Which replacement parts and repair charges qualified for Florida's industrial machinery sales-tax exemption?

Plain-English summary

The Florida Department of Revenue concluded that a qualifying medical-device manufacturer could use the industrial-machinery repair exemption for labor and replacement parts incorporated into its production equipment.

The covered equipment included milling and turning or boring machines, grinding and surface-finishing equipment, quality-control equipment, and engraving machinery. Internal tooling components such as bits, blades, inserts, gauges, scribes, and styluses qualified when they became repair parts within the machinery.

The exemption did not cover replacement of an entire stand-alone tool. It also did not cover workstations or worktables that were not incorporated into qualifying machinery and were identifiable as furniture.

What this means for you

Manufacturers

Document that the business is within a qualifying SIC industry group, operates at a fixed Florida location, and uses the repaired equipment to manufacture, process, or compound tangible products.

Repair vendors and parts suppliers

The distinction is between a component incorporated into qualifying machinery and a separate tool or furniture item. Obtain the properly executed exemption certificate described in the ruling.

Accountants and tax professionals

Review function and incorporation item by item. The Department classified this taxpayer under SIC Major Industry Group 384 and limited the ruling to qualifying industrial machinery and equipment.

Common questions

Q: Were machine-tool bits and inserts exempt?
A: Yes, when used as component repair parts incorporated into qualifying machinery.

Q: Was replacing a complete stand-alone tool exempt?
A: No.

Q: Were ordinary worktables exempt?
A: Not when they were furniture-like and not incorporated into qualifying machinery.

Citations and references

• Fla. Stat. §§ 212.05, 212.055, 212.08(7)(xx), and 213.22
• Fla. Admin. Code r. 12A-1.006(1)(a)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 17A-013

Original ruling text

Executive
Director
Leon M. Biegalski

QUESTION: TAXPAYER IS IN SEEKING A DETERMINATION WHETHER THE PARTS AND REPAIRS
REFERENCED BELOW ARE EXEMPT FROM FLORIDA SALES AND USE TAX UNDER THE PROVISIONS
OF S. 212.08(7)(XX), F.S., PERTAINING TO THE REPAIR OF QUALIFYING INDUSTRIAL MACHINERY
AND EQUIPMENT.
ANSWERS: TAXPAYER IS A QUALIFYING INDUSTRY CLASSIFIED UNDER SIC MAJOR INDUSTRY
GROUP 384. IT USES INDUSTRIAL MACHINERY AND EQUIPMENT TO MANUFACTURE, PROCESS,
OR COMPOUND, ITEMS OF TANGIBLE PERSONAL PROPERTY AT A FIXED LOCATION WITHIN
FLORIDA. HENCE, ALL LABOR CHARGES FOR THE REPAIR OF, AND PARTS AND MATERIALS USED
IN THE REPAIR OF AND INCORPORATED INTO, QUALIFYING INDUSTRIAL MACHINERY AND
EQUIPMENT ARE EXEMPT FROM SALES AND USE TAX UNDER S. 212.08(7)(XX), F.S.
SPECIFIC TO THIS ADVISEMENT, TAXPAYER’S PURCHASES RELATING TO THE REPLACEMENT OF
THE ABOVE IDENTIFIED COMPONENT ITEMS OF INTERNAL MACHINE TOOLING AS REPAIR PARTS
INCORPORATED INTO MILLING MACHINERY; TURNING/BORING MACHINERY; GRINDING,
SURFACE FINISHING EQUIPMENT; QUALITY CONTROL EQUIPMENT; AND ENGRAVING
MACHINERY WOULD QUALIFY FOR THE EXEMPTION FROM TAX PROVIDED UNDER S.
212.08(7)(XX), F.S. HOWEVER, IT IS EMPHASIZED THAT WHILE THE COMPONENT PARTS (BITS,
BLADES, AND OTHER INSERTS, ETC.) OF STAND- ALONE TOOLS WILL QUALIFY FOR THE
EXEMPTION, REPLACEMENT OF AN INDIVIDUAL STAND-ALONE TOOL WILL NOT QUALIFY FOR
THE EXEMPTION.
ADDITIONALLY, WORKSTATIONS AND WORKTABLES THAT ARE NOT
INCORPORATED INTO QUALIFYING MACHINERY AND EQUIPMENT THAT ARE IDENTIFIABLE AS
FURNITURE WILL NOT QUALIFY FOR THE EXEMPTION.

