With Florida sales and use tax issues, there are a lot of different facets one must keep track of to ensure compliance. If you take the wrong step, you can end up with a huge assessment. In instances where you comply, you could find yourself at a competitive disadvantage with your peers, who are taking sales from you but are not complying with the Florida sales and use tax laws. How is a business supposed to know what it is supposed to know? This article will shed some light on sales for resale and how businesses can prove the sale is or was exempt from Florida sales and use tax.
The statutes do not offer much guidance on sales for resale. The real guidance comes from the Florida Department of Revenue’s rule that is on point. The Florida Department of Revenue lists three main ways for proving a sale is an exempt sale for resale.
First, a seller may obtain a copy of the Florida Annual Resale Certificate from the buyer. The buyer must provide a copy of its current Florida Annual Resale Certificate. By “current,” the Florida Department of Revenue historically means the Florida Annual Resale Certificate has not expired. It is not necessary for a seller to obtain a Florida Annual Resale Certificate from the buyer for every single sale in a calendar year. The seller can accept the Florida Annual Resale Certificate at the initial sale in the calendar year and continue to make sales exempt from Florida sales and use tax as a sale for resale. There is an exception for purchasers who purchase on account from a seller on a continual basis. When that happens, the seller may rely upon the Florida Annual Resale Certificate beyond the expiration date and does not have to obtain a new Florida Annual Resale Certificate each calendar year. The phrase “on account” is defined to mean where the seller extends credit to the purchaser and has an account receivable or has a cash on delivery. A “continual basis” means the seller makes a sale to the purchaser no less than once every twelve-month period in the normal course of business. Thus, as a practical matter and in order to mitigate exposure, it may be advisable for the seller to obtain a new Florida Annual Resale Certificate every year so as not to run afoul of these very specific definitions and requirements.
Second, a seller could get a transaction resale authorization number. Such a number is in lieu of obtaining the Florida Annual Resale Certificate. The transaction resale authorization number is valid for a single transaction only and must be issued prior to or at the point of sale. In other words, the seller must obtain a transaction resale authorization number for each and every sale to the same buyer. The transaction resale authorization number can only be obtained from the Florida Department of Revenue by the seller. There are three ways to do so. One way is by using the Florida Department of Revenue’s online certificate verification system. Another way is by using the Florida Department of Revenue’s tax mobile application. The final way is by calling the Florida Department of Revenue’s automated nationwide toll-free telephone verification system at 877-357-3725. Once the transaction resale authorization number is obtained, the transaction resale authorization number must be documented on the sales invoice or other similar document and kept by the seller. The transaction resale authorization number could also be put on a completed Uniform Sales and Use Tax Certificate – Multi-jurisdiction, as outlined below. Of note, the buyer must be registered with the Florida Department of Revenue for sales and use tax purposes.
Third, a seller can attain a vendor resale authorization number for regular customers. The vendor resale authorization number may be preferable to the transaction resale authorization number, as the seller would only have to obtain the vendor resale authorization number once for a calendar year, which is how long the vendor resale authorization number is valid. The exception is a vendor resale authorization number is issued in November and December is valid not only for that calendar year but also the next calendar year. The seller is required to maintain a copy of the Florida Annual Resale Certificate, regardless of whether expired. There are a couple of ways to obtain a vendor resale authorization number. One way is by using the Florida Department of Revenue’s online certificate verification system. Another way is by writing in to the Florida Department of Revenue. Of note, the buyer must be registered with the Florida Department of Revenue for sales and use tax purposes.
While there is technically a fourth way to prove an exempt sale for resale, this method is just a hybrid of the other methods. In this fourth way, the Florida Department of Revenue will allow a purchaser to use its Multistate Tax Commission's Uniform Sales and Use Tax Certificate – Multi-jurisdiction form. However, the form must be used with the transaction resale authorization number or vendor resale authorization number.
Now that we know how to prove a sale is an exempt sale for resale, we should discuss what actually constitutes a sale for resale.
By rule, the Florida Department of Revenue provides a non-exhaustive list of transactions qualifying as an exempt sale for resale. These transactions include:
- The sale of tangible personal property to a dealer when such property will be resold to the dealer's customers.
