Can a fruit processor rely on original TAA 04A-031's conclusion that ethylene gas was not exempt packaging material?

Plain-English summary

Do not treat original TAA 04A-031 as the Department's final response. The official PDF directs readers to Revised TAA 04A-031R dated July 30, 2004.

The original April 27 ruling is preserved below for historical research. It addressed whether ethylene gas used to accelerate fruit ripening qualified as exempt packaging material.

What the original ruling said

The taxpayer processed bananas and oranges by exposing their peels to ethylene gas in an enclosed environment. The gas accelerated ripening and changed peel color.

The taxpayer argued that the peel functioned as product packaging and was not consumed by the final user, so the ethylene used on it should qualify under the packaging exemption.

Florida originally rejected that theory. Based on information from the Department of Agriculture, it found that ethylene gas left no residue and did not become a component part of the fruit after the gas source was removed.

The original packaging test required the item to accompany the product

Section 212.02(14)(c) and Rule 12A-1.040, as quoted in the 2004 TAA, addressed packaging materials that accompanied the product to the final buyer or became a component or ingredient under specified conditions.

Because the gas did not remain with the fruit, the Department originally concluded that it could not be packaging material. The ruling did not decide whether the fruit peel itself was an item accompanying the product.

The later revision displaced this answer

The original PDF's directive to Revised TAA 04A-031R means the April answer should be read only as the Department's first analysis. This page does not present the original “No” as current or final guidance.

What this means for you

Fruit processors and produce businesses

Do not rely on the original packaging denial without reviewing the revised advisement and current law.

Accountants and tax professionals

When citing this document historically, identify it as the April 27 original response and pair it with the fact that Florida issued revised TAA 04A-031R on July 30, 2004.

Researchers

The original remains useful for tracing the Department's first packaging-material theory, but it should never be quoted without the revision notice.

Common questions

Q: What did original TAA 04A-031 hold?
A: It said ethylene gas did not qualify as packaging material because it did not remain on or become part of the fruit.

Q: Did the original ruling decide whether fruit peel was packaging?
A: No.

Q: Is the original answer the Department's final response?
A: No. The official PDF directs readers to revised TAA 04A-031R.

Q: When was the revised advisement issued?
A: July 30, 2004.

Citations and references

• Fla. Stat. § 212.02(14)(c) — 2004 packaging and component-material provisions quoted in the original ruling
• Fla. Admin. Code r. 12A-1.040(1) — packaging items accompanying products to the ultimate consumer
• Revised TAA 04A-031R (July 30, 2004) — later response identified by the official original PDF

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 04A-031

Original ruling text

SUMMARY

QUESTION: Is ethylene gas used to accelerate the ripening

process in fruit exempt from tax?

ANSWER - Based on Facts Below: No. According to the

Department of Agriculture, ethylene gas does not leave a
residue on the fruit, and it does not become a component
part of the fruit. Therefore, ethylene gas does not

qualify for the exemption found in section 212.02(14)(c),

Florida Statutes.

See Revised TAA 04A-031R dated July 30, 2004

Apr 27, 2004

Re: Technical Assistance Advisement 04A-031
Sales and Use Tax - Gas Used in Fruit Processing
Section: 212.02, F.S.

Rule: 12A-1.040, F.A.C.
Petitioner: XXX (herein "Taxpayer")
FEI: XX

Dear:

This letter is a response to your petition dated March 9, 2004,
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

Your letter sets forth the following:

[Taxpayer] is... in the business of processing fruit,
specifically bananas and oranges, for human consumption.
Fruit is processed by exposing the fruit's peel to ethylene
gas within an enclosed environment, which accelerates the
ripening process and changes the color of the peel, making

the product appear more attractive to the customer.

[Taxpayer] is requesting exemption from the taxation of
ethylene gas used in the processing of fruit under the
[packaging] exemption as allowed by Florida law, because
the peel of the fruit is a part of the product packaging

and not consumed by the final user of the product...

REQUESTED ADVISEMENT

Advice is requested whether the ethylene gas is exempt from tax

as packaging material.

DETERMINATION

Section 212.02(14)(c), Florida Statutes, provides in pertinent
part:

(c) "Retail sales," "sale at retail," "use," "storage," and
"consumption" do not include materials, containers, labels,

sacks, bags, or similar items intended to accompany a

product sold to a customer without which delivery of the

product would be impracticable because of the character of
the contents and be used one time only for packaging
tangible personal property for sale or for the convenience
of the customer or for packaging in the process of
providing a service taxable under this chapter.... The

terms do not include the sale, use, storage, or consumption
of industrial materials, including chemicals and fuels
except as provided herein, for future processing,
manufacture, or conversion into articles of tangible
personal property for resale when such industrial

materials, including chemicals and fuels except as provided

herein, become a component or ingredient of the finished

product. However, the terms include the sale, use, storage,

or consumption of tangible personal property, including

machinery and equipment or parts thereof, purchased
electricity, and fuels used to power machinery, when such

items are used and dissipated in fabricating, converting,

or processing tangible personal property for sale, even
though they may become ingredients or components of the
tangible personal property for sale through accident, wear,
tear, erosion, corrosion, or similar means.... (Emphasis

Supplied)

Rule 12A-1.040, Florida Administrative Code, provides in

pertinent part:

(1) Items actually accompanying the product sold to the

final buyer or ultimate consumer without which delivery of
the product is impracticable on account of the character of
the contents and for which there is no separate charge are
exempt. These items include such things as cans in which
canned goods, paints and other commodities are contained,
medicine bottles, boxes in which jewelry, candy, suits,
dresses and hats are delivered to customers, wrapping
paper, paper bags, ice cream cartons and ice cream cones,
twine, milk bottle caps, paper discs, meat skewers, etc.,
crating, packing cases, excelsior, bail bindings, bulkhead
materials and the like when used in connection with the
packaging for shipment for sale of other tangible personal
property where these materials pass to the retailer or
ultimate consumer together with the tangible personal
property originally containing only directions for use when

it accompanies the article sold and where it is

impracticable to affix such printed matter to the article

sold. (Emphasis Supplied)

The Department of Revenue has previously consulted with the
Florida Department of Agriculture regarding the use of ethylene
gas in the processing of fruit. This Department learned that
ethylene gas is the ripening agent that occurs in nature, which
causes fruit to ripen and decay. This gas can be used in fruit
processing as a means to accelerate the ripening process.
Exposing the fruit or vegetables to ethylene gas causes certain
genetic responses in the fruit/vegetable cells, which promotes

ripening. Furthermore, the Department of Agriculture advised the

Department of Revenue that ethylene gas itself does not become a
component part of the fruit and does not leave a residue once

the source of the gas has been removed.

Based on this information, the Department concludes that the
ethylene gas does not meet the criteria established in Section
212.02(14)(c), Florida Statutes, to be exempt from tax. Since

it does not become a component part of the fruit, the gas cannot

be considered packaging materials because it does not accompany
the fruit to the final consumer. This response, therefore, does

not consider whether the peel of the fruit is considered an item

accompanying the product sold.

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

Control #59312