Was a staffed autonomous-shuttle agreement a nontaxable transportation service or a taxable vehicle rental?

Plain-English summary

Florida treated a five-year agreement for staffed autonomous shuttles as a transportation service rather than a rental of tangible personal property.

The provider retained ownership, controlled the proprietary software and approved routes, maintained the vehicles, and supplied an attendant on every shuttle. Attendants could operate the vehicle if the software malfunctioned and also handled safety, accessibility, maintenance, and cleaning duties.

Because the provider furnished the operators and the customer did not control physical operation, the customer owed no sales tax or motor-vehicle rental surcharge on the agreement. The provider remained responsible for applicable sales or use tax on the autonomous vehicles.

What this means for you

Mobility and equipment-service providers

Supplying and directing the operator can support service treatment when the customer does not possess or control the equipment's physical operation.

Customers buying transportation systems

Contract labels and separate fee categories did not control. Ownership, operator employment, maintenance duties, route control, and actual operation mattered.

Common questions

Was the customer renting the autonomous vehicles? No.

Why was it a service? The provider supplied the attendants/operators and retained operational control.

Who paid tax on the vehicles? The provider.

Citations and references

• Fla. Admin. Code R. 12A-1.071(9)(d)
• Fla. Admin. Code R. 12A-1.007(13)(d)1.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 20A-005

Original ruling text

Questions: 1. Is Taxpayer engaged in nontaxable transportation services with regards to its Customer in
the Master Agreement and, thus, required to pay sales or use tax on the autonomous vehicles utilized in
the Agreement? 2. Is Taxpayer’s provision of an autonomous vehicle operation transportation system to
its Customer in the Master Agreement considered a rental of autonomous vehicles and, thus, subject to
sales tax? 3. If Taxpayer’s provision of an autonomous vehicle operation transportation system to its
Customer in the Master Agreement were deemed to be the rental of tangible personal property, which of
Taxpayer’s separately-stated revenue streams (i.e., Planning Phase (Onboarding and Commissioning),
Operational Phase (Managed Services), and/or Attendant Services) would be subject to sales tax?

Answers: 1. Yes. As long as the attendants on the autonomous vehicles (“AVs”) are furnished by
Taxpayer, as is provided for in the Master Agreement, Taxpayer’s Agreement with Customer in the
Master Agreement to provide an autonomous vehicle operation transportation system would be viewed
as a service transaction and not as the rental of tangible personal property. As a result, Customer would
not owe tax on the transaction. See Rule 12A-1.071(9)(d), F.A.C. Taxpayer, however, would be required
to pay sales or use tax, whichever were applicable, on the purchase price of the AVs utilized in the
Agreement. 2. No. 3. N/A.

March 19, 2020

XXXXXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX
Re:

Technical Assistance Advisement No. 20A-005
Sales and Use Tax – Motor Vehicles
XXXXXXXXXX (“Taxpayer”)
FEI No. XXXXXXXXXXX
BPN: XXXXXXXXX
Section 213.22(1), Florida Statutes (“F.S.”)
Rules 12A-1.007(13)(d)1., and 12A-1.071(9), Florida Administrative Code (“F.A.C.”)

Dear XXXX:
This letter is a response to your petition on behalf of XXXX, dated September 30, 2019, for the Florida
Department of Revenue’s (the “Department’s”) issuance of a Technical Assistance Advisement ("TAA")
with regards to the sales tax implications on your client’s provision of an autonomous vehicle operation

XXXXX
March 19, 2020
Florida Department of Revenue
Page 2

transportation system to a customer. 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 s. 213.22,
F.S.
Requested Advisement

