Did Florida's $5,000 discretionary surtax limitation cover installation and administrative fees charged with projection equipment?

Plain-English summary

Florida combined projection equipment, administrative fees, and professional integration and installation charges when applying the $5,000 discretionary sales-surtax limitation.

Those services were part of the equipment's sales price rather than separate items of tangible personal property. The Department therefore applied one limitation to the combined equipment-and-service amount. It did not need to decide whether the components formed a working unit.

The onsite maintenance-support charge was different. Florida treated it as a taxable service warranty, so discretionary surtax applied to its entire price without the $5,000 limitation.

The PDF's opening header says “12A-014,” while its later subject line and official filename identify TAA 20A-014.

What this means for you

Equipment sellers and installers

Engineering, design, installation, and administrative charges that form part of an equipment sale can share the equipment's surtax limitation.

Billing teams

Keep separately taxable warranties distinct. A separately sold maintenance-support warranty did not receive the tangible-personal-property cap.

Common questions

Were installation and administrative fees capped separately? No. They combined with the projection equipment for one limitation.

Did Florida rely on the working-unit rule? No. It resolved the issue through the sales-price definition.

Was maintenance support capped? No. Surtax applied to the full warranty charge.

Citations and references

• Fla. Stat. Sec. 212.02(16)
• Fla. Stat. Sec. 212.0506
• Fla. Stat. Sec. 212.054(2)
• Fla. Admin. Code R. 12A-15.004(2)(a)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 20A-014

Original ruling text

TAX: Sales and Use Tax
TAA NUMBER: 12A-014
Subject: Discretionary sales surtax
STATUTE CITE(S): Section 212.02, 212.05, 212.0506, 212.055, 212.054, Florida Statutes (F.S.)
RULE CITE: Rules 12A-1.016, 12A-15.004, 12A-15.003, Florida Administrative Code (F.A.C.)
QUESTION:
Whether the $5,000 limitation separately applies to the service charges included with the
purchase of projector equipment?
ANSWER:
Yes. The service charges are not separate items of tangible personal property.
August 21, 2020
XXX
XXX
XXX
XXX
Re:

Technical Assistance Advisement - 20A-014
TAA No.:
AMS #: 365588
Sales and Use Tax
Local Option Taxes-Discretionary Sales Surtax $5,000 Limitation
Sections 212.02, 212.05, 212.0506, 212.054, and 212.055, Florida Statutes (F.S.)
Rule 12A-15.004, 12A-15.003, 12A-1.016, Florida Administrative Code (“F.A.C.”)
XXX (“Petitioner”) (“Taxpayer”)
Business Partner Number: XXX
FEIN: XXX

Dear XXX:
This is in response to your request dated April 28, 2020, for a Technical Assistance Advisement
(TAA) pursuant to s. 213.22, F.S., and Rule Chapter 12-11, Florida Administrative Code (F.A.C.),

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concerning the $5,000 limitation on discretionary sales surtax. An examination of your letter
has established that you have complied with the statutory and regulatory requirements for
issuance of a TAA. Therefore, the Department is hereby granting your request for a TAA.
FACTS
Taxpayer and a vendor entered into a contract for the purchase and installation of new
projection equipment in the XXX facility conference room. The Scope of Work (“contract”)
contains the equipment list and necessary services such as labor, administrative fees, etc.,
required to complete the job including the lump sum cost. The contract also listed an order for
onsite maintenance of the equipment by the vendor. The petition includes attachments,
including the Scope of Work (“contract”), invoice, and a purchase order.
The vendor billed taxpayer for equipment, administrative fee, professional service integration,
and onsite maintenance support. During a telephone conference, you indicated that the
service integration was for labor required to complete installation of the projector equipment.
On the first billing, the vendor charged the discretionary sales surtax on all charges for the full
amount charged for all items. The vendor issued a revised billing that included a charge for the
discretionary sales surtax on the first $5,000 of equipment, and on the full amount for the other
charges.
TAXPAYER POSITION
Taxpayer believes that the $5,000 discretionary sales surtax limitation applies to the total
amount of the charges for the projection equipment, administration fee, and the professional
service integration. Taxpayer believes that all of the charges, except for the onsite
maintenance support charges, relate to one working unit. Taxpayer believes that the surtax
applies to the full amount of the onsite support maintenance.
VENDOR’S POSITION
The vendor believes that the $5,000 surtax limitation applies separately to each line item
charge on the invoice. The issue is whether the services to engineer, design, program, deliver,
and install the working unit are an “item” as that word is used by Rule 12A-15.004, F.A.C. The
Rule provides that the discretionary sales surtax limit applies to any “item of tangible personal
property” and that services are not subject to the discretionary surtax limit. The Rule for the
working unit exception references “items of tangible personal property” and does not refer to
services that are part of the sale of tangible personal property. It is unclear whether the word
“item” as referenced in the working unit exception can be interpreted to include items that are
not tangible personal property but are instead services. The working unit exception examples
that appear later in the same rule do not include any situation in which services are a part of
the sale of the tangible personal property.

