Were charges to retrofit store lighting taxable to the customer, and who owed tax on the installed materials?

Plain-English summary

A retailer hired a contractor both to maintain existing store lighting and to perform larger retrofits. The retrofits replaced entire fixtures and wiring to convert eight-foot lighting to four-foot lighting or replaced ballasts and added reflector kits to increase light output.

Florida treated the retrofit work as a real-property improvement. The contractor's charge to the retailer for the retrofit was not subject to sales tax, but the contractor was the ultimate consumer and had to pay tax on fabrication and materials used in the work.

The Department distinguished that work from maintaining and washing existing lighting under the maintenance agreement. Those maintenance charges were taxable nonresidential cleaning services.

What this means for you

The tax treatment depends on what the contractor is actually doing. Permanently replacing fixtures and wiring as part of a building's electrical system was treated differently from recurring bulb replacement, maintenance, and fixture washing.

Common questions

Was the retailer charged sales tax on the retrofit work? No, under the described facts.

Did that make the materials tax-free? No. The contractor had to pay tax on the cost of fabrication and materials.

Were lighting maintenance and fixture washing treated the same way? No. Charges for maintaining and washing existing lighting were taxable.

Why were the retrofits treated as real-property work? The work replaced fixtures and wiring connected to the store's electrical system, fitting the cited real-property-contract rule.

Citations and references

• Fla. Stat. § 212.05(1)(i)1.b. (nonresidential cleaning services)
• Fla. Stat. § 212.06(14) (real property and fixtures)
• Fla. Admin. Code r. 12A-1.0091(1)(a)10. (lighting maintenance services)
• Fla. Admin. Code r. 12A-1.051(2)(h)1.c. and (4) (real-property contracts and contractor tax treatment)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 08A-006

Original ruling text

SUMMARY
Question: Is the Taxpayer’s store lighting retrofits performed by Contractor in its Florida stores
subject to sales tax?
Answer: The charges for the Taxpayer’s store lighting retrofits, performed by Contractor in its
Florida stores are not subject to sales tax. The Contractor should pay tax on the cost of fabrication
and materials.
March 5, 2008
XXX
Re:

Technical Assistance Advisement – 08A-006
Sales & Use Tax – Store Lighting Retrofits
Sections: 212.05(1)(i) and 212.06(14), Florida Statutes (F.S.)
Rule: 12A-1.0091 and 12A-1.051, Florida Administrative Code (F.A.C.)
Petitioner: XXX (herein Taxpayer)

XXX:
This letter is a response to your petition dated December 3, 2007, 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 1211, F.A.C. This response to your request constitutes a TAA and is issued to you under
the authority of s. 213.22, F.S.
FACTS
The Taxpayer has engaged XXX Lighting Services (Contractor) to provide its stores with a full
range of lighting services, including lighting maintenance, relamps, and retrofits. Lighting
maintenance and relamps are included in a Lighting Maintenance Agreement ("Agreement")
dated XXX, and a First Amendment to the Lighting Maintenance Agreement ("Amendment")
dated XXX. In addition, the Taxpayer hired Contractor to perform retrofits for many of its stores
to improve the brightness of the lighting. These retrofits are in addition to the work performed
under the Agreement and the Amendment.
The Agreement expires XXX, and requires Contractor to provide lighting maintenance and
relamp services at Taxpayer’s stores. A monthly maintenance fee and a relamp cost per store are
included in the Agreement. The monthly maintenance fee includes a periodic inspection by
Contractor of Taxpayer’s lighting needs every 30 days. During these inspections, all
inoperative lamps, ballasts, lamp fixtures, and wiring are replaced for a set monthly fee. The
set monthly fee also includes the washing of light fixtures. The relamp services include
replacing lamps on a routine schedule (every 24 or 42 months). The fee for this service is also
determined based on store square footage.

