Could one $5,000 county-surtax cap apply to a weekly order of windows and related materials?

Subject

Discretionary Sales Surtax - $5,000 Limitation

Plain-English summary

The $5,000 discretionary sales-surtax limitation applied once to each qualifying weekly order, not separately to every window or component. Each purchase order specified the items, quantities, and delivery date, and the manufacturer issued one invoice after delivery, satisfying the single-sale test.

The windows, doors, screens, touchup paint, glazing bead, and related installation materials were normally sold in bulk and used together as working units. Tools or equipment added to an invoice would not automatically share that aggregation treatment.

What this means for you

One invoice alone was not enough. The items also had to be normally sold in bulk or assembled into a working unit, and the documents had to show a single transaction.

Common questions

Q: Did the cap apply to the whole weekly order? Yes, on the stated facts.

Q: Why were the items aggregated? They were part of one documented sale and were normally sold in bulk or assembled into completed window units.

Q: Would unrelated tools qualify? Not under this ruling.

Citations and references

• Fla. Stat. § 212.054(2) — discretionary sales surtax and $5,000 limitation
• Fla. Admin. Code r. 12A-15.004(2) — single sale, bulk sale, and working unit
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00A-062

Original ruling text

SUMMARY

QUESTION: Does the $5,000 limitation on local option
discretionary sales surtax apply to orders placed by a
contractor with a window manufacturer?

ANSWER - Based on Facts Below: The $5,000 limitation
applies when a contractor places a single order for
specified windows and related materials (e.g., screening,
touchup paint) with a manufacturer. Each purchase order
specifies the items ordered, the quantities, and the
delivery date; and a single invoice is sent after delivery
of the order. The items therefore meet the "single sale"
test. The manufacturer normally sells in multiple
quantities to wholesalers, developers, and contractors such
as taxpayer. The various materials are used in conjunction
with the window frames to install the complete window
assemblies. All of the items on each purchase order
therefore qualify for aggregation when applying the $5,000
surtax limitation.

Oct 30, 2000

Re: Technical Assistance Advisement 00A-062
Discretionary Sales Surtax - $5,000 Limitation
Section 212.054, F.S.
Rule 12A-15.004, F.A.C.

Dear :

This is in response to your letters to the Florida Department of
Revenue dated September 13, 2000 and October 9, 2000, in which
you request a technical assistance advisement concerning certain
transactions.

Facts

XXX ("Taxpayer") sells and installs doors and windows in

residential construction projects, primarily tract homes.
Taxpayer enters into lump sum contracts with builders of such
homes. Taxpayer purchases large volumes of doors and windows on
a weekly basis from XXX ("Manufacturer") in order to fulfill
those contracts. Manufacturer is located in Texas and
manufactures aluminum window and door products for sale to
builders, building supply businesses, and contractors. Taxpayer
places orders with Manufacturer every Monday by telecopy. You
have provided the first two pages of a typical weekly purchase
order, order number 221, dated February 7, 2000. It states an
expected delivery date of February 21, 2000. The entire
itemized order is 15 pages long. The items ordered include
various sizes of windows and doors, screens, paint, glazing
bead, and similar parts and materials that are needed to install
the finished windows and doors. It is assumed for purposes of
this advisement that only items of this nature are purchased
from Manufacturer. This advisement would not necessarily apply
if Taxpayer were also to order other items (e.g., tools or
equipment) from Manufacturer.

When Manufacturer receives an order, Manufacturer enters the
information in its computers and generates a "Pre-Bill", which
is telecopied to Taxpayer for review and correction before
manufacture begins. It ordinarily takes manufacturer two weeks
to prepare and deliver an order. The order is shipped in one or
more trucks with shipping documents that itemize the delivery.
Taxpayer inspects the goods and signs the shipping receipts,
which identify items by reference to Taxpayer's original order
and page number. For example, items ordered on pages 1 and 2 of
order 221 were shipped on February 18, 2000 in Manufacturer's
truck #30 and delivered to Taxpayer on February 21, 2000, the
date specified in the original order. After receiving the
signed receipts back, Manufacturer generates a printout that
details the delivered items and prices. Taxpayer checks the
printout against its own records and notifies Manufacturer of
any errors. Manufacturer then sends a single invoice for the
order. The invoice for order 221 was dated March 27, 2000 and
stated only that the amount of $83,428.19 was due for "purchase
order 221 pages 1 through 15, delivered on 2/21/00". Taxpayer
writes a single check to pay for each order.

