Who must collect Florida sales tax and obtain resale certificates when vehicles are sold on consignment through an auto auction?

Plain-English summary

The auto auctioneer was the dealer responsible for collecting and remitting Florida sales tax and obtaining resale certificates from qualifying buyers. The taxpayer that owned and consigned the vehicles did not have those primary duties merely because it remained the owner and principal.

The Department treated the delivery of vehicles to the auctioneer as a consignment or bailment, not a taxable sale from the owner to the auctioneer. The taxable transaction occurred when the auctioneer sold a vehicle to a buyer and transferred title.

There was an important backstop. The taxpayer had to retain evidence that the auctioneer was registered for Florida sales tax when the transactions occurred. If the auctioneer was unregistered or failed to collect and remit the tax, the taxpayer remained ultimately liable as principal and owner of the vehicles.

What this means for you

Vehicle owners using an auction company should not assume the auctioneer's role eliminates every tax risk. Keep a copy of the auctioneer's Florida sales-and-use-tax certificate of registration for at least the five-year period specified in the advisement.

The Department also called it prudent, though not legally required by the cited provisions, for the consignor to retain copies of the resale certificates the auctioneer obtained from buyers.

Common questions

Q: Is placing a vehicle with an auctioneer itself a sale? No. The Department characterized the consignment as a bailment and agency relationship, not a transfer of title or possession for consideration.

Q: Who is the selling dealer at the auction? The auctioneer. As consignee and selling dealer, it must register, collect and remit applicable tax, and obtain resale certificates.

Q: Can the vehicle owner still be liable? Yes. The owner remains ultimately liable if the auctioneer was not registered or otherwise failed to collect and remit the tax due.

Q: What records did the Department expect the owner to keep? Documentary proof of the auctioneer's registration, specifically a copy of its Florida sales-and-use-tax certificate of registration, retained for at least five years. Copies of buyers' resale certificates were also recommended as a prudent practice.

Citations and references

• Fla. Stat. § 212.02(14)(a) — definition of retail sale
• Fla. Stat. § 212.02(15)(a) — definition of sale
• Fla. Stat. § 212.05(1) — taxable privilege of selling tangible personal property at retail
• Fla. Admin. Code r. 12A-1.038 — resale and exemption certificates
• Fla. Admin. Code r. 12A-1.066 — auctioneers, agents, brokers, and factors
• Fla. Admin. Code r. 12A-1.081 — consignee collects and remits tax on consignment sales
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-066

Original ruling text

SUMMARY

In the case of a consignment sale through an auctioneer, the auctioneer is the dealer making the sale and is the party responsible for the collection and remittance of tax and the obtaining of resale certificates on its sale of the consigned goods. However, if the auctioneer is not registered dealer, or if the auctioneer otherwise fails to collect and remit the tax due, the Taxpayer, as principal and owner of the vehicle or vehicles sold, would be ultimately liable for the tax due.

Oct 16, 1997

Re: Technical Assistance Advisement 97(A)-066 Liability for Collection and Remittance of Tax and for Resale Documentation on Motor Vehicles Sold on Consignment at Auto Auctions Taxpayer: XXX (the "Taxpayer" or "Petitioner") Address: XX Federal Identification Number: XX

Dear :

This response is in reply to your January 6, 1997, petition for the Department's issuance of a Technical Assistance Advisement ("TAA") pursuant to s. 213.22, F.S. The Department has carefully examined your petition and finds it to meet the criteria set forth in Chapter 12-11, F.A.C., requisite to issuance of a TAA. Therefore, the Department is by this response issuing the requested TAA.

DISCUSSION OF FACTS

Your petition imparts the following significant information regarding the issues under advisement herein:

[Taxpayer], a Florida corporation, and its subsidiary

corporations (hereinafter collectively referred to as "Petitioner") are engaged in the sale of automobiles in Florida. Petitioner does not have a Florida state tax identification number. [However, the respective corporations making up the Petitioner are registered with the Department for sales and use tax purposes.] When Petitioner does file tax related documents with the DOR, it uses its federal identification number, XX.

Petitioner frequently sells vehicles by consigning such vehicles to an automobile auction company ("Auctioneer"). The Auctioneer functions as the consignee or selling agent for Petitioner. When the Auctioneer sells a vehicle for the Petitioner, it completes the sales transaction by collecting the sales proceeds and transferring the vehicles's title to the purchaser. Only qualified automobile dealers may participate in selling and purchasing vehicles through an auctioneer.