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Vendor cites the following from Rule 12A-15.004, F.A.C.:
(2)(a) The surtax does not apply to the sales amount above $5,000 on any item of tangible
personal property. However, the surtax does apply to the first $5,000 of the sales amount
on the sale, use, lease, rental, or license to use any item of tangible personal property,
including electric power or energy. The surtax applies, without limitation, to sales of
admissions; sales and use of services; sales of service warranties; charges for prepaid calling
arrangements; leases, rentals, and licenses to use real property or transient
accommodations; leases or rentals of parking or storage space for motor vehicles in parking
lots or garages, docking or storage space in boat docks and marinas, and tie-down or
storage space for aircraft; and all other transactions subject to the discretionary sales
surtax.
(b) ITEMS NORMALLY SOLD IN BULK OR ITEMS THAT COMPRISE A WORKING UNIT. A single
sale must be a sale of items of tangible personal property that meets at least one of the
following conditions:

1. The items are multiple quantities of a single item that the dealer normally sells in
   multiple quantities in the normal course of the dealer’s business or that the purchaser
   normally buys in multiple quantities in the normal course of the purchaser’s business;
2. The items are normally sold as a set or a unit and the utility of each for its intended
   purposes is dependent on the set being complete;
3. The items are normally sold in single sale by the seller to the purchaser for use in the
   normal business practice of the purchaser as an integrated unit; or
4. The items are component parts that have no utility unless assembled with each other to
   form a working unit or part of a working unit
   (Emphasis added in petition)
   ADVISEMENT REQUESTED
   What is the proper application of the State sales tax, and the local option discretionary sales
   surtax?
   LAW AND DISCUSSION
   Section 212.05(1)(a)1.a., F.S., provides, in part, the following:
   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 [….]
   (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:
   (a)1.a. At the rate of 6 percent of the sales price of each item or article of tangible
   personal property when sold at retail in this state, computed on each taxable sale

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for the purpose of remitting the amount of tax due the state, and including each
and every retail sale.[…]
(Emphasis added)
As provided by section 212.05(1)(a)1.a., F.S., sales tax is imposed on dealers who sell tangible
personal property. The sales tax is computed on the “sales price” on each item or article of
tangible personal property. “Sales price” is defined by s. 212.02(16), F.S. It provides
in part, the following:
(16) “Sales price” means the total amount paid for tangible personal property,
including any services that are a part of the sale, valued in money, whether paid
in money or otherwise, and includes any amount for which credit is given to the
purchaser by the seller, without any deduction therefrom on account of the cost
of the property sold, […] labor or service cost, […] or any other expense
whatsoever. “Sales price” also includes the consideration for a transaction which
requires both labor and material to alter, remodel, maintain, adjust, or repair
tangible personal property. […]
(Emphasis added)
As provided by s. 212.02(16), F.S., “sales price” includes services that are part of the sale of an
item(s) or article(s) of tangible personal property. This includes engineering, design, and
installation services and labor charges sold in connection with the projection equipment. As to
installation charges, Rule 12A-1.016(3), F.A.C., provides, in part, the following:
(3)(a) The total consideration received for labor or services used in installing
tangible personal property which is sold and does not become a part of realty, is
taxable even though such charge may be separately stated.
(Emphasis added)
Also, in AT&T v. Department of Revenue, 764 So.2d 665 (Fla. 1st DCA 2000) the court ruled that
service charges for engineering and installing telecommunications equipment were subject to
sales tax because the charges were part of the “sales price” for the sale of the
telecommunications equipment. Similarly, the charges for the projection equipment, the
professional fee integration, and the administrative fee are part of the “sales price” of the
tangible personal property (the projection equipment) sold. As provided by s. 212.05(1)(a)1.a.,
the charges are part of the “sales price” for an item of tangible personal property (the
equipment).
The charge for maintenance support is not part of the “sales price” related to the equipment
because the charges are for a “service warranty.” Section 212.0506, F.S., provides, in part, the
following:

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(1) It is the intent of the Legislature that every person is exercising a taxable
privilege who engages in this state in the business of soliciting, offering,
providing, entering into, issuing, or delivering any service warranty.
(2) For exercising such privilege, a tax is levied on each taxable transaction or
incident, which tax is due and payable at the rate of 6 percent on the total
consideration received or to be received by any person for issuing and delivering
any service warranty.
(3) For purposes of this section, “service warranty” means any contract or
agreement which indemnifies the holder of the contract or agreement for the
cost of maintaining, repairing, or replacing tangible personal property. […]
(Emphasis added)
Section 212.055, F.S., authorizes a County to require the imposition of local option discretionary
sales surtax. Section 212.054, F.S., addresses the administration of the local option
discretionary sales surtax. Section 212.054(4)(a), F.S., provides, in part, the following, “The
department shall administer, collect, and enforce the tax authorized under s. 212.055 pursuant
to the same procedures used in the administration, collection, and enforcement of the general
state sales tax imposed under the provisions of this chapter, except as provided in this section.”
Also, s. 212.054(2), F.S., provides, in part, the following:
(2)(a) The tax imposed by the governing body of any county authorized to so levy
pursuant to s. 212.055 shall be a discretionary surtax on all transactions occurring in the
county which transactions are subject to the state tax imposed on sales, use, services,
rentals, admissions, and other transactions by this chapter and communications services
as defined for purposes of chapter 202. The surtax, if levied, shall be computed as the
applicable rate or rates authorized pursuant to s. 212.055 times the amount of taxable
sales and taxable purchases representing such transactions. […]
(b) However:

1. The sales amount above $5,000 on any item of tangible personal property shall not
   be subject to the surtax. However, charges for prepaid calling arrangements, as defined
   in s. 212.05(1)(e)1.a., shall be subject to the surtax. For purposes of administering the
   $5,000 limitation on an item of tangible personal property, if two or more taxable items
   of tangible personal property are sold to the same purchaser at the same time and,
   under generally accepted business practice or industry standards or usage, are normally
   sold in bulk or are items that, when assembled, comprise a working unit or part of a
   working unit, such items must be considered a single item for purposes of the $5,000
   limitation when supported by a charge ticket, sales slip, invoice, or other tangible
   evidence of a single sale or rental.[…]
   (Emphasis added)
   As required by s. 212.054(2)(a), F.S., the discretionary sales surtax is required to be computed
   on the amount of taxable sales. As to transactions involving the sale of tangible personal

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property, the taxable sales amount is computed using the sales price of tangible personal
property. See s. 212.05, F.S.
The $5,000 discretionary sales surtax limitation on the sale of an item of tangible personal
property is further addressed by Rule 12A-15.004, F.A.C. It provides, in part, the following:
(1) SCOPE. This rule is intended to provide guidelines regarding the limitation for
the sales amount above $5,000 provided for any item of tangible personal
property subject to the discretionary sales surtax imposed under sections
212.054 and 212.055, F.S. For the application of the limitation to the fabrication
of items used in the performance of a real property contract, see rule 12A15.008, F.A.C.
(2)(a) The surtax does not apply to the sales amount above $5,000 on any item
of tangible personal property. However, the surtax does apply to the first $5,000
of the sales amount on the sale, use, lease, rental, or license to use any item of
tangible personal property, including electric power or energy. The surtax
applies, without limitation, to sales of admissions; sales and uses of services;
sales of service warranties; […]
(Emphasis added)
As provided by Rule 12A-15.004(2)(a), F.A.C., the limitation does not apply to service
warranty charges. Therefore, the discretionary sales surtax calculation for maintenance
support charges is computed on the total charge for the maintenance support.
Vendor believes that the charges for the administrative fee and the professional
integration fee are separate items of tangible personal property. For the reasons
already provided herein, these charges are part of the “sales price” for one item of
tangible personal property, the projection equipment. In addition, Rule 12A15.003(4)(a), F.A.C., provides for examples as to the collection of the discretionary sales
surtax on sales of tangible personal property. Examples 1, 2, and 3 provide that the
discretionary sales surtax is computed on the “sales price.” This is consistent with the
requirement provided for by s. 212.054(2)(a), F.S., that the discretionary sales surtax
must be computed on the taxable sales amount, which is the sales price amount which
includes services that are part of the sale of tangible personal property. See s.
212.02(16), and 212.05, F.S.
Both sections 212.05(1), F.S., and 212.054(2)(a), F.S., indicate that a taxable sale
involves the sale of an “item . . . of tangible personal property.” “Tangible personal
property” is defined by s. 212.02(19), F.S., in part, to mean and include, “personal
property which may be seen, weighed, touched or is in any manner perceptible to the
senses….” The administrative fee and professional service integration charge are not
items that are perceptible to the senses, and therefore are not separate items of
tangible personal property. Therefore, for the reasons provided herein, the
discretionary sales surtax $5,000 limitation is calculated on the total of the charges for

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equipment, the administrative fee, and the charge for professional service integration –
as the sale of an item of tangible personal property including those services that are
part of the sale. See section 212.02(16), F.S.
As a result of this determination, there is no need to address the Taxpayer’s alternative
argument that the charges for the projection equipment, administration fee, and the
professional service integration are for a “working unit” pursuant to Rule 12A15.004(3)(b), F.A.C.
RESPONSE
The charges for the equipment, administrative fee, and the professional service integration are
combined when making the calculation of the $5,000 limitation on the discretionary sales
surtax. The discretionary sales surtax is calculated separately with no limitation on the
maintenance support charge.
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, your request and related documents are public
records under Chapter 119, F.S., which are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Your name, address, and any other details, which might lead to
identification of the taxpayer, must be deleted before disclosure.
In an effort to protect the confidentiality of such information, we request you provide the
undersigned with an edited copy of your request for Technical Assistance Advisement, backup
material and response within fifteen days of the date of this advisement.
Sincerely,

Chuck Wallace
Chuck Wallace
Conferee
Technical Assistance and Dispute Resolution
Record ID: 7000365588