Can a building-material invoice to an exempt governmental entity also name its contractor or subcontractor as the c/o party?

Plain-English summary

The Florida Department of Revenue concluded that a building-material dealer may list a contractor or subcontractor as the “c/o” party on an invoice without automatically defeating a governmental entity's sales-tax exemption.

The governmental entity must remain the actual bill-to party. The contractor's c/o role is only that of an intermediary helping route the invoice and confirm delivery; it does not shift the purchase or risk of loss away from the government.

All other public-works direct-purchase requirements still apply, including the government's purchase order, direct invoice and payment, passage of title, assumption of risk of loss, and required Certificate of Entitlement.

What this means for you

Building-material dealers

You may add the project contractor as c/o when the governmental purchase order directs it, but the invoice must still bill the governmental entity.

Governmental entities and contractors

An invoice label alone does not establish an exempt direct purchase. Preserve the full set of purchase, title, payment, insurance, and certificate records.

Common questions

Q: Does adding the contractor as c/o make the contractor the purchaser?
A: No, not when the government remains the bill-to party and the contractor only serves as an intermediary.

Q: Is the c/o format enough to make the sale exempt?
A: No. Every other direct-purchase requirement must also be met.

Citations and references

• Fla. Stat. §§ 212.08(6) and 213.22
• Fla. Admin. Code rr. 12A-1.038(4) and 12A-1.094

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 14A-005

Original ruling text

Executive Director

Marshall Stranburg

QUESTION: WHETHER A DEALER WHO SELLS BUILDING MATERIALS TO
AN EXEMPT GOVERNMENTAL ENTITY MAY INCLUDE THE NAME OF A
CONTRACTOR OR SUBCONTRACTOR AS “C/O” ON THE INVOICES IT REMITS
TO THE EXEMPT GOVERNMENTAL ENTITY?

ANSWER: AS LONG AS THE PARTY BEING BILLED REMAINS THE
GOVERNMENTAL ENTITY (AND ALL OF THE OTHER REQUIREMENTS FOR A
DIRECT PURCHASE ARE MET), THERE IS NO PROHIBITION AGAINST ALSO
INCLUDING A CONTRACTOR OR SUBCONTRACTOR ON THE INVOICE AS A
C/O PARTY.
February 27, 2014
Re:

Technical Assistance Advisement – TAA 14A-005
Sales and Use Tax – Public Works Contracts
Subsection: 212.08(6), Florida Statutes (F.S.)
Rules: 12A-1.038, 12A-1.094, Florida Administrative Code (F.A.C.)
Petitioner: XXX [hereinafter “Association”]

Dear XXX:
This letter is a response to your petition dated XXX, 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, Florida Administrative
Code. This response to your request constitutes a TAA and is issued to you under the
authority of Section 213.22, F.S.
Issue
Whether a dealer who sells building materials to an exempt governmental entity may
include the name of a contractor or subcontractor as “c/o” on the invoices it remits to the
exempt governmental entity?
Presented Facts
The Association requests clarification on behalf of members of its association and will
distribute this response to those members.

Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – James McAdams, Director  Information Services – Damu Kuttikrishnan, Director
www.myflorida.com/dor
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
Page 2
The Association is comprised of and represents the interests of building supply credit
managers throughout the State of XXX.
On XXX, the Department issued a Letter of Technical Assistance (“LTA”) to the
Association regarding the issue reference above. The Association now requests a binding
response concerning whether a dealer selling construction materials to a governmental
entity may include the contractor’s name on its invoice as a “c/o,” and whether doing so
would affect the exempt status of the sale as a sale to an exempt governmental entity.
The contractor’s name does not replace the governmental entity’s name as the “bill to”
party, and the “c/o” addition is at the request of the governmental entity pursuant to its
purchase order. Your correspondence does not address the additional requirements to
effect an exempt sale to governmental entities pursuant to public works contracts other
than to acknowledge that other requirements are contained in administrative rule.
Applicable Authority
Sales to governmental units are exempt from sales tax pursuant to s. 212.08(6), F.S.,
which provides in pertinent part:
(a) There are also exempt from the tax imposed by this chapter sales made to the
United States Government, a state, or any county, municipality, or political
subdivision of a state when payment is made directly to the dealer by the
governmental entity. . . .
(b) The exemption provided under this subsection does not include sales of
tangible personal property made to contractors employed directly to or as agents
of any such government or political subdivision when such tangible personal
property goes into or becomes a part of public works owned by such government
or political subdivision. A determination of whether a particular transaction is
properly characterized as an exempt sale to a government entity or a taxable sale
to a contractor shall be based upon the substance of the transaction rather than the
form in which the transaction is cast. However, for sales of tangible personal
property that go into or become a part of public works owned by a governmental
entity, other than the Federal Government, a governmental entity claiming the
exemption provided under this subsection shall certify to the dealer and the
contractor the entity’s claim to the exemption by providing the dealer and the
contractor a certificate of entitlement to the exemption for such sales. If the
department later determines that such sales, in which the governmental entity
provided the dealer and the contractor with a certificate of entitlement to the
exemption, were not exempt sales to the governmental entity, the governmental
entity shall be liable for any tax, penalty, and interest determined to be owed on
such transactions. Possession by a dealer or contractor of a certificate of
entitlement to the exemption from the governmental entity relieves the dealer
from the responsibility of collecting tax on the sale and the contractor for any
liability for tax, penalty, or interest related to the sale, and the department shall