ISSUE

You endeavor to receive the Department's advice regarding the following issue:

Whether the Petitioner must collect sales tax or obtain a resale exemption tax certificate when vehicles it consigns to an Auctioneer are sold by such Auctioneer?

DISCUSSION OF LAW

We consult the following, statutory, administrative, and case law in addressing the issue under advisement herein:

Section 212.02(15)(a), F.S., defines the term "Sale" for sales and use tax purposes as follows:

(15) "Sale" means and includes:
(a) Any transfer of title or possession, or both, exchange, barter, license, lease, or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for a consideration.

Section 212.05(1), F.S., provides in relevant part the following:

212.05 Sales, storage, use tax.--It is hereby declared to be the legislative intent that every person is exercising a taxable privilege who engages in the business of selling tangible personal property at retail in this state.... (Emphasis Supplied)

Section 212.02(14)(a), F.S., defines the term "retail sale" as used in s. 212.05(1), F.S., and elsewhere in chapter 212, F.S., as follows:

(14)(a) "Retail sale" or a "sale at retail" means a sale to a consumer or to any person for any purpose other than for resale in the form of tangible personal property or services taxable under this part, and includes all such transactions that may be made in lieu of retail sales or sales at retail. (Emphasis Supplied)

Rules 12A-1.066, and 12A-1.081, F.A.C., seek to provide administrative interpretations of the above statutory provisions with respect to consignment sales, including those made through an auctioneer. These rules provide in relevant part the following:

12A-1.066 Auctioneers, Agents, Brokers and Factors. (1)(a) Every agent, auctioneer, broker, or other person who is engaged in any business activity of making sales of tangible personal property with the object of private or public gain, benefit, or advantage, either direct or indirect, who sells at retail, or who offers for sale at retail, or who has in his possession for sale at retail, is required to register as a dealer under Part I, Chapter 212, F.S., and collect and remit any applicable tax on the total retail sales price of any taxable item of tangible personal property without any deduction for any expense, such as storage, commission, repairs, etc. It is immaterial that:

1. The auctioneer, broker, factor or other person may not

have possession of the tangible personal property;

2. The title to the tangible personal property cannot be
   transferred to the purchaser without further action on the part of the principal; or

3. The purchaser has disclosed the identity of the
   principal.

(b) An agent, auctioneer, broker, or other person selling tangible personal property shall collect and remit the tax when title or possession of the property is transferred within this state notwithstanding the fact that the tangible personal property belongs to an out-of-state principal.

(c) The following words and terms, when used in this section, shall have the following meaning, unless the context clearly indicates otherwise:....

2. "Auctioneer" is a person who either owns an item of
   tangible personal property, or to whom an item of tangible personal property has been consigned or delivered, and who offers for sale the item of tangible personal property for sale by competitive bid....

...

12A-1.081 Consignment Sales. Where merchandise is delivered to a dealer on a consignment basis, the tax shall be collected and remitted by the consignee, not the consignor. (Emphasis Supplied)

Ancillary to the issue under advisement, the question arises whether the action of consignment from the Petitioner to the Auctioneer itself constitutes a sale which needs to be documented by the issuance of a resale certificate by the Auctioneer to the Petitioner. To answer this question it is necessary to analyze a consignment transaction to determine whether it meets the statutory definition of a "sale."

To this end, it is useful to consult Black's Law Dictionary, Sixth Edition, for the denotative meaning of the term "consignment." This widely used reference source defines the term "consignment" in relevant part as follows:

... Entrusting goods to another to sell for the consignor. A bailment for sale....

Therefore, a consignment is a form of bailment. Again consulting Black's Law Dictionary, Sixth Edition, the term "bailment" is defined as:

A delivery of goods or personal property, by one person (bailor) to another (bailee), in trust for the execution of a special object upon or in relation to such goods, beneficial either to the bailor or bailee or both, and upon a contract, express or implied, to perform the trust and carry out such object, and thereupon either to redeliver the goods to the bailor or otherwise dispose of the same in conformity with the purpose of the trust. The bailee is responsible for exercising due care toward the goods.

