Were factory-built bank kiosks installed on customer-owned or leased land real-property improvements or taxable tangible property?

Subject

Importing and Installing Factory-Built Buildings

Plain-English summary

A kiosk was a real-property improvement when the purchaser intended permanent installation and title passed to the landowner. Under a lump-sum contract, the company was then the consumer of fabrication materials and owed Florida use tax on cost, reduced by qualifying tax paid to another state.

If a customer leasing the site intended to remove the kiosk, it remained tangible personal property and Florida sales tax applied to the full sales price, including installation. Without a lease or other document showing the kiosk would remain with the realty after lease expiration, Florida would treat a leased-site kiosk as tangible property.

What this means for you

Identical physical installation methods could produce different tax results because permanent intent and title disposition were central fixture tests.

Common questions

Did installation on leased land automatically make a kiosk personal property? No, but permanent-retention documentation was required.

What if the lessee planned to remove it? The kiosk was taxable tangible personal property.

Was other-state tax credited? Yes, with Florida use tax due for any shortfall against Florida's rate.

Citations and references

• Fla. Stat. §§ 212.02(4), 212.02(10)(h), 212.06(1)(b), and 213.22
• Fla. Admin. Code rr. 12A-1.051(2)(e) and 12A-1.091(3)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94A-002

Original ruling text

Jan 07, 1994

RE: TAA 94A-002
Sales Tax; Importing and Installing Factory-Built Buildings
Sections 212.02(4)(10)(h), 212.06(1)(b), F.S.
Rules 12A-1.051(2)(e), 12A-1.091(3), F.A.C.

Dear :

This is in response to your letter dated July 7, 1992,
which requested a technical assistance advisement (TAA)
regarding the proper method of applying Florida's sales and use
tax on tangible personal property fabricated by XXX [hereinafter
the Company] and installed by Company on property either owned
or leased by its customers. At issue is whether improvements
made by the Company on realty leased by its customers constitute
improvements to real property or leasehold improvements which
remain as tangible personal property.

It is your contention that when the Company enters into a
lump sum contract to furnish and install kiosks it is performing
an improvement to real property regardless of whether the kiosks
are installed on property owned or leased by its customers.

As stated in your letter, the kiosks are constructed by the
Company in XXX and trucked to the job site for installation by
Company employees. The kiosks are integrated into the walls of
existing bank buildings or set up as separate structures. The
kiosks may also be installed into the ground in places such as
shopping center parking lots.

On April 23, 1992, the Company was issued a letter from Ms.
Nancy Porch, Special Programs Supervisor, which stated that if
the buildings manufactured are sold and installed on property
not belonging to the purchaser they are considered tangible
personal property and are taxable on the total sales amount,
including installation.

Your letter provides in part:

"The Company takes issue with the determination regarding
installations on leased property. The Company and several
states we do business in, agree that our products are
improvements to real property and, as such, we pay sales
tax on all materials and supplies we purchase. We do not
charge sales tax on our kiosks nor do we have resale
certificates on file in any state. No state, other than
Florida has ever attempted to classify our construction as
tangible personal property. And even Florida agrees that
our products are improvements to real property when
installed on property owned by our customers.

"... there is no question that our products are
improvements to real property. And there is also
absolutely no difference in the installation, trenching, or
wiring methods used on kiosks, whether installed on
property owned by the purchaser, or leased by the
purchaser. Our product is the same product in either case.
We contend that an attempt to make any distinction that
doesn't exist is arbitrary, not statutory. The Company
wonders how many XXX or XXX you've collected tax from on
their buildings installed on leased property."

Accompanying your request are two photographs of completed
kiosks manufactured and installed by your firm and a blank
contract for the purchase of a kiosk.

RESPONSE

Section 212.02(10)(h), F.S., defines real property as "the
surface land, improvements thereto, and fixtures, and is
synonymous with realty' andreal estate'".

In Commercial Finance Co. v. Brooksville Hotel Co., 123 So.
814, 816 (Fla. 1929), the Court cited and quoted Seedhouse v.
Broward, 16 So. 425, 429 (Fla. 1894), "'In establishing the fact
whether a given thing is or is not a fixture upon land, the
intention of the owner in placing it there, to be gathered from
his declarations, and from the character, relations, and
purposes of the property, is an important element, sometimes of

controlling importance.'" (Emphasis Supplied by the Court) 27
Fla Jur 2d, Fixtures Sec. 4.

