How did Florida's $5,000 surtax limitation apply to hospital linens and diagnostic equipment bought in one transaction?

Plain-English summary

A hospital asked how the $5,000 discretionary sales surtax limitation applied to institutional purchases of patient clothing and linens and to sophisticated diagnostic and therapeutic equipment.

Florida treated each clothing or linen line item as its own bulk sale. The invoices established single sales, but the different lines did not form one working unit, so the limitation applied separately to each line.

Two ultrasound systems purchased together met both the single-sale and bulk-sale tests, so one limitation applied to their purchase. A combined radiographic and fluoroscopic imaging system qualified as one working unit and also received one limitation. Florida declined to decide the other described equipment because no invoices, orders, or contracts were provided.

What this means for you

The cap can apply at different levels within one purchasing program. Documentation and the character of the items determine whether it applies per line, per system, or once to an entire bulk transaction.

Common questions

How did the cap apply to gowns, linens, and scrubs? Separately to each line item that constituted a bulk sale.

How did it apply to two ultrasound systems? Once to the combined purchase because they were bought together in a qualifying bulk single sale.

How did it apply to the radiographic/fluoroscopic equipment? Once to the documented system as a working unit.

Were MRI, CT, radiation-therapy, nuclear-medicine, mammography, and PET purchases decided? No. Florida lacked the transaction documents needed for a specific opinion.

Citations and references

• Fla. Stat. § 212.054(2)(b)1. (multiple items and the $5,000 surtax limitation)
• Fla. Admin. Code r. 12A-15.004(3) (single sale, bulk sale, and working unit tests)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 06A-026

Original ruling text

SUMMARY
QUESTION #1: Are purchases by a hospital of beds, linens, and other items of tangible personal property, when
purchased in bulk, or institutional quantities, and supported by the issuance of a single purchase order subject to the
discretionary sales surtax limitation?
ANSWER - Based on Facts Below: Items meeting both the single sale and the working unit or bulk sale tests may be
aggregated for the purposes of the discretionary sales surtax limitation. Provided that there is documentary evidence
to establish a single sale occurred, each line item can meet the bulk sale test. If, however, all of the line items do not
comprise a working unit, the discretionary sales surtax limitation will apply to each line item on the invoice.
QUESTION #2: Is the purchase of sophisticated medical equipment considered a purchase of a "single working unit"
or part of a "single working unit" for the purposes of the discretionary sales surtax limitation.
ANSWER - Based on Facts Below: Each piece of equipment such as an ultra sound system or a radiographic and
fluoroscopic imaging system may be considered a "single working unit" for the purposes of the discretionary sales
surtax limitation, and the limitation would apply to each system. If there is sufficient evidence to support a single sale,
the systems may also qualify for a bulk sale, and the limitation would apply once to the contract.

August 28, 2006

Re: Technical Assistance Advisement 06A-026
Sales and Use Tax
Discretionary Sales Surtax Limitation
XXX (hereinafter "Taxpayer")
Tax Identification Number: XX
Section: 212.054, Florida Statutes, (hereinafter "F.S.")
Rule: 12A-15.004, Florida Administrative Code, (hereinafter "F.A.C.")
Dear:
This is in response to your correspondence to the Department, dated May 2, 2006, requesting the Department's
issuance of a Technical Assistance Advisement ("TAA") pursuant to Section 213.22, F.S., and chapter 12-11, F.A.C.,
regarding the discretionary sales surtax limitation to the taxpayer's purchases. An examination of your letter
established that you complied with the statutory and regulatory requirements for issuance of a TAA. Therefore, the
Department is hereby granting your request for issuance of a TAA.
Issue
Whether purchases made by the subject taxpayer are considered sales of items normally sold in bulk or items that

