Were fabricated variable message signs installed for FDOT tangible personal property or real-property improvements, and who owed tax?

Plain-English summary

Florida treated the fabricated and installed variable message signs as real-property improvements. The 2002 law removed automatic tangible-personal-property treatment for trade fixtures and required analysis of attachment, removal damage, buyer intent, accounting, and other facts.

The signs and related assemblies were permanently attached along public roadways. Florida therefore treated the contractor as the consumer: it owed tax on materials and manufactured cost and did not collect tax from FDOT as a retail sale.

Historical safe harbor

The definitional change applied retroactively, but the Legislature protected qualifying contracts performed before July 1, 2002 when taxpayers had followed the earlier trade-fixture statute. That safe harbor prevented additional tax, penalty, or interest but did not authorize refunds of tax already paid.

What this means for you

Sign contractors should document attachment method, removal consequences, customer intent, contract completion date, fabricated cost, and any public-owner exemption certificates. Historical safe harbors are date-specific.

Common questions

Q: Did FDOT's exemption certificate make the installed signs a tax-free sale?
A: No under the real-property classification; the contractor owed tax as consumer.

Q: What tax base applied to fabricated signs?
A: The manufactured cost described in the ruling.

Q: Did the retroactive change create refunds?
A: No. It provided protection from additional liability for qualifying earlier treatment.

Citations and references

• Fla. Stat. § 212.06(14) — real property and fixtures
• Fla. Admin. Code r. 12A-1.051 — real-property contractors and manufactured cost
• Chapter 2002-218, § 14, Laws of Florida — historical safe harbor discussed
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 03A-026

Original ruling text

SUMMARY

QUESTION: Taxpayer is a foreign corporation engaged in the
business of installing pre-fabricated signs for use along
public roadways. Under a contract with the DOT, Taxpayer is
required to provide and install the signs and to provide
certain roadway construction work related to the
installation of signs. The only items imported into
Florida for the project were the signs themselves,
controllers, controller cabinets, related computer
hardware, and the overhead sign assemblies. All other
necessary materials were purchased in Florida from local
vendors, and sales taxes were paid on these local
purchases. Although the contract included work involving
the improvement of real property, the predominant purpose
of the contract was the installation of signs. Are the
signs, controllers, controller cabinets, related computer
hardware and overhead sign assemblies sold to the FDOT
subject to Florida sales or use tax?

ANSWER - Based on Facts Below: The 2002 Florida Legislature
deleted "trade fixtures" as a class of items that would be
treated as tangible personal property regardless of
permanent attachment. The effect is that trade fixtures
will be classified as real property or as tangible personal
property depending upon review of all the facts and
circumstances, including the method of attachment, damage
upon removal, intent of the buyer, treatment for other tax
and accounting purposes, and any other relevant factors.

Therefore, according to the new statute, exterior signs
that are welded or bolted, channel letters that are lighted
and directly wired, or signs that are embedded in concrete
foundations are now classified as real property, based on
the method of attachment. The contractor should pay tax on
the materials and supplies used to fabricate and install
the sign, and not collect tax from the customer. The use
tax is due on the manufactured cost even if the sign is
installed in another state. See Rule 12A-1.051, F.A.C.

May 19, 2003

Re: Technical Assistance Advisement 03A-026
XXX
Sales and Use Tax-Variable Message Signs
Statute: Section 212.06, F.S.
Rule: 12A-1.051, F.A.C.

Dear :

This response is in reply to your letter dated April 10, 2003,
requesting the Department's issuance of a Technical Assistance
Advisement ("TAA") pursuant to Section 213.22, F.S., and Chapter
12-11, F.A.C., regarding the referenced matter and parties. An
examination of your petition has established that you have
complied with the statutory and regulatory requirements for
issuance of a TAA. Therefore, the Department is hereby granting
your request for issuance of a TAA.

