FL TAA 04A-027 Sales and Use Tax 2004-04-12

Which parts of a new Florida slag-manufacturing plant—and which fuel, electricity, and repair purchases—qualified for sales-tax exemptions?

Short answer: Mixed. Production-integral systems, specialized foundations, movable production equipment, monitoring and laboratory equipment qualified; ordinary buildings, furniture, paving, a fuel tank, and most upstream electrical infrastructure did not. Flash-dryer natural gas, qualifying electricity, and incorporated repair parts were exempt under stated conditions, while dyed diesel was taxable.

Apply this to your situation

This page answers the general question as of 2004. Ezel answers yours, under current Florida tax law, with citations.

Disclaimer: This is an official Florida Department of Revenue Technical Assistance Advisement issued to a redacted slag manufacturer for a specific plant design, production process, projected electricity use, fuel purchases, and repair items under 2004 law. Under section 213.22, Florida Statutes, it binds the Department only for those facts and circumstances. Different equipment functions, installation methods, usage percentages, certificates, or later law could change the result. This summary is informational only and is not legal or tax advice. Consult a licensed Florida tax professional about your specific facts.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

Florida gave a mixed, asset-by-asset answer for a new plant that would manufacture ground granulated blast-furnace slag for the ready-mix concrete industry. Equipment integral to production qualified for the new-business machinery exemption, while ordinary buildings, furniture, site improvements, a fuel-storage tank, and most upstream electrical infrastructure did not.

The Department also approved three operating exemptions under stated conditions: natural gas used exclusively in the flash dryer, all electricity at the fixed location because projected qualifying use exceeded the statutory threshold, and parts or materials incorporated into repairs of qualifying machinery. Dyed diesel used in movable equipment remained taxable.

Facility components that qualified

The following groups qualified as industrial machinery and equipment under section 212.08(5)(b):

The slag transport system and raw-material silo, including the front-end loader, loading bin, conveyor system, and temporary feed silo.
The plant's production-integrated mill structure, qualifying air compressors, and water-cooling system.
Finished-slag storage silos, aerators, loading ramps, and scales that kept the product saleable and measured it for delivery.
Special pilings and an interconnected slab needed to prevent movement that could make production equipment inoperable.
A forklift and Bobcat used as integral parts of the production process at the fixed location.
Monitoring equipment in the control building.
Laboratory equipment used to test goods during production.
Computers used for qualifying quality control; computers used only for administration did not qualify.

Grinding media and other replacement parts bought before production could also qualify under the new-business exemption when they met its timing rules. The ruling said replacement, maintenance, or repair parts had to be purchased before production began and delivered within twelve months after production started, unless another exemption applied.

Facility components that did not qualify

The Department classified these items as nonqualifying tangible personal property or real-property improvements:

The oil tank used to store diesel for movable equipment.
The workshop building, its general repair tools and equipment, and its furniture.
The control-building shell and furniture.
The office and laboratory building and furniture.
The garage, concrete and asphalt paving, and retention pond.
The electrical substation, overhead wiring, transformer, and protective structures for meters and relays, except for qualifying wiring from the nearest power panel or disconnect point to production machinery.

The oil tank's final classification depended on how it was affixed, but it did not qualify as production machinery either way. Office or laboratory computers likewise depended on their actual use.

Natural gas was exempt; dyed diesel was not

Natural gas used exclusively as combustible fuel in the flash dryer qualified for the boiler-fuel exemption in section 212.08(7)(b). The manufacturer had to give the vendor an exemption certificate. If any of that gas were used for another purpose, such as hot water or heating the plant or offices, the ruling said none of the gas purchase would be exempt.

Dyed diesel used in the forklift, Bobcat, or other movable equipment did not qualify. The cited rule excluded distillate diesel from the boiler-fuel exemption. Because the planned dealer had elected not to collect sales tax, the manufacturer had to remit use tax on the total cost consumed.

The entire electricity purchase qualified on the projected facts

The manufacturer was in SIC Major Group 32, one of the industries listed in section 212.08(7)(ff), and expected more than 95% of its electricity to operate qualifying machinery and equipment. The statute provided a 100% exemption when at least 75% of electricity at the fixed location served qualifying uses.

On that projection, all electricity purchases were exempt. The manufacturer had to give its utility a certificate stating the exempt use and claimed percentage.

Incorporated repair and maintenance parts qualified

Section 212.08(7)(xx) exempted repair labor and parts or materials used in repair and incorporated into qualifying industrial machinery. The Department read “repair” to include preventive maintenance as well as correction after failure.

That covered graded steel grinding balls, oil filters, filter bags, conveyor belts, and supply-elevator buckets used to keep production equipment operating. It did not cover equipment rental, general tools, or consumables that were used during a repair but not incorporated into the machinery, such as rags, cleaning solution, sandpaper, wrenches, hammers, or drills.

What this means for you

Manufacturers building or expanding a plant

Function matters more than labels. A structure can qualify when it is designed around and supports production machinery so closely that it would be replaced with that machinery. Conversely, a costly electrical system dedicated to the plant can remain a nonqualifying real-property improvement if it lies upstream of the nearest production-equipment disconnect.

Plant engineers and construction managers

Document how each component participates in production, whether it keeps goods saleable, whether it is a special foundation, how it is affixed, and where the production-equipment electrical boundary lies. Those facts drove the classifications.

Accountants and tax professionals

Track each exemption separately. The new-business machinery exemption, boiler-fuel exemption, electricity-use exemption, and repair-parts exemption had different functional, timing, percentage, incorporation, and certificate requirements.

Common questions

Q: Did the mill building qualify even though buildings usually do not?
A: Yes. Its steel structure physically supported and aligned the production machinery and was expected to share the equipment's useful life, making it integral to production under the cited rule.

Q: Were finished-product storage silos exempt?
A: Yes. Their aerators continually kept the slag saleable, and their scales measured product when it was loaded for delivery.

Q: Was every computer at the facility exempt?
A: No. Computers used in qualifying quality control could qualify; computers used solely for administrative work did not.

Q: Was natural gas used in the flash dryer exempt?
A: Yes, only if it was used exclusively as combustible fuel in the manufacturing process and the required certificate was given to the vendor.

Q: Was dyed diesel used by plant vehicles exempt?
A: No. The manufacturer owed use tax on the full cost when its dealer did not collect sales tax.

Q: Why was 100% of the electricity exempt?
A: The manufacturer was in a qualifying SIC group and projected that more than 95% of electricity would serve qualifying machinery, exceeding the statute's 75% threshold for a full exemption.

Q: Did the repair-parts exemption include preventive maintenance?
A: Yes. It covered qualifying parts and materials incorporated into machinery to keep it operating, but not rental equipment, general tools, or unincorporated consumables.

Citations and references

Fla. Stat. § 212.08(5)(b) — new-business industrial machinery and equipment exemption
Fla. Admin. Code r. 12A-1.096 — qualifying production machinery, structures, foundations, conveyors, computers, scales, and wiring
Fla. Admin. Code r. 12A-1.051 — real-property improvements and structural systems
Fla. Stat. § 212.08(7)(b); Fla. Admin. Code r. 12A-1.059 — boiler-fuel exemption and dyed-diesel treatment
Fla. Stat. § 206.86(1), (9) — diesel and dyed-diesel definitions
Fla. Stat. § 212.08(7)(ff) — electricity or steam used for qualifying manufacturing
Fla. Stat. § 212.08(7)(xx) — repair labor, parts, and materials incorporated into industrial machinery
Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

Landing page: Florida Tax Law Library
Advisement: TAA 04A-027

Original ruling text

Question(s):

In its petition, the Taxpayer requests determinations with
regard to the taxability of the following items for Florida
sales tax purposes:

Individual components of its manufacturing facility that
is currently under construction and may be subject to
exemption under section 212.08(5)(b)1., F.S.
Charges for boiler fuels to be used in an industrial
manufacturing, processing, compounding, or production
process qualifying for exemption under section
212.08(7)(b), F.S.
Charges for electricity, to be used to power machinery
and equipment used in manufacturing, qualifying for
exemption under section 212.08(7)(ff), F.S.
Purchase of consumable supplies, such as graded steel
balls, oil filters, filter bags, conveyor belts, and supply
elevator buckets, qualifying for exemption under section
212.08(7)(xx), F.S.

