When did multiple deliveries under a purchase order count as one sale for Florida's $5,000 discretionary-surtax cap?

Subject

Limitation of Surtax/Purchase of Tangible Personal Property

Plain-English summary

A fixed-quantity order with a definite delivery period could count as one sale for the $5,000 surtax cap even when delivered and invoiced in installments. Twenty bulk-ordered junction boxes were one sale, and 2,600 receivers scheduled for monthly delivery under one definite order were also one sale.

An authorized later delivery date changed the order's status and made deliveries separate for the cap. A two-year requirements order that stated no unit quantity also made each delivery a separate sale.

What this means for you

The cap depended on written specificity. Quantity and delivery time had to be definite; invoice count alone did not control.

Common questions

Did separate monthly invoices split a definite receiver order? No.

Did a delivery-date extension matter? Yes; the ruling treated deliveries separately after the alternate date was authorized.

Was a dollar ceiling enough for a requirements order? No, without a specified unit quantity.

Citations and references

• Fla. Admin. Code r. 12A-15.004(2)
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94A-026

Original ruling text

Title:

Limitation of Surtax/Purchase of Tangible Personal
Property

Apr 25, 1994

Re: TAA 94A-026
Sales Tax - Limitation of Surtax on First $5,000 of the
Purchase Price of Tangible Personal Property
Rule 12A-15, F.A.C.

Dear:

This is in response to your letter to the Department, dated
February 3, 1994, regarding the above referenced issue. The
Department hereby acknowledges and responds to your request for
a Technical Assistance Advisement (TAA) pursuant to s. 213.22,
F.S.

FACTS

XXX (hereinafter, Taxpayer), a municipal electric utility,
issues written purchase orders with specified due dates and
specified quantities. However, in some cases the quantity of
product ordered is stated in terms of a time period (i.e., one
year supply) instead of specifying a number of units.

In some cases where the number of units is specified, the
vendor is unable to deliver all or a portion of the shipment on
or before the specified delivery date on the original purchase
order. In this situation, any portion of the shipment that has
not been delivered to Taxpayer on or before the delivery date
specified on the purchase order is subject to cancellation by
Taxpayer. However, Taxpayer has the option of extending the
specified delivery date on the purchase order.

Taxpayer requests clarification regarding Rule 12A15.004(2), F.A.C., as it applies to purchase orders for "all
requirements," and purchase orders that are not completed on or
before the specified delivery date. Towards this end Taxpayer

requests a determination from the Department of those items in
the following four transactions, and inquires whether such sales
may be treated as one sale for purposes of the $5,000 surtax
limitation.

Enclosed with your letter and reviewed by this writer were
the Exhibits A, B, C, and D, sample purchase orders to accompany
transactions a., b., c, and d., respectively.

REGULATORY PROVISIONS

The following provisions from the Florida Administrative
Code (F.A.C.) are pertinent to the issues raised in your letter.

Rule 12A-15.004, F.A.C., provides:

"(2)(a)1. The surtax does not apply to the sales amount
above $5,000 on any item of tangible personal property.
However, the surtax does apply to the first $5,000 of the
sales amount on any item of tangible personal property and
to all other transactions which are subject to the state
tax imposed on sales, use, rentals, and other transactions
by Part I, Chapter 212, F.S., without limitation, except as
provided in (3) below.

"(b)1. For purposes of administering the $5,000 limitation
on any item of tangible personal property, if two or more
taxable items of tangible personal property are sold to the
same purchaser at the same time and, under generally
accepted business practice or industry standards or usage,
are normally sold in bulk or are items which, when
assembled, comprise a working unit or part of a working
unit, such items shall be considered a single item for
purposes of the $5,000 limitation when supported by a
charge ticket, sales slip, invoice, or other tangible
evidence of a single sale or rental.

"(d) Where a purchase order is issued by the purchaser to
the selling dealer, or an agreement is made between the
selling dealer and the purchaser which is reduced to
writing, that provides for the purchase of a specific

quantity of tangible personal property which, according to
the terms and conditions set out in the purchase order or
agreement, is to be delivered to the purchaser within a
definite specified time, such transaction constitutes one
sale for purposes of the $5000 limitation. Delivery of the
tangible personal property so ordered within the time
specified in the purchase order or agreement will
constitute one sale notwithstanding that due to the nature
of the property it must be delivered in installments or
that multiple deliveries may be necessary to consummate
delivery to the purchaser. In the absence of a written
purchase order or written agreement reflecting the above
conditions, each individual delivery of tangible personal
property is to be considered one sale. Each individual
delivery of tangible personal property on purchase orders
for indefinite quantities or open-end purchase orders is
considered to be one sale." (Emphasis added.)

The transactions presented by you will be quoted below and
the questions pertaining to each transaction will be responded
to separately.

TRANSACTION a. Taxpayer issued a written purchase order for
twenty secondary junction boxes, which could have been
purchased individually or in quantity, for a total of
$5,950. Due to the higher shipping cost associated with
individual deliveries and volume discounts, it is customary
throughout the industry to order several units at the same
time. All of the units were delivered together, at the
same time. Therefore, you conclude, it appears that the
twenty units comprise one "sale" and $950 ($5,950 - $5,000)
is not subject to the surtax pursuant to paragraphs 12A15.004(2)(b) and (d), F.A.C.

QUESTION Should the surtax have applied to only $5,000 of
the $5,950, when all twenty units were delivered at the
same time pursuant to a written purchase order?

DEPARTMENT'S RESPONSE TO TRANSACTION a.