As indicated by the above definitions, a consignment is a form of bailment. It results in the entrusting of one's goods to another for a particular purpose (in this case for sale to third parties); it is not a transfer of title or possession for a consideration. The consignor and consignee are likened to the relationship of principal and agent, not seller and buyer. Therefore, the consignment transaction is not a "sale."

The resale provision under the statutory definition of "retail sale" is interpreted administratively by Rule 12A-1.038, F.A.C., which specifies in part the following:

12A-1.038 Resale and Exemption Certificates. (1) It is the specific legislative intent that each and every sale... is taxable under Chapter 212, F.S., unless such sale... is specifically exempt. The exempt status of the transaction must be established by the dealer. Unless the dealer shall have taken from the purchaser a certificate signed by the dealer or the dealer's authorized

representative to the effect that the property or service was purchased for resale and bearing the date, the name and address of the purchaser, the effective date of the certificate, and the number of the dealer's certificate of registration,... the sale shall be deemed to be a taxable sale at retail....
...
(3)(a) A resale certificate is required from every purchaser who purchases tangible personal property or service for resale, subject to the provisions of subsection (1) of this rule. Otherwise, the dealer will be required to collect and remit the tax to the Department of Revenue.... (Emphasis Supplied)

In considering the weight which must be given the above rule provisions, we note the following holdings by Florida courts:

An agency is afforded wide discretion in the interpretation of a statute which it administers and will not be overturned on appeal unless clearly erroneous; reviewing court will defer to any interpretation within the range of possible interpretations by the administering agency. Dyer v. Department of Ins. and Treasurer, 585 So.2d 1009 (Fla. 1 DCA 1991); Natelson v. Department of Ins., 454 So.2d 31 (Fla. 1 DCA 1984), reh. den. Sept. 6, 1984. Administrative rules interpreting the sales and use tax statute are accorded considerable persuasive force and courts generally will not depart from such construction unless it is clearly erroneous or unauthorized. State Ex Rel. Szabo Food Serv., Inc. of N.C. v. Dickinson, 286 So.2d 529 (Fla. 1973), reh. den. Jan. 9, 1974.

CONCLUSIONS OF LAW

As provided in Rule 12A-1.081, F.A.C., the dealer to whom goods are entrusted for sale is the consignee, and the consignee, not the consignor, is liable for the collection and remittance of tax on the sale of the consigned goods. In the case where the goods are consigned to an auctioneer for sale at auction, the auctioneer is the consignee. This is reiterated in Rule 12A1.066(1), F.A.C., which specifies the obligation of an

auctioneer to register as a dealer and collect and remit tax on any retail sales it makes on behalf of principals. Rule 12A1.038(1) and (3), F.A.C., squarely places the burden of obtaining resale certificates on the dealer making the sale. In the case of a consignment sale through an auctioneer, the auctioneer is the dealer making the sale. Accordingly, the auctioneer, as both the consignee and selling dealer, is the party responsible for the collection and remittance of tax and the obtaining of resale certificates on its sale of the consigned goods.

Applying this analysis of the law to the instant case, the Petitioner would be the consignor and the auto auction company ("Auctioneer") to which the Petitioner consigns vehicles for sale at auction would be the consignee. As such, the Auctioneer would, under the collective application of Rules 12A-1.038, 12A1.066, and 12A-1.081, F.A.C., be the selling dealer responsible for both the collection and remittance of tax and the securing of resale certificates. However, this determination is conditioned upon the Petitioner being able to substantiate by documentary evidence that the Auctioneer was a registered dealer for sales tax purposes with this Department at the time of the consignment transactions. Such documentary evidence should take the form of a copy of the Auctioneer's sales and use tax Certificate of Registration issued by this Department and such documentation should be retained in and made a part of the Petitioner's records for a period of not less than five years. Should the Auctioneer not be registered or otherwise fail to collect and remit the tax due, Petitioner would be ultimately liable as principal and owner of the vehicle or vehicles sold. Although not a requirement of statutory or administrative law, it would nonetheless be a prudent and advisable practice for the Petitioner to obtain and maintain in its records a copy of the resale certificates secured by the Auctioneer from buyers of the consigned vehicles.

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 confidential information, we request you notify the undersigned in writing within 15 days of any deletions you wish made to the request or this response.

Sincerely,

Kama Schultz
Tax Law Specialist

KDS\
Control No. 28384