Did an out-of-state seller have to collect Florida tax when it sold goods to an unregistered out-of-state buyer and drop-shipped them to the buyer's Florida customer?

Plain-English summary

Florida did not require the out-of-state seller to collect sales or use tax on the described drop shipment.

The seller and buyer were both outside Florida. The seller had no Florida manufacturing facility, and the goods came from out-of-state inventory or sources. At the buyer's direction, a common carrier delivered the property from outside Florida to the buyer's Florida customer.

The Department said the seller's sale to the buyer was not a Florida sale because both parties and the goods were outside Florida at the time of sale. The seller's Florida dealer registration did not change that result, and common-carrier delivery did not require it to collect tax from the Florida customer.

The unregistered out-of-state buyer could not collect Florida sales tax. Instead, the Florida customer could owe use tax unless the customer was reselling the property or otherwise exempt.

What this means for you

• The result depended on the seller being an out-of-state nonmanufacturer and the goods being outside Florida when sold.
• An invoice noting the out-of-state buyer and common-carrier shipment into Florida was sufficient documentation under the ruling.
• Different drop-shipment facts could produce a different collection obligation.

Common questions

Q: Did the seller have to charge Florida sales tax to the buyer? A: No, on the specific out-of-state sale and shipment facts described.

Q: Could the unregistered buyer charge its Florida customer sales tax? A: No.

Q: Was the transaction entirely tax-free? A: Not necessarily. The Florida customer could owe use tax unless it was a reseller or otherwise exempt.

Citations and references

• Fla. Stat. § 212.05 — Florida sales and use tax
• Fla. Admin. Code r. 12A-1.091(10) — rule provision the Department said would apply to a Florida manufacturer
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-043

Original ruling text

Aug 12, 1996

Re: TAA 96A-043
Drop Shipment Into Florida From Out-of-State Seller Section 212.05, F.S. Rule 12A-1.091(10), F.A.C.

Dear :

This is a response, styled a Technical Assistance Advisement, to your letter dated February 15, 1996, wherein you ask whether Florida sales or use tax may be imposed on a sale, commonly known as a "drop shipment," by your firm, XXXX (herein Seller), to a firm located outside this state (herein Buyer), not registered as a Florida dealer for purposes of the collection of sales tax, which directs Seller to deliver the tangible personal property to the Florida customer of Buyer. Seller has received from the Department a communication styled a Letter of Technical Advice dated July 28, 1995, and a communication known as an Information Letter dated January 25, 1996, all considering the same facts as in the instant letter and issued in response to previous Seller's inquiries.

You originally provided the information relative to this type of drop-shipment in a letter dated November 21, 1994, but which was received in the Department's offices on July 25, 1995. In that letter, and in a letter dated December 19, 1995, you described Seller as located outside Florida. It does not operate a manufacturing facility in this state. Seller was described in those letters as a registered Florida dealer which delivers the goods by common carrier to Buyer's customer in Florida. Buyer is described as not registered in Florida for purposes of the collection of the Florida sales tax.

Department Response

The Department affirms its previous determination expressed in the Letter of Information and in the Letter of Technical Advice,

that the transaction you describe is not a Florida sale subject to sales tax, nor is Seller required to collect and remit use tax. Section 212.05, F.S., imposes such taxes on sales or use within the jurisdiction of Florida law.

The sale of tangible personal property by Seller to Buyer, considering the facts you provide, is not a Florida sale because 1) both firms are located outside Florida, 2) the property, at the time of sale, was outside Florida, and 3) Seller shipped the goods from a point outside Florida by common carrier to Buyer's customer in Florida.

Thus, Seller, located and doing business outside of Florida, and having no manufacturing facilities in this state, albeit registered as a Florida dealer for purposes of the collection of sales tax, is not obligated to charge sales tax on the invoice representing a sale of tangible personal property drawn from Seller's out-of-state inventory, or obtained from out-of-state sources, and sold by Seller to Buyer which is unregistered and located out-of-state, which then directs the Seller to ship the property to its Florida customer by common carrier. Further, since the property was shipped into Florida by common carrier, Seller has no duty to collect sales or use tax from the Buyer's customer in Florida.

The Department affirms also that sufficient documentation or evidence of this nontaxable sale to Buyer would be the sales invoice on which it is noted that the property was sold to an out-of-state buyer and then shipped into Florida by common carrier.

Buyer, not a registered Florida dealer, may not collect Florida sales tax from its customer in Florida. Thus, the only tax applicable to this transaction is the Florida use tax which may be imposed on the Buyer's customer in Florida provided such customer is not, itself, a reseller of the property, or otherwise exempt.

In previous letters the Department has revealed that Rule 12A1.091(10), F.A.C., provides that Seller would be obligated to collect sales tax from Buyer if Seller were a Florida

manufacturer. However, since Seller is not a Florida manufacturer, this rule provision is not applicable.

You are alerted that the determination expressed herein is only applicable to the specific transaction described in your letters and is not an expression of the Department's position as to any other "drop shipment" transaction having different facts than those you have provided the Department in such letters.

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 response.

Sincerely,

Robert G. Parsons
Tax Law Specialist
Tax Policy and Dispute Resolution

Ctrl. No. 24778