Magazine article The CPA Journal

Florida Looks at Delivery under P.L. 86-272

Magazine article The CPA Journal

Florida Looks at Delivery under P.L. 86-272

Article excerpt

The Florida Department of Revenue (DOR) has just issued a harsh nexus ruling to an out-of-state corporation that sells products to Florida customers. Although the company had established corporate income tax nexus with Florida through other activities conducted in the state, a ruling was requested as to whether the mere delivery of the company's products on its own trucks created income tax nexus. For purposes of the ruling, the DOR ignored the company's other activities and focused only on the issue of the delivery of the product. This gives the ruling potential for a more expansive application.

The DOR ruled that the company established income tax nexus through the regular and systematic delivery of goods into Florida using the company's own trucks. In this instance, the drivers of the company's vehicles were independent contractors whose only responsibilities were the delivery of the products.

The DOR reasoned that the company lost the P.L. 86-272's protection under three sections of its nexus regulation:

* Owned or leased tangible personal property was present in the state: The company's trucks used for delivery constituted tangible property owned in the state.

Employees present in the state performed activities other than sales solicitation: Ignoring the word "employees" in the rule, the drivers of the vehicles (who were not employees) were viewed as representatives the company performing functions other than solicitation (i.e., delivery).

* Services were performed within the state: The company performed services (delivery) within the state.

The company argued that because all Florida orders were approved outside the state and shipped from a location outside the state, the sales of product should be protected by P.L. 86-272. This law protects companies whose activities in a state are limited to solicitation of tangible personal property and that sell and deliver goods from a stock of goods maintained outside the state. …

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