How did Florida apply the $5,000 discretionary sales surtax limitation to aircraft repair service orders and replacement-equipment rentals?

Plain-English summary

Florida applied one $5,000 discretionary sales surtax limitation to all repair work performed on one aircraft under a qualifying service order. The order could be a single sale and the aircraft repair work formed one working unit.

Multiple invoices issued under that same qualifying order did not create additional sales. But work added later became a new sale, and separate service orders could not be combined to create one sale.

Spare or replacement-equipment rentals were different. They were not part of the aircraft repair working unit and could not be aggregated with repair charges; each required rental payment stood alone for the surtax limit.

What this means for you

Aircraft service centers should preserve the original approved scope, additions, order numbers, invoices, aircraft identity, and rental agreements. The organization of transactions affects how the historical surtax limitation applies.

Common questions

Q: Did multiple invoices create multiple surtax limits?
A: No, if they belonged to one qualifying service order.

Q: Was later-added work part of the original sale?
A: No. Florida treated it as a new or additional sale.

Q: Could two service orders be combined?
A: No.

Q: Could replacement-equipment rent join the repair working unit?
A: No. Each rental payment stood alone.

Citations and references

• Fla. Stat. §§ 212.054 and 212.055 — discretionary sales surtax
• Fla. Admin. Code r. 12A-15.004 — single sale, bulk sale, working unit, and rentals
• Fla. Stat. § 212.08 — sales-tax provision cited in the ruling
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 03A-034

Original ruling text

SUMMARY

QUESTION: What is the correct application of the $5,000
discretionary sales surtax limitation to Taxpayer's Service
Orders and to its rentals of equipment to customers?

ANSWER - Based on Facts Below: Each of Taxpayer's Service
Orders can qualify as a single sale. Additional work added
to a Service Order at a later time constitutes a
new/additional sale. Multiple Service Orders cannot be
combined to constitute a single sale. Conversely, multiple
invoices to a single qualifying Service Order continue to
be considered a single sale.

Additionally, all work performed on a single aircraft
pursuant to a single qualifying Service Order meets the
bulk sale/working unit test. Rental of spare or
replacement equipment cannot be aggregated with repairs on
a Service Order to meet the bulk sale/working unit test;
each required rental payment stands alone, for purposes of
applying the $5,000 discretionary sales surtax limitation.

Therefore, all repair work performed pursuant to a single
qualifying Service Order is subject to a single $5,000
discretionary sales surtax limitation.

Jul 14, 2003

Re: Technical Assistance Advisement 03A-034
Discretionary Sales Surtax - Aircraft Repairs
Sections: 212.054, 212.055, 212.08, F.S.
Rules: 12A-15.004, F.A.C.
Petitioner: XXX (herein "Taxpayer")
FEI: XX

Dear :

This letter is a response to your petition dated April 28, 2003,
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 sets forth the following facts:

[Taxpayer] manufactures aircraft at a facility located
outside Florida. New aircraft are delivered/picked up by
our customers at our manufacturing facility located outside
Florida. [Taxpayer] also provides owners of [its] aircraft
various post sale products and support, including aircraft
service. [Taxpayer] operates several jet aircraft Service
Centers around the country, one of which is located in
Florida. [Taxpayer's] Service Centers around the country
are capable of provid[ing] almost any service requested by
[Taxpayer's] customers relating to their aircraft.

The Service Center service process is as follows:

A customer flies their aircraft to [Taxpayer's] Service
Center. The customer identifies the work they want
performed[,] which is written up by Service Center
personnel on a [Taxpayer] Service Order. Work to be
accomplished, as specified on the Service Order, is then
approved by the customer. Each Service Order number is
specific to the aircraft/customer. On very rare occasions,
more than one Service Order will be prepared for a customer
and [it] is done so at the customer's request.... Two
examples of when multiple Service Orders are prepared would
be to keep insurance claim work separate from other work
the customer wants accomplished during their visit or the
current owner of the aircraft is in the process of selling
it, and the current owner and the buyer have agreed to each
pay for certain costs, so XXX keeps the costs separate by

opening separate Service Orders. Labor and/or various
items of tangible personal property are involved in the
work performed. The types of tasks that may be performed
on the aircraft include: inspection (preventative, FAA
required or identification of repairs/work needed),
servicing, repair, alteration, installing, adjusting,
refitting, reconditioning, rebuilding, modification, and
maintaining. If, during [its] work in the airplane,
[Taxpayer] identifies additional tasks [it] believe[s] need
to be accomplished, the additional tasks are added to the
Service Order and presented to the customer for approval or
disapproval. Only work approved by the customer in writing
is performed. Work performed is accomplished by [Taxpayer]
employees, [by] contract labor or is sent out to a vendor
who has the expertise needed to accomplish the task. The
various items of tangible personal property used to
accomplish the work are from [Taxpayer] inventory or are
purchased from vendors. Some activities are limited to the
aircraft as it presently exists while other activities
structurally change or enhance the aircraft. Some
transactions involve a combination of activities. An
estimated completion date for the work authorized by the
customer is established[;] however[,] both parties
understand the date is only an estimate[,] due to the
complexities of repairing an aircraft or overhauling
engines or other parts.

