Were the phosphate industry's listed facilities, machinery, equipment, and chemicals exempt as pollution-control purchases?

Subject

Pollution Control Equipment Used in Phosphate Industry

Plain-English summary

The facilities, devices, fixtures, machinery, equipment, and chemicals listed in the phosphate industry's Exhibit A were exempt from sales and use tax. Each item was used primarily—meaning more than 50%—to control pollution or contaminants as required by a Department of Environmental Protection law or permit condition at fixed locations where phosphate products were mined, processed, or produced.

The purchaser had to provide the vendor an appropriate certificate, with the Department recommending the format in TIP 00A01-17. The certificate documented why tax was not charged; actual qualifying use established the exemption. A business with self-accrual authority did not issue a certificate to itself but still had to keep proof.

What this means for you

The ruling treated phosphate mining as within the qualifying production activity and evaluated pollution control across the fixed location, not just one processing step. The environmental requirement, primary use, and records remained essential.

Common questions

Q: Did the exemption cover phosphate mining operations? Yes, under the Department's construction of the statute.

Q: What did “used primarily” mean? More than 50% use for the qualifying pollution-control purpose.

Q: Did the certificate itself create the exemption? No. Actual use created it; the certificate supported the tax-free transaction.

Citations and references

• Fla. Stat. § 212.051 — pollution-control equipment, machinery, and materials exemption
• Fla. Stat. § 212.08(5)(b) — new and expanding business machinery exemption
• Alachua County v. Department of Revenue, 466 So. 2d 1186 (Fla. 1st DCA 1985)
• TIP 00A01-17 — recommended certificate format
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-058

Original ruling text

SUMMARY

QUESTION: Whether the facilities, devices, fixtures,
equipment, machinery, and chemicals, as presented by the
Phosphate Industry in its Exhibit A to the request for a
TAA are exempt from sales and use tax pursuant to s.
212.051, F.S.

ANSWER - Based on Facts Below: The facilities, devices,
fixtures, equipment, machinery, and chemicals, as presented
in Exhibit A to the request for a TAA, are used primarily
(greater than 50 percent) for the control of pollution as
required by the Department of Environmental Protection in
the manufacturing, processing, compounding, or production
of phosphate products, Therefore, such facilities, devices,
fixtures, equipment, machinery, and chemicals are exempt
from sales and use tax pursuant to s. 212.051, F.S., after
the appropriate certificate has been submitted to the
vendor. It is recommended that the certificate format as
presented in TIP 00A01-17, dated July 11, 2000, be
followed.

Sep 21, 2001

Re: Technical Assistance Advisement 01A-058
Sales and Use Tax
Pollution Control Equipment Used in Phosphate Industry
Section 212.051, F.S.

Dear :

This is in response to your letter of March 1, 2001, which
requests a Technical Assistance Advisement (TAA) on behalf of
your client, the XXX (hereinafter the "Phosphate Industry").

Background

Companies in the Phosphate Industry are engaged in the
mining and processing of phosphate rock and in the production of

phosphatic chemicals and fertilizers. These activities can be a
significant source of air and water pollution. Accordingly, the
activities of the Phosphate Industry are regulated by the
Florida Department of Environmental Protection (DEP). These
regulations generally do not mandate the use of any particular
machinery and equipment or systems for the control or abatement
of pollutants. Instead, DEP specifies that a facility may not
discharge specific pollutants in excess of certain amounts into
the air or water.

Phosphate Industry's Position

It is the Phosphate Industry's contention that the
facilities, devices, fixtures, equipment, machinery, and
chemicals, as presented in Exhibit A to the request for a TAA,
are used primarily (greater than 50 percent) for the control of
pollution as required by DEP in the manufacturing, processing,
compounding, or production of phosphate products. Accordingly,
after presentation to the vendor of a certificate that is
consistent with the format presented in Tax Information
Publication (TIP) 98A01-28, dated December 30, 1998, such
facilities, devices, fixtures, equipment, machinery, and
chemicals are exempt from sales and use tax pursuant to s.
212.051, F.S.

Relevant Authority

The following passage from the Florida Statutes (F.S.) is
pertinent to your request for a Technical Assistance Advisement.