compromise a working unit, or part of a working unit, subject to the $5,000 limitation contained within the provisions of
Section 212.054, F.S.
Facts
Your letter provides the following statement of facts:
[Taxpayer] purchases items such as beds, linens, and many other miscellaneous items of tangible personal property
to satisfy the needs of a large institutional medical facility. For purposes of economy, [Taxpayer] purchases many of
these items in bulk or in institutional quantities to eliminate excess shipping and accounting expenses. It is quite
common for the taxpayer to purchase many beds, linens and other miscellaneous items of tangible personal property
via a single purchase order, followed by a single or multiple invoices. Representative examples of relevant purchase
orders and invoices are enclosed for your review.
[Taxpayer] also purchases, via single purchase order, diagnostic imaging and therapeutic equipment that [Taxpayer]
considers to constitute a single working unit from XXX ("Vendor 1") and other vendors. The equipment includes the
following categories or "modalities" of imaging and therapeutic equipment: magnetic resonance imaging ("MRI");
computed tomography ("CT"); x-ray vascular ("XV"); x-ray radiographic (only) ("XR"); x-ray fluoroscopic ("XF"); x-ray
therapeutic ("XT"); nuclear medicine ("NM"); mammography ("MM"); and positron emission tomography ("PET"). The
foregoing equipment is used for the diagnosis or treatment of injury or disease. The modalities are described in detail,
as follows:
MRI: Magnetic resonance imaging uses radiofrequency ("RF") waves rather than x-rays to produce images of a
patient's internal structures. It produces clear and detailed pictures of internal organs and tissues for purposes of
diagnosis.
An MRI system is a large collection of equipment that typically contains many or all of the following parts: a
superconducting magnet that generates magnetic fields for imaging; RF and magnetic shielding for the scan room;
computer workstation; operator control console; color laser printer for image printing; MRI "phantoms" (objects used to
simulate imaging safely, for purposes of testing performance); RF system made up of a power supply, programmable
interface, receiver and demodulator; spectrometer; wave form generator and analog to digital converters; RF coils;
physician's viewing station; gantry system, including magnet housing, patient handling controls, patient table with
microprocessor and table motor drive system; multiformat multi-image camera; injector system for contract media; and
accessories. As a result of the size and number of pieces of equipment making up a typical MRI system, the
equipment must be installed in several contiguous rooms requiring special structural, electrical, and mechanical
considerations.
During an MRI procedure, the patient is placed on a sliding patient table and positioned for the examination. The
radiologist and technologist do not remain in the scan room during the procedure. They communicate with the patient
via intercom from their positions in the viewing and operator's areas. If indicated, contrast media is injected. Following
the procedure, the radiologist reviews the resulting images on a computer screen and may print them on a color laser
printer.

CT: Computed tomography (also called "CAT" scan) uses x-rays to produce images from multiple angles. The images
are processed by computers to show cross sections of body tissues and organs for purposes of diagnosis.
A CT scanning system is a large collection of equipment that typically contains many or all of the following component
parts: a large, cube-like machine with a circular opening in its center; a patient table; a rotating gantry with an x-ray
tube mounted on one side; an arc-shaped detector mounted on the opposite side that captures images; computer
processors that digitize and interpret the analog point-source information; shielding in and around the imaging
equipment; computer workstation; operator control console; laser printer for image printing; power supply equipment;
contrast media injector; and accessories. The CT scanner is placed in the examination room and contiguous rooms
are used for the operator’s workstation and the power supply.
During a CAT scan, the patient is placed on a sliding patient table and positioned for the examination. The radiologist
and technologist do not remain in the scan room during the procedure. They communicate with the patient via
intercom from their positions in the viewing and operator's areas. If indicated, contrast media is ingested or injected
before the exam. The patient table moves up or down and slides backward or forward during the procedure as
required for imaging. Following the procedure, the radiologist reviews the resulting images on a computer screen and
may print them on a laser printer.
XV: X-ray vascular equipment is used in connection with treatment and diagnosis of diseases of the heart and
circulatory system through angiography and catheterization. Angiography is an x-ray image of blood vessels in a part
of the body, such as the heart, brain or kidneys, to detect disease, narrowing, enlargement or blockage.
Catheterization is the process of passing a catheter through an artery to the area of interest and injecting contrast
media for purposes of angiography. Catheterization is also used in angioplasty procedures, which reconstitute or
reopen blood vessels through inflation of a balloon, placement of a stent, or stripping of the inside of a vessel.
Cardiac catheterization labs contain the following equipment: radiographic and fluoroscopic x-ray imaging devices,
either suspended from ceiling-mounted gantries or contained on large c-arms affixed to the floor; patient table; image
intensifier; video monitors; wiring and cabling conduits; operator control panels; and computer workstation.
During the procedure, the patient lies still on the patient table. The patient is connected to an IV line for administration
of a sedative. The radiologist introduces a catheter into the patient’s artery and threads it to the desire location.
Contrast media is injected through the catheter. X-rays are then passed through the patient into an image intensifier
that receives the signals, amplifies them and sends them to a television monitor. If indicated, angioplasty procedures
are performed.
XR and XF: X-ray radiography is a procedure that produces a still image of interior structures of a patient. X-ray
fluoroscopy uses a fluoroscope to take dynamic x-ray images of organs in operation.
Radiographic x-ray
Radiographic x-ray systems include film plates and x-ray tubes, which may be affixed either to a ceiling-mounted
pedestal or gantry or to a c-arm bolted to a fixed pivot on the floor. They include film developers and printers. The