Technical Assistance Advisement
Page 2
The Agreement was amended on XXX, and the monthly maintenance fee was removed. Instead
of a monthly maintenance fee, the Taxpayer agreed to make three lump sum payments, payable at
the beginning of each month, beginning with XXX. After that time, Contractor is on an on-call
basis, and the Taxpayer is billed for lamps, ballasts, and per-hour labor at agreed-upon rates
included in the Amendment.
In addition to the work included in the Agreement and the Amendment, the Taxpayer hired
Contractor to perform retrofits for many of its stores to improve the brightness of the lighting.
During a retrofit, stores with 8-foot lighting are converted to 4-foot lighting, replacing the entire
light fixtures and wiring to accommodate 4-foot lamps instead of 8-foot lamps. Additionally, the
work also includes the replacing of ballasts, with low light output electronic ballasts, along with a
reflector kit, in order to double the light output. If a store already has 4-foot lighting, but poor
light output (40 to 55 foot candles), the existing light fixtures are reballasted with high light
output electronic ballasts to increase the light levels to 80 foot candles. The purpose of the
retrofits is to improve lighting in Taxpayer’s stores, not to save money. In fact, after the
installation of the high light output ballasts, its energy consumption increases by approximately
30%.
The Contractor is registered with the State of Florida and has collected and remitted Florida state
and local sales taxes from the Taxpayer on all invoices (maintenance fees, relamps, and retrofits).
Contractor has been audited by the State of Florida, and it was advised by the Department’s
auditors that sales tax should be charged on all invoices.
REQUESTED ADVISEMENT
Are the Taxpayer’s store lighting retrofits performed by Contractor in its Florida stores
subject to sales tax?
APPLICABLE LAW
Section 212.05(1)(i)1.b., F.S., imposes sales tax, at the rate of 6 percent on the charges for all
nonresidential cleaning services included in SIC Industry Group Number 734. Rule 12A-1.0091,
F.A.C., contains the Department’s interpretation of the statute, and provides, as an example of
nonresidential cleaning services: “Lighting maintenance services (bulb replacement and
cleaning).” (subparagraph (1)(a)10.)
Section 212.06(14), F.S., provides, in part:
(14) For the purpose of determining whether a person is improving real property, the
term:
(a) "Real property" means the land and improvements thereto and fixtures and is
synonymous with the terms "realty" and "real estate."

Technical Assistance Advisement
Page 3
(b) "Fixtures" means items that are an accessory to a building, other structure, or land
and that do not lose their identity as accessories when installed but that do become
permanently attached to realty. . . .
Rule 12A-1.051, F.A.C., provides guidance for sales to or by contractors who repair, alter,
improve, and construct real property. Specifically, Rule 12A-1.051(2)(h)1., F.A.C., provides, in
part:
(h)1. "Real property contract" means an agreement, oral or written, whether on a lump
sum, time and materials, cost plus, guaranteed price, or any other basis, to:

c. Furnish and install tangible personal property that becomes a part of or is directly
wired or plumbed into the central heating system, central air conditioning system,
electrical system, plumbing system, or other structural system that requires installation of
wires, ducts, conduits, pipes, vents, or similar components that are embedded in or
securely affixed to the land or a structure thereon. . . .
Rule 12A-1.051(4), F.A.C., provides the general rule of taxability of real property contracts, and
it states that contractors are the ultimate consumer of the materials and supplies used to perform
real property contracts and must pay tax on their cost of those materials and supplies.
RESPONSE
Charges that the Contractor makes to the Taxpayer under its Lighting Maintenance Agreement
and First Amendment to the Lighting Maintenance Agreement for maintaining and washing the
existing lighting are taxable, pursuant to Section 212.05(1)(i)1.b., F.S. However, the
replacement of lighting fixtures, referred to as “Retrofit,” constitutes a real property
improvement and, as such, is not included in with, or a part of, the SIC Industry Group Number
734, nonresidential cleaning services.
CONCLUSION
The charges for the Taxpayer’s store lighting retrofits, performed by Contractor in its Florida
stores, are not subject to sales tax. The Contractor should pay tax on the cost of fabrication and
materials.
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

Technical Assistance Advisement
Page 4
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 Section 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 10 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) 922-4727.
Sincerely,

Horace Royals
Senior Tax Specialist
Technical Assistance & Dispute Resolution
HR\lp
Record ID:

38876