Answer(s) - Based on Facts Below:

1) The Department has made the following determinations
with regard to the Taxpayer's assertions of its treatment
of the individual components of its new facility relative
to the exemption provided by section 212.08(5)(b), F.S.:

Group

Component

Sales Tax Treatment pursuant

to s. 212.08(5)(b), F.S.
A

Slag transport

Qualifying Machinery and

system& raw

Equipment

material silo
B

Plant

Qualifying Machinery and
Equipment

Slag Storage

Qualifying Machinery and

Silos

Equipment

Pilings/Slab

Qualifying Machinery and

Equipment

Movable Equipment Qualifying Machinery and
Equipment

Oil Tank

Non-Qualifying Tangible
Personal Property/Real
Property Improvement

Workshop:
Building

Real Property Improvement

Tools and Equipment Non-Qualifying Tangible
Personal Property
Furniture

Non-Qualifying Tangible
Personal Property

Control Building:
Building

Real Property Improvement

Monitoring Equipment Qualifying Machinery and
Equipment
Furniture

Non-Qualifying Tangible
Personal Property

Office and Laboratory:
Office and
Laboratory Building Real Property Improvement
Furniture

Non-Qualifying Tangible
Personal Property

Laboratory Testing
Equipment

Qualifying Machinery and
Equipment

Computers

Qualifying/Non-Qualifying
Machinery and Equipment,
dependent on use

Garage

Concrete and Asphalt
Paving

Real Property Improvement

Retention Pond

Real Property Improvement

Electrical Substation, Non-Qualifying Tangible
Overhead Wiring and
Transformer

Personal Property/

Real Property Improvement

2) The Department agrees with the Taxpayer's assertion that
the purchase of natural gas to be used in the flash dryer
will qualify for the exemption for boiler fuels as set
forth in section 212.08(7)(b), F.S., provided such fuel is
used exclusively in the manufacturing process as a
combustible fuel. The Taxpayer's purchase of dyed diesel
does not qualify for the boiler fuels exemption. The
Taxpayer will owe a use tax on the total cost of the dyed
diesel fuel consumed.

3) The Department agrees that since the Taxpayer is
classified under SIC Industry Major Group Number 32, a
qualifying industry as listed in the statute, and it is
expected that greater than 95% of its electricity will be
used by its qualifying machinery and equipment to
manufacture, process compound, or produce for sale items of
tangible personal property, 100% of the Taxpayer's
electricity purchases will be exempt from sales tax under
Section 212.08(7)(ff), F.S. The exemption can be obtained
by extending a certificate to the local utility provider
stating that electricity purchased is for the exempt
purpose designated by statute and the claimed percentage.

4) The Department agrees that since the Taxpayer is
classified under SIC Industry Major Group Number 32, a
qualifying industry as listed in the statute, its purchases
of parts and materials to be used in the repair and
incorporated into qualifying industrial machinery and
equipment qualify for the exemption provided in section
212.08(7)(xx), F.S.

Apr 12, 2004

Re: Technical Assistance Advisement 04A-027
Sales and Use Tax - Manufacturers' Exemptions
Sections 212.08 and 206.86, F.S.
Rules 12A-1.051, 12A-1.059, and 12A-1.096, F.A.C.
Petitioner: XXX. ("Taxpayer")
FEIN: XX

Dear :

This is a response to your petition dated December 8, 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 under Chapter 12-11, F.A.C., and is issued to you under
the authority of Section 213.22, F.S.

Preliminary Facts

XXX (hereinafter "Taxpayer"), a Delaware corporation and wholly
owned subsidiary of XXX (Holdings) Ltd., a UK limited company,
is in the process of establishing a new manufacturing facility
at XXX. This facility will produce ground granulated
blastfurnace slag (GGBS) for sale to the ready-mix concrete
industry. GGBS is a material used to make highly durable
concrete when used in combination with Portland cement.

Pursuant to Section 212.08(5)(b), F.S., the Taxpayer applied
for, and was granted, a temporary tax exemption to purchase the
machinery and equipment. The exemption was authorized under
Temporary Tax Exemption Permit XXX for the period of November 7,
2002, through May 31, 2004.

The Taxpayer states that it is currently a lessee pursuant to a
40-year land lease at XXX. Construction of its manufacturing
facility began in July, 2003, pursuant to a construction
contract entered into with XXX, effective July 30, 2003 (the
"Contract"). The work to be performed under the Contract
includes initial preparation of the site and construction of a
processing plant, related control and supply structures, and

other ancillary structures to be used for various administrative
purposes. A complete copy of the contract was not provided.
However, the Taxpayer provided a color-coded map of the entire
facility ("Project Map"), attached as Exhibit A, along with
details of the individual components of the construction,
including the components' identification number on the Project
Map and the depreciation treatment for federal tax purposes. On
February 18, 2004, the Taxpayer provided six technical drawings
of the "mill building" identified as Department 531 on the
Project Map.

Requested Advisements

In its petition, the Taxpayer requests determinations with
regard to the taxability of the following items for Florida
sales tax purposes:

Individual components of its manufacturing facility
that is currently under construction and may be
subject to exemption under section 212.08(5)(b)1, F.S.
Charges for boiler fuels to be used in an industrial
manufacturing, processing, compounding, or production
process qualifying for exemption under section
212.08(7)(b), F.S.
Charges for electricity, to be used to power machinery
and equipment used in manufacturing, qualifying for
exemption under section 212.08(7)(ff), F.S.
Purchases of consumable supplies, such as graded steel
balls, oil filters, filter bags, conveyor belts, and
supply elevator buckets, qualifying for exemption
under section 212.08(7)(xx), F.S.

Facts - Issue I

The Taxpayer has provided the following details of the
individual components of its manufacturing facility currently
under construction:

Slag transport system (Group A)
Project Map code: 244

IRS Asset Class 32.3, Assets Used in the Manufacture
of Other Stone and Clay Products

IRS Class Life: 15 years; Depreciation Period: 7 year
MACRS

The slag transport system will include a loading bin into
which raw materials will be loaded and introduced into the
processing plant via connecting conveyors. The raw
materials will be transferred from one of two 40,000 metric
ton slag stock-piles (shown on the west side of the Project
Map) to the slag transport system by a machine called a
front-end loader. This front-end loader will carry the
materials up a ramp in the slag transport system to a
loading bin that will introduce the raw materials onto a
conveyor belt for transfer to the raw material silo. The
ramp will be constructed from standard concrete materials
with guard rails to prevent the front-end loader from being
driven off either side of the ramp.

Raw material silo (Group A)
Project Map identification: Circular shape at southern
end of mill building (531)

IRS Asset Class 32.3, Assets Used in the Manufacture
of Other Stone and Clay Products

IRS Class Life: 15 years; Depreciation Period: 7 year
MACRS

The conveyor belts in the slag transport system will
transfer the raw materials into the raw material silo,
which will then temporarily store those materials while it
provides a consistent rate of feed into the plant's
equipment.

Plant (Group B)
Project Map codes: 531 (mill building), 741 (air

compressors), 761 (water cooling system)

IRS Asset Class 32.3, Assets Used in the Manufacture
of Other Stone and Clay Products

IRS Class Life: 15 years; Depreciation Period: 7 year
MACRS

The mill building will contain the machinery necessary for
production of the finished products. It will be a
"building" only in the sense that the machinery will be
surrounded by a steel housing that is designed to provide
physical support to the machinery during operation. The
machinery will be physically attached to the housing on the
bottom and around all sides.

Additional supplies of items such as grinding media (graded
steel balls), which wear out during production, will be
purchased before production begins to be used for future
maintenance of the equipment.

Adjacent to the mill building will be air compressors and a
water cooling system. The air compressors will provide
compressed air necessary to power certain machinery in the
mill building. The water cooling system will serve a
"radiant" cooling system throughout the mill building
primarily to keep both the equipment and the finished goods
at the appropriate temperatures for optimum operation and
protection.

Slag storage silos (Group C)
Project Map codes: 611, 612

IRS Asset Class 32.3, Assets Used in the Manufacture
of Other Stone and Clay Products

IRS Class Life: 15 years; Depreciation Period: 7 year
MACRS

Two silos will be erected for the purposes of storing and
maintaining [Taxpayer's] processed goods[,] known as "slag"

cement[,] until they are removed via truck for delivery to
customers. The silos will be equipped with an aerator
which is required to constantly process the slag to keep it
in saleable condition. Without the aerator, the slag would
pack-set into a solid mass. Each silo will also be
equipped with two loading ramps onto which delivery trucks
will drive so that loading mechanisms can load finished
product into delivery trucks. Each of these ramps, four in
total, will contain scales to be used to measure the amount
of product dispensed into each delivery truck.

Pilings/Slab (Group D)
Project Map code: Blue area

IRS Asset Class 32.3, Assets Used in the Manufacture
of Other Stone and Clay Products

IRS Class Life: 15 years; Depreciation Period: 7 year
MACRS

The raw material silo, plant, and slag storage silos will
all be supported by concrete pilings to avoid differential
settlement. These pilings are required to prevent
movements which could render the equipment inoperable. To
further guard against movement, the pilings under all parts
of the plant will be connected by a slab to ensure that no
parts move in relation to each other. Before the slab and
pilings can be installed, the land underneath must be
prepared by excavation and the use of fill material to
ensure proper grading.

Movable equipment (Group E)
Project Map code: Not separately identified

IRS Asset Class 32.3, Assets Used in the Manufacture
of Other Stone and Clay Products

IRS Class Life: 15 years; Depreciation Period: 7 year
MACRS

At least two additional pieces of movable equipment, a

forklift and a Bobcat (a machine with a loading bucket on
the front end), will be used throughout the facility in
performing the Taxpayer's manufacturing operations. This
equipment will be used to transport raw materials and workin-process in and around the mill building as necessary.

Oil tank (Group F)
Project Map code: 721

IRS Asset Class 32.3, Assets Used in the Manufacture
of Other Stone and Clay Products

IRS Class Life: 15 years; Depreciation Period: 7 year
MACRS

The oil tank will hold diesel fuel solely for use in the
front-end loader, the forklift, and the Bobcat.

