Was a church's direct purchase of a prefabricated roof system exempt when the supplier separately contracted with the prime contractor for installation?

Subject

Real Property Improvement Contract with Tax Exempt Organizations

Plain-English summary

The church's direct purchase of the prefabricated roof system was exempt from Florida sales tax. The prime contract let the church buy materials directly and reduced the contractor's price through deductive change orders for those purchases.

The church issued the purchase order, was invoiced by the supplier, paid the supplier directly, took title when the system reached the job site, was named as an additional insured, and included its exemption number on the purchase order. The supplier separately contracted with the prime contractor to unload and install the system.

What this means for you

The exemption depended on the church becoming the genuine purchaser of the materials while installation remained a separate contractor relationship.

Common questions

Q: Did the church pay the supplier directly? Yes.

Q: When did the church take title? At delivery to the job site.

Q: Did the supplier also install the roof system? It had a separate installation-labor contract with the prime contractor.

Citations and references

• Fla. Stat. § 212.08(7)(o) — direct sales to churches
• Fla. Admin. Code r. 12A-1.001(3)(a) — church purchases and direct payment
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-058

Original ruling text

Sep 03, 1993

RE: TAA 93A-058
Real Property Improvement Contract with Tax Exempt
Organizations
Section 212.08(7)(o), F.S.
Rule 12A-1.001(3)(a), F.A.C.

Dear :

This is in response to your letter dated March 23, 1993, in
which you requested a Technical Assistance Advisement regarding
the application of sales and use tax to building materials and
supplies when such materials and supplies will be used to
fulfill a real property improvement contract with a church. In
response to our subsequent letter of April 15, 1993, you have
also provided a copy of the prime contract between XXXXX
(hereinafter Prime Contractor) and XXXXX (hereinafter Church)
and a copy of an invoice issued by XXXXX (hereinafter Taxpayer)
to the Church.

FACTS PRESENTED

In your letter dated March 23, 1993, you provided the
following facts:

"Taxpayer has purchased laminated raw beams and decking from a
manufacturer. Taxpayer manufactures the laminated truss system
and sells it to the Church. The Church has issued their Order
to Purchase a complete XXXXX to Taxpayer. Taxpayer has a
contract with Prime Contractor to unload and install the... Roof
System.

"The Church would like to use its Florida Sales Tax Exemption
certificate to purchase building material from Taxpayer...

"The facts with respect to the entire transaction are as
follows:

"Taxpayer, as a subcontractor, submitted its quote on this
project to all contractors bidding this job. Prime
Contractor... was awarded this project. Taxpayer was the low
bidding subcontractor for the... Roof System and was
subsequently awarded the Order to Purchase materials from the
Church. Taxpayer has a contract with Prime Contractor to
install the material...."

RELEVANT AUTHORITY

Section 212.08(7)(o), F.S., provides in part:

"1. There are exempt from the tax imposed by this part
transactions involving:
"a. Sales or leases directly to churches...."
Rule 12A-1.001(3)(a), F.A.C., provides in part:

"A sale or lease directly to... churches... [is] exempt
from the tax imposed by Part I, Chapter 212, F.S.... However,
such institutions... desiring to qualify for the exemption must
obtain from the Department of Revenue a consumer's certificate
of exemption, and payment must be made directly to the dealer by
the exempt entity...."

DETERMINATION

Submitted for examination was a copy of the prime contract
between Prime Contractor and the Church; a copy of the contract
for installation labor between Prime Contractor and Taxpayer; a
copy of the Church's purchase order to Taxpayer; a copy of
Taxpayer's invoice to the Church; and a copy of the Church's
check No. 118 submitted as proof that the Church has made
payment directly to Taxpayer. These documents were examined and
were found to contain various provisions pertinent to the
subject of this advisement.

It is the Department of Revenue's position that the Church
will be making direct purchases of construction materials
directly from Taxpayer for the following reasons:

1. The prime contract between Prime Contractor and the Church
provides that the Church has an option to purchase construction
materials directly from vendors for the purpose of saving sales
tax;

2. The prime contract sum is reduced in an amount equal to the
   purchase price, including sales tax, of materials directly
   purchased by the Church by means of deductive change orders;

3. The Church executes the purchase orders for the construction
   materials it desires to purchase directly from vendors;

4. The Church acquires title to the construction materials at
   the point in time they are delivered to the job site;

5. The Church is named an additional insured party on all
   liability insurance required of the Prime Contractor;

6. Taxpayer has directly invoiced the Church for the
   construction materials it has purchased in its own name;

7. The Church has made payment directly to Taxpayer;

8. Taxpayer has entered into a labor contract with Prime
   Contractor for installation of the building materials purchased
   directly by the Church; and

9. The Church has obtained a consumer's certificate of exemption
   from the Department of Revenue which exemption number is
   incorporated into the language of the purchase order issued to
   Taxpayer.

Due to the facts as presented in this advisement, the
direct purchase of the XXXXX by the Church from Taxpayer is
exempt from sales tax as provided under s. 212.08(7)(o), F.S.,
and Rule 12A-1.001(3)(a), F.A.C.

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
Cont. #8550