1. Is Taxpayer engaged in nontaxable transportation services with regards to its Customer in the Master
   Agreement and, thus, required to pay sales or use tax on the autonomous vehicles utilized in the
   Agreement?
2. Is Taxpayer’s provision of an autonomous vehicle operation transportation system to its Customer in
   the Master Agreement considered a rental of autonomous vehicles and, thus, subject to sales tax?
3. If Taxpayer’s provision of an autonomous vehicle operation transportation system to its Customer in
   the Master Agreement is deemed to be the rental of tangible personal property, which of Taxpayer’s
   separately-stated revenue streams (i.e., Planning Phase (Onboarding and Commissioning), Operational
   Phase (Managed Services), and/or Attendant Services) would be subject to sales tax?
   Brief Answer
4. Is Taxpayer engaged in nontaxable transportation services with regards to its Customer in the Master
   Agreement and, thus, required to pay sales or use tax on the autonomous vehicles utilized in the
   Agreement?
   Yes. As long as the attendants on the autonomous vehicles (“AVs”) are furnished by Taxpayer, as is
   provided for in the Master Agreement, Taxpayer’s Agreement with Customer in the Master Agreement to
   provide an autonomous vehicle operation transportation system would be viewed as a service transaction
   and not as the rental of tangible personal property. As a result, Customer would not owe tax on the
   transaction. See Rule 12A-1.071(9)(d), F.A.C. Taxpayer, however, would be required to pay sales or use
   tax, whichever were applicable, on the purchase price of the AVs utilized in the Agreement.
5. Is Taxpayer’s provision of an autonomous vehicle operation transportation system to its Customer in
   the Master Agreement considered a rental of autonomous vehicles and, thus, subject to sales tax?
   No.

XXXXX
March 19, 2020
Florida Department of Revenue
Page 3

3. If Taxpayer’s provision of an autonomous vehicle operation transportation system to its Customer in
   the Master Agreement were deemed to be the rental of tangible personal property, which of Taxpayer’s
   separately-stated revenue streams (i.e., Planning Phase (Onboarding and Commissioning), Operational
   Phase (Managed Services), and/or Attendant Services) would be subject to sales tax?
   N/A.
   Facts As Provided
   Taxpayer is a corporation headquartered in Florida that provides autonomous vehicle (“AV”) operation
   transportation systems to its customers. Taxpayer entered into a contract with XXXXX (“Customer”) to
   provide such a system in a certain location in Florida. Customer’s purpose for employing Taxpayer is to
   improve resident and visitor mobility along various routes in the community. Pursuant to the contract,
   Taxpayer will provide two AV shuttles, along with fully-staffed shifts of attendants. The term of the
   contract is five years, following the importation and delivery of the AVs. See Master Agreement Cover
   Page. The AVs move according to a pre-determined path and are controlled by software applications.
   This software consists of Taxpayer’s and its licensors’ proprietary software applications. See Master
   Agreement §§ 1.12 and 6.1. The AVs are motorized, and Taxpayer’s representative believes that they are
   required to be registered in Florida. Taxpayer would be responsible for paying Florida sales tax in the
   event they are required to be registered.
   There will always be an attendant onboard the vehicles. Pursuant to the Master Agreement, Taxpayer
   will provide the attendants to accommodate an AV shuttle schedule up to 8 hours per day, 7 days per
   week (up to 240 hours per month). See Master Agreement § 4.5. These attendants will greet the
   passengers, provide Customer-suggested information during the route, perform basic maintenance, and
   operate the vehicles in the event the software malfunctions. The attendants will also assist customers
   with disabilities, provide additional safety and security measures, and provide basic cleaning.
   Taxpayer and Customer will work together to design each route for the operation of the AVs. See Master
   Agreement § 4.4. Once all the plans have been agreed to in the Statement of Work, neither party will be
   able to make alterations to the routes or to any other aspect of the plans without the prior written consent
   of the other party. See Master Agreement § 4.4. Customer can access and use the software, as installed,
   in the AVs; however, it cannot make any changes to the software. See Master Agreement § 5. Customer
   must use the AVs in accordance with Taxpayer’s Licensed Applications and its user manuals. See Master
   Agreement § 8.1. It must also use the AVs in accordance with the terms of the Master Agreement and
   not for any other purpose. See Master Agreement § 8.5.
   Taxpayer has divided its services for Customer into three categories: Onboarding and Commissioning,
   Managed Services, and Attendant Services. See Master Agreement Exhibit B-1. Taxpayer will charge
   Customer a one-time fee for Onboarding and Commissioning, which includes the mapping of the routes,
   engineering, licensing, procurement, a one-time fixed fee for the two AVs, etc. See Master Agreement
   Exhibit B-1. Taxpayer will also charge a monthly fee for the AVs (Managed Services), and it will charge a

XXXXX
March 19, 2020
Florida Department of Revenue
Page 4

separate monthly fee for the services of its attendants (Attendant Services). See Master Agreement
Exhibit B-1. Taxpayer will retain ownership of the vehicles. See Master Agreement § 7.

