Are temporary dewatering equipment rentals and the related installation and removal services taxable in Florida?

Plain-English summary

The Department ruled that the provider was renting tangible personal property when it supplied pipes, pumps, accessories, and other equipment to remove groundwater from a customer's job site. The equipment was installed only temporarily and returned to the provider after the water was removed, so it was not a permanent fixture or improvement to real property.

The rental charges were therefore subject to Florida sales tax. The installation and removal charges were taxable too, even when described separately, because that work was not incidental or minor: it was an essential and "inextricably intertwined" part of providing the rented dewatering equipment.

What this means for you

Temporarily attaching equipment at a construction site does not by itself turn the transaction into a real-property contract. When the provider retains the equipment, removes it after the job, and supplies installation that is central to its use, Florida may treat the full arrangement as a taxable equipment rental.

Common questions

Was the dewatering equipment treated as a real-property improvement? No. It was not intended to be permanently attached and was removed when the job was complete.

Were the equipment rental charges taxable? Yes.

Could installation and removal be excluded as labor? No. On these facts, those services were an essential part of the rental and part of the taxable sales price.

Citations and references

• Fla. Stat. §§ 212.02, 212.05(1), and 212.06(14)(b); Fla. Admin. Code rr. 12A-1.006, 12A-1.040, and 12A-1.071; American Telephone & Telegraph Co. v. Department of Revenue, 764 So. 2d 665 (Fla. 1st DCA 2000); and Department of Revenue v. B&L Concepts, 612 So. 2d 720 (Fla. 5th DCA 1993), as cited in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 09A-055

Original ruling text

November 5, 2009

XXX
XXX
XXX
XXX

Re:

Technical Assistance Advisement 09A-055
Sales and Use Tax – XXX Service
Sections: 212.02 and 212.05(1), Florida Statutes (F.S.)
Rules: 12A-1.006 and 12A-1.040, Florida Administrative Code (F.A.C.)
Petitioner: XXX(herein after Taxpayer)
FEI: XXX

Dear XXX:
This letter is a response to your petition dated October 31, 2008, and the supplemental
information provided under cover letter dated November 12, 2008, 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
As provided by the Taxpayer, the Taxpayer provides a service called “XXX.”
Taxpayer’s request states that the project consists of using pipe, pumping equipment, etc.
to remove water from the ground. The installation includes the drilling of holes in the
ground to install wellpoints, swing joints and header pipe, which will then be connected
to a pump to suction the water from the ground. All products are supplied by Taxpayer,
including the pump, accessories, and installation labor to provide the XXX service. The
project is quoted to the customer as a lump sum per month/week/day, and billed weekly.
The quotation and invoice to the customer are not itemized and show one charge for
dewatering service. The Taxpayer further states that the equipment remains at the job
site until all ground water has been removed, and once removed, all equipment is
returned to the Taxpayer.
The Taxpayer states that this process removes water from the ground for various
purposes, such as installing sewers, pools, gas tanks, etc. below ground. Taxpayer’s
equipment is left at the job site until the customer calls and advises that the ground water

has been removed from the site which varies by job. Taxpayer’s employees are not
required to remain at the jobsite to operate the equipment during the dewatering process.
The only labor required by Taxpayer’s employees is to install or remove the XXX
equipment. The Taxpayer bills its customer weekly. The first invoice provided the
customer contains a charge for the dewatering installation costs, and the second and
subsequent invoices are for the quoted weekly rental price. Copies of invoices presented
for review reveal that the Taxpayer breaks out its charges as “rental” for the equipment
provided, and as “services” for other charges, such as backhoe mobilization, loader NEFF
rental, and dewatering service. The Taxpayer has been charging its customers sales tax
on its dewatering services.
A review of the Taxpayer’s web site revealed that the Taxpayer maintains a “rental”
section in its business, and that its products were equipped with automatic priming and
repriming capabilities; indefinite dry run capability with no harm to the unit; and, can run
unattended for hours.
ISSUE
The issues in this case are whether the Taxpayer is engaged in a real property contract or
the rental of tangible personal property, and the proper tax treatment of the equipment
installation and removal services.
APPLICABLE LAW
Section 212.05, F.S., provides in pertinent part:
It is hereby declared to be the legislative intent that every person is exercising a taxable
privilege who engages in the business of selling tangible personal property at retail in this
state . . . or who rents or furnishes any of the things or services taxable under this chapter.
...
(1) For the exercise of such privilege, a tax is levied on each taxable transaction or
incident, which tax is due and payable as follows:

(c) At the rate of 6 percent of the gross proceeds derived from the lease or rental of
tangible personal property . . . .
Section 212.02, F.S., provides the following regarding the definition of terms used in Chapter
212, F.S.:
(15) "Sale" means and includes:

(a) Any transfer of title or possession, or both, exchange, barter, license, lease, or rental,
conditional or otherwise, in any manner or by any means whatsoever, of tangible
personal property for a consideration. . . .
(16) "Sales price" means the total amount paid for tangible personal property, including
any services that are a part of the sale . . . .
Rule 12A-1.071, F.A.C., contains the Department’s interpretation of the rental, lease, or license
to use tangible personal property. Paragraph (1)(a) of the rule provides that the term “lease”
includes any rental or license to use tangible personal property, unless a different meaning is
clearly indicated by the context in which it is used. In addition, subparagraph (1)(c) of the rule
provides that for an operating lease the tax applies to the gross proceeds derived from the lease
of tangible personal property for the entire term of the lease when the lessor of such property is
an established business, part of an established business, or leasing tangible personal property is
incidental or germane to the lessor’s business.
ANALYSIS and DISCUSSION
The Taxpayer asserts that the installation process of its service is considered an improvement to
real property. Thus, the Taxpayer asserts that, since it is providing an installation service of
labor only and removing the equipment from the jobsite once the water has been removed, this
service qualifies as tax exempt labor only services.
The Taxpayer is not correct in its assumption that the installation of its XXX equipment is an
improvement to real property. Pursuant to Section 212.06(14)(b), F.S., quoted above, a “fixture”
must be permanently attached to the real property to qualify as “realty.” In this case, the
Taxpayer is temporarily installing pipe and other equipment in order to produce the desired
results of “XXX” the specific job site. Once the jobsite is free of the unwanted water, the
Taxpayer removes its equipment. Therefore, the Taxpayer’s equipment is not, and is not
intended to be, permanently attached to the real property.
Since the Taxpayer’s services are not considered to be the improvement real property, it remains
to be determined whether the Taxpayer is involved in the rental of tangible personal property.
Section 212.05(1)(c), F.S., levies sales tax on the gross proceeds derived from the rental of
tangible personal property. The sales price includes the amount charges, as well as any services
that are a part of that sale. See Section 212.02(16), F.S.
The identity of a service that is “part of a sale,” as required by Section 212.02(16), F.S., has been
clarified in American Telephone and Telegraph Company v. Department of Revenue, 764 So.2d
665 (Fla. 1st DCA 2000).
In that case, the appeals court affirmed the conclusion of the trial court that certain engineering
services were “inextricably intertwined” with the sales of the telecommunications equipment. Id.
at 667. Also, the court found that there is no requirement that the purchases of services must be
linked with tangible personal property. The court, referring to Section 212.02(16), F.S., stated
that “. . . the Legislature chose not to limit the sales tax to services that must be purchased with

tangible personal property . . . .” Id. at 667. The court concluded that the intent of the statute did
not limit the services in such a manner and that the court would “. . . have no authority to do so.”
The court distinguished the Fifth District Court of Appeal opinion in Department of Revenue v.
B&L Concepts, 612 So.2d 720 (Fla. 5th DCA 1993), which found no tax was due on the charge
for delivering furniture. The court in American Telephone and Telegraph stated that the test is
not whether such charges are optional. The real question is whether the sale of the service is
incidental to the sale of property, whether the service is subordinate, having a minor role. In
American Telephone and Telegraph, since the trial court found that the engineering services
were clearly not incidental to the sale of the switching equipment, the services were part of the
sales price of the equipment. Further, the appeals court held that services were not separate or
discrete transactions but were “a part of the sale,” even when the sales prices of the services and
of the tangible personal property were separately billed. Id. at 668.
In this case, the service of installing the required pipes and equipment is not incidental to the
rental of the equipment. It is clearly not subordinate or a minor role in the process of XXX the
customer’s jobsite, and is thus, “inextricably intertwined” with the rental of the equipment such
as to become a part of the taxable sales price.
RESPONSE
Based on the discussion and analysis above, the Taxpayer is renting tangible personal property.
Therefore, charges for the rental of the XXX equipment are subject to sales tax. Equipment
installation and removal services are a part of the equipment rental charges and are also subject
to sales tax.
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 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 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) 922-4727.

Sincerely,

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

53807