Could a state insurance receivership division use its parent agency's Florida sales-tax exemption certificate?

Plain-English summary

The insurance receivership division could use its parent state agency's Consumer's Certificate of Exemption. Florida treated the division as an integral part of the executive-branch agency rather than a separate or semi-governmental entity.

That coverage applied to qualifying transactions made while acting as receiver for an insurance company and to purchases or leases for the division's own general use. The result did not change merely because receivership-related funds might pay some or all of the cost. The division could also apply for its own certificate, which would provide the same coverage for the described transactions.

What this means for you

The ruling depended on the division's legal status as part of the state agency and on compliance with the governmental-purchase rules. Those rules require the governmental unit to document the exemption and make payment directly rather than reimburse an employee's personal purchase.

Common questions

Q: Could the division exempt transactions entered into as receiver for an insolvent insurer? Yes, for the described qualifying transactions.

Q: Could it exempt property bought or leased for its own general use? Yes.

Q: Did the division need a separate exemption certificate? No. It could use the agency's certificate, although it could choose to obtain its own.

Citations and references

• Fla. Stat. § 212.08(6) — governmental sales-tax exemption
• Fla. Admin. Code r. 12A-1.038(4) — direct sales to governmental units
• Fla. Stat. § 20.13 — agency and division organization
• Fla. Stat. §§ 631.101(1), 631.111(1), and 631.141(1) — receivership functions and funds
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 02A-037

Original ruling text

SUMMARY

QUESTION 1: Is the agency, when acting through the division
as receiver and entering into a transaction that would have
been subject to the sales and use tax imposed by Chapter
212, F.S., if entered into directly by the company in
receivership, eligible to utilize its Consumer's
Certificate of Exemption to exempt such transaction under
the provisions of s. 212.08(6), F.S.?

ANSWER 1- Based on the facts below: Yes. The agency, when
acting through the division as receiver and entering into a
transaction that would have been subject to the sales and
use tax imposed by Chapter 212, F.S., if entered into
directly by the company in receivership, is eligible to
utilize its Consumer's Certificate of Exemption to exempt
such transaction under the provisions of s. 212.08(6), F.S.

QUESTION 2: Is the purchase or lease of tangible personal
property by the division for its general use, in a
transaction otherwise taxable under chapter 212, F.S.,
eligible for exemption under the provisions of 212.08(6),
F.S., even though it is possible that some portion, or all,
of the cost of the property may be paid for with funds
obtained by the agency under s. 631.101(1), F.S., or s.
631.111(1), F.S.?

ANSWER 2- Based on the facts below: Yes. The purchase or
lease of tangible personal property by the division for its
general use, in a transaction otherwise taxable under
chapter 212, F.S., is eligible for exemption under the
provisions of 212.08(6), F.S., even though it is possible
that some portion, or all, of the cost of the property may
be paid for with funds obtained by the agency under s.
631.101(1), F.S., or s. 631.111(1), F.S.

QUESTION 3: Is it proper for the division to utilize the
Consumer's Certificate of Exemption issued to the agency,
or should the division apply for a separate Consumer's
Certificate of Exemption?

ANSWER 3 - Based on the facts below: Yes. It is proper for
the division to utilize the Consumer's Certificate of
Exemption issued to the agency. The division may also
elect to apply for its own Consumer's Certificate of
Exemption. In doing so, the division would receive the same
coverage on the subject purchases and transactions under s.
212.08(6), F.S.

Sep 25, 2002

Re: Technical Assistance Advisement 02A-037
Sales and Use Tax - Receivership/Consumer Certificate of
Exemption
Section: 212.08(6), F.S.
Rule: 12A-1.038(4), F.A.C.
Petitioner: XX (herein "Taxpayer")

Dear :

This letter is a response to your petition dated XX, 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

Taxpayer is XXX. The XXX (herein the "Division"), is one of
Taxpayer's divisions established under s. 20.13(2)(d), F.S.

Proceedings for the rehabilitation or liquidation of insurance
companies are initiated by Taxpayer, and are under the
jurisdiction of the circuit court. See s. 631.031, and s.
621.021(2), F.S. Section 631.141(1), F.S., requires the
appointment of Taxpayer as Receiver for these proceedings. The
Division fulfills most of Taxpayer's responsibilities as

Receiver.

The Division rehabilitates financially troubled insurance
companies and coordinates, plans, and directs the rehabilitation
and liquidation of insolvent insurance companies, unlicensed
insurance companies and unlicensed insurance entities. In
performing its duties, the Division incurs many "costs and
expenses of administration," including purchases or transactions
that, if entered into by the insurance company in a prereceivership period, would have been subject to the sales and
use tax imposed by Chapter 212, F.S. Such purchases and
transactions may include the purchase of office supplies to be
used at the office of the insurance company, the repair of
property formerly belonging to the insurance company, and the
lease of real or tangible personal property to allow the
continuance of a lease previously entered into by the insurance
company. The Division may also incur expenses of its own that
are not attributable to a receivership company, including but
not limited to the purchase or lease of tangible personal
property for the general use of the Division or its employees.

Taxpayer has been issued a consumer's certificate of exemption
in order to qualify for the exemption provided by s. 212.08(6),
F.S. However, no consumer's certificate of exemption has been
issued in the name of the Division.

REQUESTED ADVISEMENT

I. Is Taxpayer, when acting through the Division as Receiver,
and entering into a transaction concerning a specific insurance
company that would have been subject to the sales and use tax
imposed by Chapter 212, F.S., if entered into by that insurance
company directly, eligible to utilize its Consumer's Certificate
of Exemption to exempt such transaction from sales tax under the
provisions of s. 212.08(6), F.S.?

