Sales Tax Articles
Sales Tax State Activity Update - June 2007
Florida Clarifies Drop Shipments for the Boogie Woogie Buyer of Company B
Company A is a drop shipper located outside of Florida but registered as a Florida dealer. Company B is a customer of Company A. Company B is also located outside of Florida and has no tax nexus with Florida. Company B instructs Company A to deliver goods to Company C who is Company B's customer and is located in Florida. The delivery by A to C is by Common carrier. It was ruled that A who is a Florida dealer is not obligated to collect tax from B the out-of-state buyer in this instance.
Facts
Company B (Buyer), an unregistered out-of-state dealer that has no nexus with the State of Florida purchases merchandise from a registered out-of-state supplier Company A (Drop Shipper) but directs the Company A to ship the merchandise to its customer in Florida (Company C).
With this ruling request Company B, has provided the Florida Department of Revenue with a copy of its purchase order, and a copy of the sales invoice from Company A. One document describes the sale that was made and both documents contain the instructions to ship the product to Company B's Florida customer, via common carrier.
Issue
Is a Company A, located outside Florida but registered as a Florida dealer, obligated to collect sales/use tax on a sale to a customer (Company B) that is an unregistered dealer located outside Florida, with no tax nexus with Florida, in the instance where the Company A ships the merchandise by common carrier to the Company C who is located in Florida?
Discussion and Conclusion
On third-party drop shipments, where a dealer purchases merchandise from a vendor and, then, instead of taking possession of the merchandise, directs the vendor to drop-ship the merchandise to its customer in Florida, the drop shipment of the merchandise into Florida would not be considered a Florida sale if: 1) both the dealer and the vendor are located outside Florida; 2) the property, at the time of sale, is outside Florida; and 3) the vendor ships the merchandise from a point outside Florida by common carrier, or sends the goods through the U.S. Postal Service, to the dealer's customer.
This full text can be viewed at The Florida Department of Revenue website.
(Florida Department Revenue, TAA 07A-008, 3/29/07)
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