operator's controls are located in a separate, contiguous room protected by radiation shielding.
During a radiographic examination, the patient is positioned between the x-ray tube and the film plates. The
technologist steps into a separate room and activates the x-ray equipment. X-rays pass through the body onto the film
plates. The plates are removed and developed. The resulting images are printed for review by the technologist and
radiologist.
Fluoroscopic x-ray
Fluoroscopic imaging devices include an x-ray tube mounted on a gantry or c-arm and a fluorescent plate that
captures images and sends them to a television monitor. They include a large, flat patient examination table and
computerized controls. The operator's controls are located in a separate, contiguous room protected by radiation
shielding.
In a fluoroscopic procedure, the moveable x-ray apparatus extends over a portion of the table and sends real-time
images to a television monitor. Multiple static images are also obtained for later review. The patient table moves and
tilts. As x-rays pass through the patient, the fluorescent plate captures the images and sends them to the television
monitor for viewing.
XT: Radiation therapy is the use of high-energy radiation to destroy cancerous cells. Two common pieces of radiation
therapy equipment are the linear accelerator and gamma knife.
Linear accelerator
A linear accelerator delivers a uniform dose of high-energy x-rays directly to a patient’s cancerous tumor. The x-rays
destroy cancer cells while leaving healthy tissue undamaged.
A linear accelerator system includes a gantry, which delivers doses of x-rays. The patient lies on a moveable
treatment couch. Lasers are used to position the patient precisely. There is a closed-circuit television monitor and
intercom system. The system includes x-ray film and developer. The operational controls are located in a separate,
shielded room.
For therapy with a linear accelerator, the patient is placed on the treatment couch. The gantry rotates around the
patient and delivers x-rays. The lasers ensure that the patient is in the proper position during therapy. The treatment
couch and gantry are moved or rotated to govern the angle of radiation. From a separate room, the radiation therapist
observes the patient through a closed-circuit television monitor. The patient and therapist communicate via intercom.
X-rays called "port films" are taken with the treatment beam; these are checked regularly to make sure that the beam
position is consistent with the plan.
Gamma knife
A gamma knife is used to locate and irradiate with intense doses of radiation small targets in the head, usually inside
the brain.
A gamma knife includes a planning computer, stereotactic head frame, patient positioning table, collimator for

