TAA 23A-021 Nexus and Medical

QUESTION: Are any of the Products or services sold by Taxpayer subject to Florida sales and use tax? 

ANSWER: If taxable items of tangible personal property or services are sold by Taxpayer to a customer while the customer’s vessel is dockside or in Florida waters, such transactions would be subject to Florida sales tax. 

December 01, 2023

Technical Assistance Advisement – TAA #: 23A-021

Florida Sales and Use Tax – Nexus and Medical Products

__________________ (“Taxpayer”)

BP#: __________________

Sections: 212.02, 212.05, 212.0596, 212.06, 212.07, 212.08, 212.18, and 212.183, Florida

Statutes (“F.S.”)

Rules: 12A-1.011, 12A-1.020, 12A-1.039, 12A-1.062, 12A-1.0641, and 12A-1.0911, Florida

Administrative Code (“F.A.C.”)

Dear __________________:

This letter is in response to your letter dated _________, requesting this Department’s issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section(s.) 213.22, F.S., and Rule Chapter 12- 11, F.A.C., Florida Administrative Code, regarding the matter discussed below. Your request 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. 

Requested Advisement 

Are any of the Products or services sold by Taxpayer subject to Florida sales and use tax? 

Facts

Taxpayer is a _________ company registered as a Florida dealer. From its _________ in the U.S.¹ and _________  worldwide, Taxpayer distributes: 1) __________________; 2) __________________; 3) __________________; and 4) ____________________________________(collectively the “Products”), solely to __________________and __________________ engaged in __________________commerce.

All pharmaceutical sales are monitored by various federal and state regulatory agencies. Taxpayer is registered with each appropriate federal and state agency and maintains all records required by such oversight agencies, including an expiration date registry to ensure that the pharmaceuticals “on the shelves” in its various customer ships are good, current, and have not expired. Taxpayer employs pharmacists on its staff so as to be able to purchase and resell pharmaceutical products.

In addition to the sale of Products, Taxpayer provides comprehensive __________________ and __________________ (the “__________________”) to its customers in __________________ waters to ensure that each customer’s vessel is in full compliance with all __________________, __________________, __________________, and __________________ laws and regulations governing the minimum mandatory amount of medical supplies required on board. Because medical facilities and equipment are complex and precise, Taxpayer also provides __________________ services to its customers in __________________waters (“ __________________”). Most recently, Taxpayer has added and __________________ (“__________________”) to its menu of offerings so that Taxpayer’s customer vessels can obtain critical guidance from qualified medical professionals by way of __________________. This is especially critical for those customers engaged in the merchant marine industry who may not have __________________.

Taxpayer distributes all of its Products and services solely to the __________________, either to __________________ or to __________________. Taxpayer does not sell Products to the general public, has no retail stores, and engages in no mail-order sales, Amazon-type sales, or web sales. Taxpayer’s customers are exclusively __________________ and __________________ engaged in the __________________ __________________ business. By far, Taxpayer’s largest group of customers consist of the __________________ (e.g., __________________, etc.) whose __________________ contain medical facilities that are often equivalent to a __________________, including a __________________, and __________________ ready to handle any medical emergency that may arise __________________. Taxpayer provides Products and services to the __________________ industry so that the __________________ can maintain their medical facilities to the highest standards and meet all local and certification requirements. Although a much smaller portion of the business, Taxpayer also provides Products and services to various __________________ to enable customer __________________ vessels to remain in full compliance with all __________________ and __________________ regulations governing the operation and certification of __________________ vessels and for use by the crew in the event of an accident or illness onboard.

Taxpayer purchases Products from and ( ) and directly from . Taxpayer maintains an inventory of Products for resale in each of its U.S. locations and locations. Taxpayer has the Services based on a perceived market need. __________________ are performed by Taxpayer’s employees or subcontractors as needed. All __________________ are provided by physicians and other medical providers located __________________.

Law & Discussion 

Unless a specific exemption applies, s. 212.05, F.S., provides it is the legislative intent that every person is exercising a taxable privilege that engages in the business of selling tangible personal property² at retail in this state³ . For exercising such a privilege, a tax is levied on each taxable transaction or incident. The tax is due and payable at the rate of 6 percent, plus any applicable surtaxes imposed under s. 212.055, F.S., on the total consideration received for each item or article of tangible personal property when sold at retail in this state.

It is well-settled law exemptions are strictly construed against the taxpayer, causing the burden of proof for the exemption to be on the taxpayer. See State ex rel. Szabo Food Servs., Inc. of N.C. v. Dickinson, 286 So. 2d 529, 530-32 (Fla. 1973); Green v. City of Pensacola, 126 So. 2d 566, 569 (Fla. 1961); State v. Thompson, 101 So. 2d 381, 386 (Fla. 1958). Any doubt as to an exemption is resolved favorably towards the State. See Szabo Food Servs., 286 So. 2d at 531; United States Gypsum Co. v. Green, 110 So. 2d 409, 413 (Fla. 1959). 