Technical Assistance Advisement
Page 3
look solely to the governmental entity for recovery of tax, penalty, and interest if
the department determines that the transaction was not an exempt sale to the
governmental entity. The governmental entity may not transfer liability for such
tax, penalty, and interest to another party by contract or agreement. . . . (Emphasis
Supplied)
Rule 12A-1.038(4), Florida Administrative Code, provides guidelines for claiming and
documenting the exemption. Governmental entities must obtain a consumer's certificate
of exemption from the Department of Revenue. Vendors are required to obtain, for their
records, proper documentation of the exempt status of the sale.
By its terms, s. 212.08(6), F.S., exempts only direct purchases by governmental entities.
The exemption does not apply when a contractor, employed by a governmental entity,
purchases tangible personal property that is to be incorporated into public works owned
by the entity. Administrative guidelines governing the taxability of materials purchased
for public works contracts, such as those involved in the instant situation, are set forth in
Rule 12A-1.094, F.A.C., which provides in pertinent part:
(1) This rule shall govern the taxability of transactions in which contractors
manufacture or purchase supplies and materials for use in public works contracts
....
(2) The purchase or manufacture of supplies or materials by a public works
contractor, when such supplies or materials are purchased for the purpose of
going into or becoming part of public works, whether the purchase or
manufacture occurs inside or outside Florida, is taxable to the public works
contractor if the public works contractor also installs such supplies or materials,
since the public works contractor is the ultimate consumer of such supplies or
materials. Public works contractors that purchase or manufacture such supplies
and materials in Florida are liable for sales tax or use tax on such purchases and
manufacturing costs. A public works contractor that purchases supplies or
materials that may be sold as tangible personal property or may be incorporated
into a public works project may purchase such supplies or materials without tax
by issuing a copy of the contractor’s Annual Resale Certificate and accrue and
remit tax upon withdrawing such supplies or materials from inventory to go into
or become a part of public works. Public works contractors that purchase or
manufacture such materials outside the State of Florida are liable for use tax,
subject to credit for any sales or use tax lawfully imposed and paid in the state of
purchase or manufacture.
(3) The purchase or manufacture of tangible personal property for resale to a
governmental entity is exempt from tax, provided this exemption shall not include
sales of tangible personal property made to, or the manufacture of tangible
personal property by, public works contractors when such tangible personal
property goes into or becomes a part of public works.

Technical Assistance Advisement
Page 4
(4)(a) The exemption in Section 212.08(6), F.S., is a general exemption for sales
made directly to the government. A determination whether a particular transaction
is properly characterized as an exempt sale to a governmental entity or a taxable
sale to or use by a contractor shall be based on the substance of the transaction,
rather than the form in which the transaction is cast. The Executive Director or the
Executive Director’s designee in the responsible program will determine whether
the substance of a particular transaction is a taxable sale to or use by a contractor
or an exempt direct sale to a governmental entity based on all of the facts and
circumstances surrounding the transaction as a whole.
(b) The following criteria that govern the status of the tangible personal property
prior to its affixation to real property will be considered in determining whether a
governmental entity rather than a contractor is the purchaser of materials:

1. Direct Purchase Order. The governmental entity must issue its purchase order
   directly to the vendor supplying the materials the contractor will use and provide
   the vendor with a copy of the governmental entity’s Florida Consumer’s
   [Certificate] of Exemption.
2. Direct Invoice. The vendor's invoice must be issued to the governmental entity,
   rather than to the contractor.
3. Direct Payment. The governmental entity must make payment directly to the
   vendor from public funds.
4. Passage of Title. The governmental entity must take title to the tangible
   personal property from the vendor at the time of purchase or delivery by the
   vendor.
5. Assumption of the Risk of Loss. Assumption of the risk of damage or loss by
   the governmental entity at the time of purchase is a paramount consideration. A
   governmental entity will be deemed to have assumed the risk of loss if the
   governmental entity bears the economic burden of obtaining insurance covering
   damage or loss or directly enjoys the economic benefit of the proceeds of such
   insurance.
   (c)1. To be entitled to purchase materials tax exempt for a public works project, a
   governmental entity is required to issue a Certificate of Entitlement to each
   vendor and to the governmental entity’s contractor to affirm that the tangible
   personal property purchased from that vendor will go into or become a part of a
   public work. This requirement does not apply to any agency or branch of the
   United States government.

Technical Assistance Advisement
Page 5

2. The governmental entity’s purchase order for tangible personal property to be
   incorporated into the public works project must be attached to the Certificate of
   Entitlement. The governmental entity must issue a separate Certificate of
   Entitlement for each purchase order. Copies of the Certificate may be issued.
3. The governmental entity will also affirm that if the Department determines that
   tangible personal property sold by a vendor tax-exempt pursuant to a Certificate
   of Entitlement does not qualify for the exemption under Section 212.08(6), F.S.,
   and this rule, the governmental entity will be liable for any tax, penalty, and
   interest determined to be due.
4. The following is the format of the Certificate of Entitlement to be issued by the
   governmental entity:
   CERTIFICATE OF ENTITLEMENT
   The undersigned authorized representative of__ (hereinafter
   “Governmental Entity”), Florida Consumer’s Certificate of Exemption Number
   , affirms that the tangible personal property purchased pursuant to
   Purchase Order Number from _ (Vendor) on or after _
   (date) will be incorporated into or become a part of a public facility as part of a
   public works contract pursuant to contract # __ with __
   (Name of Contractor) for the construction of ____.
   Governmental Entity affirms that the purchase of the tangible personal property
   contained in the attached Purchase Order meets the following exemption
   requirements contained in Section 212.08(6), F.S., and Rule 12A-1.094, F.A.C.:
   You must initial each of the following requirements.
   __ 1. The attached Purchase Order is issued directly to the vendor supplying the
   tangible personal property the Contractor will use in the identified public works.
   _ 2. The vendor’s invoice will be issued directly to Governmental Entity.
   3. Payment of the vendor’s invoice will be made directly by Governmental
   Entity to the vendor from public funds.
   _ 4. Governmental Entity will take title to the tangible personal property from
   the vendor at the time of purchase or of delivery by the vendor.
   _ 5. Governmental Entity assumes the risk of damage or loss at the time of
   purchase or delivery by the vendor.

Technical Assistance Advisement
Page 6
Governmental Entity affirms that if the tangible personal property identified in the
attached Purchase Order does not qualify for the exemption provided in s.
212.08(6), F.S., and Rule 12A-1.094, F.A.C., Governmental Entity will be subject
to the tax, interest, and penalties due on the tangible personal property purchased.
If the Florida Department of Revenue determines that the tangible personal
property purchased tax-exempt by issuing this Certificate does not qualify for the
exemption, Governmental Entity will be liable for any tax, penalty, and interest
determined to be due.
I understand that if I fraudulently issue this certificate to evade the payment of
sales tax I will be liable for payment of the sales tax plus a penalty of 200% of the
tax and may be subject to conviction of a third degree felony.
Under the penalties of perjury, I declare that I have read the foregoing Certificate
of Entitlement and the facts stated in it are true.

Signature of Authorized Representative

Purchaser’s Name (Print or Type)

Title

Date

Federal Employer Identification Number: ____
Telephone Number: ______
You must attach a copy of the Purchase Order to this Certificate of Entitlement.
Do not send to the Florida Department of Revenue. This Certificate of
Entitlement must be retained in the vendor’s and the contractor’s books and
records.
(d) Sales to contractors, including subcontractors, are subject to tax.
(e) The governmental entity may not transfer liability for such tax, penalty, and
interest to another party by contract or agreement. . . .
(5) Contractors, including subcontractors, that manufacture, fabricate, or furnish
tangible personal property that the contractor incorporates into public works are
liable for tax in the manner provided in subsection (10) of Rule 12A-1.051,
F.A.C. The contractor and subcontractors, not the governmental entity, are
deemed to be the ultimate consumers of the articles of tangible personal property
they manufacture, fabricate, or furnish to perform their contracts and may not
accept a Certificate of Entitlement for these articles. . . . (Emphasis Supplied)