Workshop (Group G)
Project Map Code: 911

Item

IRS Asset Class IRS Class Depreciation
Life

Building Nonresidential

Period

39 years

39-yr MACRS

real property
Tools and 32.3 Assets Used 15 years
Equipment in the Manufacture
of Other Stone and

5-yr MACRS

(IRC 168(e)
(3)(B)(iv)

Clay Products
Furniture 00.11, Office

10 years

7-yr MACRS

Furniture, Fixtures
and Equipment

The workshop will contain tools and equipment such as lifting
cranes, testing devices, and other small tools required to
repair and maintain the plant and equipment used in the
production of the finished product.

Control building (Group H)
Project Map Code: 952

Item

IRS Asset Class IRS Class Depreciation
Life

Building

Period

Nonresidential

39 years

39-yr MACRS

real property
Testing

32.3 Assets Used 15 years

Equipment

in the Manufacture

of Other Stone and

(IRC 168(e)

Clay Products
Furniture

5-yr MACRS

(3)(B)(iv))

00.11, Office

10 years

7-yr MACRS

Furniture, Fixtures,
and Equipment

The control building will house computer equipment that
will monitor the performance of the mill building's
equipment. This equipment will monitor items such as power
demands, temperatures, vibrations, productivity, and
overall performance.

Office and laboratory (Group I)
Project Map code: 941

Item

IRS Asset Class IRS Class Depreciation
Life

Building

Period

Nonresidential

39 years

39-yr MACRS

6 years

5-yr MACRS

real property
Computers

00.12,

Information Systems

(IRC 168(e)

(3)(B)(iv))
Furniture

00.11, Office

10 years

7-yr MACRS

Furniture, Fixtures,
and Equipment

The office will be used by the Taxpayer's employees for
executive and administrative functions.

The laboratory will contain equipment designed to test the
quality of goods being produced. Samples will be taken
from different stages of production to be tested.
Computers will be used for testing and furniture such as
tables, desks, and chairs will be present for use by the

quality control staff.

Garage (Group J)
Project Map code: 914

IRS Asset Class: Nonresidential real property

IRS Class Life: 39 years; Depreciation Period: 39 year
MACRS

The garage will be used to store the forklift and Bobcat in
order to protect them from inclement weather.

Concrete & asphalt paving (Group K)
Project Map code: Pink and orange areas

IRS Asset Class: 00.3, Land Improvements

IRS Class Life: 20 years; Depreciation Period: 15 year
MACRS

Concrete paving areas will be used by administrative staff
(including small parking lot) and delivery trucks for
pickup of finished goods. Asphalt paving areas will be
used around the mill building by manufacturing personnel.

Retention pond (Group L)
Project Map code: Lower-right corner of map

IRS Asset Class: 00.3, Land Improvements

IRS Class Life: 20 years; Depreciation Period: 15 year
MACRS

The retention pond will store storm water drained off the
property. The water will be retained in the pond until it
evaporates or is absorbed into the soil.

Electrical substation (Group M)
Project Map identification: approximately 100 yards
west of the oil tank (721)

IRS Asset Class 32.3, Assets Used in the Manufacture
of Other Stone and Clay Products

IRS Class Life: 15 years; Depreciation Period: 7 year
MACRS

An electrical substation will be constructed under a
separate contract directly with one of the subcontractors
being used in the construction of the plant facility. Its
primary purpose will be to transform the power delivered to
the substation by XXX at 138,000 volts down to 5,000 volts,
the voltage required in manufacturing. The substation will
be constructed on a concrete slab for permanent attachment
to the earth and will be surrounded by a gravel bed to
ensure storm water dissipation.

While the substation's transformer will be on a concrete
slab with no surrounding structure, the related meters and
electrical relays must be protected from the elements in
order to function properly. Therefore, a small structure
will be erected solely for the purpose of housing these
items.

Overhead cabling (Group M)
Project Map identification: between the electrical
substation and transformer along XXX Road

IRS Asset Class 32.3, Assets Used in the Manufacture
of Other Stone and Clay Products

IRS Class Life: 15 years; Depreciation Period: 7 year
MACRS

Overhead electrical cabling will be installed between the
electrical substation and the transformer station along XXX
Road to deliver the 5,000 volts of electricity being
delivered by the substation to both the transformer and the
manufacturing plant.

Transformer station (Group M)

Project Map codes: 548

IRS Asset Class 32.3, Assets Used in the Manufacture
of Other Stone and Clay Products

IRS Class Life: 15 years; Depreciation Period: 7 year
MACRS

There is also a transformer which will convert the 5,000
volt electricity to both 480-volt and 120-volt electricity
to be used primarily to power other machinery and equipment
in the mill building. This transformer will also deliver
the power required by the other ancillary structures on the
property.

Requested Advisement - Issue I

Taxpayer requests determinations with regard to the taxability
of the individual components of its manufacturing facility
currently under construction.

Taxpayer's Position - Issue I

The Taxpayer asserts the following treatment for the individual
components of its facility as related to the new business
exemption provided for in section 212.08(5)(b)1., F.S.:

Slag transport system and raw material silo (Group A)
The Taxpayer's production process begins when the raw
materials are delivered to one of two slag storage
piles, as shown on the Project Map, by truck from
cargo ship loading docks operated by XXX which are
located approximately 150 yards to the east of the
Taxpayer's facility. The slag transport system
principally provides a delivery function[,]
introducing the raw materials into the processing
plant. This system includes a front-end loader which
will carry raw materials up a concrete ramp with guard
rails into enclosed structure containing a conveyor
system. The raw material silo will receive the
materials in batches and provide a consistent flow of

those materials into the plant.

The Taxpayer asserts that the front-end loader is
exempt under Rule 12A-1.096(9)(e), F.A.C., which
states that industrial machinery and equipment which
is an integral part of the production process, as well
as in post production, such as a fork-lift, will
qualify for the exemption. The Taxpayer asserts that
the ramp, enclosing structure, conveyor system, and
raw material silo are exempt under Rule 12A1.096(9)(j), F.A.C., which provides that "conveyors or
related equipment used to transport raw materials from
the storage area located at the fixed location to the
production line will qualify for the exemption." The
external structures would be expected to be replaced
when the machinery is replaced and, accordingly,
[meet] the exception to the general rule that
structures will not qualify as industrial machinery
and equipment. The Taxpayer asserts that the raw
material silo and the entire slag transport system
including: the front-end loader, concrete ramp with
guard rails, enclosing structure, and conveyor system
meet the definition of industrial machinery and
equipment as provided in s.212.08(5)(b)6[.]a, F.S.

Plant (Group B)
The entire process of actually converting raw
materials into finished goods takes place within the
plant. Included in the plant is the mill building,
which contains the machinery to be used in processing.
This machinery will be supported by a steel housing
that is integral to the functions of the machinery.
Without the housing, the various pieces of equipment
could not be placed in the proper positions relative
to each other. Since the machinery will be firmly
attached to the steel housing, the housing would be
expected to be replaced at the same time the machinery
is replaced.

The plant also includes: air compressors which are
necessary to operate the equipment; a water cooling

system necessary to keep the equipment, raw materials,
and finished goods at optimum temperatures; and a
flash dryer stack to dry the raw materials before
processing. All of these components are integral to
the operation of the plant, as discussed in the
description of the plant's operation above. Section
212.08(b)6[.]a, F.S.[,] states that heating and air
conditioning systems are not industrial machinery and
equipment unless their sole justification for their
installation is to meet the requirements of the
production process, even though the system may provide
incidental comfort to employees or serve, to an
insubstantial degree, nonproduction activities. The
Taxpayer asserts that both the flash dryer stack and
the cooling system are installed solely to meet the
requirements of the production process and,
accordingly, the Taxpayer asserts that the entire
plant, including these related items, meets the
definition of industrial machinery and equipment.

The Taxpayer will also be purchasing, before the start
of production, additional supplies of equipment parts
that wear out during production, such as ball rollers
to grind cement. The Taxpayer asserts that these
items qualify for exemption under Rule 12A1.096(9)(i), F.A.C., which states that parts and
accessories for industrial machinery and equipment
purchased for replacement, maintenance, or repair
purposes do not qualify for this exemption unless
purchased by a new business before production
activities begin and delivery is made within 12 months
from the start of production.

Slag storage silos (Group C)
Since the slag must be continuously processed through
aeration integrated within the slag storage silos
until the slag is transferred to delivery trucks, the
Taxpayer asserts that its production process ends when
the slag is transferred from the silos to the trucks.
The Taxpayer asserts that the functions served by the
silos fall within the post-production quality control

activities discussed in Rule 12A-1.096(1)(g), F.A.C.
and Rule 12A-1.096(9)(d), F.A.C., since these
activities are required by good manufacturing
practices to maintain the slag. The Taxpayer also
asserts that the concrete ramps and scales qualify as
exempt machinery under Rule 12A-1.096(9)(p)[, F.A.C.,]
which states that scales at the start of, or within,
the production process that are necessary to weigh raw
materials or ingredients, or finished goods at the
time of packaging, will qualify for the exemption. In
addition, the silos are not contained within external
buildings or structural components that would not be
expected to be replaced when the machinery is
replaced. Accordingly, the Taxpayer asserts that the
entire slag storage silos meet the definition of
industrial machinery and equipment.

Pilings/slab (Group D)
The Taxpayer asserts that its concrete pilings, slab,
and related excavation materials represent qualifying
equipment under Rule 12A-1.096(9)(a)1[.], F.A.C.,
which states that special foundations required for the
support of machinery and equipment will qualify for
the exemption.