Nexus 

Physical presence of a dealer in a State is sufficient to establish physical nexus with the State for the purposes of the Commerce Clause of the United States Constitution. See Quill Corporation v. North Dakota, 112 S.Ct. 91 (1992); South Dakota v. Wayfair, Inc., 138 S.Ct 2080 (2018). A physical presence is considered as the following: having employees, agents, or representatives that sell or take orders, solicit orders, deliver merchandise, accept payments, service merchandise, or represent an entity in Florida through some other activity; owning or leasing any tangible personal property or real property in Florida; or maintaining any office, warehouse, or retail establishment that is physically located in Florida.

Section 212.18(3)(a), F.S., provides that all persons must be registered dealers before engaging in business in Florida. 

Section 212.06(1)(a), F.S., provides that sales tax is collectible from all dealers. Section 212.06(2)(c), F.S., defines as a “dealer” every person who sells at retail or who offers for sale at retail, or who has in his or her possession for sale at retail; or for use, consumption, or distribution; or for storage to be used or consumed in this state, tangible personal property, including a retailer who transacts a substantial number of remote sales. Section 212.06(2)(f), F.S., defines as a “dealer” any person who maintains or has within this state, directly or by a subsidiary, an office, distributing house, salesroom, or house, warehouse, or other place of business.

Beginning July 1, 2021, persons not located in Florida who make a substantial number of remote sales for delivery in Florida are required to register with the Department and collect and remit tax. A “substantial number of remote sales” is any number of taxable remote sales in the previous calendar year in which the sum of the total sales exceeds $100,000 (See s. 212.0596(1)(b), F.S.). A “remote sale” is the retail sale of tangible personal property ordered by mail, telephone, the internet, or other communication, from a person who receives the order outside Florida and causes the property to be transported into Florida (See s. 212.0596(1)(a), F.S.).

It appears from the facts provided that Taxpayer has established physical nexus in Florida. Therefore, if taxable items of tangible personal property or services are sold while a vessel is dockside or in Florida waters, such transactions would be subject to Florida sales tax. Please refer to the sections below regarding whether specific __________________ sold by Taxpayer “in this state” are subject to Florida sales tax plus any applicable surtaxes. 

Medical Products

Section 212.08(2)(a), F.S., provides that any medical products and supplies or medicine dispensed to human beings according to individual prescriptions or prescriptions written by prescribers authorized to prescribe medicinal drugs are specifically exempt from Florida sales tax. Furthermore, if medical products and supplies are not specifically identified by the statute, certain medical products and supplies are exempt if included on the Nontaxable Medical Items and General Grocery List, Form DR46NT, as approved by the Department of Business and Professional Regulation. Form DR-46NT under the category, “General Groceries,” list “Dietary Supplements,” under the category, “Common Household Remedies,” list “Pain relievers, oral or topical,” “First aid kits,” and “Antacids,” under the category, “Chemical Compounds and Test Kits,” list “Thermometers, for human use.” 

Rule 12A-1.011(2)(a)12., F.A.C., provides that “dietary supplements (including herbal supplements) are exempt from Florida sales tax.”

According to the Dietary Supplement Health and Education Act (DSHEA) of 1994, a “dietary supplement” is a product taken by mouth that contains a dietary ingredient intended to supplement the diet. The “dietary ingredient” in these products may include: vitamins, minerals, herbs or other botanicals, amino acids, and substances such as enzymes, organ tissues, glandulars, and metabolites. Dietary supplements can be found in many forms, including tablets, capsules, soft gels, liquids, and powders. DSHEA places dietary supplements in a special category under the general umbrella of “foods” and requires that every supplement be labeled a dietary supplement. 

Rule 12A-1.020(4), F.A.C., provides that “compressed medical gases and medical oxygen in compliance with the provisions of Rule 61N-1.007, F.A.C., are exempt.”

Rule 12A-1.020(5)(a)2., F.A.C., provides that disinfectants used for sterilization purposes are subject to Florida sales tax.

Rule 12A-1.020(6)(d)4., F.A.C., provides that “no exemption certificate or Annual Resale Certificate is required to make purchases of medical products, supplies, or devices exempt from tax when the item is listed on Form DR-46NT or the label of the medical product, supply, or device indicates that it must be dispensed under federal or state law by the prescription or order of a licensed practitioner and that it is intended for use on a single patient.”