II. Is the purchase or lease of tangible personal property by
the Division for its general use, in a transaction otherwise
taxable under chapter 212, F.S., eligible for exemption under
the provisions of 212.08(6), F.S., even though it is possible
that some portion, or all, of the cost of this property may be

paid for with funds obtained by Taxpayer under s. 631.101(1),
F.S., or s. 631.111(1), F.S.?

III. If the answer to either of the two previous issues is yes,
is it proper for the Division to utilize the Consumer's
Certificate of Exemption issued to Taxpayer, or should the
Division apply for a separate Consumer's Certificate of
Exemption?

LAW AND DISCUSSION

Section 212.08(6), F.S., provides in pertinent part:

(6) EXEMPTIONS; POLITICAL SUBDIVISIONS.--There are also
exempt from the tax imposed by this chapter sales made to
the United States Government, a state, or any county,
municipality, or political subdivision of a state when
payment is made directly to the dealer by the governmental
entity. This exemption shall not inure to any transaction
otherwise taxable under this chapter when payment is made
by a government employee by any means, including, but not
limited to, cash, check, or credit card when that employee
is subsequently reimbursed by the governmental entity....
(Emphasis Supplied)

Rule 12A-1.038(4), F.A.C., provides, in pertinent part:

(4) SALES MADE DIRECTLY TO GOVERNMENTAL UNITS.

(a) Any state, or any county, municipality, or political
subdivision of a state that holds a valid Consumer's
Certificate of Exemption (form DR-14) issued by the Florida
Department of Revenue may issue a copy of its certificate
to the selling dealer to purchase or rent taxable items or
services tax exempt in lieu of paying sales tax. . . .

(b) Payment for tax exempt purchases or rentals of property
or services must be made directly to the selling dealer by
the governmental unit of a state, or any county,
municipality, or political subdivision of a state. Payments
made with an authorized P-Card are considered to be made

directly by the governmental unit. When the payment for
taxable property or services is made with the personal
funds of an authorized representative of the governmental
unit, the purchase is subject to tax, even if the
representative is subsequently reimbursed with the
governmental unit's funds. The authorized representative of
any state, county, municipality, or political subdivision
of a state, must CHOOSE ONE of the following methods to
make tax exempt purchases or rentals:

1. Use an authorized Purchasing or Procurement Card ("PCard") which indicates on its face that it is a Florida
   government purchasing card for official business only.
   Information printed on the front of the card will include
   the agency's name, the agency's Consumer's Certificate of
   Exemption number, the account number, the name of the
   cardholder (employee), and the expiration date. The selling
   dealer who accepts the "P-Card" should retain a copy of the
   face of the "P-card" to note the Consumer's Certificate of
   Exemption number, account number, and cardholder name for
   its books and records to properly document the exempt sale.
   When the selling dealer cannot copy the "P-Card," the
   dealer must retain the Consumer's Certificate of Exemption
   number, the account number, cardholder's name, and the
   expiration date of the "P-Card."

2. Issue a certificate containing the governmental unit's
   name, address, the Consumer's Certificate of Exemption
   number, the effective date and expiration date of the
   Consumer's Certificate of Exemption, and the signature of
   an authorized representative of the governmental unit....

Sales to governmental units are exempt from sales tax pursuant
to section 212.08(6), F.S. Rule 12A-1.038(4), F.A.C., entitled
"Sales Made Directly to Governmental Units," contains guidelines
for claiming and documenting the exemption. Governmental
entities must obtain a Consumer's Certificate of Exemption from
the Department. Vendors are required to obtain for their records
proper documentation of the exempt status of the sale.

Taxpayer is created as an agency of the executive branch of the

government of the State of Florida under s. 20.13, F.S. The
Division is established as a division of Taxpayer under s.
20.13(2)(d), F.S. The Division is not semi-governmental in
nature. Rather, it is very clearly an integral part of an agency
of the executive branch of the government of the State of
Florida. With respect to the Receiver function that it performs
on behalf of Taxpayer, the Division cannot realistically be
viewed as a separate entity. Accordingly, the Division should
be viewed as an appendage of Taxpayer created to perform a
specific function. The Division should be permitted to supply
Taxpayer's Consumer's Certificate of Exemption for purchases or
transactions entered into in the performance Taxpayer's Receiver
function. These purchases and transactions would include both
purchases and transactions made on behalf of insurance companies
during the receivership process, and purchases and transactions
made for the Division or its employees' own general use. Please
note that the Division may elect to apply for its own Consumer's
Certificate of Exemption. In doing so, the Division would
receive the same coverage on the subject purchases and
transactions under s. 212.08(6), F.S.

CONCLUSION

I. Yes. Taxpayer, when acting through the Division as Receiver,
and entering into a transaction concerning a specific insurance
company that would have been subject to the sales and use tax
imposed by Chapter 212, F.S., if entered into by that insurance
company directly, may utilize its Consumer's Certificate of
Exemption to exempt such transaction from sales tax under the
provisions of s. 212.08(6), F.S.

II. Yes. The purchase or lease of tangible personal property by
the Division for its general use, in a transaction otherwise
taxable under chapter 212, F.S., is eligible for exemption under
the provisions of 212.08(6), F.S., even though it is possible
that some portion, or all, of the cost of this property may be
paid for with funds obtained by Taxpayer under s. 631.101(1),
F.S., or s. 631.111(1), F.S.

III. It is proper for the Division to utilize the Consumer's
Certificate of Exemption issued to Taxpayer. The Division may

also elect to apply for its own Consumer's Certificate of
Exemption. In doing so, the Division would receive the same
coverage on the subject purchases and transactions under s.
212.08(6), F.S.

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,

Case Bodiford
Attorney
Technical Assistance and Dispute Resolution
850/922-4714

Control #50565