Some tasks require multiple visits to the Service Center.
During the period between visits[,] the customer may rent
or lease replacement property from [Taxpayer] while their
property is being repaired or overhauled (ex. rental
engines). Rental activity is anticipated before the
aircraft is brought in for service work to allow the
Service Center the time needed to obtain the rental units.
Rental payment invoices reference the customer Service
Order number. Customers are invoiced for rentals on either
a weekly, bi-weekly or monthly basis or rental charges may
be included in the final invoice along with all the other
work performed at the customer's request. The utilization
of rental units permits the customer continued use of their
aircraft during the repair period versus the aircraft being

grounded. When multiple visits are required due to the
type of work requested, work completed during the first
visit is invoiced at the end of the first visit and work
completed during the second visit is invoiced at the end of
the second visit and so on. Once all the work approved by
the customer on a Service Order has been completed, the
Service Order is closed. All invoices reference the
Service Order number.

The total charge for the work requested by the customer can
exceed $5,000. Generally[,] one invoice is issued for all
work accomplished, except as noted above for rentals,
multiple visits or customer requested separate invoices.
Invoices reference the Service Order number. If more than
one invoice is issued for the work, due to the timing of
the work (ex. engine overhaul requiring more than one
visit), all subsequent invoices also reference the Service
Order number.... Whether one Service Order is prepared or
more than one Service Order is prepared, work requested is
[performed] concurrently.

The vast majority of... Service Center customers are not
Florida residents and do not base their aircraft in
Florida.

REQUESTED ADVISEMENT

Taxpayer requests advice on the applicability of the $5,000
discretionary sales surtax limitation to its Service Orders and
to its rentals of equipment to its customers.

LAW AND DISCUSSION

Section 212.08(5)(i), Florida Statutes, provides:

Aircraft modification services. - There shall be exempt
from the tax imposed by this chapter all charges for
aircraft modification services, including parts and
equipment furnished or installed in connection therewith,
performed under authority of a supplemental type
certificate issued by the Federal Aviation Administration.

Section 212.08(7)(ee), Florida Statutes, provides:

Aircraft repair and maintenance labor charges. - There
shall be exempt from the tax imposed by this chapter all
labor charges for the repair and maintenance of aircraft of
more than 15,000 pounds maximum certified takeoff weight
and rotary wing aircraft of more than 10,000 pounds maximum
certified takeoff weight. Except as otherwise provided in
this chapter, charges for parts and equipment furnished in
connection with such labor charges are taxable.

Taxpayer did not provide information necessary to consider
whether either of the two exemptions is applicable. Therefore,
this advisement will not discuss the applicability of these
exemptions to Taxpayer's business.

Section 212.054, Florida Statutes, provides in pertinent part:

(2)(a) The tax imposed by the governing body of any county
authorized to so levy pursuant to s. 212.055 shall be a
discretionary surtax on all transactions occurring in the
county which transactions are subject to the state tax
imposed on sales, use, services, rentals, admissions, and
other transactions by this chapter and communications
services as defined for purposes of chapter 202....

(b) However:

1. The sales amount above $5,000 on any item of tangible
   personal property shall not be subject to the surtax....

Rule 12A-15.004, Florida Administrative Code, which has recently
been amended, provides in pertinent part:

(2)(a) The surtax does not apply to the sales amount above
$5,000 on any item of tangible personal property....

(b) Each lease or rental payment made, or contracted to be
paid, for the lease or rental of tangible personal property
by a lessee or renter represents one taxable transaction.

The surtax applies to the first $5,000 of the lease or
rental payment when the lease or rental payment is due.
Liability for the immediate payment of the tax on all the
payments required under the lease or rental does not arise
at the time of the execution of the lease or rental.

(3) When multiple items of tangible personal property are
sold by a dealer to the same purchaser at the same time,
the $5,000 limitation applies when the sale or purchase is
a single sale that meets the requirements of paragraph (a)
and is a sale of items normally sold in bulk or items that
comprise a working unit, or a part of a working unit, that
meets the requirements of paragraph (b).

