Could an out-of-state direct seller collect Florida sales tax for distributors who were not registered dealers?

Subject

Direct Seller Collecting Tax for Distributors

Plain-English summary

The out-of-state direct seller could collect and remit Florida sales tax on behalf of distributors who were not registered dealers. That arrangement eliminated those distributors' need to register with the Department or file Florida sales-tax returns for the covered sales.

A distributor that chose to collect and remit tax personally had to register as a dealer. Once registered, the distributor collected tax on its Florida retail sales and could buy products from the seller tax-free by giving the seller a valid resale certificate at the time of purchase.

Retail sales had to itemize the tax or state that applicable taxes were included in the price. The ruling also noted that some products labeled dietary supplements or vitamins might qualify for exemptions under Rule 12A-1.011(1)(b) and (c).

TAA 98A-006R later clarified that a buyer could be an end consumer and/or distributor, order forms could be transmitted rather than only mailed, and tax and local surtax on end-consumer sales used the actual retail sales price. The revision also recommended due diligence to distinguish resale from consumption and adequate books and records supporting the treatment.

What this means for you

A direct seller could centralize collection for low-volume distributors, but registered distributors retained the option to handle tax themselves and use resale certificates for inventory purchases.

Labels were not enough. The later clarification emphasized actual customer role, actual retail price, and records substantiating whether a product was bought for resale or personal use.

Common questions

Q: Did every distributor have to register? No. Unregistered distributors could have the seller collect and remit tax on their behalf.

Q: What if a distributor wanted to collect tax directly? The distributor had to register as a Florida dealer, collect tax from customers, and file accordingly.

Q: Could a registered distributor buy inventory without tax? Yes, by extending a valid resale certificate to the seller at purchase.

Q: What price controlled tax after the revision? TAA 98A-006R specified the actual retail sales price for end-consumer sales and local-option surtax.

Q: How was local surtax sourced in the ruling? By the end consumer's location for sales into surtax counties, using actual retail sales price after the correction.

Q: Did the original collection allowance remain current? The original ruling stated a historical allowance of 2.5% of the first $1,200 of tax due, capped at $30 per filing period. Current rules should be checked before using those figures.

Citations and references

• Fla. Admin. Code r. 12A-1.038 — resale certificates
• Fla. Admin. Code r. 12A-1.011(1)(b), (c) — possible treatment of dietary supplements and vitamins
• TAA 98A-006R — later clarification of buyer roles, order transmission, actual retail price, due diligence, and records
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-006

Original ruling text

Status: See TAA 98A006R (Revised), dated May 8, 1998

SUMMARY

It was determined that the Taxpayer may collect the sales
tax on behalf of its Distributors, based on the suggested
retail sales price. However, in cases where the
Distributor elects to collect and remit the sales tax
himself or herself, the Distributor must register with the
Department as a dealer to collect and remit sales tax. In
all instances the retail sales should include an
itemization of the taxes collected or a statement that
applicable taxes are included in the price. In relation to
local option surtaxes on all sales made to the end
consumers located in surtaxes on all sales made to the end
consumers located in surtax counties, based on the
suggested retail sales price.

Feb 26, 1998

Re: Technical Assistance Advisement 98A-006
Sales and Use Tax - Collection and Remittance Agreement
Petitioner: XXX (herein "Taxpayer")
FEI: XXX

Dear:

This letter is a response to your petition dated November
25, 1997, for the Department's issuance of a Technical
Assistance Advisement ("TAA") concerning the above referenced
party and matter. Your petition has been carefully examined and
the Department finds it to be in compliance with the requisite
criteria set forth in Chapter 12-11, F.A.C. This response to
your request constitutes a TAA and is issued to you under the
authority of s. 213.22, F.S.