generation of gamma radiation, and remote control panels and patient monitoring equipment.
In preparation for gamma knife therapy, MRI, CT scanning or angiography is first performed as indicated. The results
are sent to the gamma knife's planning computer system. The physician uses the planning computer to set the
controls on the gamma knife to treat the target lesions. The patient is placed under local anesthesia while the special
stereotactic head frame is attached to the patient's skull with four screws. The head frame has three-dimensional
coordinates built into it. Using the three-dimensional coordinates determined in the planning process, the head frame
is precisely aligned with and attached to the gamma knife unit. Approximately two-hundred converging beams of
gamma radiation are precisely aimed at the targets. The collimator is then activated, firing the gamma radiation at the
targets. The operator remains in an adjacent room protected by radiation shielding and monitors the patient using a
computer workstation.
NM: Nuclear medicine equipment includes gamma cameras, which are used for imaging and diagnosis.
A gamma camera consists of a patient table, gantry, collimator, detector crystal, photomultiplier tube array, position
logic circuits, and data analysis computer. The equipment is configured in three separate, contiguous rooms: a
magnet room, a control room for the operator, and a power supply room.
The physician administers a radioactive imaging agent to the patient. The patient lies on the positioning table and is
moved into position beneath the gantry. The operator leaves the scan room and operates the equipment from a
contiguous, radiation shielded room. The computer constructs and displays a two-dimensional image on a monitor for
interpretation by the physician.
MM: Mammography equipment is specialized x-ray equipment used for detecting anomalies in breast tissue.
A mammography unit is a rectangular box that houses an x-ray tube. Special accessories limit x-ray exposure to the
area of the breast. The unit holds, positions, and compresses the breast for imaging from multiple angles. The
operator's controls are in a separate, contiguous room shielded from radiation.
For a mammography procedure, the technologist positions the patient in the machine. The technologist moves to the
control room and activates the device. Images are captured on film and developed for evaluation by a radiologist.
PET: Positron emission tomography involves acquisition of images based on detection of positrons emitted by a
radioactive substance administered to the patient. PET scans are used in a variety of diagnostic endeavors, including
detection of cancer, heart disease, and anomalies in the brain.
A PET scanner consists of the following pieces of equipment: a round enclosure that contains multiple rings of
detectors; a patient positioning table; a computer monitor; and operator control workstation.
Before a PET scan, a radioactive substance is administered to the patient intravenously or through inhalation. After
the substance has dispersed, the patient is placed on the examination table and the scan begins. The operator is
positioned in an adjacent room, where images appear on a computer monitor and are captured for analysis by a

radiologist.
Representative examples of relevant purchase orders and invoices associated with the acquisition of diagnostic
imaging and therapeutic equipment are enclosed for your review.
Issue One: Clothing and Linens
With your letter, you included several invoices which reflect the purchase of patient gowns, bath towels, bed linens,
washcloths, scrubs, et cetera from XXX, ("Vendor 2"). You have asked the Department to concur in the form of a TAA
that the purchase of these items, when purchased in bulk or in institutional quantities, and supported by the issuance
of a single purchase order, is subject to the discretionary sales surtax limitation.
Issue Two: Diagnostic and Therapeutic Equipment
Taxpayer further requests that the Department agree that the purchase of sophisticated medical equipment, such as
magnetic resonance imaging, computed tomography, x-ray vascular, x-ray radiographic, x-ray fluoroscopic, x-ray
therapeutic, nuclear medicine, mammography, and position emission tomography modalities, as described herein, is
considered a purchase of items considered as a "single working unit," or part of a "single working unit" subject to the
aforementioned $5,000 discretionary sales surtax limitation.
Applicable Statutes and Rules
Because Issue One and Issue Two are dependent upon the Department's interpretation and application of Section
212.054, F.S., and Rule 12-15.004, F.A.C., the statute and rule citations are given once below.
Subparagraph 212.054(2)(b)1., F.S., provides, in part:
The sales amount above $5,000 on any item of tangible personal property shall not be subject to the surtax.... For
purposes of administering the $5,000 limitation on an item of tangible personal property, if two or more taxable items
of tangible personal property are sold to the same purchaser at the same time and, under generally accepted
business practice or industry standards or usage, are normally sold in bulk or are items that, when assembled,
comprise a working unit or part of a working unit, such items must be considered a single item for purposes of the
$5,000 limitation when supported by a charge ticket, sales slip, invoice, or other tangible evidence of a single sale or
rental.
Rule paragraphs 12A-15.004(3)(a), and (c), F.A.C., provide, in part:
(3) When multiple items of tangible personal property are sold by a dealer to the same purchaser at the same time,
the $5,000 limitation applies when the sale or purchase is a single sale that meets the requirements of paragraph (a)
and is a sale of items normally sold in bulk or items that comprise a working unit, or a part of a working unit, that
meets the requirements of paragraph (b).
(a) SINGLE SALE. The sale or purchase of multiple items of tangible personal property must be a single sale in which

the purchaser buys all items of tangible personal property from the dealer at the same time.

