Were custom concrete floating docks fabricated and installed under lump-sum contracts real-property improvements for Florida sales tax?

Plain-English summary

The described custom floating docks were fixtures and real-property improvements for Florida sales and use tax. Concrete decks moved vertically with the water but were held horizontally by pile guides attached to pilings sunk into the watercourse bed. The docks were substantial, custom designed, fully installed, permitted like fixed docks, and equipped with embedded utilities and other permanent systems.

As a real-property-improvement contractor under lump-sum contracts, the taxpayer could remit tax on its material purchases and fabricated cost rather than collect sales tax on the full contract price. But its proposal said the lump-sum price included 6% Florida sales tax. The Department warned that this wording implied collection on the total contract price and instructed the taxpayer to remove it to use contractor treatment.

What this means for you

The ability to rise and fall with water did not prevent fixture status. Florida applied the whole factual picture, including attachment, adaptation, intent, scale, utilities, permits, and how the completed dock was used.

Common questions

Q: Did vertical movement make the docks tangible personal property? No.

Q: What tax base applied under the accepted contractor treatment? Purchases and fabricated cost, not the full lump-sum contract price.

Q: Why did invoice or proposal wording matter? Saying the total price included sales tax indicated tax had been collected on that amount.

Citations and references

• Fla. Stat. §§ 212.05 and 212.06(14) — sales tax and real-property improvements
• Fla. Admin. Code r. 12A-1.051 — contractors improving real property
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 02A-024

Original ruling text

SUMMARY

QUESTION: Is it proper to treat the floating dock system as
a fixture to real property for Florida sales and use tax
purposes?

ANSWER - Based on Facts Below: Floating docks fabricated
and installed by Taxpayer in a manner consistent with the
proposal provided with this petition are classed as real
property improvements (fixtures), and tax treatment for
sales and use tax purposes should be as such. The
determination was made based on a review of the criteria
set forth in Rule 12A-1.051(2)(c), F.A.C. The totality of
the facts of the proposal led to the conclusion that
Taxpayer's floating docks fabricated and installed
consistent with the proposal are real property
improvements.

May 09, 2002

Re: Technical Assistance Advisement 02A-024
Sales and Use Tax - Floating Docks
Section: 212.06, F.S.
Rule: 12A-1.051, F.A.C.
Petitioner: XXX (herein "Taxpayer")
FEI: XX

Dear :

This letter is a response to your petition dated March 21, 2002,
for the Department's issuance of a Technical Assistance
Advisement ("TAA") concerning the above referenced party and
matter. Your petition 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.

FACTS

Your petition sets forth the following facts:

[Taxpayer] is a leading manufacturer of concrete floating
docks. [Taxpayer] designs, engineers, fabricates and
installs these floating docks under lump-sum contracts
[footnote omitted]. [Taxpayer] is a registered Florida
sales tax dealer.

[Taxpayer's] floating docks are custom designed, fabricated
and installed for each project. The project owner can
choose from a variety of accessories to meet its particular
need.... The design and installation of each floating dock
is flexible and adaptable to the premises....

The components of a typical floating dock are described in
the Proposal.... The dock is based on pilings sunk into
the watercourse bed, around which a concrete deck rises and
falls with the water level. The concrete deck is affixed
to the pilings, but able to move up and down, through the
use of rollers housed in pile guides (internal pile guides
or end pile guides) welded to the deck frame.... These pile
guides allow vertical, but not horizontal, movement of the
concrete deck.

The floating dock includes walers, fendering, raceways,
cleats, and gangways. A typical floating dock includes
embedded and hardwired electric, telephone, fire
protection, fresh water, sewer, and cable television
systems. Construction and installation of these floating
docks requires the same government permits (e.g.,
Department of Environmental Protection, Department of
Natural Resources, U.S. Army Corps of Engineers,
city/county building permit) and construction licenses as a
fixed dock. These floating docks have the same amenities
and capabilities as a fixed dock. In short, the only
difference between these floating docks and a fixed dock is
the ability of the deck to maintain a spatial relationship
with [moored] vessels.

... [T]hese floating docks are substantial in nature.
[Taxpayer's] floating docks are primarily for commercial
and military use.... These floating docks are used for
both berthing vessels and to create slip spaces for mooring
vessels. These floating docks are uniformly assessed as
real property for ad valorem tax purposes and are treated
as depreciable fixed assets for financial accounting and
income tax purposes.

