Did a Georgia company's receivables from Florida customers have taxable Florida situs when an employee serviced displays in Florida?

Subject

Taxable Situs

Plain-English summary

The Department concluded that the Georgia corporation's accounts receivable from Florida customers had taxable Florida situs. The company kept its only office and warehouse in Georgia, received Florida orders there, had no Florida salespeople, and delivered with company trucks. But it also stationed an employee in Ocala to dust shelves and maintain merchandise displays at customer locations.

Florida's statute treated business as transacted in the state when commercial or servicing activity was regularly conducted with Florida customers through an in-state employee or representative, whether or not that person had discretionary authority. The Department found that the receivables benefited from Florida law, arose from business with Florida customers, and were connected to regularly conducted activity through the route employee.

An earlier case involving salespeople who only solicited orders did not change the result because the ruling explained that section 199.175 had since been amended.

What this means for you

Under the statutory regime applied in this 1997 ruling, an out-of-state location for order approval, inventory, and offices did not prevent Florida situs when an employee regularly performed customer-related activity inside Florida. The employee did not need authority to accept or reject orders.

Common questions

Q: Did it matter that all orders were received in Georgia? That fact did not prevent Florida situs under the amended statute applied by the Department.

Q: Was the Ocala employee a salesperson? No. The ruling says the employee did not accept or reject orders and mainly dusted shelves and maintained product displays.

Q: Did the employee need discretionary authority? No. The quoted statute expressly covered agents, employees, or representatives whether or not they had discretionary authority.

Q: What property did the Department tax? The accounts receivable arising from the taxpayer's Florida business activity.

Citations and references

• Fla. Stat. § 199.175(2) — Florida business situs for intangible personal property
• United States Shoe Corporation v. Department of Revenue, 508 So. 2d 1252 (Fla. 1st DCA 1987) — pre-amendment solicitation decision discussed by the ruling
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97C2-004

Original ruling text

Jun 26, 1997

Re: Technical Assistance Advisement 97(C)2-004
Intangible Tax; Taxable Situs
Section 199.175, F.S.
XXX ("Taxpayer")

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 an employee contacting
customers, at the customer's location within Florida.

FACTS

Both the Taxpayer's only office and only warehouse are
located in Cairo, Georgia. All the Taxpayer's sales to Florida
customers are received at the Cairo office by telephone or
electronic ordering systems. There are no salespersons residing
in Florida. All deliveries into Florida are by Company trucks.

In the fall of 1996, the Taxpayer sent an employee to Ocala
to serve as a "route man" there. The employee is not a
salesperson and does not accept or reject orders; he is
essentially there to dust the shelves and see that merchandise
is displayed.

REQUESTED RULING

Your have requested a ruling whether the referenced
Taxpayer is exempt from filing Florida intangible tax.

LAW AND DISCUSSION

In the decision in United States Shoe Corporation v.
Department of Revenue of the State of Florida, 508 So.2d 1252
(Florida 1st DCA, 1987), it was held that where salesmen merely

solicit orders for their employer and were not authorized to and
did not accept orders on behalf of their employer, the requisite
tax situs for a non-domiciliary corporation's intangibles did
not exist. However, section 199.175, F.S., was amended in
Section 8, Chapter 89-356, Laws of Florida, effective for
intangibles owned January 1, 1990. In pertinent part, the
amended provision of Section 199.175(2), F.S., states the
following:

(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 evidence of the intangible is
kept or 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 with a customer in this state.
For purposes of this paragraph:

1. Business is transacted in this state when any
   occupation, profession, or commercial activity,
   including financing, leasing, selling, or servicing
   activities, is regularly conducted with customers in
   this state from an office, plant, home, or any other
   business location in this state.
2. Business is transacted in this state when any
   occupation, profession, or commercial activity,
   including financing, leasing, selling, or servicing
   activities, 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. (emphasis supplied)

It is the Taxpayer's position that the intangibles have no
taxable situs in Florida based on the earlier ruling it received
from the Department in March 1993, and therefore, no intangible
tax is due on the intangible property arising out of the Florida

business activity.

However, the receivables receive the benefit and protection
of Florida laws, and they arise out of business transacted with
customers in this state. An occupation is regularly conducted
with customers in this state by one or more representatives in
this state. Such occupation may also be conducted from an
office or home in this state.

CONCLUSION

Based on the facts of this case, it is the opinion of this
office in accordance with the applicable Florida Statutes and
case law, that the accounts receivable arising out of the
business conducted by the Taxpayer in Florida are subject to
Florida 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,

Moses O. Daramola

Senior Tax Specialist
Technical Assistance
Office of the General Counsel

MOD/md