TAA 21A-015 Direct Pay Permit
QUESTION: Can Merging Entity’s vendors accept Surviving Entity’s valid direct pay permit, even if the contracts and purchase orders are in the name of Merging Entity, in order to not charge sales tax on a transaction, and to permit Surviving Entity to directly remit the Florida sales and use tax due to the Florida Department of revenue?
ANSWER: Merging Entity’s vendors can accept Surviving Entity’s valid direct pay permit and to permit Surviving Entity to directly remit the Florida sales and use tax due to the Florida Department of Revenue.
November 16, 2021
Technical Assistance Advisement 21A-015
Florida Sales and Use Tax
XXXX (“Taxpayer”)
BP#: XXXX
Sections 212.183, 607.1106, Florida Statutes (F.S.)
Rule 12A-1.0911, Florida Administrative Code (F.A.C.)
Dear XXXX:
This letter is in response to your request dated March 8, 2021, and received in this office on March 9, 2021, for issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section 213.22, F.S., and Rule Chapter 12-11, F.A.C., concerning direct pay permit. An examination of your request has established you complied with the statutory and regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting your request for a TAA.
REQUESTED ADVISEMENT
Can XXXX’s (“XXXX”) vendors accept Taxpayer’s valid direct pay permit, even if the contracts and purchase orders are in the name of XXXX, in order to not charge sales tax on a transaction, and to permit Taxpayer to directly remit the Florida sales and use tax due to the Florida Department of Revenue?
STATED FACTS
On January 1, 2021, XXXX legally merged with Taxpayer pursuant to Florida law. A copy of the Florida Secretary of State’s records regarding the merger have been provided with this request. As the surviving entity, Taxpayer assumed all of XXXX’s assets and liabilities, including current contracts with vendors.
Prior to the legal merger, Taxpayer and XXXX both held Sales and Use Tax Direct Pay Permits issued by the Florida Department of Revenue pursuant to s. 212.183, F.S. Both permits allow Taxpayer and XXXX to purchase tangible personal property without being charged the Florida sales tax by vendors, as the entities take the responsibility for remitting the applicable taxes directly to the Department of Revenue.
Taxpayer’s current direct pay permit, Number XXXX, is effective from May 17, 2017 until May 31, 2022. XXXX’s direct pay permit, Number XXXX, was effective from October 17, 2019 until December 31, 2020, when the entities merged. Copies of both permits have been provided with this request. Effective January 1, 2021, all of XXXX’s business locations are now registered as Taxpayer’s locations for Florida sales and use tax purposes.
Prior to the merger, XXXX entered into numerous purchase orders and contracts with third-party vendors and contractors. XXXX provided its Sales and Use Tax Direct Pay Permit to those vendors and contractors to avert paying the tax on invoices, and instead, XXXX accrued and remitted the applicable tax directly to the Department. Here, after the merger, the XXXX’s name will continue as an operating division of Taxpayer through this calendar year. However, Taxpayer will ultimately be the legal entity responsible for the payment of all valid invoices and purchase orders in XXXX’s name, and Taxpayer will be responsible for the payment of any associated Florida sales and use taxes.
LAW & DISCUSSION
Section 607.1106, F.S., provides, in pertinent part, the following:
(1) When a merger becomes effective:
(a) The domestic or foreign eligible entity that is designated in the plan of merger as the survivor continues or comes into existence, as the case may be;
(b) The separate existence of every domestic or foreign eligible entity that is a party to the merger, other than the survivor, ceases;
(c) All real property and other property, including any interest therein and all title thereto, owned by, and every contract right possessed by, each domestic or foreign eligible entity that is a party to the merger, other than the survivor, become the property and contract rights of and become vested in the survivor, without transfer, reversion, or impairment;
(d) All debts, obligations, and other liabilities of each domestic or foreign eligible entity that is a party to the merger, other than the survivor, become debts, obligations, and liabilities of the survivor;
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Section 212.183, F.S., Rules for self-accrual of sales tax. —The Department of Revenue is authorized to provide by rule for self-accrual of the sales tax under one or more of the following Circumstances, provides in part:
(1) Where authorized by law for holders of direct pay permits.