DISCUSSION OF FACTS

In your letter and in our several telephone conversations,
you presented the following:

The Taxpayer is a multi level marketing company
headquartered in XXX. The Taxpayer sells dietary
supplements, vitamins, and health care products (hereafter
"products"). The Taxpayer's sales are made to individuals
who may either be the end consumer or the Distributor of
the products. A Distributor resells the Taxpayer's
products. The Taxpayer does not have any facilities,
employees, inventory or salesmen within Florida. Regarding
the relationship between the Distributors and the Taxpayer,
you asserted that the Distributors are not employees and
are independent from the Taxpayer. You further asserted
that the Distributors are not agents of the Taxpayer.

A Distributor or end consumer purchases the Taxpayer's
products either by mail order, telephone, or facsimile. In
the near future, the Taxpayer plans to make the products
available on the Internet. All orders are subject to
acceptance by the Taxpayer at its principal office, outside
Florida. When placing orders, the Distributor or end
consumer indicates whether it is acting as an end consumer
or Distributor, selects the products to be purchased,
totals the amount purchased, where applicable, adds tax
based on its location, and sends in the order form through
the U.S. mail to the Taxpayer's location outside Florida.
Except for replacement of defective products or corrections
of orders, all sales are final. If a Distributor fails to
remit payment for products purchased, the Taxpayer will try
to collect. If this fails, the Taxpayer does not request
that the products be returned, but the Taxpayer does
discontinue to do business with the Distributor.

When a sale is made to an individual who indicates that he
or she is an end consumer, the Taxpayer charges tax on the
total sales price. When a sale is made to an individual
who indicates that he or she is a Distributor, the Taxpayer
does not charge tax as long as the Distributor extends a
valid resale certificate at the time of sale. Some

Distributors have registered to collect and remit sales and
use tax and are extending valid resale certificates to the
Taxpayer at the time of sale. However, most Distributors
have a very low volume of resales and have not registered
to collect and remit sales and use tax and therefore cannot
extend valid resale certificates. In these instances, the
Taxpayer is charging tax on the total sales price.

Requested Advisement

The Taxpayer requests that it be granted permission to
collect and remit sales and use tax on behalf of its
Distributors who are reselling its products, but who are not
registered to collect and remit tax.

Department's Determination

Upon review of all facts and circumstances, it is the
Department's determination that the Taxpayer may collect the
sales tax on behalf of its Distributors, based on the suggested
retail sales price. This should eliminate the need for
Taxpayer's Distributors to register with the Department, or to
file sales tax returns, for Florida sales tax purposes.

However, in cases where the Distributor elects to collect
and remit the sales tax himself or herself, the Distributor must
register with the Department as a dealer to collect and remit
sales tax. In cases where the Distributor is registered, it
must collect sales tax on the total retail sales price, at the
time it sells the products to its customers in Florida. Also,
if the Distributor is registered, to collect and remit sales
tax, it may purchase the products from the Taxpayer tax exempt,
provided the Distributor extends its resale certificate to the
Taxpayer, in lieu of remitting the tax to the Taxpayer, at the
time of the purchase, in accordance with Rule 12A-1.038, F.A.C.
Please note that in all instances the retail sales should
include an itemization of the taxes collected or a statement
that applicable taxes are included in the price. Also note that
some of the Taxpayer's products identified as dietary
supplements or vitamins may be exempt from sales tax pursuant to
Rule 12A-1.011(1)(b) and (c), F.A.C.

In relation to local option surtaxes, as determined by the
rate of the end consumer's location, the Department requires
that the Taxpayer collect and remit local option surtaxes on all
sales made to the end consumers located in surtax counties,
based on the suggested retail sales price.

Finally, the Taxpayer shall be allowed a collection
allowance to be computed at the rate of 2.5 percent on the first
$1,200.00 of tax due. Therefore, the maximum collection
allowance authorized for any filing period shall be $30.00.

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 upon 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 from that
which is 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 that 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 this response.

Sincerely,

Leigh L. Ceci
Tax Law Specialist

Enclosure
Control #32053