Movable equipment (Group E)
The Taxpayer asserts that the forklift and Bobcat
represent qualifying equipment under Rule 12A1.096(9)(e), F.A.C., which states that industrial
machinery and equipment which is an integral part of
the production process, as well as in post production,
such as a fork-lift, will qualify for the exemption.

Oil tank (Group F)
The Taxpayer asserts that its oil tank qualifies for
the exemption since its exclusive purpose is to store
fuel for use by other qualifying industrial machinery
and equipment.

Workshop (Group G)
Under Rule 12A-1.096(9)(n), F.A.C., tools required to

continuously keep qualified equipment in optimum
condition are themselves qualified equipment, but
equipment used for general repair and maintenance is
not qualified equipment. The workshop will only
contain equipment used for general maintenance, so no
exemption is claimed for this equipment.

The workshop will be a separate free-standing
structure and, as such, will be considered a real
property improvement. Any furniture such as tables,
desks, chairs, etc. that are installed in the workshop
will be considered tangible personal property other
than qualifying equipment.

Control building (Group H)
The Taxpayer asserts that the monitoring equipment to
be installed in the control building represents
qualifying equipment under Rule 12A-1.096(9)(g),
F.A.C., which states that monitoring machinery and
equipment that is an integral part of the production
process qualifies for the exemption. The equipment in
the control building is integral to the production
process since it constantly monitors the performance
of the machinery in the mill building.

The control building will be a separate free-standing
structure and, as such, will be considered a real
property improvement. Any furniture such as tables,
desks, chairs, etc. that are installed in the workshop
will be considered tangible personal property other
than qualifying equipment.

Office and laboratory (Group I)
The office and laboratory will be considered real
property improvements and all of their equipment
(computers, etc.) and furniture will be considered
tangible personal property other than qualifying
equipment. It is expected that the office furniture,
office equipment, and laboratory furniture will not
qualify as industrial machinery and equipment.

The Taxpayer asserts that the testing equipment to be
installed in the laboratory represents qualifying
equipment under Rule 12A-1.096(9)(d), F .A.C., which
states that preproduction, random, or postproduction
quality control equipment shall qualify as industrial
machinery and equipment if it is an integral part of
the production process. The laboratory equipment is
integral to the production process since it ensures
the appropriate level of quality at various stages of
the production process.

Garage (Group J)
The garage will be considered a real property
improvement.

Concrete & asphalt paving (Group K)
Since the paving is not within the areas of the
production process, it will be considered a real
property improvement.

Retention pond (Group L)
The retention pond allows for proper drainage from the
entire site, but it does not serve an integral
function to the production process. Accordingly, it
will be considered a real property improvement.

Electrical substation, overhead wiring, and transformer
(Group M)
Florida law and rules only mention electrical hookups
with respect to the sales tax exemption in Rule 12A1.096(9)(a)2[.], F.A.C., which states that electrical
wiring from the nearest power panel or disconnect box
to the qualifying machinery and equipment qualifies
for the exemption. In the Taxpayer's case, its
electrical supply system, consisting of an electrical
substation, overhead wiring, and a transformer, is
being installed solely to meet the high electricity
demands of its qualifying machinery and equipment.
While the electrical output will serve, to an
insubstantial degree, nonproductive areas such as the
office, substantially all of the electrical output

from the substation will be used by the production
process. Other areas of Florida sales tax law and
rules disregard insignificant, nonqualifying usage of
otherwise qualifying purchases when determining
whether a purchase qualifies for the exemption.
Examples of these areas include heating and air
conditioning systems, (s. 212.08(5)(b)6.a., F.S.)
computer equipment, (Rule 12A-1.096(9)(k), F.A.C.) and
purchased electricity (s. 212.08(7)(ff), F.S.).
Applying the same reasoning, the Taxpayer asserts that
the entire cost of the electrical substation, overhead
wiring, transformer and all wiring from the
transformer to the various pieces of qualifying
equipment meet the definition of industrial machinery
and equipment.

Electrical meters and relays will be installed inside
small structures in order to prevent malfunction as a
result of exposure to the elements. These structures
will be installed solely for this purpose and would
have no other useful purpose without the meters and
relays. Since these buildings would be expected to be
removed or replaced if the related meters or relays
were removed or replaced, the Taxpayer asserts that
they meet the exception under Section
212.08(5)(b)6[.]a[.], F.S. to the general rule that
structures will not qualify as industrial machinery
and equipment.

In its submission of February 18, 2004, the Taxpayer provided
further clarification of the mill building, stating that the
design of the mill building is somewhat unique in that the
process equipment must be attached to, and supported by, the
steel frame to ensure that it is in the correct alignment and
elevation required for production. Rather than simply providing
an isolated weather-protective skin around the process
equipment, the Taxpayer asserts that the structural steel is a
vital and integral element in the manufacturing equipment. In
the event of a failure of the equipment requiring its total
replacement, the steel framing around the failed component would
be damaged and in need of replacement when the equipment itself

is replaced. In the event the company was to discontinue use of
the equipment, the entire structure would need to be replaced
before the property could be used for any other purpose. This
is due to the highly integrated structure of the equipment
within the inner workings of the structure itself. Therefore,
the Taxpayer concludes, the building does not have a useful life
beyond that of the equipment contained within it. Accordingly,
the surrounding structure should qualify for the exemption under
Sec. 212.08(5)(b)6.a., F.S.

The Taxpayer provided that the grinding media consist of graded
steel balls that are placed inside the mill's grinding equipment
and tumbled with the unprocessed raw material in order to grind
the material into slag to be incorporated in the final product.

Applicable Law and Discussion - Issue I

Section 212.08(5)(b)1., F.S., provides the following, in
pertinent part:

Industrial machinery and equipment purchased for ... use
in new businesses which manufacture, process, compound, or
produce for sale items of tangible personal property at
fixed locations are exempt from the tax imposed by this
chapter upon an affirmative showing by the taxpayer to the
satisfaction of the department that such items are used in
a new business in this state. Such purchases must be made
prior to the date the business first begins its productive
operations, and delivery of the purchased item must be made
within 12 months of that date.

Rule 12A-1.096, F.A.C., interprets the statute and provides the
following, in pertinent part:

(1)(b) "Industrial machinery and equipment" means tangible
personal property or other property with a depreciable life
of 3 years or more that is used as an integral part in the
manufacturing, processing, compounding, or production of
tangible personal property for sale or is exclusively used
in spaceport activities. Buildings and their structural

components are not industrial machinery and equipment
unless the building or structural component is so closely
related to the industrial machinery and equipment that it
houses or supports that the building or structural
component can be expected to be replaced when the machinery
and equipment itself is replaced. Heating and air
conditioning systems are not considered industrial
machinery and equipment, unless the sole justification for
their installation is to meet the requirements of the
production process, even though the system may provide
incidental comfort to employees, or serves, to an
insubstantial degree, non-production activities. For
example, a dehumidifier installed for the sole purpose of
conditioning air in a factory, where the manufacturing of
electronic components requires a controlled-humidity
environment, will be considered industrial machinery and
equipment. (See subsection (9) of this rule.)

(c) "Integral to" means that the machinery and equipment
provides a significant function within the production
process, such that the production process could not be
complete without that machinery and equipment.

(g) "Production process" or "production line" means those
industrial activities beginning when raw materials are
delivered to the new or expanding business' fixed location
and generally ending when the items of tangible personal
property have been packaged for sale, or are in saleable
form if packaging is not done. However, the production
process may include quality control activities after the
items have been packaged (or are in saleable form if
packaging is normally not done), if such quality control
activities are required by good manufacturing practices or
mandated by state or federal government agencies....

(9) Types of industrial machinery and equipment that will
or will not qualify for the exemption.

(a) For the purpose of this exemption industrial machinery
and equipment includes:

1. Special foundations required for the support of such
qualifying machinery and equipment;

Electrical wiring from the nearest power panel or
disconnect box to the qualifying machinery and equipment;
and
Plumbing connections necessary to connect the machinery
and equipment to the nearest water supply or drain line.

(b) The exemption for industrial machinery and equipment
ends at that stage of the production process where the
product produced is placed in a package (or is in saleable
form if packaging is normally not done) to be sold to the
wholesaler, retailer, or other purchaser. However, the
production process may include quality control activities
for perishable goods after the item of tangible personal
property has been packaged (or is in saleable form if
packaging is normally not done), if such quality control
activities are required by good manufacturing practices
mandated by state or federal government agencies.

(c) Quality control equipment installed within the
production line and required to perform quality checks on
each item, article, or batch produced before the item,
article, or batch can be sold qualifies for the exemption.

(d) Preproduction, random, or postproduction quality
control equipment shall qualify as industrial machinery and
equipment, if it is an integral part of the production
process.

(e) Industrial machinery and equipment which is an integral
part of the production process, as well as in
postproduction, such as a fork-lift, will qualify for the
exemption. (f) Pollution control equipment, or sanitizing
and sterilizing equipment that is an integral part of the
production process qualifies for exemption.

(g) Monitoring machinery and equipment that is an integral
part of the production process qualifies for exemption.