August 9, 2017
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Re:

Technical Assistance Advisement 17A-013
XXXXXXXXXX (“Taxpayer”)
Florida Sales and Use Tax
Manufacturing Exemptions
Sections 212.05, 212.055, 212.08(7)(xx), Florida Statute (F.S.)
Rule 12A-1.006, Florida Administrative Code (F.A.C.)
BP#: XXXXXXXXX

Dear XXXXXXXXX:
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

www.floridarevenue.com
Florida Department of Revenue
Tallahassee, Florida 32399-0100

TAA
Page 2

This letter is in response to your request dated April 14, 2017, and received in this office on April 18,
2017, for issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section 213.22, F.S., and
Rule Chapter 12-11, F.A.C., concerning manufacturing exemptions. An examination of your request has
established you complied with the statutory and regulatory requirements for issuance of a TAA.
Therefore, the Department is hereby granting your request for a TAA.
FACTS PRESENTED
Taxpayer is a manufacturer of critical high precision medical device components, implants, surgical
instruments, cutting tools, and mechanical/electro mechanical assemblies. Taxpayer also manufactures
surgical systems for Arthroscopy, Endoscopy, and Laparoscopy.
The company uses machine tools to manufacture its products for sale at a fixed location in Florida. A
machine tool is a machine for shaping or machining metals or other rigid materials by way of cutting,
boring, shearing, and grinding. The machine tools used by the company include CNC milling machines
and Swiss-type and Automatic Screw lathes/turning machines. The company also has equipment for
grinding materials to tolerances, fluting the material, laser welding and etching. Throughout the
manufacturing process, the company also has inspection and gauging equipment that is used for purposes
of quality control.
Manufacturing Process:
The manufacturing process involves machining stock to precise sizes and shapes to ultimately produce
medical products for sale. This is accomplished by milling or turning the stock to be cut, bored, or shaped
on a machine. The stock to be cut, bored, or shaped is secured to a work table within the machine. The
stock is milled using rotary cutters to remove material from a work piece while the tools rotate around the
stock on the milling machine. The stock may be turned or bored using a non—rotary cutter that moves
linearly while the work piece rotates on a lathe. The stock may subsequently need to be fluted. Fluting is
the threading or grooving of an item. This is accomplished using a lathe known as an Automatic Screw
Machine.
Within the milling and turning machines are tool holders/tooling centers that hold the machine’s tooling.
The machine and the machine’s internal tooling together are what compromise a single working unit.
The medical products produced from the milling machines and lathes may need further processing. The
items may need to be polished. The items may need to be ground to remove burrs and blemishes. The
company uses surface finishing machines such as grinders and polishers to accomplish these tasks.
As part of the company’s quality control procedures, the medical products produced are inspected and
tested to ensure that the items meet the correct tolerances and are the correct thickness. The company has
equipment that performs these functions. After the products pass quality control testing and inspection,
they are engraved with identifying information such as the manufacturer, serial number, and part number.
The company has laser welding and engraving machinery to perform this final task.

