Could the jewelry seller collect Florida sales tax for its independent home-show retailers?

Subject

The Sale of Jewelry by Independent Retailers

Plain-English summary

The out-of-state jewelry seller could collect Florida sales tax directly from its independent retailers when it made the wholesale sale, using the suggested retail price if that price was the retailer's actual customer price. That arrangement eliminated the need for those independent retailers to register or file Florida sales-tax returns.

An independent retailer could instead choose to collect and remit tax. In that case, the retailer had to register as a dealer, collect tax on the actual Florida customer price, and provide a resale certificate when purchasing the jewelry tax-free from the seller.

The ruling also required the seller to collect applicable local-option surtax based on the independent retailer's location, including applicable shipping and similar charges in the base described by the ruling.

What this means for you

The Department accepted the retailers' independent status only preliminarily and subject to audit verification because no retailer agreements were submitted. Agency, control, actual pricing, registration, and resale documentation were therefore important to the result.

Common questions

Could the seller collect tax instead of each retailer registering? Yes, under the described actual-price collection method.

Could an independent retailer collect tax itself? Yes, but it then had to register, file, and collect tax from its customers.

Could a registered retailer buy from the seller tax-free? Yes, by giving the seller a resale certificate at the wholesale purchase.

How did the ruling locate local surtax? By the independent retailer's location.

Citations and references

• Fla. Stat. §§ 212.02(17), 212.0596, 212.06, and 213.22
• Fla. Admin. Code r. 12A-1.038

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94A-050

Original ruling text

Aug 30, 1994

Re: TAA 94A-050
Sales Tax; The Sale of Jewelry by Independent Retailers

Dear :

This letter constitutes a Technical Assistance Advisement, issued to you under Chapter 12-11, F.A.C., and under the authority of s. 213.22, F.S.

This is in response to a proposed collection and remittance agreement for your client, XXX (hereinafter, "Taxpayer"), for which you and the Department have commenced negotiations. As I informed you in the letter of June 27, 1994, a collection and remittance agreement was not the suitable means to meet the needs of your client; therefore, the issuance of a Technical Assistance Advisement shall serve to clarify the collection and remittance obligation of Taxpayer as it relates to its transactions with its independent retailers.

FACTS

As ascertained from all the documents reviewed, pursuant to your prior negotiations with the Department, the following conclusions of fact have been reached. Taxpayer is engaged in the business of purchasing and selling jewelry and related products throughout the United States and within Florida. Taxpayer does not have any facilities, employees, inventory or salesmen within Florida, but sells its products directly to independent retailers in Florida. The independent retailers resell the products, principally through a home show system, directly to Florida residents.

Typically, an independent retailer will contact a homeowner, who will agree to have a home show, and will invite potential retail customers. The independent retailer will display at the home show the jewelry products that are available, and orders will be placed at that time by the retail

customers.

After orders are placed at the home shows, the independent retailers place the order(s) with Taxpayer to purchase at wholesale the necessary products to fill the retail order sales. All wholesale orders are subject to acceptance by the Taxpayer at its principal office, outside the State of Florida.

After Taxpayer receives an order and the wholesale payment, if Taxpayer accepts the order, Taxpayer will ship the products necessary to fill the order through third party interstate carriers either directly to the hostess, who will distribute the order to the purchaser(s), or sometimes to the independent retailer, who will distribute the order to the purchaser. Each retail order is individually packaged by Taxpayer at its offices. All sales are "F.O.B. [the out of state location]." Except for replacement of defective products, all sales are final. The Taxpayer has no obligation to service any items.

The independent retailers are at sole risk for collection from their retail customers. If a retail customer fails to pay, the products belong to the independent retailer, and Taxpayer does not repurchase them or provide credit for them.

Taxpayer has been remitting sales tax to the Department, collected from the independent retailers based on the suggested retail price, since 1986, in accordance with ss. 212.0596 and 212.06, F.S. However, Taxpayer wishes to ascertain and clarify its collection and remittance obligation in Florida as it relates to its transactions with the independent retailers making the retail sales in Florida.

The Department notes that no agreements between Taxpayer and the independent retailers were submitted for review. However, based on the representations made by you to the Department regarding the relation between the parties (i.e., the independent retailers and Taxpayer), the Department preliminarily accepts your classification of these "independent retailers," as being truly independent from Taxpayer and not agents of Taxpayer, subject to audit verification.

TAXPAYER'S POSITION

Taxpayer specifically requests that the Department rule that the independent retailers are not the responsible party for collecting the sales tax on their retail sales to Florida residents; instead, Taxpayer requests that the Department confirm that the independent retailers need not be individually registered with the Department for sales and use tax purposes.

DEPARTMENT'S DETERMINATION

Upon review of all facts and circumstances, it is the Department's determination that Taxpayer may collect the sales tax directly from its independent retailers, based on the suggested retail sales price, provided it is the actual sales price, as defined in s. 212.02(17), F.S., at the time that Taxpayer makes the wholesale sale to the independent retailers. This should eliminate the need for Taxpayer's independent retailers to register with the Department, or to file sales tax returns, for Florida sales tax purposes.

However, in cases where the independent retailer elects to collect and remit the sales tax himself (or herself), the independent retailer must register with the Department as a dealer to collect and remit sales tax. In cases where the independent retailer is registered, it must collect sales tax on the sales price, as defined in s. 212.02(17), F.S., at the time it sells the jewelry to its customers in Florida. Also, if the independent retailer is registered, to collect and remit sales tax, it may purchase the jewelry from Taxpayer tax exempt, provided the independent retailer extends its resale certificate to Taxpayer, in lieu of remitting the tax to Taxpayer, at the time of the wholesale purchase, in accordance with Rule 12A1.038, F.A.C.

In relation to local option surtaxes, as determined by the rate of the independent retailer's location, the Department requires that Taxpayer collect and remit local option surtaxes on all sales made to the independent retailers located in surtax counties, based on the suggested retail sales price, including applicable shipping charges and other similar charges.

Finally, Taxpayer shall be allowed a collection allowance to be computed at the rate of 2.5 percent on the first $1,200.00 of tax due. Therefore, the maximum collection allowance authorized for any filing period shall be $30.00.

The Department appreciates your efforts in assisting your clients to comply with the tax laws of the State of 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 based 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 are public records under Chapter 119, F.S., which are subject to disclosure to the public under the conditions of s. 213.22, F.S. Your name, address, and any other details which might lead to identification of the taxpayer must be deleted by the Department before disclosure. In an effort to protect the confidentiality of such information, we request you notify the undersigned in writing within 15 days of any deletions you wish made to the request or the response.

Sincerely,

Nydia Men‚ndez
Tax Law Specialist

NM/
Control No. 16392