(h) Machinery and equipment used to remove waste materials
away from industrial machinery and equipment, where the
removal is required to maintain the operation of the
production process, will qualify for exemption. For
example, equipment used to remove wood chips and sawdust
from around a qualified industrial wood lathe will qualify
for exemption.

(i) Parts and accessories for industrial machinery and
equipment purchased for replacement, maintenance, or repair
purposes do not qualify for this exemption unless purchased
by:

A new business before production or spaceport activities
begin and delivery is made within 12 months from the start
of production or spaceport activities; or
An expanding business before the completion of the
expansion project.
Parts and accessories purchased for replacement,
maintenance, or repair that have already received an
exemption pursuant to s. 212.08(7)(zz), F.S., shall not be
allowed an exemption for the same amount of tax pursuant to
this paragraph.

(j) Conveyers or related equipment used to transport raw
materials from the storage area located at the fixed
location to the production line will qualify for exemption.

(k) Computers used to direct and control the functions of
exempt industrial machinery and equipment will qualify for
exemption, even though such computers may also have nonproduction related applications or uses.

(l) Machines used to control exempt industrial machinery
and equipment through the reading or sensing of a tape or
some other similar means will qualify for exemption.

(m) Masks, molds, jigs, or templates, where such property

is integral to the production process will qualify for
exemption. The machinery and equipment that is integral to
the creation or maintenance of those masks, molds, jigs, or
templates will also qualify for exemption even though such
machinery and equipment is not a direct part of the
production process.

(n) Machinery and equipment used in the general repair or
maintenance of the plant or production machinery and
equipment, such as welders, gear-pullers, or bench
grinders, does not qualify for the exemption. However,
specialized machinery and equipment that is continuously
required to keep production machinery and equipment
calibrated or in optimum condition such as a sharpening
machine in a sawmill, will qualify for the exemption.

(o) Machinery and equipment qualifying for a partial
exemption from tax under s. 212.08(3), F.S., is not
eligible for the exemption under s. 212.08(5)(b), F.S.

(p) Scales at the start of, or within, the production
process that are necessary to weigh raw materials or
ingredients, or finished goods at the time of packaging,
will qualify for the exemption.

(q) Office equipment, such as telephones, copy machines,
typewriters, or calculators, will not qualify for the
exemption.

(r) Furniture items for office or production personnel will
not qualify for the exemption.

(s) General or task lighting fixtures will not qualify for
the exemption.

(t) Installation labor charges qualify for exemption.
However, other installation costs, such as equipment rental
or expendable supplies, which do not become a physical part
of qualifying machinery and equipment, do not qualify for
exemption.

Rule 12A-1.051(2), F.A.C., provides the following, in pertinent
part:

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

(e)2. "Machinery or equipment" generally does not include
junction boxes, switches, conduits, wiring, valves, pipes,
and tubing incorporated into the electrical, cabling,
plumbing, or other structural systems of fixed works,
buildings, or other structures, whether or not such items
are used solely or partially in connection with the
operation of machinery and equipment.

The Department makes the following determinations with regard to
the Taxpayer's assertions of its treatment of the individual
components of its new facility relative to the exemption
provided by section 212.08(5)(b), F.S.:

Group A - Slag transport system and raw material silo:
Qualifying machinery and Equipment.

Pursuant to Rule 12A-1.096(9)(j), F.A.C, conveyors or related
equipment used to transport raw materials from the storage area
located at the fixed location to the production line will
qualify for the exemption. The Taxpayer's Group A consists of a
slag transport system and raw material silo. The slag transport
system will consist of a front end loader, a loading bin, and a
conveyor system. The front end loader will be used to transport
raw materials from the facility's stock-piles to the loading bin
that is accessed via a concrete ramp with guard rails. The
loading bin will then introduce the raw materials to a conveyor
belt that will then transport the materials to the raw material
silo. The raw material silo will then be used as temporary
storage for the raw material while at the same time it will
provide a consistent rate of feed into the plant. To that end,
the Taxpayer's Group A falls within the Department's
interpretation as being a conveyor or related equipment that is

used to transport raw materials to the production line and, as
such, is considered to be an integral part of the production
process, as provided by Rule 12A-1.096(9)(e), F.A.C.
Accordingly, Taxpayer's Group A is determined to be qualifying
machinery and equipment pursuant to the exemption statute.

Group B - Plant: Qualifying machinery and equipment.

The Taxpayer's Group B - Plant consists of the mill building,
air compressors, and water cooling systems. The Taxpayer
describes the mill building to be a "building" only in the sense
that the production machinery will be surrounded by a steel
housing that is designed to provide physical support to the
machinery during operation. It has been indicated that the
machinery will be physically attached to the housing at its base
and on all sides. The definition of industrial machinery and
equipment as found in Rule 12A-1.096(1)(b), provides that
buildings and their structural components are not industrial
machinery and equipment unless the building or structural
component is so closely related to the industrial machinery and
equipment that it houses or supports that the building or
structural component can be expected to be replaced when the
machinery and equipment itself is replaced. In reviewing the
technical drawings provided by the Taxpayer, the symbiotic
relationship between the structural components of the mill
building and the manufacturing machinery and equipment is
evident. It is clear that the mill building is designed around
the manufacturing machinery and equipment in that the machinery
and equipment must be attached to the building in such a way to
ensure that it is in correct alignment and elevation required
for production. It is apparent that the structural component of
the mill building serves an integral part in the production
process to the point that the building itself would not have a
useful life beyond that of the equipment contained within it.
It is further evident that if any component part of the
production machinery and equipment were to be replaced, the
corresponding structural element of the building would be
required to be replaced as well. Accordingly, the Department
agrees with the Taxpayer's assertion that the mill building
represents qualifying industrial machinery and equipment as
defined in the exemption statute.

The air compressors that will be adjacent to the mill building
will qualify for the exemption if they are integral to the
production process in that they are used to operate qualifying
machinery and equipment. Inasmuch as the water cooling system
is necessary to keep the both the production machinery and
equipment and the finished product at the appropriate
temperatures for optimum operation and production, it will
qualify as industrial machinery and equipment.

The taxpayer has also indicated that grinding media and other
replacement parts, such as oil filters, filter bags, conveyor
belts and supply elevator buckets that are needed to repair or
maintain the machinery and equipment will be purchased prior to
the start of production. The grinding media are graded steel
balls that are placed into the Taxpayer's grinding equipment in
order to grind the raw material into the finished product. It
is apparent that without such media, the Taxpayer's facility
would essentially be inoperable. To that end, the grinding
media are considered integral to the production process, thereby
qualifying as "parts or accessories" that may be purchased under
the guidelines of the exemption statute prior to the start of
production. It is important to note that parts and accessories
for industrial machinery and equipment purchased for
replacement, maintenance, or repair purposes do not qualify for
this exemption unless they are purchased prior to the start of
production and delivery occurs within 12 months from the start
of production. Items that have already received an exemption
under the provisions of section 212.08(7)(xx), F.S., are
excluded as well.

Group C - Slag Storage Silos: Qualifying machinery and
equipment.

Rule 12A-1.096(1)(g), F.A.C., provides that the production
process generally ends when the items of tangible personal
property are in saleable form. However, the production process
may include quality control activities after the items are in
saleable form if such quality control activities are required by
good manufacturing practices. Rule 12A-1.096(9)(d), F.A.C.,
further provides that postproduction quality control equipment

shall qualify as industrial machinery and equipment, if it is an
integral part of the production process. In the instant case,
Taxpayer will be constructing two silos for the purposes of
storing and maintaining its finished slag until the slag is
removed via truck for delivery to its customers. The silos will
be equipped with an aerator that will be required to constantly
process the slag to keep it in saleable form. In light of these
facts, it is apparent that the silos represent quality control
equipment that is an integral part of the production process,
thereby qualifying for the statutory exemption.

Pursuant to Rule 12A-1.096(9)(p), F.A.C, scales that are
necessary to weigh finished goods at the time of packaging will
qualify for the exemption. In this instance, each silo, as
described above, will contain two loading ramps onto which
delivery trucks will drive, so that the finished product may be
loaded. The ramps will contain scales that will be used to
measure the amount of product dispersed into each delivery
truck. The product is not packaged. Therefore, the product is
not considered to be a finished product in saleable form until
the point at which it is dispersed into the delivery trucks.
Even though the product is not packaged, the scales are at the
point in the production process where packaging would occur if
it was to be done.

Based on the above analysis, it is the Department's
determination that the individual elements of the Taxpayer's
Group C - Slag Storage Silos represent qualifying machinery and
equipment.

Group D - Pilings/Slab: Qualifying machinery and equipment.

For the purpose of the exemption provided by section
212.08(5)(b), F.S., special foundations required for the support
of qualifying machinery and equipment are considered to be
industrial machinery and equipment pursuant to Rule 12A1.096(9)(a)1., F.A.C. Since the pilings and interconnecting
slab are necessary to support the raw material silo, plant, and
the slag storage silos and to prevent movements of the
production machinery and equipment that could render it
inoperable, the Department agrees with the Taxpayer's assertion

that its Group D - Pilings/Slab represent qualifying machinery
and equipment.

Group E - Movable Equipment: Qualifying machinery and equipment.

Inasmuch as it has been indicated that the Taxpayer will be
utilizing at least two additional pieces of movable equipment,
such as a forklift and a Bobcat (a small scale front end loader)
throughout the facility to transport raw materials and work-inprocess, the Department agrees with the Taxpayer's assertions
that these items represent qualifying machinery and equipment
provided they serve as an integral part of the production
process at a fixed location.

