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Can Deliveries Create Sales Tax Nexus?

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With each passing year, states become more aggressive and come up with new creative ways to attribute nexus to a company. Once nexus—or a connection—is created with a state, a host of responsibilities come along with it, including charging collection and remitting sales tax. We regularly get a myriad of questions from businesses inquiring as to whether they have nexus. A common question is whether delivering goods to customers creates nexus in a state. In most states, the answer is typically that it does create nexus. In a recent Florida case, a company tested the waters on this issue.

In Rinehart Equipment, The taxpayer in this matter was a heavy equipment retailer located in Georgia that sold into Florida. During the audit period of issue, the Department of Revenue believed the taxpayer’s physical presence in the state of Florida was regular and substantial when the taxpayer used its employees to transport equipment and make numerous sales and deliveries to Florida. Many times, the taxpayer accepted equipment for trade that was physically located in Florida where the taxpayer’s employees would retrieve the equipment.

The Taxpayer disagreed with the state’s position and filed for an administrative hearing to challenge the assessment. The equipment was not even the most significant concern. Facts during the hearings established that the taxpayer deliberately and systematically targeted Florida customers in its advertising. Advertisements were found in a Florida publication that were specifically targeting to potential Florida customers. In the courts view, this was clearly an exploitation of Florida customers.

In late 2014, the State of Florida, Department of Revenue adopted and incorporated Administrative Law Judge W. David Watkins’ Amended Final Order in the Division of Administrative Hearings ("DOAH") case Rhinehart Equipment Co, vs. Department of Revenue, Case No. 11-2567. To see our previous discussion of the case in full, please see following link: FL LITIGATION ALERT - RHINEHART EQUIPMENT - SOL, NEXUS, & A TIPSTER.

There are several interesting things to take from this case…

Be Penny-wise and Pound-Foolish: If your company is going to start doing business in another state, it is likely prudent to consult with a professional that thoroughly knows that state's tax laws backwards and forwards. Not only will it save you a lot of money in the long run, but you likely will have a hired gun on retainer whenever your company has questions about how to structure the next transaction. Imagine how much money Rhinehart would have saved by simply hiring a common carrier to deliver the equipment instead of using its own employees and equipment.

ENTRY ONE OR TWO TIMES A YEAR MAYBE OK, BUT MORE IS DANGEROUS: The court mentioned Florida Department of Revenue v. Share Int’l, Inc., 667 So.2d 226 (Fla. 1st DCA 1995). This is one of the more interesting taxpayer favorable cases from around the country regarding what de minimis activity a company can do in a state without creating substantial nexus. Using this case, three days a year in a seminar is not enough to create substantial nexus for sales and use tax purposes in Florida.

THE VALUE OF VOLUNTARY DISCLOSURE: The taxpayer's use of the special statute of limitations, was creative, albeit unsuccessful. The lesson to learn is how valuable a Voluntary Disclosure can be for a taxpayer that realizes a mistake has been made, especially for an out of state taxpayer that has never filed a Florida tax return. Most states have a similar provision that can allow the state to go back decades and assess the tax, penalties, and interest (which was 12.99% in 1999). However, this statute provides a statutory statute of limitations of only 3 years from the date the Voluntary Disclosure is filed.

The litigation is all but over. In December 2004, Rhinehart Equipment appealed the administrative court’s ruling. In an interesting turn of events to mitigate its assessment, Rhinehart Equipment argues that the disastrous hurricane seasons of 2004 and 2005 led to substantial increases in sales to Florida—due to the immediate need to replace damaged heavy equipment. Time will tell whether Rhinehart Equipment will prove successful in its hard fought battle.

About the Author: Mr. Donnini is a multi-state sales and use tax attorney and a shareholder in the law firm Moffa, Sutton & Donnini, PA, based in Fort Lauderdale, Florida. Mr. Donnini’s primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, federal estate planning, Florida probate, and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini earned his LL.M. in Taxation at NYU. He is also a co-author of the CCH Expert Treatise Library: State Sales and Use Taxation. Please feel free to visit his firm’s web-site or his blog .

Questions? If you have any questions please do not hesitate to contact him via email at or call 954-642-9390.

Other recent “Sales Tax Nexus” posts by Jerry Donnini:

NOTE: All blog content, comments, and participation subject to disclaimer at bottom of page.


4 Responses to Can Deliveries Create Sales Tax Nexus?

  • Posted by Vinny on October 23, 2017 6:47am:

    I am a tailor based outside the U.S. I visit Louisiana twice a year - a total of about 20 days in the year altogether - to meet local individuals who are my clients. I show them fabric swatches and take their measurements. The clothing is made outside the US and shipped to the client. Does this constitute sales tax nexus in Louisiana? Does it make a difference if I take payment from the client when I am in Louisiana?

  • Posted by Aylin on May 6, 2016 8:57am:


    What would be the case if the product was delivered out of the country by a company employee. Does nexus apply?

    • Posted by Gerald on May 6, 2016 11:24am:

      Your question is a bit unclear. Would the employee create nexus in another country ? Generally, if an employee is regularly and continuously in a jurisdiction, the employee would create nexus

  • Posted by Denise on November 6, 2015 11:31am:

    I work for a manufacture's rep in Ohio. We sold something to a customer in Indiana. My customer had it shipped into GA. It shipped from the manufacture in PA. We are TE in OH, KY, and IN. Are we required to pay taxes in GA? How do we get tax exempt status?

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