Section 212.051, F.S., provides in part:

212.051 Equipment, machinery, and other materials for
pollution control; not subject to sales or use tax.-

(1) Notwithstanding any provision to the contrary, sales,
use, or privilege taxes shall not be collected with respect
to any facility, device, fixture, equipment, machinery,
specialty chemical, or bioaugmentation product used
primarily for the control or abatement of pollution or
contaminants in manufacturing, processing, compounding, or

producing for sale items of tangible personal property at a
fixed location, or any structure, machinery, or equipment
installed in the reconstruction or replacement of such
facility, device, fixture, equipment, or machinery. To
qualify, such facility, device, fixture, equipment,
structure, specialty chemical, or bioaugmentation product
must be used, installed, or constructed to meet a law
implemented by, or a condition of a permit issued by, the
Department of Environmental Protection; however, such
exemption shall not be allowed unless the purchaser signs a
certificate stating that the facility, device, fixture,
equipment, structure, specialty chemical, or
bioaugmentation product to be exempted is required to meet
such law or condition. . . .

(3) For the purposes of this section, "specialty chemicals"
means those chemicals used to enhance or further treat
wastewater, including, but not limited to, defoamers,
nutrients, and polymers, and "bioaugmentation products"
means the microorganisms used in waste treatment plants to
break down solids and consume organic matter.

The following rule chapters from the Florida Administrative
Code (F.A.C.) are applicable to activities within the Phosphate
Industry.

Ch. 62-273, F.A.C. Air Pollution Episodes
Ch. 62-296, F.A.C. Stationary Sources - Emission Standards
Ch. 62-297, F.A.C. Stationary Sources - Emissions Monitoring
Ch. 62-312, F.A.C. Dredge And Fill Activities
Ch. 62-520, F.A.C. Ground Water Classes, Standards, And
Exemptions
Ch. 62-522, F.A.C. Ground Water Permitting And Monitoring
Requirements
Ch. 62-660, F.A.C. Industrial Wastewater Facilities
Ch. 62-671, F.A.C. Phosphate Mining Waste Treatment
Requirements
Ch. 62-672, F.A.C. Minimum Requirements For Earthen Dams Used
In Phosphate Mining And Beneficiation
Operations And For Dikes Used In
Phosphogypsum Stack System Impoundments

Ch. 62-673, F.A.C. Phosphogypsum Management
Ch. 62C-16, F.A.C. Bureau Of Mine Reclamation - Mandatory
Phosphate Mine Reclamation

Determination

The exemption provided by s. 212.051, F.S., is generally
applicable to manufacturers, but the exemption is available to
mining operations. Support for this position can be found in
the current exemption provisions of s. 212.08(5)(b), F.S., for
new and expanding businesses. That exemption is also available
to businesses that "manufacture, process, compound, or produce"
tangible personal property for sale. Effective July 1, 1999, s.
1., Chapter 99-171, L.O.F., amended the new and expanding
business exemption by removing the express prohibition of
"phosphate or other solid minerals severance, mining, or
processing operations" from eligibility for that exemption.
Since the terms "manufacture, process, compound, or produce"
within s. 212.08(5)(b), F.S., were not amended to expressly
include "mining," it can be reasonably concluded that the terms
manufacture, process, compound, or produce encompass the term of
mining. Accordingly, phosphate mining operations would be
includable and eligible for the exemption provided by s.
212.051, F.S.

An important exemption criterion of s. 212.051, F.S., is
that the facility, device, fixture, equipment, machinery,
specialty chemical, or bioaugmentation product must be used
primarily "to meet a law implemented by, or any condition of a
permit issued by, the Department of Environmental Protection."
DEP does not specify the devices or materials that must be used
to control pollution. Instead, DEP specifies that a facility may
not discharge specific pollutants in excess of certain amounts
into the air or water. Therefore, in the administration of the
exemption, the Department of Revenue (DOR) considers those
devices or materials used primarily to meet, or not exceed, the
stated pollution limits as qualifying for the exemption. Within
this context, "primarily" is considered to be an amount in
excess of 50 percent.

The exemption provisions of s. 212.051, F.S., could be

narrowly construed to only apply to those pollution control
items that are directly associated with manufacturing,
processing, compounding, or production operations. Such a
reading would be consistent with the judicially mandated narrow
interpretation of exemptions as found in Szabo Food Services,
Inc. v. Dickinson, 286 So.2d 529, 530, (Fla. 1973). However,
within the subject exemption statute, such a narrow construction
would allow an exemption to some pollution control items at a
fixed location, while denying the exemption to other pollution
control items that control or abate the same pollutant at the
same fixed location. In the matter of Alachua County v.
Department of Revenue, 466 So.2d 1186 (Fla. 1st DCA 1985), the
court stated that "[a]lthough an exemption in a taxing statute
should be strictly construed against the person claiming it, the
construction must not be so strained that it forces a conclusion
that is unreasonable. . . ." Therefore, the strictest
construction of the exemption statute at issue would reach an
unreasonable conclusion.