Group F - Oil Tank: Non-Qualifying.

Pursuant to Rule 12A-1.096(9)(e), F.A.C., industrial machinery
and equipment that is an integral part of the production
process, as well as in post production, will qualify for the
exemption. As defined by Rule 12A-1.096(1)(c), F.A.C.,
"integral to" means that the machinery and equipment provides a
significant function within the production process, such that
the production process could not be complete without that
machinery and equipment. In State ex rel. Szabo Food Services,
Inc. v. Dickinson, 286 So.2d 529 (Fla. 1973), the court held
that exemptions to taxing statutes are special favors granted by
the legislature and are to be strictly construed against the
taxpayer. Further, in State Dept. of Revenue v. Anderson, 403
So.2d 397 (Fla. 1981), the court stated that the legislature,
besides giving DOR rule making power and expressly requiring
compliance with DOR's rules and regulations, has stated its
intent that any exemptions granted be subject to the conditions
pertaining to those exemptions. s. 212.21(2), Fla. Stat. In the
instant case, even though the equipment for which it stores fuel
may be exempt, the exemption does not extend to the oil tank, as
it is not integral to the production process since the
production process can be completed without it. Therefore,
since the Taxpayer has not met the burden established by the
statute, the Department disagrees with its assertion that the
oil tank is qualifying equipment but, rather, it may represent
tangible personal property or a real property improvement

depending on the method of affixation. Since the method of
affixation has not been provided, the Department cannot
distinguish whether the oil tank will remain an item of tangible
personal property or if it will become an item of tangible
personal property incorporated into a real property improvement
upon installation.

Group G - Workshop:
Building: The Department agrees with the Taxpayer's
assertion that the building is a real property improvement.

Tools and Equipment: The Department agrees with the
Taxpayer's assertion that the tools and equipment represent
non-qualifying tangible personal property.

Furniture: The Department agrees with the Taxpayer's
assertion that the furniture represents non-qualifying
tangible personal property.

Group H - Control Building:
Building: The Department agrees with the Taxpayer's
assertion that the building is a real property improvement.

Monitoring Equipment: Inasmuch as the monitoring machinery
and equipment will monitor the performance of the
production machinery and equipment, such as power demands,
temperatures, vibrations, productivity, and overall
performance, the Department agrees that this equipment is
integral to the production process and, therefore,
represents qualifying machinery and equipment.

Furniture: The Department agrees with the Taxpayer's
assertion that the furniture represents non-qualifying
tangible personal property.

Group I - Office and Laboratory:
Office and Laboratory Building: The Department agrees with
the Taxpayer's assertion that the building is a real
property improvement.

Furniture: The Department agrees with the Taxpayer's

assertion that the furniture represents non-qualifying
tangible personal property.

Laboratory Testing Equipment: Since the laboratory
equipment will be used to test and ensure the quality of
the goods from samples taken from various stages of the
production process, the Department agrees with the
Taxpayer's assertion that the laboratory equipment
represents qualifying machinery and equipment.

Computers: If the computers are used in the preproduction,
random, or postproduction quality control process, the
computers will qualify for the exemption as provided in
Rule 12A-1.096(9)(d), F.A.C. However, if the computers are
used solely in an administrative function, such computers
will be considered to be non-qualifying tangible personal
property.

Group J - Garage: The Department agrees with the Taxpayer's
assertion that the garage is a real property improvement.

Group K - Concrete and Asphalt Paving: The Department agrees
with the Taxpayer's assertion that the concrete and asphalt
paving constitute real property improvements.

Group L - Retention Pond: The Department agrees with the
Taxpayer's assertion that the retention pond represents a real
property improvement.

Group M - Electrical Substation, Overhead Wiring, and
Transformer: Non-Qualifying.

The Department disagrees with the Taxpayer's assertion that the
electrical substation, overhead wiring, and transformer
represent qualifying industrial machinery and equipment pursuant
to Rule 12A-1.096(9), F.A.C. In fact, the rule is quite
unambiguous on this point and provides that only the electrical
wiring from the nearest power panel or disconnect box to the
qualifying machinery and equipment will qualify for the
exemption. Rather than being overridden by the exemption
statute, as the Taxpayer suggests, further clarity on this issue

is found in Rule 12A-1.051(2)(e)2., F.A.C., which provides that
"machinery or equipment" generally does not include junction
boxes, switches, conduits, wiring, valves, pipes, and tubing
incorporated into the electrical, cabling, plumbing, or other
structural systems of the fixed works, buildings, or other
structures, whether or not such items are used solely or
partially in connection with the operation of machinery and
equipment. As stated above, the court in Szabo v. Dickinson,
286 So.2d 529, held that exemptions to taxing statutes are
special favors granted by the legislature and are to be strictly
construed against the taxpayer. Accordingly, since the rule
stipulates that only the electrical wiring from the qualifying
machinery and equipment to the nearest power panel or disconnect
box will qualify for the exemption, the exemption cannot be
extended beyond that point to the Taxpayer's electrical
substation, overhead wiring, and transformer if such items do
not represent the first disconnect point or nearest power panel
from the qualifying machinery and equipment. This is so despite
the fact that these items are being installed solely to meet the
high electricity demands of the Taxpayer's qualifying machinery
and equipment. Since, in all likelihood, these items are not
the first point of disconnect from qualifying machinery and
equipment, the Department has determined that the electrical
substation, overhead wiring, and transformer are not considered
to be industrial machinery and equipment, but rather
improvements to real property subject to the provisions of Rule
12A-1.051, F.A.C. Buildings constructed to prevent exposure of
the electrical meters and relays associated with the substation
are similarly considered to be improvements to real property.

Conclusion - Issue I

The Department has made the following determinations with regard
to the Taxpayer's assertions of its treatment of the individual
components of its new facility relative to the exemption
provided by section 212.08(5)(b), F.S.:

Group

Component

Sales Tax Treatment pursuant
to s. 212.08(5)(b), F.S.

Slag transport system Qualifying Machinery and

& raw material silo
B

Plant

Equipment

Qualifying Machinery and
Equipment

Slag Storage Silos

Qualifying Machinery and

Equipment
D

Pilings/Slab

Qualifying Machinery and
Equipment

Movable Equipment

Qualifying Machinery and

Equipment
F

Oil Tank

Non-Qualifying Tangible
Personal Property/Real
Property Improvement

Workshop:
Building

Real Property Improvement

Tools and Equipment

Non-Qualifying Tangible

Personal Property
Furniture

Non-Qualifying Tangible
Personal Property

Control Building:
Building

Real Property Improvement

Monitoring Equipment Qualifying Machinery and
Equipment
Furniture

Non-Qualifying Tangible
Personal Property

Office and Laboratory:
Office & Laboratory

Real Property Improvement

Bldg.
Furniture

Non-Qualifying Tangible
Personal Property

Laboratory Testing

Qualifying Machinery and

Equipment

Computers

Qualifying/Non Qualifying
Machinery and Equipment
dependent on use

Garage

Real Property Improvement

Concrete and Asphalt

Real Property Improvement

Paving
L

Retention Pond

Real Property Improvement

Electrical Substation, Non-Qualifying Tangible

Overhead

Personal property/

Wiring, and Transformer Real Property Improvement

Facts - Issue II

The following describes the taxpayer's use of boiler fuels which
will be used in its manufacturing process:

Boiler fuels (Group N)

The raw materials delivered into the plant must first be
completely dried by a "flash dryer" (indicated at the
southwest corner of the mill building). The Taxpayer will
be purchasing natural gas to be used in this drying
process, which is required as part of the production of the
Taxpayer's products. There will be no other use of natural
gas anywhere else in the Taxpayer's facility. In addition,
the Taxpayer will be purchasing heavy diesel for use in its
movable equipment.

In a conversation with the Taxpayer's representative on January
23, 2004, it was indicated that the Taxpayer will actually be
purchasing ATSM Grade D-975 dyed diesel for use in its movable
equipment, from a dealer that has elected to not collect the
sales tax.

Requested Advisement - Issue II

Taxpayer requests determinations with regard to the taxability
of charges for boiler fuels that are to be used in an industrial
manufacturing, processing, compounding, or production process.

Taxpayer's Position - Issue II

The Taxpayer asserts the following with regard to the use of
boiler fuels at its facility:

Fuel Supply (Group N)

The Taxpayer asserts that its purchase of both natural gas
and heavy diesel will qualify for exemption as boiler fuels

under Section 212.08(7)(b), F.S., which states that natural
gas and residual oils, such as heavy diesel, used as a
combustible fuel in an industrial manufacturing,
processing, compounding, or production process at a fixed
location in this state are exempt from tax.

Applicable Law and Discussion - Issue II

Section 212.08(7)(b), F.S., provides the following, in pertinent
part:

(b) Boiler fuels.--When purchased for use as a combustible
fuel, purchases of natural gas, residual oil, recycled oil,
waste oil, solid waste material, coal, sulfur, wood, wood
residues or wood bark used in an industrial manufacturing,
processing, compounding, or production process at a fixed
location in this state are exempt from the taxes imposed by
this chapter; however, such exemption shall not be allowed
unless the purchaser signs a certificate stating that the
fuel to be exempted is for the exclusive use designated
herein....