Based on the above provisions from the Florida Statutes and Florida Administrative Code, the following Products Taxpayer sells in Florida would be specifically exempt: all __________________, __________________, and any c __________________ and __________________ and __________________and __________________ and __________________. Based on the limited information provided, there appears to be no specific exemption for Florida sales of water __________________ and __________________. I have enclosed a copy of Form 46-NT for your reference.

Information Services 

In Florida, the sale of tangible personal property is subject to sales tax, unless a specific exemption applies. See s. 212.05, F.S. Sales tax is due on the “sales price.” (See s. 212.02(16), F.S.). By definition, the “sales price” includes services that are part of the sale of tangible personal property. However, professional services are exempted from sales and use tax, except for information services. (See s. 212.08(7)(v), F.S.) Information services are defined as “… services of collecting, compiling or analyzing information of any kind or nature, or furnishing reports thereof to other persons….” (See Rule 12A1.062(3)(a) and (5), F.A.C.).

Florida courts have held that electronic images of information displayed on a screen are not "tangible personal property," as defined in s. 212.02(19), F.S. See Department of Revenue v. Quotron Systems, Inc., 615 So.2d 774 (Fla. 3rd DCA 1993); Henley Holdings Inc. v. Department of Revenue, No. 89-4381 (Fla. 2d Cir.Ct. July 22, 1991), affd. 599 So.2d 1282 (Fla. 1st DCA 1992). The Department has determined that such sales, without any other evidence of the transfer of something tangible, are not sales of tangible personal property for purposes of ss. 212.02(19), and 212.05, F.S. Sales of digital transmissions instead constitute services not subject to tax, pursuant to Chapter 212, F.S.

If Taxpayer’s “ __________________” are in the nature of “information services” as discussed above, Florida sales of such information services would be subject to Florida sales tax and any applicable surtaxes. If the __________________ are delivered to Taxpayer’s customers __________________ (as it appears the __________________ are), such sales of __________________ would not be subject to tax.

Repairs 

Repairs to tangible personal property in Florida are subject to Florida sales tax, unless a specific exemption applies. The repair of a __________________ in Florida is generally subject to tax at the rate of 6% state sales tax and any applicable surtaxes. However, on each repair of a boat in Florida, the tax on the repair may not exceed $60,000. See s. 212.05(5), F.S.

As for merchant ships, s. 212.08(8)(a), F.S. and Rule 12A-1.0641, F.A.C., provide a partial exemption for the sale or use of vessels and parts thereof used to transport persons or property in interstate or foreign commerce, including commercial fishing vessels. The partial exemption is only allowed when the purchaser signs an affidavit that the item or items to be partially exempted are for the exclusive use designated.

Direct Pay Authority 

Section 212.183, F.S., and Rule 12A-1.0911(2), F.A.C., provide that the Department will authorize dealers to assume the obligation of self-accruing and remitting tax directly to the Department for certain purposes. 

If Taxpayer makes Florida sales to customers that have been issued Sales and Use Tax Direct Pay Permits pursuant to s. 212.183, F.S., such Sales and Use Tax Direct Pay Permits allow those customers to remit the applicable sales tax due on taxable purchases directly to the Department. The implication of using a direct pay permit is that the holder of the permit acknowledges the responsibility and obligations of remitting the sales tax due on all taxable purchases.

Sales for Resale 

Section 212.07(1)(b), F.S., and Rule 12A-1.039(1)(b), F.A.C., provide that a resale must be in strict compliance with s. 212.18, F.S., and the rules and regulations, and any dealer who makes a sale for resale that is not in strict compliance with s. 212.18, F.S., and the rules and regulations is liable for and must pay the tax. A sale for resale is exempt from Florida sales tax when Taxpayer accepts in good faith a valid Florida Annual Resale Certificate from the purchaser at the time of sale. 

Conclusion 

If taxable items of tangible personal property or services are sold by Taxpayer to a customer while the customer’s vessel is dockside or in Florida waters, such transactions would be subject to Florida sales tax.

This response constitutes a TAA 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 and 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 expressed in this response. 

You are further advised that this response, 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 TAA, 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 ten (10) days of the date of this letter.

Leigh L. Ceci, MAcc 

Tax Law Specialist 

Technical Assistance & Dispute Resolution

^{(1) _______________________________________________________________}

^{(2) Section 212.02(19), F.S., defines the term, “tangible personal property” as personal property which may be seen, weighed, measured, or touched or is in any way perceptible to the senses.} 

^{(3) Section 212.02(8), F.S., defines the term, “in this state,” as “within the state boundaries of Florida as defined in s. 1, Art. 11 of the State Constitution and includes all territory within these limits owned by or ceded to the United States.”}