1. There must be an invoice, sales slip, charge ticket, written purchase order or agreement, or other tangible evidence
   of sale that establishes the items were sold in a single sale.
2. A single sale of items of tangible personal property that is documented by a written purchase order or written
   agreement executed between a purchaser and the selling dealer must:
   a. Provide for a specific quantity of tangible personal property; and
   b. If delivery of all items does not occur at the same time, provide for a specific time period within which delivery of the
   tangible personal property to the purchaser must be made.

(c) MULTIPLE ITEMS OF TANGIBLE PERSONAL PROPERTY IN A SINGLE SALE.
Multiple items of tangible personal property sold or purchased under a single sales transaction that are not normally
sold in bulk or that, when assembled, will not comprise a working unit, part of a working unit, or comprise an integrated
unit to be used in the purchaser's normal business practice, cannot be aggregated into a single sale for purposes of
the surtax limitation.
Discussion
Under section 212.054(2)(a), F.S., the basic principle in applying discretionary sales surtaxes is that they piggyback
the state sales and use tax. If a transaction is subject to sales tax and occurs at a location where surtax is imposed,
the surtax also applies. The surtax is imposed on all transactions that are subject to sales tax, and it is not limited to
sales of tangible personal property. Section 212.054(2)(b), F.S., limits application of that principle when there is a sale
of an item of tangible personal property for over $5,000. The surtax in that case applies only to the first $5,000.
Subparagraph (b)1. of the statute then sets out very specific circumstances in which more than one item can be
aggregated for purposes of application of the surtax.
The statute requires application of the $5,000 limitation on an item-by-item basis, except for very specific
circumstances when multiple items will be viewed as a single item. In order for the exception to apply, two tests must
be satisfied. There must be a single sale in which one purchaser buys all the items at the same time, with a purchase
order or other documentary evidence that there has been such a single transaction. Second, the multiple items
reflected on that documentation will be aggregated for purposes of applying the $5,000 limitation only if they fall into
one of two categories. They must either be items that are normally sold in bulk, or they must be items that will be
assembled into a working unit or a part of one.
I. Single Sale Test
Items that meet the bulk sale/working unit test cannot be aggregated if they are not purchased in a single sale. For
example, a roofing contractor may not aggregate a separate purchase of shingles, purchased in June, with a separate

purchase of shingles purchased in July, even if that contractor ordinarily purchases shingles in bulk. Those purchases
do not meet the single sale test, as they were not ordered or purchased at the same time. The single sale requirement
addresses the character of the transaction itself, whether there has been one discrete transaction to which the
limitation can be applied or multiple sales that are separately subject to the limitation. Meeting this requirement is a
matter of documenting that there was one buyer, one seller, and that the agreement to buy and sell occurred at the
same time as to all of the items involved.
II. Bulk Sale/Working Unit Test
Items cannot be aggregated solely because they are purchased in a single sale. The bulk sale/working unit test must
also be met. This requirement addresses the character of the items purchased. Items may be viewed as a single item
only if they are items that fall within one of two categories. The category of items usually sold in bulk encompasses
multiple quantities of items ordinarily sold in such quantities rather than one at a time. This applies, for example, to
wall studs purchased by a carpenter or circuit breakers purchased by an electrician. The category of items usually
assembled into a working unit addresses items that are commonly purchased together because their utility is
dependent upon their assembly into some larger unit. An example of the working unit concept would be a purchase of
sheet metal, screws, tape, and sealant by an air conditioning contractor to construct a ductwork system. Multiple items
meeting the single sale test may not necessarily qualify for the $5,000 discretionary sales surtax limitation. They must
also meet the bulk sale/working unit test.
Conclusion Issue One: Clothing and Linens
With your letter, you included copies of several invoices that reflect the purchase from vendor 2 of patient gowns, bed
linens, scrubs, and the like. Although you assert in the statement of facts that representative examples of relevant
purchase orders are enclosed, copies of purchase orders supporting these invoices were not included.
Recall that the $5,000 discretionary sales surtax limitation can only be applied when both the single sale test and the
bulk sale/working unit test are met.
Individual invoices from Vendor 2 meet the tangible evidence requirement of paragraph 12A-15.004(3)(a), F.A.C.,
needed to establish that the items were sold in a single sale. The clothing and linens purchased do not constitute a
working unit. However, each line item of the invoices provided does constitute a bulk sale. Therefore, the $5,000
discretionary sales surtax limitation applies to each line item on each invoice.
Conclusion Issue Two: Diagnostic and Therapeutic Equipment
Ultrasound system
Also provided with your letter is a copy of computer "screen-shot" referencing a purchase order inquiry. This "inquiry"
appears to relate to a purchase order, number 552162, issued to XXX ("Vendor 3") and is for the purchase of two (2)
Volusion 730 Experts at $122,085.00 each. The relevance of this "screen-shot" is not clear. Following this "screenshot" is a quotation, number S1-C19811, version 4, for the purchase of two (2) new BT05 Volusion 730 Experts. From

