Could a proposed Florida facility producing customized forms claim the new-business machinery and equipment exemption?

Subject

New Business Exemption

Plain-English summary

The proposed customized-forms facility did not qualify for the new-business machinery and equipment exemption under the statute then in effect. The company described a multi-step manufacturing process using blank paper stock, electronic publishing systems, presses, and collators, but the statute specifically excluded printing and publishing firms.

The Department noted that pending House Bill 1119 could make such firms eligible if enacted with a July 1, 1994 effective date. That was a legislative possibility, not the basis of this ruling's denial.

What this means for you

Characterizing the work as manufacturing did not overcome an express industry exclusion. This is historical guidance tied to the February 1994 statute and a proposed facility that had not yet been built.

Common questions

Did Florida dispute that the process involved manufacturing steps? The determination did not need to resolve that point because printing and publishing firms were expressly excluded.

What purchases did the company want exempted? Industrial machinery and equipment used or integral to the proposed manufacturing process.

Did the ruling say House Bill 1119 had become law? No. It said the bill had been introduced and described what would follow if it passed.

Citations and references

• Fla. Stat. §§ 212.08(5)(b)1., 212.08(5)(b)5., and 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94A-017

Original ruling text

Feb 22, 1994

Re: TAA #94A-017
Sales and Use Tax
New Business Exemption
Section 212.08(5)(b)1., F.S.

Dear:

This is in response to your letter of February 14, 1994,
requesting a Technical Assistance Advisement (TAA) concerning
XXXXX ["Corporation"] eligibility to qualify for an exemption
from sales and use taxes as a new business pursuant to Section
212.08(5)(b)1., F.S.

FACTS

Corporation is considering the purchase of some vacant land
in unincorporated XXXX. The purpose of acquiring this land
would be to construct a manufacturing and warehousing facility.
The cost of this facility, if constructed, would be in excess of
$XXX. It is intended that this facility would produce
customized forms and other documents from blank paper stock on a
quick-response basis. These forms and other documents would be
produced using electronic publishing systems, wet offset
presses, and multi-station collators.

It is your contention that Corporation is a manufacturer
and eligible for the exemption as a new business. In support of
this argument, your letter provides in part the following:

"`Corporation' is a manufacturer in every sense of the word
by virtue of the following steps that are integral to the
manufacturing process:

"1. The manufacturing process begins with the computer
composition, i.e., a screen layout of the form necessary
for proofing.

"2. Direct-to-Plate technology will be used to create the
multi-use plate which contains the impression of the form.

"3. Production process begins by installing on the
printing machine a plain web roll of paper stock, standing
4 feet high and weighing up to 2,400 pounds. Many of these
forms will be produced using recycled raw materials.

"4. The product, now in the work in process stage, is
moved over to the bindery/converting so that each
separated, manufactured form can be collated into one
multiple form. Now the completed form can be variably
imaged to the customer's specifications. Additionally,
other personalization and value added services can be
performed at this time.

"5. The finished product is packaged in its own box and
taped. Next, several packaged boxes are placed upon a
pallet and stretch wrapped as one unit for either immediate
shipment to its intended destination(s) or storage in the
warehouse. `On demand' distribution from this plant via a
sophisticated computer network, gives the customer the
flexibility they need in managing their product needs and
costs....

"The term manufacture' is not defined anywhere in Statute Section 212.08 or Rule 12A-1.096. Therefore, in accordance with the rules of statutory construction, a term or word should be afforded its plain and ordinary, i.e., every day meaning. Referring to Webster's Ninth New Collegiate Dictionary, the word manufacture is defined, as follows:[T]o make from raw materials by hand or by machinery; (b)
to produce according to an organized plan and with division
of labor.'

...

"Therefore, based upon the foregoing arguments and pursuant
to Florida Statute Section 213.22, `Corporation'
respectfully requests a binding written Technical

Assistance Advisement determining that `Corporation' is
eligible for the exemption from sales/use tax as authorized
by [Section 212.08(5)(b)1., F.S.,] and that said exemption
is applicable to all purchases of industrial machinery and
equipment used or integral to the manufacturing
process...."

RELEVANT AUTHORITY

The following passages from the Florida Statutes (F.S.) are
pertinent to your request.

Section 212.08(5)(b), F.S., provides in part:

"(b) Machinery and equipment used to increase productive
output.
"1. Industrial machinery and equipment purchased for use in
new businesses which manufacture, process, compound, or
produce for sale, or for exclusive use in spaceport
activities as defined in s. 212.02, items of tangible
personal property at fixed locations are exempt from the
tax imposed by this chapter upon an affirmative showing by
the taxpayer to the satisfaction of the department that
such items are used in a new business in this state. Such
purchases must be made prior to the date the business first
begins its productive operations, and delivery of the
purchased item must be made within 12 months of that date.
...
"5. The exemptions provided in subparagraphs 1. and 2. do
not apply to machinery or equipment purchased or used by
electric utility companies, communications companies,
phosphate or other solid minerals severance, mining, or
processing operations, oil or gas exploration or production
operations, printing or publishing firms, any firm subject
to regulation by the Division of Hotels and Restaurants of
the Department of Business Regulation, or any firm which
does not manufacture, process, compound, or produce for
sale, or for exclusive use in spaceport activities as
defined in s. 212.02, items of tangible personal property."
(Emphasis Supplied)

DETERMINATION

When the Legislature created the statute which provides an
exemption from sales and use tax on qualifying machinery and
equipment, it made the exemption available to businesses that
manufacture, process, compound, or produce tangible personal
property for sale. At the same time, the Legislature also
provided that certain industries, including printing and
publishing firms, would not be eligible for the exemption.

Since the statute specifically excludes printing or
publishing firms from qualifying for the exemption, regrettably,
Corporation's proposed XXXXX facility will not be eligible for
the new business exemption on purchases of machinery and
equipment under the current statutory language.

As you are aware, House Bill 1119 has been introduced for
consideration by the 1994 Legislature. This bill, if passed,
would make printing and publishing firms eligible for the new
and expanding business exemption effective July 1, 1994. In
that event, based on the information that you have provided, I
feel confident that the Department would, at that time, be able
to approve Corporation's application for exemption.

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 advise 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 advise 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 Section 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 response.

Sincerely,

Jeffery L. Soff
Tax Law Specialist
Statutory Compliance

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