Taxpayer states that "Taxpayer pays the sales tax due on the
cost of the windows and doors at the time of purchase". The
documentation indicates that Manufacturer does not collect tax
from Taxpayer. It is therefore assumed that Taxpayer accrues
and remits use tax directly to the state on purchases from
Manufacturer. (This advisement does not the address whether
Manufacturer should register as a dealer in Florida and collect
and remit tax on its sales to Taxpayer.)

Taxpayer is located in a county with a 1 percent discretionary
sales surtax.

Requested Advisement

Taxpayer asks whether it is appropriate to apply the $5,000
discretionary sales surtax limitation to each weekly order
placed with Manufacturer.

Applicable Law, Discussion, and Analysis

Under section 212.054(2)(a), F.S., the basic principle in
applying discretionary surtaxes is that they piggyback the state
sales and use tax. If a transaction is subject to sales tax and
occurs in a county where surtax is imposed, the surtax also
applies. Section 212.054(2)(b), F.S., limits application of
that principle when there is a sale of an item of tangible
personal property for over $5,000. The surtax in that case
applies only to the first $5,000. Subparagraph (b)1. of the
statute then sets out very specific circumstances in which more
than one item can be aggregated for purposes of application of
the surtax. That provision reads:

... For purposes of administering the $5,000 limitation on
an item of tangible personal property, if two or more
taxable items of tangible personal property are sold to the
same purchaser at the same time and, under generally
accepted business practice or industry standards or usage,
are normally sold in bulk or are items that, when
assembled, comprise a working unit or part of a working
unit, such items must be considered a single item for
purposes of the $5,000 limitation when supported by a

charge ticket, sales slip, invoice, or other tangible
evidence of a single sale or rental....

The statute requires application of the $5,000 limitation on an
item-by-item basis, except for very specific circumstances when
multiple items will be viewed as a single item. In order for
the exception to apply, two tests must be satisfied. There must
be a single sale in which one purchaser buys all the items at
the same time, with a charge ticket, sales slip, invoice, or
other documentary evidence that there has been such a single
transaction. Second, the multiple items reflected on that sales
slip or other documentation will be aggregated for purposes of
applying the $5,000 limitation only if they fall into one of two
categories. They must be either items that are normally sold in
bulk, or they must be items that will be assembled into a
working unit or a part of one.

Single Sale Test

Items that meet the bulk sale/working unit standard cannot be
aggregated if they are not purchased in a single sale. A
kitchen contractor may not aggregate seven refrigerators
purchased in June with eight refrigerators purchased in July,
even if that contractor ordinarily purchases appliances in bulk.
The single sale requirement addresses the character of the
transaction itself, whether there is a discrete unitary
transaction to which the limitation can be applied or multiple
sales that are separately subject to the limitation. Meeting
this requirement is a matter of documenting that there was one
buyer, one seller, and that the agreement to buy and sell
occurred at the same time as to all of the items involved.

Rule 12A-15.004(2)(d), F.A.C., is concerned with the single sale
requirement. It provides as follows:

(d) Where a purchase order is issued by the purchaser to
the selling dealer, or an agreement is made between the
selling dealer and the purchaser which is reduced to
writing, that provides for the purchase of a specific
quantity of tangible personal property which, according to
the terms and conditions set out in the purchase order or

agreement, is to be delivered to the purchaser within a
definite specified time, such transaction constitutes one
sale for purposes of the $5000 limitation. Delivery of the
tangible personal property so ordered within the time
specified in the purchase order or agreement will
constitute one sale.... In the absence of a written
purchase order or written agreement reflecting the above
conditions, each individual delivery of tangible personal
property is to be considered one sale....

In this case, Taxpayer issues a single purchase order that lists
a definite quantity of each item being ordered and specifies a
delivery date. There is a single invoice from Manufacturer for
the total amount due on all items purchased and delivered
pursuant to that purchase order. Documentation from both parties
thus indicates that there is a single sale for purposes of
section 212.054(2)(b).

