Could Florida's $5,000 discretionary surtax limitation apply once to an entire multi-line boat-repair invoice?

Plain-English summary

Florida applied the $5,000 discretionary sales-surtax limitation to an entire boat-repair invoice rather than to individual repair lines.

The customer signed one service and storage contract, the repairer opened one work order, and later authorized additions related back to that job. All parts and labor were billed on one final invoice. The repairer kept continuous care, custody, and control of the boat until the work was complete and payment was made.

Those facts satisfied both required tests: one sale and a working unit. Florida treated the boat as the working unit and all documented repairs as one repair job.

What this means for you

Boat repair businesses

Link additions to the original work order and retain custody documentation if you intend to treat the work as one repair sale for surtax purposes.

Billing teams

Multiple invoice lines do not necessarily create multiple sales when they form one documented repair of one working unit.

Common questions

Did the cap apply to each invoice line? No.

Why did the whole invoice qualify? One repair contract, one working unit, and continuous custody made it a single sale.

Did the TAA mention another boat-repair limit? Yes. It stated that tax on a single Florida boat repair could not exceed $60,000, including surtax.

Citations and references

• Fla. Stat. Sec. 212.054(2)(b)
• Fla. Stat. Sec. 212.05(5)
• Fla. Admin. Code R. 12A-15.004(3)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 21A-006

Original ruling text

Florida Department of Revenue
Technical Assistance and Dispute Resolution

5050 West Tennessee Street Tallahassee FL 32399

Jim Zingale
Executive Director

floridarevenue.com

QUESTION: Does the $5,000 discretionary sales surtax limitation apply to the entire invoice or
would it apply to individual line items or categories of line items listed on the invoice?
ANSWER: In the instant case, the single sale test has been met as the documentation provided
for the transaction under this advisement reflects that the repairs all relate back to the original
repair contract or work order. The bulk sale/working unit test has been met as a boat would be
considered a working unit. Lastly, Taxpayer maintains continuous care, custody, and control of
the boat throughout the repair job; therefore, the discretionary sales surtax limitation can be
applied to the entire invoice.
April 7, 2021
XXXXXXX
XXXXXXX
XXXXXXX
XXXXXXX
XXXXXXX
Subject: Technical Assistance Advisement 21A-006
STATUTE CITE: Section 212.054, Florida Statutes (F.S.)
RULE CITE: Rule 12A-15.004, Florida Administrative Code (F.A.C.)
XXXXXXX ("Taxpayer")
FEIN: XXXXXXX
BP#: XXXXXXX
Dear XXXXXXX:
This is in response to your letter dated March 24, 2020, requesting this Department’s issuance
of a Technical Assistance Advisement (“TAA”) pursuant to section 213.22, F.S., and Rule Chapter
12-11, F.A.C., concerning the taxability of the services offered by your client. An examination of
your letter has established 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.
Requested Advisement
Does the $5,000 discretionary sales surtax limitation apply to the entire invoice or would it
apply to individual line items or categories of line items listed on the invoice.

XXXXXXX
Florida Department of Revenue
Page 2

Facts
Your letter provides the following in part:
Taxpayer is in the marine industry. Specifically, Taxpayer is in the business of repairing and
maintaining boats. Prior to the customer delivering a boat to Taxpayer, the customer signs a
Service and Storage Contract (“Contract”), which details the activities to be performed. This
generates the creation of a Work Order (“WO”). The WO identifies each activity by number,
with a corresponding description of the service to be provided. Materials and labor are posted
to the WO utilizing these numbers and are accumulated in a computerized billing system.
Once the repairs are completed, a final bill is generated and given to the customer on a single
invoice.
Activities are regularly added to the WO and approved by the customer after Contract is signed
and the WO has been initiated. All service invoices are subject to a 3.9% Shipyard Repairers’
Liability Charge Service Charge, which is separately itemized on the invoice and shown as
“Other” on the invoice.
Upon completion of all activities, Taxpayer totals all labor, materials, and the service charge on
the WO and issues the customer a single invoice. A total for labor and materials is given for
each line item, as well as a separate cumulative total for each category. The invoice must be
paid in full at the completion of the job. The boat does not leave the possession of Taxpayer
until full payment is received.
Taxpayer asserts that it maintains complete control and custody of the boat while repairs are
being made to its customers’ boats.
Taxpayer states that its assertion that it maintains complete control and custody of the boat
while repairs are being made to its customer’s boats is supported by the language in Contract,
Section 8, Titled “Payment Terms and Conditions” which provides in pertinent part as follows:
. . .Payments are due and payable to the Contractor upon completion of the work
described in this Contract. All invoices must be paid in full prior to the vessel departing
Contractor premises. . . . Title to any equipment purchased shall not pass to the Owner
until payment is made in full.
Taxpayer furthermore states that while the boat is under the control and custody of Taxpayer,
Taxpayer identifies the boat in its daily Dockage Report. The day the boat arrives for the job,
the boat is recorded in the Dockage Report until the day it leaves at the completion of the job.
Taxpayer asserts that the items of tangible personal property incorporated into the repairs
made by Taxpayer are all necessary for a single unit, the boat, to continue to function at an

XXXXXXX
Florida Department of Revenue
Page 3

optimal level. Taxpayer further asserts that these are items normally sold in a single sale by the
seller to the purchaser for use in normal business practice of the purchaser as an integrated
unit, in compliance with Rule 12A-15.004(3)(b)3., F.A.C.
Taxpayer provided the following specific documentation and explanation of procedures for one
of Taxpayer’s repairs:
August 30, 2018:

1. XXXXXXX generated the Service and Storage Contract on August 30, 2018 for the vessel:
   XXXXXXX. Section 8 of the Service and Storage Contract, entitled “Payment Terms and
   Conditions,” includes the following language: “Payments are due and payable to the
   Contractor upon completion of the work described in this Contract. All invoices must be
   paid in full prior to the vessel departing Contractor premises…Title to any equipment
   purchased shall not pass to the Owner until payment is made in full.”
2. Upon signing the Service and Storage Contract, an internal Work Order is generated. In
   the provided sample, there is a transposition error. The date the Work Order was
   generated was the same date of the contract, 08-30-18, not 08-03-18.
   August 31, 2018
3. XXXXXXX is brought to the boatyard to begin work. It is recorded on the Dockage Report
   dated August 31, 2018.
   October 4, 2018
4. The first Work Order Add-On Sheet is created to add a new item. It is authorized by
   signature.
   February 12, 2019
5. The last Work Order Add-On Sheet is authorized.
   February 14, 2019
6. The job is completed, and it is the last day XXXXXX is recorded on the Dockage Reports.
   February 15, 2019
7. XXXXXXX leaves the boatyard.

XXXXXXX
Florida Department of Revenue
Page 4

February 18, 2019

1. The Final Invoice is issued on this date. It is issued after the boat left the boatyard in this
   case because payment was made in full prior to the completion of the job. Otherwise,
   the boat would not leave the boatyard until payment of the final invoice was executed.

Law and Discussion
Under section 212.054(2)(a), F.S., the basic principle in applying discretionary sales surtaxes is
that they piggyback the state sales and use tax. If a transaction is subject to sales tax and occurs
at a location where surtax is imposed, the surtax also applies. The surtax is imposed on all
transactions that are subject to sales tax.
Section 212.054(2)(b), F.S., limits application of that principle when there is a sale of an item of
tangible personal property for over $5,000. The surtax in that case applies only to the first
$5,000. Subparagraph (b)l. of the statute then sets out very specific circumstances in which
more than one item can be aggregated for purposes of application of the surtax. The statute
requires application of the $5,000 limitation on an item-by-item basis, except for very specific
circumstances when multiple items will be viewed as a single item. In order for the exception to
apply, two tests must be satisfied. There must be a single sale in which one purchaser buys all
the items at the same time, with a purchase order or other documentary evidence that there
has been such a single transaction. Second, the multiple items reflected on that documentation
will be aggregated for purposes of applying the $5,000 limitation only if they fall into one of two
categories. They must either be items that are normally sold in bulk, or they must be items that
will be assembled into a working unit or a part of one.
Items that meet the bulk sale/working unit test cannot be aggregated if they are not purchased
in a single sale. The single sale requirement addresses the character of the transaction itself,
whether there has been one discrete transaction to which the limitation can be applied or
multiple sales that are separately subject to the limitation. Meeting this requirement is a
matter of documenting that there was one buyer, one seller, and that the agreement to buy
and sell occurred at the same time as to all of the items involved (See 12A-15.004(3)(a), F.A.C.).
Items cannot be aggregated solely because they are purchased in a single sale. The bulk
sale/working unit test must also be met. This requirement addresses the character of the items
purchased.
Rule 12A-15.004(3)(b), F.A.C., provides that items comprising a working unit are either: items
normally sold as a set or a unit and the utility of each for its intended purpose is dependent on
the set being complete; items sold to a purchaser for use in the normal business practice of the
purchaser as an integrated unit; or items are component parts that have no utility unless
assembled with each other to form a working unit or part of a working unit.

XXXXXXX
Florida Department of Revenue
Page 5

In order for the surtax limitation to apply to a sale of multiple items of tangible personal
property in a repair job, the items would have to be sold in a “single sale” and, in the case of a
boat repair, the items, when assembled, would have to comprise a “working unit.” The
Department would view a boat as a “working unit,” for purposes of Rule 12A-15.004(3), F.A.C.,
and s. 212.054(2)(b)1., F.S. The question remaining, then, would be what constitutes a “single
sale,” or a single repair job, in this case.
In order for all of the repairs on a boat to constitute a single repair job, the repairs would need
to relate back to the original repair contract or work order, and the repair facility would need to
maintain care, custody, and control of the boat throughout the repair job.
From the documentation provided, it appears that all of the line items on the invoice provided
would relate to a single repair job on a working unit. Furthermore, the documentation for this
transaction appears to reflect that Taxpayer maintained care, custody, and control of the boat
throughout the repair job. Consequently, the surtax limitation would be applicable to the
entire invoice in question. It should also be noted that the maximum amount of tax imposed
on a single repair of a boat in Florida cannot exceed $60,000 (surtax included). See s. 212.05(5),
F.S.
Conclusion
In the instant case, the single sale test has been met as the documentation provided for the
transaction under this advisement reflects that the repairs all relate back to the original repair
contract or work order. The bulk sale/working unit test has been met as a boat would be
considered a working unit. Lastly, Taxpayer maintains continuous care, custody, and control of
the boat throughout the repair job; therefore, the discretionary sales surtax limitation can be
applied to the entire invoice.
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 information must be deleted before public
disclosure. In an effort to protect confidentiality, we request you provide the undersigned with

XXXXXXX
Florida Department of Revenue
Page 6

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,

Leigh L. Ceci
Leigh L. Ceci
Tax Law Specialist
Technical Assistance and Dispute Resolution
Record ID: XXXXXXX
cc: XXXXXXX
XXXXXXX
XXXXXXX