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Manufacturing Machinery:
Milling Machines
Milling is a cutting process that uses a milling cutter to remove material from the surface of a work piece.
The milling cutter is a rotary cutting tool, often with multiple cutting points. As the milling cutter enters
the work piece, the cutting edges (flutes or teeth) of the tool repeatedly cut into and exit from the material,
shaving off chips from the work piece with each pass to produce specific shapes and patterns. The milling
machines are known as CNC machines, as they use a computerized numeric code to direct the angle of the
cuts made by the cutter. The milling machine’s internal tooling is what allows the machine to cut, bore,
and turn the raw material into items of tangible personal property for sale.
The component parts of the internal tooling for milling machines consist of end mills, fluted mills, ball
mills, reamers, shanks, tapers, inserts, draw bars, and keyway broaches; collets, arbors, drill chucks, and
stops which hold the cutters within the spindle; spindles which are mounted within the quill, which is held
in the tooling center tool holders and tooling centers; stationary or rotary work tables and the jaws,
clamps, and brackets used to hold the work piece.
Turning/Boring Machines:
Turning or boring of material is done on a lathe. A Swiss—type lathe is a turning machine that feeds stock
through a guide bushing and past the tooling which cuts, bores, or shapes the material. When turning, a
piece of relatively rigid material (such as wood, metal, plastic, or stone) is rotated, and a cutting tool
traverses along the material to produce precise diameters and depths. Boring is the process of enlarging or
the truing of a hole by removing material with a cutter bit.
Another type of lathe the company uses in producing tangible personal property for sale is known as an
Automatic Screw Machine. After a hole in the stock is enlarged or trued by the boring process, the hole
needs to be threaded or grooved. Using cutting tools (fluted end mills), the bored holes can be threaded or
grooved.
The machine’s internal tooling is what allows the machine to turn and bore the raw material into items of
tangible personal property for sale. The parts for the internal tooling need replacement due to wear. The
component parts of the internal tooling for lathes are cutting tools/bits consisting of end mill, centers,
tapered shanks, reamers, inserts, draw bars, and taps; collets, arbors, drill chucks, and stops, which hold
the cutters within the spindle; spindles, which are mounted within the tool holder; tool holders and tool
posts that attach the tool holders to the lathes; parts for the tool posts, such as posts, screws, washers, and
collars, mandrels and jaw chucks used to hold the work piece within the lathe.
Grinding, Surface Finishing Equipment:
The medical products produced on the milling machines and lathes sometimes have markings, grooves,
burls, or other imperfections on their surface. The company uses grinders, polishers, and surface finishing
machinery to polish and smooth the surfaces of the items produced. The grinders and polishers are hand
held tools that a sanding/grinding disc is attached to. The grinder/polisher passes over the item of tangible
personal property until the desired finish is achieved. The items to be polished may be secured in a surface
finishing machine. A sanding/grinding belt is passed over the item until the desired finish is achieved.

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The internal parts of the grinders, polishers, and surfacing machinery need to be replaced due to wear and
if not replaced would not allow the unit to function or operate as intended to produce tangible personal
property. The parts of the grinders and polishers include the trigger assembly, the spindle, and the disc
holder. Parts for the surface finishing machinery include the work table the item being processed is
secured to, the sanding/grinding belt holder, and the spindle.
Quality Control Equipment:
Throughout production, Taxpayer’s products go through a quality control/inspection process. The items
produced are tested for tolerances and correct thicknesses using equipment that have gauges mounted
within the equipment. The equipment includes bench analyzers, hardness testers, and visual inspection
machines. The gauges for the quality control equipment need to be replaced due to wear.
Engraving Machinery:
The items produced have serial numbers and other identification laser welded or etched onto the item by
way of engraving machines. The machine uses a scribe or a stylus to etch the information onto the item.
The scribes and stylus in the engraving machinery must be replaced on occasion due to wear.

APPLICABLE LAW
Unless a specific exemption applies1, s. 212.05, F.S., provides it is the legislative intent that every person
is exercising a taxable privilege that engages in the business of selling or repairing tangible personal
property2 in this state. For exercising such a privilege, a tax is levied on each taxable transaction or
incident. The tax is due and payable at the rate of 6 percent, plus any applicable surtaxes imposed under s.
212.055, F.S., on the total consideration received for each item or article of tangible personal property
when sold at retail or repaired in this state.
Repairs to Tangible Personal Property; Exemption for Industrial Machinery and Equipment
Where parts are furnished by the repairer, the entire charge the repairer makes to a customer for adjusting,
applying, installing, maintaining, remodeling, or repairing tangible personal property is taxable. See Rule
12A-1.006(1)(a), F.A.C.