Rule 12A-15.004(2)(b)1., F.A.C., provides that if two or

more taxable items of tangible personal property are sold to the
same purchaser at the same time and are normally sold in bulk,
or are items which when assembled comprise a working unit, then
they are considered a single sale/item for purposes of the
$5,000 limitation. If the items sold are not normally sold in
bulk or are not part of a working unit then surtax is due on
each item sold up to the first $5,000 of each item's sales
price. Since you state that it is customary to order several
units of secondary junction boxes at the same time, a purchase
order of twenty such items would be considered one sale, and you
have correctly concluded that the first $5,000 will be subject
to surtax and the remaining $950 will not.

TRANSACTION b. Taxpayer issued a written purchase order for
75 street light heads ($5,995.50), 200 lamps ($1,938.00)
and 150 brackets ($951.00), with a specified delivery date
of July 1, 1993. The street light heads and the lamps were
delivered on or before the due date; however, the heads
were delivered on June 1, and the lamps are delivered on
June 2, and the two deliveries were separately invoiced.
The brackets were not delivered until July 29, well after
the due date, and were also separately invoiced.

Taxpayer's Position: Pursuant to Rule 12A-15.004(2)(d),
F.A.C., and TAA 93A-025, it appears that the heads and the
lamps should be treated as one sale for purposes of
applying the $5,000 surtax limit, and $2,933 ([$5,995.50 +
$1,938.00] - $5,000) of the sale should not subject to the
surtax.

However, it is unclear whether the brackets were part of
the same sale since they were not delivered within the due
date specified on the purchase order, even though Taxpayer
authorized a delivery date that was later than the delivery
date on the original purchase order.

QUESTIONS Should the heads and lamps have been treated as
one sale, thereby exempting $2,933 from the surtax?

Should all of the items listed on the purchase order have
been considered one "sale" if Taxpayer authorized a later

delivery date than the date specified on the original
purchase order, and all of the items were delivered prior
to the revised date?

DEPARTMENT'S RESPONSE TO TRANSACTION b.

Rule 12A-15.004, F.A.C., provides that where a purchase
order or an agreement is for the purchase of a specific quantity
of tangible personal property (normally sold in bulk quantities)
which, according to the terms and conditions set out in the
purchase order or agreement, is to be delivered to the purchaser
within a definite specified time, such transaction constitutes
one sale for purposes of the $5000 surtax limitation. The
delivery of the tangible personal property so ordered within the
time specified in the purchase order or agreement will
constitute one sale notwithstanding that due to the nature of
the property it must be delivered in installments or that
multiple deliveries may be necessary to consummate delivery to
the purchaser.

Therefore, when Taxpayer ordered, in the same purchase
order, specific quantities of street light heads, lamps and
brackets, which were supposed to be delivered on a specified
date, then it should have been considered one sale for purposes
of the $5000 surtax limitation, notwithstanding the fact that
the items ordered were delivered on different dates. However,
the fact Taxpayer authorized a later delivery date changes the
status of the order from having a definite specified date to an
order which authorized an alternate delivery date; thus, each
individual delivery of tangible personal property would
constitute an individual sale for the $5000 limitation.
Moreover, since the brackets were not specified on the same
purchase order, then they cannot be included as part of that one
sale.

Also, please be advised that in the absence of a written
purchase order or written agreement reflecting the above
conditions, each individual delivery of tangible personal
property is to be considered one sale.

TRANSACTION c. Taxpayer issued a written purchase order for

2600 load control receivers, to be shipped at the rate of
480 units per month. The purchase order states a delivery
date. Each monthly delivery has been, and will be, invoiced
separately.

Taxpayer's Position Pursuant to Rule 12A-15.004(2)(d),
F.A.C., and TAA 93A-025, it appears that the entire amount
of the purchase order should be treated as one sale for
purposes of applying the $5,000 surtax limit even if each
monthly delivery is separately invoiced.

QUESTION Should the entire purchase order have been treated
as one sale, thereby exempting $177,260.00 ($182,260 $5,000) from the surtax even though the vendor separately
invoices for each monthly delivery?

DEPARTMENT'S RESPONSE TO TRANSACTION c.

As provided in my response to transaction b., Rule 12A15.004, F.A.C., provides that if the purchase order or agreement
specifies the quantity of tangible personal property, and a
definite delivery time, such transaction constitutes one sale
for purposes of the $5000 surtax limitation. The fact that each
delivery is to be invoiced separately does not alter the
application of the $5000 limitation, insofar as a definite
amount of items and a definite delivery date are specified.

TRANSACTION d. Taxpayer issued a written purchase order for
its two year requirement of water treatment chemicals. The
purchase order specified a time period and a delivery date,
but the number of units to be purchased was not specified.
The chemicals will be delivered as required, and invoiced
upon delivery. The purchase order stated a maximum
aggregate sales amount of $112,434.80.

Taxpayer's Position Pursuant to Rule 12A-15.004(2)(d),
F.A.C., it appears that each delivery should be treated as
one sale for purposes of applying the $5,000 surtax limit
unless "TWO YEAR REQUIREMENT" satisfies the specific
quantity requirement.

DEPARTMENT'S RESPONSE TO TRANSACTION d.

As provided in my response to transactions b. and c., Rule
12A-15.004, F.A.C., requires that the purchase order or
agreement specify a definite delivery time and the quantity of
tangible personal property in order that such transaction be
considered one sale for purposes of the $5000 limitation.
Therefore, you correctly conclude that each delivery would
constitute a separate sale because the purchase order(s) or
agreement(s) does not specify the number of units to be
purchased.

Please be advised that the preliminary determinations
reached herein are subject to audit verification.

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
Tax Law Specialist

NM