The appropriate construction would be that the exemption is
not limited to pollution control items used in a single
operation or activity. Instead, the exemption applies to such
items used in all activities occurring at the fixed location
where manufacturing, processing, compounding, or production
takes place. Although the exemption statute provides definitions
for specialty chemicals and bioaugmentation products, it does
not provide definitions for facility, device, fixture,
equipment, or machinery. There is a definition for "facility"
found in Chapter 62-673, F.A.C., governing phosphogypsum
management. Rule 62-673.200(6), F.A.C., defines facility as
meaning "all contiguous land and structures, other appurtenances
and improvements on the phosphate fertilizer manufacturing
complex." Since the crux of the exemption is that the
"facility, device, fixture, equipment, structure, specialty
chemical, or bioaugmentation product must be used, installed, or
constructed to meet a law implemented by, or a condition of a
permit issued by, the Department of Environmental Protection,"
it is appropriate to use a rule promulgated by DEP in the
administration of the tax exemption. This would preclude the
above-mentioned exemption dichotomy.

Therefore, since the facilities, devices, fixtures,
equipment, machinery, and chemicals, as presented in Exhibit A
to the request for a TAA, are used primarily for the control of
pollution as required by DEP in the manufacturing, processing,
compounding, or production of phosphate products, such
facilities, devices, fixtures, equipment, machinery, and
chemicals are exempt from sales and use tax pursuant to s.
212.051, F.S., after the appropriate certificate has been
submitted to the vendor. It is recommended that the certificate
format as presented in TIP 00A01-17, dated July 11, 2000, be
followed. A sample of that certificate format is attached. It
is important to understand that the exemption is not established
by the issuance of the certificate to the vendor. The exemption
is established when the item or items are used for the express
purposes designated by the exemption statute. The certificate
simply provides documentation to the vendor as support for the
reason why tax was not charged on a particular transaction. If a
member of the Phosphate Industry has self-accrual authority,
then that business does not have to issue a certificate to
itself. However, that business must maintain all documentation
necessary to prove the exempt status of the purchases.

This response constitutes a Technical Assistance Advisement
under Section 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 Section 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 documents are public records under Chapter 119,
F.S., which are subject to disclosure to the public under the
conditions of Section 213.22, F.S. Your name, address, and any
other details, which might lead to identification of the
taxpayer, must be deleted before disclosure. In an effort to
protect the confidentiality of such information, we request you
provide the undersigned with an edited copy of your request for

Technical Assistance Advisement, backup material and response
within fifteen days of the date of this advisement.

Sincerely,

Jeffery L. Soff
Tax Law Specialist
Technical Assistance and
Dispute Resolution

ctrl# 44222

SUGGESTED MANUFACTURING FACILITY CERTIFICATE

[Note: This certificate may be a separate document attached to
purchase order(s) or may be incorporated within the purchase
order(s) itself.]

The undersigned hereby declares that all devices, fixtures,
machinery, equipment, structures, specialty chemicals, or
bioaugmentation products purchased (or leased) from
___ (Contractor's or Vendor's Name) will be
installed, constructed, or used at the fixed location at
___ (Address and City), Florida, County of
____, primarily for the control or abatement of
pollution or contaminants in the manufacturing, processing,
compounding, or production of tangible personal property for
sale. Further, the undersigned declares that said items are
required pursuant to a law implemented by the Florida Department
of Environmental Protection (DEP) or required under the
condition of a permit issued by DEP.

I understand any person furnishing a false certificate to a
vendor for the purpose of evading payment of any tax imposed
under Chapter 212, Florida Statutes, shall be subject to the
penalty set forth in Section 212.085, Florida Statutes, and as
otherwise provided by law.

This certification relieves the vendor from the responsibility

of collecting tax on exempt sales amounts. The Department looks
solely to the purchaser for recovery of tax if the purchaser was
not entitled to the exemption.

Purchaser's Name (Print or Type)

Signature

Date

Florida Sales Tax Number

Title

Federal Employer Identification

Telephone Number

Number or Social Security Number

Form to be retained in seller's records.
Do not send to the Department of Revenue.