A local example of a... floating dock is the boat dock at
XXX .... A casual observer would not even know the dock is
floating; it is substantial and firmly held into place by
the pilings. The dock does not sway and remains steady
despite the strong river current. The dock level is not
affected by passenger traffic, nor when bumped by docking
boats. The presence of the pile guides in the only clue
that the dock actually floats on the surface of the...
River.

[Taxpayer] accrues and remits tax to the Department of the
fabricated cost of these floating docks pursuant to Rule
12A-1.051, [Florida Administrative Code].

A copy of a proposal for a project in Florida was provided with
the petition. The proposal quotes a lump sum price of $XX,
"including 6% Florida sales tax".

REQUESTED ADVISEMENT

Advice is requested whether it is proper to treat the floating
dock system as a fixture to real property for Florida sales and
use tax purposes.

LAW & DISCUSSION

Section 212.05, Florida Statutes, generally imposes tax on the
sale of tangible personal property. Section 212.06(14), Florida
Statutes, provides guidance in determining whether a person is
improving real property, and states as follows:

(14) For the purpose of determining whether a person is

improving real property, the term:

(a) "Real property" means the land and improvements thereto
and fixtures and is synonymous with the terms "realty" and
"real estate."

(b) "Fixtures" means items that are an accessory to a
building, other structure, or land and that do not lose
their identity as accessories when installed but that do
become permanently attached to realty. However, the term
does not include the following items, whether or not such
items are attached to real property in a permanent manner:
trade fixtures; property of a type that is required to be
registered, licensed, titled, or documented by this state
or by the United States Government, including, but not
limited to, mobile homes, except mobile homes assessed as
real property; or machinery or equipment. For an item to be
considered a fixture, it is not necessary that the owner of
the item also own the real property to which it is
attached.

(c) "Improvements to real property" includes the activities
of building, erecting, constructing, altering, improving,
repairing, or maintaining real property.

Rule 12A-1.051, Florida Administrative Code, provides guidance
in determining whether a particular item should be treated as
real property, and states in pertinent part:

(2)(c)1. "Fixture" means an item that is an accessory to a
building, other structure, or to land, that retains its
separate identity upon installation, but that is
permanently attached to the realty. Fixtures include such
items as wired lighting, kitchen or bathroom sinks,
furnaces, central air conditioning units, elevators or
escalators, or built-in cabinets, counters, or lockers.

2. In order for an item to be considered a fixture, it is
   not necessary that the owner of the item also own the real
   property to which the item is attached. A retained title
   provision in a sales contract or in an agreement that is

designated as a lease but is in substance a conditional
sales contract is not determinative of whether the item
involved is or is not a fixture. Similarly, the fact that a
lessee or licensee of real property rather than the
lessor/owner enters into a contract for an item to be
permanently attached to the real property does not prevent
that item from being classified as a fixture.

3. The determination whether an item is a fixture depends
   upon review of all the facts and circumstances of each
   situation. Among the relevant factors that determine
   whether a particular item is a fixture are the following:

a. The method of attachment. Items that are screwed or
bolted in place, buried underground, installed behind
walls, or joined directly to a structure's plumbing or
wiring systems are likely to be classified as fixtures.
Attachment in such a manner that removal is impossible
without causing substantial damage to the underlying realty
indicates that an item is a fixture.

b. Intent of the property holder in having the item
attached. If the property holder who causes an item to be
attached to realty intends that the item will remain in
place for an extended or indefinite period of time, that
item is more likely to be a fixture. That intent may be
determined by reviewing all of the property holder's
actions in regard to the item, including how the item is
treated for purposes of ad valorem and income tax purposes.
For example, if a property owner reports the value of the
item for purposes of ad valorem taxation of the realty and
depreciates the item for tax and financial accounting
purposes as real property, that indicates an intent that
the property is permanently attached as a fixture.

c. Real property law. If an interest in an item arises upon
acquiring title to the land or building, the item is more
likely to be considered a fixture. For example, if the
seller of real property would be expected to leave an item
behind when vacating the premises for a new owner without
the contract specifically requiring that it be left, that

item is likely to be classified as a fixture.

d. Customization. If items are custom designed or custom
assembled to be attached in a particular space, they are
more likely to be classified as fixtures. Customization
indicates intent that the items are to remain in place
following installation.

e. Permits and licensing. If installation of an item
requires a construction permit or licensing of the
contractor under statutes or regulations governing the
building trades, that item is more likely to be regarded as
a fixture.

f. Legal agreements. The terms of any purchase agreement,
deed, lease, or other legal document pertaining
specifically to an item may be relevant in determining
whether that item is a fixture of real property.

