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
Ctrl #18115