Could a supply-house vendor buy construction materials for resale and sell them tax-free directly to a Florida school board?

Subject

Sale of Construction Materials to Governmental Entity

Plain-English summary

The proposed direct sale of construction materials to the school board was exempt from Florida sales tax. The supply-house vendor would buy the materials for resale, then sell them directly to the board. The board would pay the vendor and receive title and possession when the materials reached the construction site.

The contractor could order and accept delivery on the board's behalf, but it would never take title or pay the vendor or suppliers. The vendor still needed a completed resale certificate for its own purchases and the school board's blanket exemption certificate for the exempt sale.

What this means for you

A government construction project did not automatically exempt a contractor's purchases. The Department approved this arrangement because the school board itself was the direct purchaser and payer and the contractor never became the owner of the materials.

Common questions

Q: Could the vendor buy the materials without tax? Yes, if it gave its suppliers the required resale certificate.

Q: Could the school board buy the materials without tax? Yes, if it paid the vendor directly and provided its blanket exemption certificate.

Q: Could the contractor place orders or accept delivery? Yes, as part of the stated arrangement, so long as title did not pass to the contractor and the contractor provided no consideration.

Citations and references

• Fla. Stat. § 212.08(6) — direct sales to governmental entities
• Fla. Admin. Code r. 12A-1.001(9)(a) — governmental-unit exemption
• Fla. Admin. Code r. 12A-1.038(1), (3) — resale and exemption certificates
• Fla. Admin. Code r. 12A-1.039 — blanket certificate form
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-076

Original ruling text

Dec 09, 1993

Re: TAA 93A-076
Sales and Use Tax - Sale of Construction Materials to
Governmental Entity
s. 212.08(6), F.S.
Rules 12A-1.001(9)(a), and 12A-1.038(1), (3), F.A.C.

Dear :

This is in response to your letter of September 17, 1993,
in which you request, on behalf of your client, XXX,
(hereinafter, Taxpayer) the issuance of a Technical Assistance
Advisement, regarding the application of sales and use tax to
construction materials purchased by Taxpayer for resale to a
governmental entity, XXX, (hereinafter, School Board). This
response to your request constitutes a Technical Assistance
Advisement under Chapter 12-11, F.A.C., and is issued to you
under the authority of s. 213.22, F.S.

FACTS

As ascertained from your letter, an unexecuted proposed
document entitled "Materials Purchase Agreement," and a "Special
Conditions to Material Purchase/Payment" (hereinafter, Special
Conditions) submitted for review, the following conclusions of
fact have been reached.

The parties in this proposed transaction are:

-

Taxpayer, who will act as the "supply house" vendor

through which contractors and subcontractors will be
required by the School Board to place all orders for
construction materials.
-

School Board is the owner of the construction site who

will enter into the proposed contract with Taxpayer to
provide all construction materials as ordered by the
contractors or subcontractors on the School Board's
purchase order.

-

Contractor or General Contractor is the entity which

has contracted with the School Board to undertake the
construction project for the School Board.
-

Subcontractor is a contractor who takes a portion of

the contract for the (general) contractor.

Taxpayer will enter into a contract with School Board to
act as a supply house for School Board's renovation project.
The contract will require Taxpayer to purchase construction
materials and sell these materials directly to School Board, as
directed by the School Board.

The contract will also require School Board to designate
Taxpayer as its authorized vendor of materials, thereby
requiring the contractor and subcontractor(s) to order the
construction materials for the project from Taxpayer. Taxpayer
will provide School Board with specifications relating to the
purchase and payment of materials that it will furnish to School
Board, and School Board will be required to include these
specifications in the supplementary conditions of its contract
with the general contractor. To this extent, the Special
Conditions provides:

"I. General
"A. Overview
"1. The applicable sales tax for this project is ___%. In
preparation of their bids on this project all bidders shall
use this rate in calculating the sales tax on materials
that will be delivered F.O.B. jobsite. This would also
include those materials that would come from a bidder's
fabrication facility.

"3. The Owner [(School Board)] has contracted with
[Taxpayer] to purchase certain construction materials, up
to agreed upon limits, on this project. These special
conditions contain specific instructions, requirements and
forms to be used by all contractors and material suppliers
with regard to ordering, shipping, billing and paying of
materials on this project. Where these special conditions
conflict with other sections of the specifications or
contract between the CONTRACTOR and the OWNER then the

spacial conditions shall take precedence."

At the time of purchase, Taxpayer will provide the material
vendor(s) with a blanket resale and exemption certificate.
Taxpayer will be invoiced by the material vendor(s), and will
remit to the vendor(s) payment due upon receipt of the School
Board's payment for such construction materials. Taxpayer will
obtain title and possession of the materials from the vendor(s)
and be responsible for the delivery of these materials to the
construction site.

Title to and possession of the materials will transfer
directly from Taxpayer to School Board upon delivery of those
materials to the construction site. Although the contractor may
accept the materials on behalf of School Board, at no time will
title to these materials vest in the contractor, nor will the
contractor provide any consideration to Taxpayer or to the
vendor(s) for these materials.