Rule 12A-1.059(2), F.A.C., provides the following, in pertinent
part:

(2)(a) "Boiler" fuels. When purchased as a combustible
fuel, purchases of natural gas, residual oil, recycled oil,
waste oil, solid waste material as defined in s.
403.703(13), F.S., coal, sulfur, wood, wood residues, or
wood bark used in an industrial manufacturing, processing,
compounding, or production process at a fixed location in
this state is exempt. For the purpose of this exemption,
the term "residual oil" means ASTM Grades No. 5 and No. 6,
heavy diesel, and bunker C. This exemption does not apply
to any type of liquefied petroleum gases, naphtha,
kerosene, or distillate fuel oil, such as diesel fuels, No.
1 and No. 2 heating oils, and No. 4 fuel oil. The term
"fixed location" means being permanently affixed to one
location or plant site, or any portable plant which may be
set up for a period of not less than six months in a
stationary manner so as to perform the same industrial

manufacturing, processing, compounding, or production
process that could be performed at a permanent location or
plant site. To be entitled to this exemption at the time of
purchase, the purchaser must issue the seller a certificate
stating that the combustible fuel is used in an industrial
manufacturing, processing, compounding, or production
process. The following is a suggested format of a
certificate to be used for this purpose:

EXEMPTION CERTIFICATE
BOILER FUELS USED TO PRODUCE TANGIBLE
PERSONAL PROPERTY FOR SALE
___, incorporated in the State
of_, its undersigned officer who is duly authorized,
hereby certifies to ___ that purchases
of natural gas, residual oil, recycled oil, waste oil,
solid waste material as defined in s. 403.703(13), F.S.,
coal, sulfur, wood, wood residues, or wood bark under
account number _ will be exclusively used as a
combustible fuel in the manufacturing, processing,
compounding, or production of tangible personal property
for sale. This industrial process is located at
____ in ___, Florida,
County of ___. Further, it is certified
that ___ is not subject to regulation by
the Division of Hotels and Restaurants of the Department of
Business and Professional Regulation. The purchase of the
combustible fuel pursuant to this certification is exempt
from tax, pursuant to s. 212.08(7)(b), F.S.
Dated at ____, Florida, this ___
day of __, _.
AUTHORIZED OFFICER OF COMPANY
BY: ____
TITLE: _______
(Emphasis Supplied)

Section 206.86, F.S., provides the following pertinent
definitions:

(1) "Diesel fuel" means all petroleum distillates commonly
known as diesel #2, biodesel, or any other product blended

with diesel or any product place into the storage supply
tank of a diesel-powered motor vehicle.

(9) "Dyed diesel fuel" means diesel fuel that is dyed in
accordance with United States Environmental Protection
Agency or Internal Revenue Service requirements for high
sulfur diesel fuel or low sulfur diesel fuel....

Rule 12A-1.059(3)(a), F.A.C., provides the following:

(3)(a) Dyed diesel fuel used in a trade or business is
subject to use tax. Every person who uses dyed diesel fuel
in a trade or business is required to register as a dealer
to remit use tax due on the total cost price of the fuel
consumed, unless:

The diesel fuel is specifically exempt from sales tax;
or
The dealer selling the diesel fuel has elected to
collect sales and use tax on sales to persons who use or
consume the diesel fuel in a trade or business.

The Department agrees with the Taxpayer's assertion that the
purchase of natural gas to be used in the flash dryer will
qualify for the exemption for boiler fuels as set forth in
section 212.08(7)(b), F.S., provided such fuel is used
exclusively in the manufacturing process as a combustible fuel.
If the Taxpayer uses any portion of the fuel for any other
purpose, such as hot water heating or generally heating the
facility or offices, then none of the fuel purchase is exempt
from tax. If the Taxpayer uses the fuel exclusively as a
combustible fuel in the manufacturing process, then the Taxpayer
may issue a copy of the suggested format of the exemption
certificate found in Rule 12A-1.059(2)(a), F.A.C., to its
vendor.

With regard to the Taxpayer's purchases of dyed diesel for its
use in its movable equipment, such purchase does not qualify for
the exemption for boiler fuels. Pursuant to Pursuant to Rule
12A-1.059(2), F.A.C., the exemption does not apply to distillate

fuel oil, such as diesel fuels. Since dyed-diesel fuel falls
within the definition of diesel as a petroleum distillate as
defined in sections 206.86(1), and (9), F.S., the purchase of
such fuel is specifically excluded from the exemption. Inasmuch
as it has been indicated that the Taxpayer will be purchasing
the dyed-diesel from a dealer who has elected to not collect the
sales tax, the Taxpayer will be required to remit a use tax due
on the total cost of the fuel consumed.

Conclusion - Issue II

Requested Advisement - Issue III

The Taxpayer requests a determination as to the taxability of
charges for electricity that is to be used to power machinery
and equipment used in manufacturing qualifying for exemption
under section 212.08(7)(ff), F.S.

Facts - Issue III

The following describes the taxpayer's use of electricity which
will be purchased for use in its manufacturing process:

Electricity (Group O)
The Taxpayer will also be purchasing electricity for
delivery to the substation from Florida Power and
Light. After being processed by the substation and the
transformer, power will be delivered from the
transformer to the plant and the other ancillary
structures on the property. It is estimated that
greater than 95% of the electrical current delivered
to the facility will be utilized in the mill building

and silos.

Taxpayer's Position - Issue III

The Taxpayer asserts the following with regard to the use of
electricity at its facility:

Electricity supply (Group O)
The taxpayer asserts that its purchase of electricity
will qualify for exemption under Section
212.08(7)(ff)1[.], F.S., which states that charges for
electricity or steam used to operate machinery and
equipment at a fixed location in Florida when such
machinery and equipment is used to manufacture,
process, compound, produce, or prepare for shipment
items of tangible personal property for sale, are
exempt from sales tax. This subparagraph further
provides that if 75 percent or more of the electricity
or steam used at the fixed location is used to operate
qualifying machinery or equipment, 100 percent of the
charges for electricity or steam used at the fixed
location are exempt. In addition, the Taxpayer is
classified under SIC Industry Major Group Number 32,
Manufacturers of stone, clay, glass and concrete
products, which is one of the qualifying industries
listed in Section 212.08(7)(ff)2[.], F.S. Since the
Taxpayer is in a qualifying industry and expects that
greater than 95% of its electricity will be used by
its qualifying machinery and equipment, the Taxpayer
asserts that 100% of its electricity purchases are
exempt from sales tax under Section 212.08(7)(ff),
F.S.

Applicable Law and Discussion - Issue III

Section 212.08(7)(ff), F.S., provides the following, in
pertinent part:

(ff) Certain electricity or steam uses.--

Subject to the provisions of subparagraph 4., charges

for electricity or steam used to operate machinery and
equipment at a fixed location in this state when such
machinery and equipment is used to manufacture, process,
compound, produce, or prepare for shipment items of
tangible personal property for sale, or to operate
pollution control equipment, recycling equipment,
maintenance equipment, or monitoring or control equipment
used in such operations are exempt to the extent provided
in this paragraph. If 75 percent or more of the electricity
or steam used at the fixed location is used to operate
qualifying machinery or equipment, 100 percent of the
charges for electricity or steam used at the fixed location
are exempt. If less than 75 percent but 50 percent or more
of the electricity or steam used at the fixed location is
used to operate qualifying machinery or equipment, 50
percent of the charges for electricity or steam used at the
fixed location are exempt. If less than 50 percent of the
electricity or steam used at the fixed location is used to
operate qualifying machinery or equipment, none of the
charges for electricity or steam used at the fixed location
are exempt.

This exemption applies only to industries classified
under SIC Industry Major Group Numbers 10, 12, 13, 14, 20,
22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36,
37, 38, and 39 and Industry Group Number 212. As used in
this paragraph, "SIC" means those classifications contained
in the Standard Industrial Classification Manual, 1987, as
published by the Office of Management and Budget, Executive
Office of the President.
Possession by a seller of a written certification by the
purchaser, certifying the purchaser's entitlement to an
exemption permitted by this subsection, relieves the seller
from the responsibility of collecting the tax on the
nontaxable amounts, and the department shall look solely to
the purchaser for recovery of such tax if it determines
that the purchaser was not entitled to the exemption.

The Department agrees that since the Taxpayer is classified
under SIC Industry Major Group Number 32, a qualifying industry

as listed in the statute, and it is expected that greater than
95% of its electricity will be used by its qualifying machinery
and equipment to manufacture, process compound, or produce for
sale items of tangible personal property, 100% of the Taxpayer's
electricity purchases will be exempt from sales tax under
Section 212.08(7)(ff), F.S.

In order to obtain the exemption, the Taxpayer should extend an
exemption certificate, a sample of which is provided below, to
its local utility provider certifying its entitlement to the
exemption, thus relieving the provider from the responsibility
of collecting the tax on the non-taxable amounts.

Sample Exemption Certificate:

Purchases of Electricity or Steam
Used to Manufacture Items for Sale

(Purchaser's Name) certifies that the electricity or steam
purchased on or after ___ under the following account
number(s)_____ is exempt from sales tax,
because such electricity or steam will be used at a fixed
location to operate machinery and equipment that is used to
manufacture, process, compound, produce, or prepare for shipment
items of tangible personal property for sale, or to operate
pollution control equipment, recycling equipment, maintenance
equipment, or monitoring or control equipment used in such
operations.