Taxpayer’s Argument
Taxpayer’s representative states that, aside from the initial agreement on the operating environment of
the AVs, Customer does not have unfettered rights to use the vehicles. Taxpayer maintains control of the
vehicles through both its software platform embedded in the vehicles and by having its own attendant
onboard in the event the vehicle malfunctions. Customer cannot operate the AVs outside the predetermined route without Taxpayer’s approval. In addition, the terms of the Agreement cannot be altered
without Taxpayer’s consent. Taxpayer’s representative argues that the fact that Taxpayer does not
require Customer to assume any responsibility for maintenance of the vehicles is indicative of the intent
being that this is a service agreement between the two parties rather than a license of the equipment
because Taxpayer bears the cost of maintaining the equipment. He also states that, although Taxpayer
allows Customer sole “use” of the AVs during the term of the Master Agreement, this “use” does not
cause this arrangement to rise to the level of a lease of the vehicles because Taxpayer maintains operation
of the vehicles at all times. He contends that Taxpayer’s Master Agreement with Customer is analogous
to providing equipment with an operator to perform a specific service determined by Taxpayer with input
from Customer as to what the operational route will be.
Taxpayer’s representative maintains that the fees Taxpayer charges Customer 1 under the Master
Agreement are not subject to sales or use tax. He states that Taxpayer is not leasing the AVs to Customer
but, rather, is utilizing the AVs to perform a job in a manner determined by Taxpayer which, he contends,
falls within the provisions of Rule 12A-1.071(9)(c) and (d), F.A.C. Taxpayer’s representative contends that
Taxpayer should remit Florida sales or use tax, as applicable, on the autonomous vehicles used in the State
and should not charge Customer sales tax on any of its contractual transportation fees.

In Taxpayer’s representative’s letter in which he requested a TAA on this matter, he appears to want a TAA in which
the ruling will be applicable to Taxpayer’s rental of AV’s to other customers which enter into similar contracts with
Taxpayer. Section 213.22(1), F.S., however, provides, in relevant part:
Technical assistance advisements shall have no precedential value except to the taxpayer who requests the
advisement and then only for the specific transaction addressed in the technical assistance advisement . . . .

1

Therefore, whereas Taxpayer’s representative used language pertaining to multiple customers and contracts in
expressing his position (e.g., “[t]he fees charged by Taxpayer to its customers under its contracts should not be
subject to Florida retail sales and use tax . . .”), in the response, “customers” has been replaced with “Customer” and
“contracts” with “Master Agreement” since this Advisement is only applicable to the transaction between Taxpayer
and the Customer in the Master Agreement that was provided with this request for a TAA.