The foregoing list of factors relevant to determining
whether an item is a fixture is intended to be illustrative
only. Additional factors may exist in any particular case,
and the weight to be given to the factors will also vary in
each case.

Rule 12A-1.051(17), Florida Administrative Code, classifies
certain activities as improvements to real property, and states
in pertinent part:

(17) Specific activities classified as real property
contracts. Contractors who are engaged in the following
activities are generally considered to be real property
contractors, although any particular job may be determined
not to involve an improvement to real property:

(j) Dock, pier, seawall, and similar construction,
maintenance, or repair....

The Department's administrative rules provide that contractors
engaged in "dock, pier, seawall, and similar construction,
maintenance, or repair" are "generally considered to be real

property contractors," although any specific contract may be
classed otherwise. The rule does not differentiate between
floating docks and fixed docks. See Rule 12A-1.051(17)(j),
Florida Administrative Code. Floating docks are considered to
be "land" under maritime law, as are fixed docks. See Cope v.
Vallette Dry Dock Co., 119 U.S. 625, 627 (1887)(floating dry
dock permanently anchored in the Mississippi River); see also
Perry v. Haines, 191 U.S. 17, 40 (1903)(J. Brewer, dissenting).
The Department of Revenue has historically treated floating dock
systems as improvements to real property. See TAA 90A-061
(September 20, 1990), which classifies a floating dock as a
"public work" pursuant to Rule 12A-1.094, Florida Administrative
Code.

An evaluation of the factors listed in Rule 12A-1.051(2)(c),
Florida Administrative Code, support the conclusion that the
floating pontoon system is an improvement to real property.

1. Method of attachment.

The pilings are embedded in the submerged land. The electric,
telephone, fire protection, fresh water, sewer, and cable
television systems are hardwired and embedded into the dock and
are adjoined to the adjacent facility. Rule 12A1.051(2)(h)1.c., Florida Administrative Code, defines the term
"real property contract" to include items "directly wired or
plumbed into" fixed electrical and plumbing systems. Removal of
the floating pontoon system, including the pilings, would cause
substantial damage to the underlying real estate.

2. Intent of the property holder.

It is the intent of the property holder that the floating dock
will be a permanent improvement to the facility. The floating
docks are assessed as real property for ad valorem tax purposes,
and they are reported as fixed assets for financial accounting
purposes.

3. Real property law.

Acquisition of the adjacent property would also entail the

acquisition of the floating dock. The property holder/owner
would be expected to leave the floating dock in place when
conveying the adjacent property. Most of the floating docks are
constructed on submerged lands owned by the state for which the
facility owner has a submerged land lease. The lease and dock
would be expected to travel with the land.

4. Customization.

Taxpayer custom-designs and fabricates each dock in accordance
with the customer's specifications to meet the needs of the
project location.

5. Permits and licensing.

Federal, state, and local construction permits, as well as state
and local licenses, are required for the installation of the
floating docks on the waterways. These are the same permits and
licenses that are required for the construction and installation
of a fixed dock.

6. Legal agreements.

The sale and installation of the floating docks are pursuant to
lump sum contracts. This is consistent with treatment as real
property.

CONCLUSION

Floating docks fabricated and installed by Taxpayer in a manner
consistent with the proposal provided with this petition are
classed as real property improvements (fixtures), and tax
treatment for sales and use tax purposes should be as such.

Please be advised, the proposal attached to your request quotes
a contract price "including 6% Florida sales tax". This
statement implies that the tax is collected on the total
contract price, and Taxpayer would owe tax on the total contract
price. Taxpayer should delete this statement from its
proposals, and it may then remit tax only on its purchases and
fabricated costs of the floating dock.

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 upon 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 from that which is 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 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,

Sara D. Faulkenberry
Tax Law Specialist
Technical Assistance and Dispute Resolution
850/414-9838

Control #49448