Was Florida sales tax due when cloth goods were sent to an independent Florida washer before continuing to the seller's customer?

Subject

Sale of Cloth Goods

Plain-English summary

The seller did not have to charge Florida sales tax merely because the cloth goods passed through a Florida washer before continuing to the customer. The Department concluded that the transaction was not a Florida sale and that the customer did not accept delivery of the goods in Florida.

The seller shipped surgical wrappers and similar linens from a non-Florida facility to the washer at the customer's direction. The seller billed the customer only for the goods, had no role in the washer's separate contract with the customer, and did not bill or collect the washer's service charge. The Department distinguished this routing arrangement from a third-party drop shipment to the seller's customer's Florida client.

What this means for you

Temporary routing through Florida for work by an independent service provider did not, on these facts, turn the seller's sale into a Florida retail sale. The result depended on who contracted for the washing, who billed for it, where the seller shipped from, and whether the buyer accepted delivery in Florida.

Common questions

Did physical entry into Florida make the sale taxable? No, not on the facts presented.

Why was this not treated as a third-party drop shipment? The seller diverted the goods to the washer at its customer's direction; it did not deliver them to a Florida customer of its customer.

Did the seller charge the customer for washing? No. The seller billed only for the goods and was not part of the customer's contract with the washer.

Citations and references

• Fla. Stat. §§ 212.05 and 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94A-059

Original ruling text

Title:

Sale of Cloth Goods

Nov 14, 1994

Re: TAA 94A-059
Whether Florida sales tax is applicable to the sale of cloth goods by an out-of-state seller to a buyer in XXX when the only contact with Florida is the shipment of the goods to XXX for the purpose of washing such goods at which time the goods are then shipped to buyer in XXX. Section 212.05, F.S.

Dear

This is a response, styled a Technical Assistance Advisement, to your letter dated October 13, 1994, wherein you asked whether Florida sales tax may be validly charged by your firm, XXX (herein Taxpayer), a registered Florida dealer for sales tax purposes, on a sale of certain cloth goods to a hospital in XXX (herein Customer), who as a condition of the sale, orders Taxpayer to ship the cloth goods from a Taxpayer facility in XXX, by common carrier, to a Florida firm in XXX (herein Washer), who then washes and ships such goods to Customer.

The goods in the transaction described in your letter are styled "wrappers" which term means goods used to wrap surgical instruments at time of use, or goods placed on the patient around the area under surgery. Other goods shipped by Taxpayer to Washer might include bed linen of various kinds. Taxpayer is engaged both as a manufacturer and distributor of the goods it sells but the dominant portion of its business is acting as a distributor rather than as a manufacturer of the goods.

In a telephone conversation on October 26, 1994, the Department learned from personnel of Taxpayer that Taxpayer is headquartered in XXX and has facilities in other states including XXX and XXX, in which as to Florida, Taxpayer has a warehouse and employs sales representatives.

In this conversation the Department was asked to respond only to the transaction described in your letter. From the facts in the letter and additional information gained during the telephone conversation the Department understands that the transaction you describe is infrequent. Also, it is the understanding of the Department that this transaction involved a sale of the goods by Taxpayer's office in XXX to Customer and that the goods were not shipped from Taxpayer's Florida facility. The only contact with Florida was the shipment of the goods by Taxpayer to Washer in XXX. It is also the understanding of the Department that Taxpayer bills Customer only for the goods. It does not bill Customer, on behalf of Washer, for any service or function performed by Washer for Customer. Taxpayer is a stranger to any contract Customer has with Washer.

Department response

This sale of wrappers by Taxpayer to Customer, considering the facts as presented to the Department, is not subject to Florida sales tax. The only parties to the sales contract are Taxpayer and Customer. Customer's representatives did not accept delivery of the wrappers in Florida.

Within the terms of this sale, Taxpayer caused the shipment of the wrappers into Florida on orders from Customer. The billing by Taxpayer to Customer did not include any charge made by Washer on Customer.

This transaction is not what is sometimes termed a third party drop shipment. Here, Taxpayer merely diverted the goods to Washer in Florida on orders from Customer. Taxpayer did not drop-ship the goods to a Florida client of Customer which is characteristic of a third party drop shipment.

In sum, Taxpayer should not charge Customer Florida sales tax on this transaction. There is no Florida taxing statute, including s. 212.05, F.S., which imposes Florida sales tax on this sale. The sale of goods by Taxpayer to Customer, considering the facts communicated to the Department, is not a Florida sale and Florida sales tax may not validly be charged on this transaction.

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 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 s. 212.05, F.S., which levies a Florida tax on such a transaction.

Sincerely,

Robert G. Parsons
Tax Law Specialist
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