Bulk Sale/Working Unit Test

Items cannot be aggregated solely because they are purchased in
a single sale. The bulk sale/working unit test must also be
met. This requirement addresses the character of the items
purchased. Items may be viewed as a single item only if they are
items that fall within one of the two categories specified. The
category of items usually sold in bulk encompasses multiple
quantities of items ordinarily purchased in such quantities
rather than one at a time. This applies, for example, to wall
studs purchased by a carpenter or circuit breakers purchased by
an electrician. The category of items usually assembled into a
working unit addresses items that are commonly purchased
together because their utility is dependent upon their assembly
into some larger unit. An example of the working unit concept
would be a purchase of sheet metal, screws, tape, and sealant by
an air conditioner contractor to construct a ductwork system.

The relevant regulatory provision for guidance in application of
the bulk sale/working unit standard is Rule 12A-15.004(2)(b),
F.A.C., which reads as follows:

(b)1. For purposes of administering the $5,000 limitation

on any item of tangible personal property, if two or more
taxable items of tangible personal property are sold to the
same purchaser at the same time and, under generally
accepted business practice or industry standards or usage,
are normally sold in bulk or are items which, when
assembled, comprise a working unit or part of a working
unit, such items shall be considered a single item for
purposes of the $5,000 limitation when supported by a
charge ticket, sales slip, invoice, or other tangible
evidence of a single sale or rental.

2.a. Example:

c. Example: When a heating and air conditioning
distributor/dealer, who normally makes bulk sales (that is,
sells several heating and air conditioning units at the
same time) bills for such units on one invoice, the surtax
applies to the first $5,000 on the total invoice.

d. Example: In the case of heating and air conditioning
dealers who do not normally make bulk sales, the surtax
applies to the first $5,000 on each unit, even though the
dealer may sell and list several units on one invoice.

e. Example: Piping, duct material, wiring, and other
similar items used to make up the heating and air
conditioning system are normally sold in bulk. Thus, if the
selling dealer sells and invoices that type of material on
one invoice, the surtax applies to the first $5,000 for the
total of these materials.

f. Example: When a lumber and supply dealer sells lumber of
various kinds and sizes, nails of different sizes, rolls of
felt, squares of shingles, or other building materials
normally sold in bulk and the sale [is] on one invoice, the
sale will be considered to be a single item and the surtax
applies to the first $5,000 of the total invoice. If,
however, the invoice contains items not normally sold in
bulk (e.g., hammers, saws, shovels, power drills,...) the
surtax will apply to the first $5,000 for each item not
usually sold in bulk.

Like the heating and air conditioning distributor who normally
sells multiple units in single sales, Manufacturer sells its
windows and doors to contractors and developers who purchase in
multiple quantities to meet the needs of their current projects.
Like the lumber and building supply dealer who makes a single
sale of items that are used together to construct a building,
Manufacturer sells windows, doors, touchup paint, glazing bead,
and related items that are all used in installing those windows
and doors in a building. These are products that, in accordance
with the customary practice and standards in Manufacturer's
business of supplying contractors and developers, are normally
sold in bulk and are part of a working unit. Taxpayer does not
appear to order any items other than windows, doors, screens,
and miscellaneous materials that are incorporated into the
windows and doors in the course of preparation and installation.
If any such items (e.g., tools or equipment) were to be
purchased by Taxpayer from Manufacturer, they would not be
treated as items normally purchased in bulk under this
advisement.

Advisement

All of the items included in a weekly purchase order from
Taxpayer to Manufacturer are items acquired in a single sale.
All windows, doors, screens, paint, glazing bead, and other
materials that are incorporated into the installed windows and
doors are items normally purchased in bulk and assembled into
working units when sold by Manufacturer to developers and
contractors. Based upon the facts and circumstances described
in your request, the $5,000 limitation on the application of
discretionary sales surtaxes applies to all such items included
in a single weekly purchase order.

Closing Statement

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, 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 section 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.

Sincerely,

Linda W. Bridges, Senior Attorney
Technical Assistance and Dispute Resolution
(850) 922-9412

LWB/
Control #: 42511