FACTS

Taxpayer is engaged in the business of installing pre-fabricated
signs for use along public roadways. The company has its
principal office in XXX and does not maintain a permanent office
or other location in Florida. Taxpayer's only activity in
Florida has been the performance of a contract with the Florida
Department of Transportation ("FDOT") for the provision and
installation of Variable Message Signs at various locations
along the XXX. The contract was executed on October 2, 2000,
and all work was completed prior to July 1, 2002.

Under the contract, Taxpayer was required to provide and install
the signs and to provide certain roadway construction work
related to the installation of signs. The only items imported
into Florida for the project were the signs themselves,
controllers, controller cabinets, related computer hardware, and
the overhead sign assemblies. All other necessary materials
were purchased in Florida from local vendors, and sales taxes
were paid on these local purchases. Although, as stated, the

contract included work involving the improvement of real
property, the predominant purpose of the contract was the
installation of signs.

This request is limited to the issue of whether the signs,
controllers, controller cabinets, related computer hardware and
overhead sign assemblies sold to the FDOT were subject to
Florida sales or use tax

APPLICABLE LAW AND DISCUSSION

As of July 1, 1998, s. 212.06(14), F.S., was added to the
statutes to provide definitions to assist contractors in
deciding whether a job should be taxed as a sale of tangible
personal property or as the performance of a real property
contract. "Real property" is land, improvements to land, and
fixtures. "Fixtures" are "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." Id. The determination of
whether an item is a fixture requires review of all the facts
and circumstances. A prerequisite for a fixture is that it must
be attached to real property in some manner indicating that it
has become part of the real property and will remain in place
indefinitely. The statute specifically excludes certain types
of property from classification as a real property fixture, even
if the items are permanently attached and would otherwise
qualify as a fixture.

Under s. 212.06(14), F.S., prior to the retroactive amendment
approved by the legislature in 2002, "trade fixtures" would
always be tangible personal property, even if permanently
attached. The statute did not define the term "trade fixtures."
In general terms, trade fixtures are items that are attached to
real property to further a particular business conducted at that
location. Examples of trade fixtures would be built-in specialty
shelving for a particular product, signs identifying the
business at a location, or channel letters that are bolted to
the wall and hard wired.

The 2002 Florida Legislature deleted "trade fixtures" as a class

of items that would be treated as tangible personal property
regardless of permanent attachment. The effect is that trade
fixtures will be classified as real property or as tangible
personal property depending upon review of all the facts and
circumstances, including the method of attachment, damage upon
removal, intent of the buyer, treatment for other tax and
accounting purposes, and any other relevant factors.

Therefore, according to the new statute, exterior signs used to
identify business locations that are welded or bolted, channel
letters that are lighted and directly wired, or signs that are
embedded in concrete foundations are now classified as real
property, based on the method of attachment. The contractor
should pay tax on the materials and supplies used to fabricate
and install the sign, and not collect tax from the customer.
The use tax is due on the manufactured cost even if the sign is
installed in another state. See Rule 12A-1.051, F.A.C.

CONCLUSION

The signs Taxpayer fabricated and installed in the State of
Florida are real property, and Taxpayer's costs for those signs
are taxable. However, the definitional changes to s.
212.06(14), F.S., are remedial and have retroactive effect to
July 1, 1998, when the statute took effect. Therefore, if
Taxpayer treated the sale and installation of the variable
messages signs as trade fixtures, and accepted the FDOT's
exemption certificate in lieu of collecting sales tax or paying
use tax on the cost price of the signs and related items,
Taxpayer will be held harmless for any tax liability on
contracts performed prior to July 1, 2002. See Chapter 2002218, Section 14 Laws of Florida (providing a safe harbor for
additional tax, penalty, or interest against any taxpayer that
complied with s. 212.06(14)(b), F.S, as amended by Chapter 98141, Laws of Florida, effective July 1, 1998. Correspondingly,
a taxpayer shall not be entitled to a refund of taxes previously
paid due to the retroactive effect of this act).

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 and
administrative rule changes or those 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., which are subject to disclosure to the public under the
conditions of s. 13.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request that 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,

Michael T. Cavanaugh
Tax Law Specialist
Technical Assistance and Dispute Resolution
850-922-9411

Control # 54731