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