(2) Where tangible personal property is subject to tax on a prorated basis, and the proration factor is based upon characteristics of the purchaser.
(3) Where the taxable status of types of tangible personal property will be known only upon use.
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(5) Where the purchaser makes purchases in excess of $10 million per year of tangible personal property in any county.
Rule 12A-1.0911(2), F.A.C., provides in part:
(2) Self-accrual authorization.
(a) The Department will authorize dealers to assume the obligation of self-accruing and remitting tax directly to the Department for the following purposes:
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5. The purchase of tangible personal property by dealers who annually purchase in excess of $10 million of taxable tangible personal property in any county for the dealer’s own use.
6. The purchase of tangible personal property by dealers who annually purchase at least $100,000 of taxable tangible personal property, including maintenance and repairs for the dealer’s own use, and the taxable status of the property will be known only when the dealer uses the property. For example, dealers whose normal trade or business characteristics require them to purchase property, maintenance, or repairs that will either become a component part of a product manufactured for sale or will be used and consumed by the dealer will know the taxable status of the property only when the property is used.
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(c) The Department will issue a Sales and Use Tax Direct Pay Permit to qualified applicants. The effective date of the permit is the postmark date of the application or, when the application is delivered by means other than the United States Postal Service, the date the application is received by the Department.
(d) The Department will specify on each permit the circumstances for which the dealer is authorized to self-accrue and remit sales and use tax directly to the Department. The authorized dealer is required to remit the tax directly to the Department.
(e) Any dealer that holds a valid Sales and Use Tax Direct Pay Permit may extend a copy of its permit to the selling dealer in lieu of paying tax for authorized purchases to the selling dealer.
(f) The validity of a Sales and Use Tax Direct Pay Permit may be verified by using the Department’s online Certificate Verification System at www.floridarevenue.com/taxes/certificates, by using the Department’s FL Tax mobile application, or by calling the Department’s automated nationwide toll-free verification system at 1(877)357-3725. Persons with hearing or speech impairments may call the Florida Relay Service at 1(800)955-8770 (Voice) and 1(800)955-8771 (TTY).
Under the provisions of s. 607.1106(1)(c) and (d), F.S., when the merger of two entities occurs, the surviving entity assumes any contracts, debts, and obligations of the merging entity. In the instance case, Taxpayer has assumed XXXX’s vendor contracts and the obligations associated with such contracts, effective January 1, 2021, pursuant to the merger between the two parties.
Both entities have been issued Sales and Use Tax Direct Pay Permits pursuant to s. 212.183, F.S., which allows them to remit the applicable sales tax due on taxable purchases directly to the Department. The implication of using a direct pay permit is that holder of the permit acknowledges the responsibility and obligations of remitting the sales tax due on all taxable purchase. Since obligation of XXXX’s liabilities has been relegated Taxpayer after the merger, Taxpayer would now be responsible and would be obligated to remit any sales tax due related to XXXX taxable purchases.
CONCLUSION
XXXX’s vendors can accept Taxpayer’s valid direct pay permit that permits Taxpayer to directly remit the Florida sales and use tax due to the Florida Department of Revenue.
For more information concerning all the taxes administered by the Department of Revenue, please refer to the Department’s Internet site at:
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 and related backup documents are public records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions of s. 213.22, F.S. Confidential information must be deleted before public disclosure. In an effort to protect confidentiality, we request you provide the undersigned with an edited copy of your request for Technical Assistance Advisement, the backup material and this response, deleting names, addresses and any other details which might lead to identification of the taxpayer. Your response should be received by the Department within 15 days of the date of this letter.
Xiaoxi Miao
Tax Law Specialist
Technical Assistance & Dispute Resolution