RELEVANT PROVISIONS

The following provisions of the Florida Statutes (F.S.) and
the Florida Administrative Code (F.A.C.), are pertinent to the
issues presented by the aforementioned transaction.

Section 212.08, F.S., provides:

"(6) EXEMPTIONS; POLITICAL SUBDIVISIONS. - There are also
exempt from the tax imposed by this chapter sales made to
the United States Government, a state, or any county,
municipality, or political subdivision of a state when
payment is made directly to the dealer by the governmental
entity..."

In light of this statute, the Department has promulgated
Rule 12A-1.001, F.A.C., which provides, in pertinent part, as
follows:

"(9) GOVERNMENTAL UNITS.
"(a) All sales made directly to the United States
Government, a state, or any county, municipality, or

political subdivision of a state are exempt,.... Payment
must be made directly to the dealer by the governmental
entity of a state, or county, municipality, or political
subdivision of a state.... Such governmental entities
desiring to qualify for the exemption, must obtain from the
Department of Revenue a consumer's certificate of
exemption..."

Rule 12A-1.038, F.A.C., provides, in pertinent part, as
follows:

"(1) It is the specific legislative intent that every
sale,... is taxable under Chapter 212, F.S., unless such
sale, admission, use, storage, consumption or rental is
specifically exempt. The exempt status of the transaction
must be established by the dealer. Unless the dealer shall
have taken from the purchaser a certificate to the effect
that the property or service was purchased for resale and
bearing the name and address of the purchaser, the
effective date of the certificate and the number of his
dealer's certificate of registration, or a certificate
bearing the number of his consumer's exemption certificate,
and the effective date of the certificate, the sale shall
be deemed to be a taxable sale at retail..."

"(3) A resale certificate is required from every purchaser
who purchases tangible personal property or service for
resale,... Otherwise, the dealer will be required to
collect and remit the tax to the Department of Revenue... "

DISCUSSION

Florida sales and use tax is an excise tax, levied in the
chain of manufacture and distribution, imposed for exercising
the privilege of selling, using, consuming or renting items of
tangible personal property or services that are taxable in this
state. When tangible personal property is sold at retail, tax
is due and payable based on the sales price and is collectible
by the dealer from the purchaser. However, when such items are
not purchased for sale but are used, consumed, distributed or
stored for use or consumption in this state, tax is due and

payable based on the cost price by such user or consumer. Since
the sale or purchase of real property is not subject to Florida
sales or use tax, tangible personal property which becomes real
property is taxed at the last transaction prior to being
converted into real property.

The parties to this proposed transaction include a
governmental entity; therefore, the Department must look to s.
212.08(6), F.S., and Rule 12A-1.001(9)(a), F.A.C., supra. These
provisions state that sales made directly to the United States
Government, a state, or any county, municipality, or political
subdivision of a state are exempt, when payment is made directly
to the dealer by the governmental entity.

Therefore, in compliance with s. 212.08(6), F.S., and Rule
12A-1.001, F.A.C., when Taxpayer, the "supply house" dealer of
the construction materials, sells these materials directly to
School Board, a governmental entity, such sales are exempt from
sales tax. However, Taxpayer is required to obtain from School
Board its blanket exemption certificate as provided in Rule 12A1.039, F.A.C., in order to make sales to School Board tax
exempt.

With regard to Taxpayer's purchase of the construction
materials and supplies, Rule 12A-1.038(1), F.A.C., provides that
a sale is exempt from tax if, at the time of purchase, the
dealer (seller) takes from the purchaser a certificate to the
effect that the property is purchased for resale. The
application of Rule 12A-1.038, F.A.C., to Taxpayer's case,
provides that Taxpayer may purchase the construction materials
for resale to the School Board, exempt from sales tax liability,
insofar as Taxpayer complies with the requirements of Rule 12A1.038, F.A.C.

Rule 12A-1.038(3), F.A.C., provides that a completed resale
certificate is required from every purchaser who purchases
tangible personal property for resale, subject to the provisions
of subsection 12A-1.038(1), F.A.C.; otherwise the selling dealer
will be required to collect and remit the tax to the Department.

The Department does not supply dealers with preprinted

forms which meet the standards of Rule 12A-1.038, F.A.C., and
has therefore promulgated Rule 12A-1.039, F.A.C., providing only
a suggested form for a blanket resale and exemption certificate
that meets the minimum requirements of Rule 12A-1.038, F.A.C.
(A copy of Rules 12A-1.038 and 12A-1.039 is enclosed for your
review).

Please be advised that a blanket resale certificate does
not expire, as this is not a document issued by the Department.
It may continue to be used until the issuer, in this case
Taxpayer, revokes it by written notice to the supplier, or until
such time as the Florida Department of Revenue cancels
Taxpayer's tax registration, should such an event occur.

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
based 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,

Nydia Men‚ndez
Technical Assistant

NM/pb
Con. #10975