(a) SINGLE SALE. The sale or purchase of multiple items of
tangible personal property must be a single sale in which
the purchaser buys all items of tangible personal property
from the dealer at the same time.

1. There must be an invoice, sales slip, charge ticket,
   written purchase order or agreement, or other tangible
   evidence of sale that establishes the items were sold in a
   single sale.

2. A single sale of items of tangible personal property
   that is documented by a written purchase order or written
   agreement executed between a purchaser and the selling
   dealer must:

a. Provide for a specific quantity of tangible personal
property; and

b. If delivery of all items does not occur at the same
time, provide for a specific time period within which
delivery of the tangible personal property to the purchaser
must be made.

3. Each delivery of items of tangible personal property,
   under the provisions of a written purchase order or written
   agreement that does not specify the quantity and the time
   period during which delivery of the property will occur,

will be a single sale.

(b) ITEMS NORMALLY SOLD IN BULK OR ITEMS THAT COMPRISE A
WORKING UNIT. A single sale must be a sale of items of
tangible personal property that meets at least one of the
following conditions:

1. The items are multiple quantities of a single item that
   the dealer normally sells in multiple quantities in the
   normal course of the dealer's business or that the
   purchaser normally buys in multiple quantities in the
   normal course of the purchaser's business;

2. The items are normally sold as a set or a unit and the
   utility of each for its intended purposes is dependent on
   the set being complete;

3. The items are normally sold in single sale by the seller
   to the purchaser for use in the normal business practice of
   the purchaser as an integrated unit; or

4. The items are component parts that have no utility
   unless assembled with each other to form a working unit or
   part of a working unit.

(c) MULTIPLE ITEMS OF TANGIBLE PERSONAL PROPERTY IN A
SINGLE SALE. Multiple items of tangible personal property
sold or purchased under a single sales transaction that are
not normally sold in bulk or that, when assembled, will not
comprise a working unit, part of a working unit, or
comprise an integrated unit to be used in the purchaser's
normal business practice, cannot be aggregated into a
single sale for purposes of the surtax limitation.

I. Single Sale Test

All items sold to a single purchaser at one time can meet the
single sale test. Documenting that a single sale occurred can
be handled in two ways. If all items are sold pursuant to a
single invoice, then they will be considered to be sold in a
single sale. Likewise, all items purchased pursuant to a single

purchase order will be considered to be sold in a single sale,
as long as the purchase order identifies a specific quantity of
goods to be delivered by a time certain. Items purchased
pursuant to a single qualifying order will meet the single sale
test, even though multiple invoices are required to fulfill the
order.

In Taxpayer's case, its sales are documented as single sales via
its Service Orders. Each Service Order will be treated as a
single sale; multiple Service Orders for a single aircraft
cannot be combined to form a single sale. Additionally, items
added to a Service Order at a later date constitute a new sale;
these essentially represent change orders in which new items are
to be sold/purchased. Each Service Order and each later
addition to a Service Order constitute a single sale for
purposes of determining the application of the $5,000
discretionary sales surtax limitation. However, even though the
single sale test is met, the bulk sale/working unit test must
also be met, before the $5,000 discretionary sales surtax
limitation can be applied.

II. Bulk Sale/Working Unit Test

Items sold together, thereby meeting the single sale test, may
not necessarily qualify for the $5,000 discretionary sales
surtax limitation. They must also meet the bulk sale/working
unit test. Repair work performed on a single aircraft meets the
working unit test.

However, rental of spare/replacement parts is not part of the
working unit. Rental of items cannot be aggregated with the
repair charges to meet the bulk sale/working unit test. Rule
12A-15.004(2)(b), Florida Administrative Code, specifically
requires that each rental payment stand on its own for purposes
of the $5,000 discretionary sales surtax limitation.

CONCLUSION

Each of Taxpayer's Service Orders can qualify as a single sale.
Additional work added to a Service Order at a later time
constitutes a new/additional sale. Multiple Service Orders

cannot be combined to constitute a single sale. Conversely,
multiple invoices to a single qualifying Service Order continue
to be considered a single sale.

Additionally, all work performed on a single aircraft pursuant
to a single qualifying Service Order meets the bulk sale/working
unit test. Rental of spare or replacement equipment cannot be
aggregated with repairs on a Service Order to meet the bulk
sale/working unit test; each required rental payment stands
alone, for purposes of applying the $5,000 discretionary sales
surtax limitation.

Therefore, all repair work performed pursuant to a single
qualifying Service Order is subject to a single $5,000
discretionary sales surtax limitation.

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 #55048