In Strickland's Mayport, Inc. and B.J. Strickland, Jr. v.
Kingsley Bank, 449 So.2d 928 (Fla. DCA 1984) the First District
Court of Appeal cited Commercial Finance Co. v. Brooksville
Hotel Co., supra, stating: "... the Florida Supreme Court set
out a three-part test for determining whether an object is a
fixture or personalty:

"1. Is there actual annexation to the realty or something
appurtenant thereto?
"2. Is the item in question appropriately applied to the
use or purpose of that part of the realty to which it is
connected?
"3. Did the party making the annexation intend the item to
be a permanent accession to the freehold?

"If the answer to these three questions is yes, the object
is a fixture."

As contained in 27 Fla Jur 2d, Fixtures Sec. 4, citing
Commercial Finance Co., supra; Greenwald v. Graham, 130 So. 608
(Fla. 1930): "Of the three tests previously mentioned, the
third--the intention of the party making the annexation--is
generally considered to be the chief test."

Judge Ellis, in Commercial Finance Co. v. Brooksville Hotel
Co., supra, stated: "... What the intention was in making the
annexation is inferred from the following facts: (a) The nature
of the article annexed; (b) the relation of the party making the
annexation; (c) the structure and mode of annexation; and (d)
the purpose or use for which the annexation has been made....

"The chattel was not owned by the owner of the freehold;
the purpose of the owner of the chattel was that it should
remain personal property until paid for; in this purpose
the owner of the freehold participated. They both
contemplated the possibility of its removal and made
provisions in the contract for such an event. They both
agreed that the owner of the chattel might repossess it at

any time the owner of the land should make default in the
payments, and that the title to the chattel should remain
in the seller until the thing was paid for, which is
inconsistent with the idea that it should become a part of
the land."

Improvement to Real Property

The Company's contract provides that the purchaser of the
kiosk is responsible for providing all necessary concrete work,
masonry, openings, curbing, foundations, pits, tunnels, culvert,
piping, canopies, proper drainage, and so forth prior to the
kiosk's installation. Should the entity purchasing the kiosk
intend for the improvement to be one of a permanent nature
(i.e., title to the kiosk passes to the owner of the land) then
the Company's installation of the kiosk appears to meet the
needed criteria to qualify as an improvement to real property.

As provided in Rule 12A-1.051(2)(e), F.A.C., lump sum
contractors are deemed to be the ultimate consumers of materials
and supplies used by them in fulfilling contracts to improve
real property. Section 212.06(1)(b), F.S., further provides
that a person shall pay tax only on the cost price of items used
in the manufacture of factory-built buildings for his own use in
the performance of contracts for the improvement of real
property.

Rule 12A-1.091(3), F.A.C., provides in part:

"... If the amount of tax so lawfully imposed and paid in
another state, territory of the United States, or the
District of Columbia is not equal to or greater than the
amount of tax imposed by Chapter 212, F.S., then the person
from whom the use tax is due shall pay to the Department of
Revenue an amount sufficient to make the tax paid in the
other state, territory of the United States, or the
District of Columbia and in this state equal to the amount
imposed by that Chapter."

Therefore, when the Company fabricates kiosks out-of-state
and transports them to Florida it may owe use tax to the state

of Florida. Chapter 212, F.S., currently imposes tax at the
rate of six percent on tangible personal property imported for
use, consumption or storage within this state. If tax was paid
to the state of XXX at the rate of three percent on purchases of
materials and supplies used in the manufacture of the kiosks
then use tax is due the state of Florida at the rate of three
percent.

Tangible Personal Property

However, should the entity purchasing the kiosk intend to
remove the kiosk from the leased realty upon which it is affixed
then the improvement would not meet the criteria cited above to
classify an object as a fixture. The kiosk would be deemed to
be tangible personal property. Florida sales tax would be due
on the total sales price, including any installation charges.

This is consistent with Florida law which also recognizes
contracts with retained title clauses as sales of tangible
personal property.

Therefore, unless the Company obtains from the lessee a
copy of his lease agreement or such other documentation which
provides that the kiosks are to remain as a structure of the
realty once the lease has expired we would deem such kiosk to be
tangible personal property when installed on leased property.

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,

Betsy Turner
Technical Assistant
Statutory Compliance Section
BT/
CC: Ms. Nancy Porch,
Special Programs Analyst