1

The Department must point out that while taxing statutes are strictly construed against the taxing authority, statutes that grant
an exemption are strictly construed against the taxpayer. See Asphalt Pavers v. Dept. of Revenue, 584 So.2d 55 (Fla. 1st DCA
1991), at 57 (citing the rule that exemptions from tax are strictly construed against the taxpayer, with any ambiguity resolved in
favor of the administrative agency); State ex rel. Szabo Food Services Inc. v. Dickinson, 286 So.2d 529 (Fla. 1973)
(“Exemptions to taxing statutes are special favors granted by the Legislature and are to be strictly construed against the
taxpayer.”). See also, United States Gypsum Co. v. Green, 110 So.2d 409 (Fla. 1959) (also stating that exemptions from tax are
strictly construed against the taxpayer) and Wanda Marine Corp. v. Dep’t of Revenue, 305 So.2d 65, 69 (Fla. 1st DCA 1975).
2
Tangible personal property means and includes personal property which may be seen, weighed, measured, or touched or is in
any manner perceptible to the senses. See s. 212.02(19), F.S.

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Section 212.08(7)(xx), F.S., provides, with specified limitations based on a business’ Standard Industrial
Classification Code (SIC)3, that there are exempt from sales and use tax all labor charges for the repair of,
and parts and materials used in the repair of and incorporated into, industrial machinery and equipment
which is used for the manufacture, processing, compounding, production, or preparation for shipping of
items of tangible personal property at a fixed location within Florida.
If a purchaser qualifies and adheres to the requirements of s. 212.08(7)(xx), F.S., and provides a properly
executed exemption certificate4 to the selling dealer relating to the purchase of parts and materials used in
the repair of, and incorporated into, qualifying industrial machinery the sales transaction would be exempt
from tax. It is noted that Taxpayer asserts its SIC is 3599. However, research by the Department reflects
the appropriate classification code is within Major Industry Group 384 and the applicable SIC is 3841
and/or 3845.
REQUESTED ADVISEMENT & DETERMINATION
Taxpayer is seeking a determination whether the parts and repairs referenced below are exempt from
Florida sales and use tax under the provisions of s. 212.08(7)(xx), F.S., pertaining to the repair of
qualifying industrial machinery and equipment.
•

Replacement of internal machine tooling parts for milling machinery.

•

Replacement of internal machine tooling for turning/boring machinery.

•

Replacement of parts for grinding and surface finishing equipment.

•

Replacement of the gauges for quality control equipment.

•

Replacement of the scribes and stylus for engraving machinery.

Taxpayer is a qualifying industry classified under SIC Major Industry Group 384. It uses industrial
machinery and equipment to manufacture, process, or compound, items of tangible personal property at a
fixed location within Florida. Hence, all labor charges for the repair of, and parts and materials used in
the repair of and incorporated into qualifying industrial machinery and equipment are exempt from sales
and use tax under s. 212.08(7)(xx), F.S.
Specific to this advisement, Taxpayer’s purchases relating to the replacement of the above identified
component items of internal machine tooling as repair parts incorporated into milling machinery;
turning/boring machinery; grinding, surface finishing equipment; quality control equipment; and
engraving machinery; would qualify for the exemption from tax provided under s. 212.08(7)(xx), F.S.
However, it is emphasized that while the component parts (bits, blades, and other inserts, etc.) of standalone tools will qualify for the exemption, replacement of an individual stand-alone tool will not qualify
3

This exemption applies only to industries classified under SIC Industry Major Group Numbers 10, 12, 13, 14, 20, 22, 23, 24,
25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, and 39 and Industry Group Number 212. See s. 212.08(7)(xx)2., F.S.
4
See Tax Information Publication 00A01-15, dated July 5, 2000.

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for the exemption. Additionally, workstations and worktables that are not incorporated into qualifying
machinery and equipment that are identifiable as furniture, will not qualify for the exemption.
For more information concerning all of the taxes administered by the Department of Revenue, please refer
to the Department’s Internet site at:
www.floridarevenue.com
This response constitutes a Technical Assistance Advisement under s. 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 s. 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 and 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.
Kind Regards,

Alan R. Fulton
Tax Law Specialist
Technical Assistance & Dispute Resolution
850-717-6735
ARF\tadrstaff
Record ID: XXXXXXXXXX