the quotation, the BT05 Volusion 730 Expert is an ultrasound system designed for women's healthcare.
When purchasing multiple items at the same time, the $5,000 discretionary sales surtax limitation can only be applied
when both the single sale test and the bulk sale/working unit test are met. The limitation can apply to portions of a
transaction when the transaction as a whole does not qualify for a single $5,000 limitation.
The quotations provided for the purchase of the two (2) BT05 Volusion 730 Experts indicate that they are indeed
purchased together and meet the single sale test. In addition, the purchase also constitutes a bulk sale. Therefore, the
$5,000 discretionary sales surtax limitation will apply to the purchase of the two (2) BT05 Volusion 730 Experts.
Radiographic and Fluoroscopic Imaging System
A copy of a quotation from Vendor 3, numbered F8TC6JA, and its addendum were also included with your letter.
From the documents, the quotation is in anticipation of the sale of a Precision 500 D Base System, and the trade-in of
a Picker Elite 5000, serial number 407933RF3. The Precision 500 D Base System is a combination radiographic and
fluoroscopic imaging device. Three separate invoices, numbered 500104014, 500102468, and 500111198, from
Vendor 3 were attached as supporting documentation. These invoices all reference a purchase order, numbered
542774, and appear to be partial billings as specified by terms of payment in the quotation, numbered F8TC6JA, for
the purchase of the equipment specified in purchase order number 542774. A copy of this purchase order was not
included with your letter; however, you did submit a computer "screen-shot" referencing purchaser order number
542774. The "screen-shot" references quotation number F8TC6JA. The relevance of the "screen-shot" is unclear.
Recall that when purchasing multiple items at the same time, the $5,000 discretionary sales surtax limitation can only
be applied when both the single sale test and the bulk sale/working unit test are met. The limitation can apply to
portions of a transaction when the transaction as a whole does not qualify for a single $5,000 limitation.
The quotations provided for the purchase of the Precision 500 D Base System indicates that the system is a “working
unit.” As the contract is for the purchase of one unit and a purchase order exists for its purchase, the $5,000
discretionary sales surtax limitation would apply on the purchase of the system.
Other Diagnostic and Therapeutic Equipment
In your request, you described several other pieces of equipment, including magnetic resonance imaging, computed
tomography, x-ray vascular, x-ray therapeutic, nuclear medicine, mammography, and positron emission tomography.
However, invoices, purchase orders, or contracts for the purchase of this equipment were not included with your
request. Consequently, the Department, at this time, does not express a specific opinion as to the application of the
discretionary sales surtax limitation to the purchase of the equipment. However, should this equipment meet either the
working unit or bulk sale tests, as enumerated above, similar discretionary sales surtax treatment would be applicable.
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 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.
Sincerely,
Jimmy Kalfas
Senior Tax Specialist
Technical Assistance and Dispute Resolution
(850) 922-4845
Record ID# 21013