Technical Assistance Advisement
Page 7
Determination
Rule 12A-1.038(4)(b), F.A.C., states that in order for a sale to a state or local
governmental entity to be tax exempt, "[p]ayment for tax exempt purchases . . . must be
made directly to the selling dealer by the . . . political subdivision of a state. . . ." Rule
12A-1.094(2) and (3), F.A.C., state that the purchase of materials for public works
contracts is taxable to the contractor as the ultimate consumer where the contractor is
deemed to be the purchaser. If the purchaser of the materials is the governmental entity,
however, the transaction is exempt. For there to be an exempt transaction, the
governmental entity must directly purchase, hold title to, and assume the risk of loss of
the tangible personal property from the time of delivery to the jobsite, and satisfy various
factors provided in Rule 12A-1.094, F.A.C.
Rule 12A-1.094(4), F.A.C., which sets forth the criteria that govern the status of the
tangible personal property prior to its affixation to real property, will be considered in
determining whether a governmental entity rather than a contractor is the purchaser of
materials. These criteria include direct purchase order, direct invoice, direct payment,
passage of title, and assumption of risk of loss. However, the assumption of risk of
damage or loss from the time that the building materials are physically delivered to the
job site is a paramount consideration. The governmental entity must assume all risk of
loss or damage for the tangible personal property from the moment of acceptance of title
to the materials. To establish that it has assumed that risk, the governmental entity
should purchase, or be the insured party under, insurance on the building materials.
To establish that the governmental entity is entitled to the exemption, it must issue a
Certificate of Entitlement to the vendors with each purchase order, and to the
contractor(s). A copy of the governmental entity’s Consumer’s Certificate of Exemption
must be attached to the Certificate of Entitlement. The Certificate of Entitlement sets
forth the requirements for making tax-exempt direct purchases and notes the
governmental entity’s acknowledgement that it is responsible for tax, penalty, and
interest on material purchases that do not meet the exemption criteria. By statute, the
governmental entity is prohibited from assigning liability for the tax, penalty, and interest
to another party by contract or agreement. A suggested format for the certificate is found
in Rule 12A-1.094(4)(c), Florida Administrative Code.
To summarize, the conditions that must be met to satisfy the requirements of Rule 12A1.094, Florida Administrative Code, and establish that the governmental entity rather than
the contractor is the purchaser of materials, include:

1. The governmental entity must execute the purchase orders for the tangible
   personal property involved in the contract directly to the materials vendors. The
   contractor may present the governmental entity's purchase orders to the vendors
   of the tangible personal property;

Technical Assistance Advisement
Page 8

2. The governmental entity must acquire title to, and assume liability for, the
   tangible personal property at the point in time when it is delivered to the job site;
3. Vendors must directly invoice the governmental entity for supplies;
4. The governmental entity must directly pay the vendors for the tangible personal
   property; and
5. The governmental entity must assume all risk of loss or damage for the tangible
   personal property involved in the contract, as indicated by the entity's acquisition
   of, or inclusion as the insured party under, insurance on the building materials.
6. The governmental entity must issue a Certificate of Entitlement with each
   purchase order, along with a copy of its Consumer’s Certificate of Exemption, to
   each vendor, as well as to the contractor. The governmental entity is responsible
   for payment of tax, penalty, and interest on any purchases that are not found to be
   in compliance with the procedures for tax-exempt direct purchase of materials.
   The instant question regards the invoicing of the governmental entity requirement.
   Specifically, advice is requested whether the selling dealer of the construction materials
   may include (at the direction of the governmental entity’s purchase order) the name of the
   contractor or subcontractor as a c/o party in addition to the governmental entity’s name as
   the bill-to party. “Care of” is an abbreviation most commonly used in reference to postal
   services. The party acting in “care of” acts as an intermediary who transfers mail between
   the postal service and the final addressee. Since the party acting in “care of “is only
   transferring the information and is not the final recipient, the liability for receipt of the
   mail should remain with the final addressee. The same reasoning would apply in this
   case, the government entity looks to the contractor to act as intermediary, ensuring that
   the correct materials have been delivered to the job site and incorporated into the project.
   However, the assumption of risk does not change and continues to rest with the
   governmental entity. Therefore, as long as the party being billed remains the
   governmental entity (and all of the other requirements for a direct purchase are met),
   there is no prohibition against also including a contractor or subcontractor on the invoice
   as a c/o party.
   Closing Statement
   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.

Technical Assistance Advisement
Page 9
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.
Sincerely,

Sara D. Faulkenberry, Senior Tax Specialist
Technical Assistance and Dispute Resolution
Control # 141303