Were an out-of-state manufacturer's receivables from Florida customers subject to Florida intangible tax when its salesperson regularly visited the state?

Plain-English summary

Florida ruled that the out-of-state manufacturer's accounts receivable from Florida customers were subject to Florida intangible tax.

The company manufactured and stored its products outside Florida and shipped them by common carrier. It had no Florida office, warehouse, inventory, or permanently located employee or independent representative.

Its southeastern salesperson nevertheless entered Florida for company business on 19 days in 1995 and 16 days in 1994. During those visits, the salesperson called on existing and potential customers and solicited orders, which remained subject to approval at the out-of-state headquarters.

The Department treated those regular in-state sales activities as business transacted in Florida. It also noted that claims against Florida customers or property would have to be enforced through Florida courts. The resulting receivables therefore had Florida business situs.

What this means for you

• A business did not avoid intangible-tax situs merely because it lacked permanent Florida property or personnel.
• Regular visits by a traveling salesperson were enough on these facts to connect Florida receivables to in-state business activity.
• The ruling focused on receivables arising from Florida customer sales, not every asset of the out-of-state company.

Common questions

Q: Did the company maintain property in Florida? A: No. It had no Florida office, warehouse, inventory, or other assets.

Q: What Florida activity mattered? A: Its salesperson regularly visited Florida customers and prospects and solicited orders there.

Q: Were the Florida customer receivables taxable? A: Yes. The Department concluded they arose from Florida business and had Florida taxable situs.

Citations and references

• Fla. Stat. § 199.175(2)(a) — Florida business situs for intangible personal property
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-078

Original ruling text

Sep 06, 1996

Re: Technical Assistance Advisement No. 96(C)2-078 Intangible Tax; Taxable Situs Section 199.175, F.S. XXX (Corporation A)

Dear :

Your letter requesting a Technical Assistance Advisement has been received by this office. The request deals with the taxation of accounts receivable from Florida customers owned by a non-Florida corporation having a sales representative contacting customers, at the customer's location within Florida.

FACTS

The facts that you have provided to the department are as follows:

Corporation A manufactures a product at plants in another state. Corporation A sells its product to customers located in Florida. The product is shipped via common carrier from Corporation A's warehouses in another state. Corporation A does not maintain an office or warehouse, rented or owned, in Florida. Corporation A maintains no inventory or other assets in Florida. Corporation A has no employees or independent sales representatives permanently located in Florida.

The travel records of the salesperson who covers the southeastern United States shows the salesperson was physically present in Florida on Corporation A's business 19 days in 1995, and 16 days in 1994. While in Florida, the salesperson makes calls on existing and potential customers and solicits orders, subject to approval at Corporation A's headquarters in another state.

ISSUE

Based on the facts as stated above, you have requested a ruling on the following issue:

Will the accounts receivable from Florida customers owned by Corporation A be subject to Florida intangible tax?

LAW AND DISCUSSION

Section 199.175, F.S., states in pertinent part:

(2) Intangible personal property shall have a taxable situs in this state when it is deemed to have a business situs in this state and it is owned, managed, or controlled by a person transacting business in this state, even though the owner may claim a domicile elsewhere. This provision shall apply regardless of where the intangible is created, approved, or paid.

a) Intangibles shall be deemed to have a Florida business situs when they receive the benefit and protection of Florida laws and courts and they are derived from, arise out of, or are issued in connection with the business transacted in this state. For the purpose of this paragraph:
...

2. Business is transacted in this state when any
   occupation, profession, or commercial activity, including financing, leasing, selling, or servicing is regularly conducted with customers in this state by or through agents, employees, or representatives of any kind in this state, whether or not such persons are vested with discretionary authority....

It is your position that Corporation A has no taxable situs in Florida, even though its representatives call on Florida customers at the customers' Florida locations.

In response to your position; not only does the representative of Corporation A make regular trips to Florida but the accounts receivable must be enforced in Florida. No other jurisdiction can effect a claim against a person or property located in

Florida other than the Florida courts.

CONCLUSION

It is the opinion of this office that the accounts receivable arising out of the business conducted by Corporation A in Florida are subject to Florida's intangible tax.

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,

Maryella Ingram
Tax Law Specialist
Tax Policy & Dispute Resolution