Was a company's charge to install, maintain, and remove real-estate yard-sign arms a taxable rental of equipment?

Subject

Realtor use of Yard Arms

Plain-English summary

The company's yard-sign service was not subject to Florida sales tax as a rental of tangible personal property. The company owned the wooden yard arms, installed and maintained them, hung the realtor's separate sign faces, and removed its equipment when requested.

The contract barred the realtor from tampering with, altering, servicing, or removing the yard arms or allowing anyone else to do so. Because the customer received no possession, control, or right to use the company's property, the Department treated the arrangement as a personal service rather than a lease, rental, or license to use equipment.

What this means for you

Keeping ownership alone was not the only relevant fact. The service provider also retained actual control over installation, maintenance, and removal, while the customer supplied its own sign face and could not handle the yard-arm equipment.

Common questions

Q: Did leaving the yard arm at the listed property transfer possession to the realtor? No. The contract withheld custody, control, servicing, alteration, and removal rights from the realtor.

Q: Did the company sell or rent signs? On the submitted facts it did neither; it installed its own yard arms and displayed sign faces supplied by the realtor.

Q: Did the company pay tax when buying lumber? Yes. The facts said it paid sales tax on the lumber used to manufacture its yard arms.

Citations and references

• Fla. Stat. § 212.08(7)(v)1. — service transactions with inconsequential sales
• Fla. Admin. Code r. 12A-1.071(1)(a), (b) — leases and transfer of possession
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-017

Original ruling text

Title:

Realtor use of Yard Arms

Mar 26, 1993

RE: TAA 93A-017
Sales Tax - Yard Arms
Section 212.08(7)(v)1., F.S.
Rule 12A-1.071(1)(a), (b), F.A.C.

Dear :

This is in response to your request for a Technical
Assistance Advisement on behalf of your client, XXXXX
(hereinafter [Taxpayer]) regarding the application of sales tax
relative to the following transaction presented in your letter
dated November 23, 1992, to which this office responded with a
Letter of Technical Advice on January 27, 1993:

"This Firm represents [Taxpayer]... which is engaged in the
business of putting up realtors' yard listing signs on real
property listed by the realtor.

"[Taxpayer] purchases, at hardware stores, 4' x 4' lumber upon
which they pay sales tax. They manufacture yard arms out of the
lumber and they keep an inventory of yard arms at all times.
When a realtor decides to use [Taxpayer's] services, the realtor
places with [Taxpayer] a quantity of sign faces with the
realtor's name, telephone number, etc. on the sign face. The
realtor has paid for the preparation of the sign face and simply
entrusts it to [Taxpayer].

"When the realtor lists a property, he calls [Taxpayer] and says
`I have a listing on the property located at such and such
location, please install one of my signs on that property'.

"[Taxpayer] takes one of its yard arms and one of the realtor's
sign faces to the property, installs the yard arm and hangs the
realtor's sign face on the yard arm.

"For this service, [Taxpayer] charges a flat fee - regardless of
how long the sign remains on the property. In other words, if
the sign is there for one day, one month, or six months, the fee
is the same. [Taxpayer] does not charge a fee based on any
interval, such as $5.00 per week, etc.

"I have researched the tax statutes and codes and do not find
any reference to taxing a service of putting up and taking down
signs.

"[Taxpayer] is not renting its yard arms, it is simply charging
a flat fee for the service of putting up a sign and taking a
sign down. [Taxpayer] does not manufacture signs, does not sell
signs, and does not rent signs. All [Taxpayer] does is put up a
sign and take it down for a fee."

Transmitted with your request was a standard sales contract
which contains the following provisions:

"[Taxpayer] is a privately owned company created to service the
real estate brokerage industry by installing yardarm posts to
display the individual broker's yard sign in a professional and
convenient manner....

"Whereas [Taxpayer] owns, maintains and installs all yardarms
and attached hardware used for the purpose of housing the
Agent's shield and Associates display signs....

"INSTALLATION AND MAINTENANCE
a. [Taxpayer] shall maintain and inspect all yardarms,
hardware, shields and rider signs as necessary. [Taxpayer] will
remove and hold any damaged panels from inventory for broker and
will notify broker of the damaged panel.

"CARE OF PROPERTY
a. The agent shall not tamper with or make any alterations
to the installers equipment.

b. Agent shall not service nor allow others to service
[Taxpayer] installed equipment.

"REMOVAL OF INSTALLED EQUIPMENT
a. Agent shall give reasonable notice as to the removal
date of [Taxpayer] installed equipment.

b. Agent shall not allow any other person to remove
[Taxpayer] property (yardarm) from its initial point of
installation.

"DISCLAIMER
a. [Taxpayer] assumes no liability for bodily injury or
property damage resulting from the installation, use, or removal
of its equipment in accordance to the terms of this agreement."

The contract further provides for compensation to
[Taxpayer] based on separate charges for the following:
installation at residential properties; removal from residential
properties; vacant lot installations within a certain area;
re-installation fees after a sign has been installed for twelve
months at the same location; trip charges due to customer
errors; mileage fees for installation and removals outside a
certain area; installation and removal of commercial
installations based on dimensions of signs.

STATUTORY/REGULATORY AUTHORITY

Section 212.08(7)(v)1., F.S., provides:

"Also exempted are professional, insurance, or personal
service transactions that involve sales as inconsequential
elements for which no separate charges are made."

Rule 12A-1.071, F.A.C, provides in part:

"(1)(a) For the purpose of this rule, the term `lease'
includes any rental or license to use tangible personal
property, unless a different meaning is clearly indicated
by the context in which it is used. The term refers to all
transactions that are not bailments in which there is a
transfer of possession of tangible personal property,
without regard to limitations upon the use, for a

consideration, without a transfer of title to the property.
It is not essential for a transfer of possession of
tangible personal property to include the right to move the
tangible personal property. It includes a transaction
under which a person secures for a consideration the
temporary use of tangible personal property which, although
not on his premises, is operated by or under the direction
or control of the person or his employees. All leases of
tangible personal property other than conditional-sale type
leases as described in paragraph (1)(d) of this Rule, are
operating leases. Whether a transaction is a sale' or arental, lease, or license to use' shall be determined in
accordance with the provisions of the agreement.
"(b) Transfer of possession with respect to an operating
lease means that one of the following attributes of
tangible personal property ownership has been transferred:
"1. Custody or possession of the property, actual or
constructive;
"2. The right to custody or possession of the property; or,
"3. The right to use and control or direct the use of the
property."

DETERMINATION

Based on the description of the service provided by
[Taxpayer] and certain language in the standard contract,
[Taxpayer] could be construed to be rendering a personal service
which is beyond the reach of the sales tax statutes.

The terms of the contract provide that the customer at no
time is given a right to tamper with, alter, remove, service, or
allow others to service or remove [Taxpayer's] tangible personal
property. Therefore, in effect, the customer does not have a
right to possess, control, or use [Taxpayer's] tangible personal
property.

Based on these observations and facts, it is the position
of the Department that [Taxpayer] does not lease, rent, or grant
a license to use tangible personal property. Rather, [Taxpayer]
provides a personal service which is not subject to sales tax.

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
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 by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the
request or the response.

Sincerely,

Sharon Gallops
Technical Assistant

SG/pb
Cont. #7072