida Secretary of State’s records regarding the merger have been provided with this request.
As the surviving entity, Taxpayer assumed all of XXXX’s assets and liabilities, including current
contracts with vendors.
Prior to the legal merger, Taxpayer and XXXX both held Sales and Use Tax Direct Pay Permits
issued by the Florida Department of Revenue pursuant to s. 212.183, F.S. Both permits allow
Taxpayer and XXXX to purchase tangible personal property without being charged the Florida
sales tax by vendors, as the entities take the responsibility for remitting the applicable taxes
directly to the Department of Revenue.
Taxpayer’s current direct pay permit, Number XXXX, is effective from May 17, 2017 until May 31,
2022. XXXX’s direct pay permit, Number XXXX, was effective from October 17, 2019 until
December 31, 2020, when the entities merged. Copies of both permits have been provided with
this request. Effective January 1, 2021, all of XXXX’s business locations are now registered as
Taxpayer’s locations for Florida sales and use tax purposes.
Prior to the merger, XXXX entered into numerous purchase orders and contracts with third-party
vendors and contractors. XXXX provided its Sales and Use Tax Direct Pay Permit to those vendors
and contractors to avert paying the tax on invoices, and instead, XXXX accrued and remitted the
applicable tax directly to the Department. Here, after the merger, the XXXX’s name will continue
as an operating division of Taxpayer through this calendar year. However, Taxpayer will
ultimately be the legal entity responsible for the payment of all valid invoices and purchase
orders in XXXX’s name, and Taxpayer will be responsible for the payment of any associated
Florida sales and use taxes.
LAW & DISCUSSION
Section 607.1106, F.S., provides, in pertinent part, the following:
(1) When a merger becomes effective:
(a) The domestic or foreign eligible entity that is designated in the plan of merger as the
survivor continues or comes into existence, as the case may be;
(b) The separate existence of every domestic or foreign eligible entity that is a party to
the merger, other than the survivor, ceases;
(c) All real property and other property, including any interest therein and all title
thereto, owned by, and every contract right possessed by, each domestic or foreign

Technical Assistance Advisement
November 16, 2021
Florida Department of Revenue
Page 3

eligible entity that is a party to the merger, other than the survivor, become the property
and contract rights of and become vested in the survivor, without transfer, reversion, or
impairment;
(d) All debts, obligations, and other liabilities of each domestic or foreign eligible entity
that is a party to the merger, other than the survivor, become debts, obligations, and
liabilities of the survivor;

Section 212.183, F.S., Rules for self-accrual of sales tax. —The Department of Revenue is
authorized to provide by rule for self-accrual of the sales tax under one or more of the following
Circumstances, provides in part:
(1) Where authorized by law for holders of direct pay permits.
(2) Where tangible personal property is subject to tax on a prorated basis, and the
proration factor is based upon characteristics of the purchaser.
(3) Where the taxable status of types of tangible personal property will be known only
upon use.

(5) Where the purchaser makes purchases in excess of $10 million per year of tangible
personal property in any county. . ..
Rule 12A-1.0911(2), F.A.C., provides in part:
(2) Self-accrual authorization.
(a) The Department will authorize dealers to assume the obligation of self-accruing and
remitting tax directly to the Department for the following purposes:

5. The purchase of tangible personal property by dealers who annually purchase in
   excess of $10 million of taxable tangible personal property in any county for the
   dealer’s own use.
6. The purchase of tangible personal property by dealers who annually purchase at
   least $100,000 of taxable tangible personal property, including maintenance and
   repairs for the dealer’s own use, and the taxable status of the property will be known
   only when the dealer uses the property. For example, dealers whose normal trade or
   business characteristics require them to purchase property, maintenance, or repairs
   that will either become a component part of a product manufactured for sale or will

Technical Assistance Advisement
November 16, 2021
Florida Department of Revenue
Page 4

be used and consumed by the dealer will know the taxable status of the property only
when the property is used.

(c) The Department will issue a Sales and Use Tax Direct Pay Permit to qualified applicants.
The effective date of the permit is the postmark date of the application or, when the
application is delivered by means other than the United States Postal Service, the date
the application is received by the Department.
(d) The Department will specify on each permit the circumstances for which the dealer is
authorized to self-accrue and remit sales and use tax directly to the Department. The
authorized dealer is required to remit the tax directly to the Department.
(e) Any dealer that holds a valid Sales and Use Tax Direct Pay Permit may extend a copy
of its permit to the selling dealer in lieu of paying tax for authorized purchases to the
selling dealer.
(f) The validity of a Sales and Use Tax Direct Pay Permit may be verified by using the
Department’s
online
Certificate
Verification
System
at
www.floridarevenue.com/taxes/certificates, by using the Department’s FL Tax mobile
application, or by calling the Department’s automated nationwide toll-free verification
system at 1(877)357-3725. Persons with hearing or speech impairments may call the
Florida Relay Service at 1(800)955-8770 (Voice) and 1(800)955-8771 (TTY).
Under the provisions of s. 607.1106(1)(c) and (d), F.S., when the merger of two entities occurs,
the surviving entity assumes any contracts, debts, and obligations of the merging entity. In the
instance case, Taxpayer has assumed XXXX’s vendor contracts and the obligations associated
with such contracts, effective January 1, 2021, pursuant to the merger between the two parties.
Both entities have been issued Sales and Use Tax Direct Pay Permits pursuant to s. 212.183, F.S.,
which allows them to remit the applicable sales tax due on taxable purchases directly to the
Department. The implication of using a direct pay permit is that holder of the permit
acknowledges the responsibility and obligations of remitting the sales tax due on all taxable
purchase. Since obligation of XXXX’s liabilities has been relegated Taxpayer after the merger,
Taxpayer would now be responsible and would be obligated to remit any sales tax due related to
XXXX taxable purchases.
CONCLUSION
XXXX’s vendors can accept Taxpayer’s valid direct pay permit that permits Taxpayer to directly
remit the Florida sales and use tax due to the Florida Department of Revenue.
For more information concerning all the taxes administered by the Department of Revenue,
please refer to the Department’s Internet site at:

Technical Assistance Advisement
November 16, 2021
Florida Department of Revenue
Page 5

http://floridarevenue.com
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 and 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.
Kind Regards,

Xiaoxi Miao
Xiaoxi Miao
Tax Law Specialist
Technical Assistance & Dispute Resolution
XM\tadrstaff
Record ID: 501133