XXXXX
March 19, 2020
Florida Department of Revenue
Page 5

Applicable Law and Discussion
Rule 12A-1.071(9), F.A.C., which pertains to Rentals, Leases, or License to Use Tangible Personal Property,
provides:
(9)(a) A transaction involving the use of equipment with an operator supplied by the
owner of the equipment is a lease if control or direction over the use of the equipment
passes to the customer.
(b) When the operator of the equipment is on the payroll of the lessee, the contract
constitutes a rental of tangible personal property and is subject to the tax.
(c) A transaction is not a lease if it is for the performance of a specific job in a manner
to be determined by the owner or his operator.
(d) When the owner of equipment furnishes the operator and all operating supplies,
and contracts for their use to perform certain work under his direction and according to
his customer’s specifications, and the customer does not take possession or have any
direction or control over the physical operation, the contract constitutes a service
transaction and not the rental of tangible personal property, and no tax is due on the
transaction.
The Department would view Taxpayer’s attendant on the AV as an “operator” for purposes of Rule 12A1.071(9), F.A.C. In addition to other duties, attendants provided by Taxpayer are responsible for operating
the vehicles in the event the software malfunctions, performing basic maintenance, and performing basic
cleaning. The fact pattern described by Taxpayer’s representative and found in the Master Agreement
support that, as long as the attendant is furnished by Taxpayer, as is the case in the Master Agreement,
Taxpayer’s Agreement with Customer in the Master Agreement to provide an autonomous vehicle
operation transportation system would be viewed as a service transaction and not as the rental of tangible
personal property. As a result, Customer would not owe tax on the transaction. 2 See Rule 12A1.071(9)(d), F.A.C. Taxpayer, however, would be required to pay sales or use tax, whichever were
applicable, on the AVs utilized in the Agreement. 3
With regards to Taxpayer’s questions:

It should be noted that, while, in the Master Agreement and, thus, for purposes of this TAA, the attendants are not
employees of Customer and the provision of the AV transportation system is viewed as a service transaction, if the
situation were different and the attendants were employees of the customer and not Taxpayer, Taxpayer’s provision
of this transportation system to its customers might be considered the taxable rental of tangible personal property.
See Rule 12A-1.071(9)(a) and (b), F.A.C., and s. 212.02(19), F.S.
3
A House Bill pertaining to autonomous vehicles was signed into law in Florida on June, 13, 2019. See Ch. 2019-101,
§ 311, Laws of Fla.
2

XXXXX
March 19, 2020
Florida Department of Revenue
Page 6

1. Is Taxpayer engaged in nontaxable transportation services with regards to its Customer in the Master
   Agreement and, thus, required to pay sales or use tax on the autonomous vehicles utilized in the
   Agreement?
   Yes. As long as the attendants on the AVs are furnished by Taxpayer, as is provided for in the Master
   Agreement, Taxpayer’s Agreement with Customer in the Master Agreement to provide an autonomous
   vehicle operation transportation system would be viewed as a service transaction and not as the rental of
   tangible personal property. As a result, Customer would not owe tax on the transaction. 4 See Rule 12A1.071(9)(d), F.A.C. Taxpayer, however, would be required to pay sales or use tax, whichever was
   applicable, on the purchase price of the AVs utilized in the Agreement.
2. Is Taxpayer’s provision of an autonomous vehicle operation transportation system to its Customer in
   the Master Agreement considered a rental of autonomous vehicles and, thus, subject to sales tax?
   No.
3. If Taxpayer’s provision of an autonomous vehicle operation transportation system to its Customer in
   the Master Agreement were deemed to be the rental of tangible personal property, which of Taxpayer’s
   separately-stated revenue streams (i.e., Planning Phase (Onboarding and Commissioning), Operational
   Phase (Managed Services), and/or Attendant Services) would be subject to sales tax?
   N/A.
   Conclusion
   Taxpayer’s provision of an autonomous vehicle operation transportation system to its Customer in the
   Master Agreement is considered a service transaction, as described in Rule 12A-1.071(9)(d), F.A.C. Among
   other things contributing to this finding is that Taxpayer, rather than Customer, furnishes the
   attendants/operators for the AVs. Taxpayer is required to pay sales or use tax, as applicable, on the
   autonomous vehicles utilized in the Agreement. Taxpayer’s provision of the AV transportation system to
   its Customer in the Master Agreement is not considered a rental of autonomous vehicles; thus, Customer
   does not owe sales tax or any potential motor vehicle rental surcharge under Rule 12A-1.007(13)(d)1.,
   F.A.C., for any rental of the AVs. The answer to Question 3 is moot.
   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 that 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
   4

It is being assumed that the AVs are being used for transportation and not for sightseeing purposes.

XXXXX
March 19, 2020
Florida Department of Revenue
Page 7

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,

Katharine Heyward
Katharine Heyward
Senior Attorney
Technical Assistance & Dispute Resolution
Record ID: 272260