- The sale, lease, or rental of tangible personal property to a dealer when such property will be held exclusively for leasing or rental purposes.
- The sale of taxable services to a dealer when such services are being resold to the dealer's customers under the conditions stated in another provision.
- The lease or rental of real property to a dealer when such property will subsequently be leased, rented, or licensed by the dealer's tenants.
- The lease or rental of real property to a dealer when such property will subsequently be leased, rented, or licensed as transient accommodations by the dealer's tenants.
- The sale of tangible personal property to a dealer when such property will be incorporated as a material, ingredient, or component part of tangible personal property that is being produced for sale by manufacturing, processing, or compounding.
- The sale of inserts of printed materials that are distributed as a component part of a newspaper or magazine.
- The sale of tangible personal property to a repair dealer, when such property will be incorporated into and sold as part of a repair of tangible personal property by such dealer.
- The alteration, remodeling, maintenance, adjustment, or repair of tangible personal property (when labor and materials are provided) that is held in inventory for resale or exclusively for leasing purposes by a dealer.
Again, this is a non-exhaustive list. There may be other types of sales transactions out there in which the sale would and should otherwise qualify as an exempt sale for resale. Of course, there are also exceptions to the above noted rules. In short, your mileage may vary.
In conclusion, it is imperative for sellers to know how a transaction must properly show it is exempt from Florida sales and use tax as a sale for resale. Not pursuing one of the above noted methods for proving the exemption could leave the seller stuck with the Florida sales tax coming out of their bottom line. Moreover, and from a buyer’s perspective, buyers must know the types of transactions qualifying for a purchase for resale purposes. If the buyer’s purchase does not qualify, then the buyer could be stuck with tax, interest, and penalties on the transaction.
About the author: David Brennan is partner with Moffa, Sutton, & Donnini, P.A. His primary practice area is multistate tax controversy. David received a B.S. in Accounting and Finance, with a minor in Computer Science, from Florida State University. He worked as an accountant for a CPA firm before attending law school at Regent University. He received his Juris Doctor in 2013 and was licensed to practice law in Florida in the same year. In 2015, David earned his Masters of Laws in Taxation from Boston University. While working for the Florida Department of Revenue as a Senior Attorney, David focused on various sales and use tax issues. You can read his BIO HERE.
At the Law Office of Moffa, Sutton, & Donnini, PA, our primary practice area is Florida taxes, with a very heavy emphasis in Florida sales and use tax. We have defended Florida businesses against the Florida Department of Revenue since 1991 and have over 100 years of cumulative sales tax experience within our firm. Our partners are both CPAs/Accountants and Attorneys, so we understand both the accounting side of the situation as well as the legal side. We represent taxpayers and business owners from the entire state of Florida. Contact us for a FREE INITIAL CONSULTATION to confidentially discuss how we can help put this nightmare behind you.
AUTHORITY
Section 212.02, F.S. – Definitions.
Section 212.07, F.S. – Sales, storage, use tax.
Rule 12A-1.039, F.A.C. – Sales for Resale.
ADDITIONAL RESOURCES
DECEMBER 2023 – FL REDUCES THE SALES TAX ON COMMERCIAL RENT, published December 1, 2023, by Jackie Mustian, Esq.
2023 FLORIDA SALES TAX UPDATE PART I, published July 5, 2023, by David J. Brennan, Jr., Esq.
2023 FLORIDA SALES TAX UPDATE PART II, published August 14, 2023, by David J. Brennan, Jr., Esq.
FLORIDA SALES TAX AUDITS PROCESS AND TRAPS, published March 4, 2023, by David J. Brennan, Jr., Esq.
PHONE CALL FROM FLORIDA DEPARTMENT OF REVENUE: SALES TAX, published October 15, 2022, by Jeanette Moffa, Esq.
FLORIDA SALES TAX INFORMAL WRITTEN PROTEST, published November 17, 2018, by James Sutton, C.P.A., Esq.
FLORIDA SALES TAX - VOLUNTARY DISCLOSURE PROGRAM, published April 9, 2018, by Jeanette Moffa, Esq.