(Purchaser's Name) further certifies that: a) its four-digit SIC
Industry Number is listed below, and this number is classified
under SIC Industry Major Group Number 10, 12, 13, 14, 20, 22,
23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38,
or, 39, or under Industry Group Number 212 as contained in the
Standard Industrial Classification Manual, 1987, as published by
the Office of Management and Budget, Executive Office of the
President; and b) 75% or more of the electricity or steam used
at a fixed location is used to operate machinery and equipment
as described above, and the location qualifies for the 100%
exemption, or c) more than 50% but less than 75% of the
electricity or steam used at a fixed location is used to operate

machinery and equipment as described above and the location
qualifies for a 50% exemption.

SIC INDUSTRY NUMBER ________

Address of Exempt
Location(s)

Utility or Steam

Amount of

Account Numbers

Exemption

Claimed
(Circle One)

100% / 50%

The undersigned understands that if such purchases of
electricity or steam do not qualify for exemption, the
undersigned will be subject to sales and use tax, interest, and
penalties. Purchaser further understands that when any person
shall fraudulently, for the purpose of evading tax, issue to a
vendor or to any agent of the state a certificate or statement
in writing in which he or she claims exemption from the sales
tax, such person, in addition to being liable for the payment of
the tax plus a mandatory penalty of 200% of the tax shall be
liable for fine and punishment provided by law for conviction of
a misdemeanor of the second degree, as provided in s. 775.082,
s. 775.083, or s. 775.084.

Purchaser's Name (Print or Type)

Date

Signature and Title

Florida Sales Tax Number

Federal Employer Identification

Telephone Number

Number (FEI) or Social Security Number

Conclusion - Issue III

The Department agrees that since the Taxpayer is classified
under SIC Industry Major Group Number 32, a qualifying industry
as listed in the statute, and if, as expected, greater than 95%

of its electricity will be used by its qualifying machinery and
equipment to manufacture, process compound, or produce for sale
items of tangible personal property, 100% of the Taxpayer's
electricity purchases will be exempt from sales tax under
Section 212.08(7)(ff), F.S. The exemption can be obtained by
extending a certificate to the local utility provider stating
that electricity purchased is for the exempt purpose designated
by statute and the claimed percentage.

Requested Advisement - Issue IV

The Taxpayer requests a determination as to the taxability of
purchases of parts and accessories used to repair or maintain
industrial machinery and equipment qualifying for exemption
under section 212.08(7)(xx), F.S.

Facts - Issue IV

The Taxpayer will be purchasing grinding media and other
replacement parts after the start of production, such as oil
filters, filter bags, conveyor belts and supply elevator buckets
that are needed to maintain the production machinery and
equipment. The grinding media are graded steel balls that are
placed into the Taxpayer's grinding equipment in order to grind
the raw material into the finished product.

Taxpayer's Position - Issue IV

The Taxpayer asserts that its purchases of grinding media and
other replacement parts, such as oil filters, filter bags,
conveyor belts, and supply elevator buckets, qualify for
exemption under section 212.08(7)(xx), F.S.

Applicable Law and Discussion - Issue IV

Section 212.08(7)(xx), provides the following, in pertinent
part:

(xx) Certain repair and labor charges.1. Subject to the provisions of subparagraphs 2. and 3.,
there is exempt from the tax imposed by this chapter all

labor charges for the repair of, and parts and materials
used in the repair of and incorporated into, industrial
machinery and equipment which is used for the manufacture,
processing, compounding, production, or preparation for
shipping of items of tangible personal property at a fixed
location within this state.

This exemption applies only to industries classified
under SIC Industry Major Group Numbers 10, 12, 13, 14, 20,
22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36,
37, 38, and 39 and Industry Group Number 212. As used in
this subparagraph, "SIC" means those classifications
contained in the Standard Industrial Classification Manual,
1987, as published by the Office of Management and Budget,
Executive Office of the President.

The exemption provided in section 212.08(7)(xx), F.S., extends
to "all labor charges for the repair of, and parts and materials
used in the repair and incorporated into," qualified machinery
and equipment. The statute does not define the term "repair."
When a statute fails to define terms, they must be given their
ordinary meaning. Rinker Materials Corp. v. City of North
Miami, 286 So.2d 552 (Fla. 1973). Merriam-Webster's Collegiate
Dictionary, Tenth Edition (1999) defines "repair" as "to restore
by replacing a part or putting together what is torn or broken;
to restore to a sound or healthy state" and defines "maintain"
as "to keep in an existing state; preserve from failure or
decline." In the context under consideration, both terms refer
to taking action to keep existing machinery and equipment
operating properly at existing levels. The exemption therefore
applies regardless whether an engine belt is replaced when it is
merely worn out or whether it is replaced after it snaps. In
either case, there is an action that involves using labor and a
replacement belt in order for the engine to perform in its
intended manner. This interpretation is supported by Treas.
Regs. section 1.162-4, which characterizes repairs as operations
that "neither materially add to the value of the property nor
appreciably prolong its life, but keep it in an ordinarily
efficient operating condition...." The exemption extends to
preventative maintenance as well as corrective repairs.
Accordingly, the exemption will extend to the Taxpayer's

purchase of oil filters, filter bags, conveyor belts, and supply
elevator buckets that are necessary to ensure that the
production machinery and equipment is maintained in a sound
operating condition.

Under the same reasoning, the exemption will also apply to the
Taxpayer's purchase of the grinding media in that the exemption
extends to any parts or materials incorporated into existing
industrial machinery or equipment to ensure that the machinery
and equipment remains in a sound operating condition. It is
readily apparent that the grinding media are a critical
component of the production process due to the fact that they
are placed into the grinding machines to facilitate the grinding
of the raw material into the finished product. Without such
media, the taxpayer's grinding machines would be inoperable and
the Taxpayer would not be able to produce a finished product.

It is important to note that not all expenses incurred in the
course of exempt repair are exempt. The exemption is limited by
its terms to charges for labor and parts that are incorporated
into machinery and equipment. It does not apply to any other
expenses incurred in the course of a repair. For example, if
equipment is rented to use in making a repair, the rental
charges are not exempted by section 212.08(7)(xx), F.S.
Consumable items and tools that are used in the course of an
exempt repair but are not incorporated into the machinery and
equipment, such as rags, cleaning solutions, sandpaper,
wrenches, hammers, and drills, are not exempt.

In order to obtain the exemption, the Taxpayer should extend an
exemption certificate, a sample of which is provided below, to
its vendor certifying its entitlement to the exemption, thus
relieving the vendor from the responsibility of collecting the
tax on the exempt amounts.

SUGGESTED PURCHASER'S EXEMPTION CERTIFICATE
REPAIRS TO QUALIFYING INDUSTRIAL MACHINERY AND EQUIPMENT

___ (Purchaser's Name) certifies that
the labor charges and/or repair parts and materials billed
on or after __ (date) were used in the repair of

and incorporated into, industrial machinery and equipment
on or after ______ (date), and that the industrial
machinery and equipment were used for manufacturing,
processing, compounding, production, or preparation for
shipment of items of tangible personal property at a fixed
location in Florida. Any labor charges, repair parts, or
materials which are not eligible for the exemption will be
so designated by the purchaser.

_______ (Purchaser's Name) further
certifies that its four-digit SIC Industry Number is listed
below, and this number is classified under SIC Industry
Major Group Number 10, 12, 13, 14, 20, 22, 23, 24, 25, 26,
27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, or 39, or
Industry Group Number 212, as contained in the Standard
Industrial Classification Manual, 1987, as published by the
Office of Management and Budget, Executive Office of the
President. The undersigned understands that if such labor
charges and/or repair parts and materials do not qualify
for this exemption, the undersigned will be subject to
sales and use tax, interest, and penalties. The
undersigned further understands that when any person
fraudulently, for the purpose of evading tax, issues to a
vendor or to any agent of the state a certificate or
statement in writing in which he or she claims exemption
from the sales tax, such person, in addition to being
liable for payment of the tax plus a mandatory penalty of
200% of the tax, shall be liable for fine and punishment
provided by law for conviction of a misdemeanor of the
second degree, as provided in s. 775.082, s.775.083, or s.
775.084, Florida Statutes.

Purchaser's Name (Print or Type)

Four-digit SIC Industry

Number

Signature and Title

Date

Florida Sales Tax

Number

Federal Employer Identification

Telephone Number

Number (F.E.I.) or Social Security Number

Form to be retained in repairer's records.
DO NOT send to Department of Revenue.

Conclusion - Issue IV

The Department agrees that since the Taxpayer is classified
under SIC Industry Major Group Number 32, a qualifying industry
as listed in the statute, its purchases of parts and materials
to be used in the repair and incorporated into qualifying
industrial machinery and equipment qualifies for the exemption
provided in section 212.08(7)(xx), F.S.
Closing Statement

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 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 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., 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.

If you have any further questions with regard to this matter and
wish to discuss them, you may contact me directly at (850) 922-

4802.

Sincerely,

Christopher J. Whittier
Tax Law Specialist
Technical Assistance & Dispute Resolution

CJW\
Encl.: Exhibit A
Control No: 57953

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