Were airport passenger-screening services taxable when the Federal Aviation Administration contracted and paid the provider directly?

Plain-English summary

Airport passenger-screening services were exempt from Florida sales tax when the United States government paid the provider directly. The taxpayer performed the services in four Florida cities under a Federal Aviation Administration contract and received payment from the federal government.

Florida otherwise taxed detective, burglar-protection, and other protection services. The government exemption applied to security services provided directly to an exempt governmental entity with direct governmental payment. It did not apply when the provider invoiced and was paid by a private contractor working for the government.

What this means for you

The identity of the customer and the payment path were decisive. Performing work connected to a government project was not enough if a private contractor actually purchased and paid for the service.

Common questions

Q: Were the FAA contract services taxable? No.

Q: What fact supported the exemption? Direct payment by the United States government to the service provider.

Q: What if a private government contractor pays? The ruling says the security transaction is taxable.

Citations and references

• Fla. Stat. § 212.05(1)(j)1.a. — tax on protection services
• Fla. Stat. § 212.08(6) — United States government exemption
• Fla. Admin. Code r. 12A-1.0092(3)(c) — security services for government entities
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 02A-025

Original ruling text

SUMMARY

QUESTION: What is the taxable status of security services
when the services are provided pursuant to a contract with
the Federal Aviation Administration.?

ANSWER - Based on Facts Below: Sales tax is not due on
security transactions where payment is made to Taxpayer
directly by the United States Government.

May 09, 2002

Re: Technical Assistance Advisement 02A-025
Sales and Use Tax - Security Services for United States
Government
Sections: 212.05, 212.08, F.S.
Rule: 12A-1.0092, F.A.C.
Petitioner: XXX (herein "Taxpayer")
FEI: XX

Dear :

This letter is a response to your petition dated April 17, 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

The petition for the issuance of a Technical Assistance
Advisement follows the issuance of Letters of Technical Advice
02A-179 and 02A-377, dated February 18, 2002, and April 10,
2002, respectively, to Taxpayer.

Taxpayer provides airport passenger screening services to
airports in four Florida cities. Service is provided pursuant
to a contract with the Federal Aviation Administration.
Taxpayer receives payment directly from the federal government.

REQUESTED ADVISEMENT

Advice is requested on the taxability of security services when
the services are provided pursuant to a contract with the
Federal Aviation Administration.

APPLICABLE STATUTES AND RULES

Section 212.05(1)(j)1.a., Florida Statutes, imposes tax on the
sale on detective, burglar protection, and other protection
services. Section 212.08(6), Florida Statutes, exempts from tax
"... sales made to the United States Government... when payment
is made directly to the dealer by the governmental entity...."

Rule 12A-1.0092(3)(c), Florida Administrative Code, provides:

Investigative or security services provided directly to a
governmental entity that is exempt from sales and use taxes
under s. 212.08(6), F.S., are exempt if payment is made
directly by the governmental entity. Such services are not
exempt when provided to a contractor for a governmental
entity.

DETERMINATION

Sales tax is not due on security transactions where payment is
made to Taxpayer directly by the United States Government. The
contract Taxpayer holds with the Federal Aviation Administration
falls into this category. However, sales tax is due on security
transactions when Taxpayer invoices, and is paid by, a private
contractor working for a governmental entity.

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 #49944