Did machinery for a new commercial laundry qualify for Florida's new-business manufacturing exemption?

Subject

New Business Exemption

Plain-English summary

The commercial laundry's machinery did not qualify for the new-business exemption. The company washed hospital-owned linens and returned them to the owners, so the Department treated the activity as a service rather than making tangible personal property for sale.

The Department interpreted "for sale" to apply across manufacturing, processing, compounding, and producing. Spaceport activity was the separately stated exception where a product sale was not required.

What this means for you

New equipment and increased output were not enough. The business had to use the machinery in a qualifying goods-for-sale activity under the cited statute.

Common questions

Did cleaning linens count as processing? Not for the exemption, because no tangible property was sold.

Did the fact that hospitals used the linens matter? No.

Was the Department's original permit denial upheld? Yes.

Citations and references

• Fla. Stat. §§ 212.08(5)(b) and 213.22
• Fla. Admin. Code r. 12A-1.042

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94A-031

Original ruling text

May 12, 1994

Re: TAA 94A-031
Sales and Use Tax; New Business Exemption - XXXXX
Section 212.08(5)(b), F.S.

Dear:

This is in response to your letter of February 3, 1994,
requesting a Technical Assistance Advisement (TAA) on behalf of
your client, XXXXX [Taxpayer].

BACKGROUND

Since March 1, 1993, Taxpayer has operated a small
temporary commercial laundry facility. On September 7, 1993,
the Department received an Application for Temporary Tax
Exemption Permit, Form DR-1214, from Taxpayer for the purpose of
making tax exempt purchases of machinery and equipment under the
provisions of Section 212.08(5)(b)1., F.S., as a new business.
The machinery and equipment would be installed in a new facility
for the purpose of cleaning and processing linens used by area
hospitals. On September 10, 1993, the Department denied
Taxpayer's application based on the fact that Taxpayer did not
manufacture, process, compound, or produce items of tangible
personal property for sale.

RELEVANT AUTHORITY

The following passages from the Florida Statutes (F.S.) are
pertinent to Taxpayer's application for exemption.

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)

TAXPAYER'S POSITION

Your letter provides in significant part the following
analysis and request for a determination.

"It is the Department's analysis and application of the
pertinent statutory law with which the taxpayer
respectfully disagrees....

"It is clear that the Department's rejection of the
taxpayer's application was its view that the taxpayer would
not be using the new machinery and equipment for the
purpose of processing items of tangible personal property
for sale. But, the statute does not require that the items
of tangible personal property be processed for sale for the
machinery and equipment to be exempt.

"In its rejection letter the Department has rearranged the
words used in the statute. In the statute the words 'for

sale' modify only the word produce.' The wordsitems of
tangible personal property' are located after the spaceport
activities exemption clause, not after the word produce' and before the wordsfor sale' as the Department's letter
states. The only category where sale' of the tangible personal property is required for the exemption to apply isproduce for sale.' The words for sale' do not apply to any of the other four categories listed in the statute, including theprocess' category. Thus, the statute does
not require that items of tangible personal property
manufactured by such machinery and equipment be for sale' in order for the exemption to apply; it does [not?] require that items of tangible personal property to be compounded be for sale; nor does it require that items of machinery and equipment for exclusive use in spaceport activities be for sale. Each of the five categories --manufacture,'
process,'compound,' produce for sale,' andexclusive
use in spaceport facilities' -- has its own meaning and
each means something different than the other. Otherwise,
the legislature would not have created these separate,
distinct categories of exempt machinery and equipment.

If the legislature had intended to modify each category by
the words for sale' it would have done so. Indeed, the fact that the legislature chose to so modify only one category shows that it did not intend to so modify the other categories. It is a general rule of statutory construction that the mention of one thing in a statute implies the exclusion of another; expressio unius est exclusio alterius. Towerhouse Condominium, Inc. v. Millman, 475 So.2d 674 (Fla. 1985). It is axiomatic that it must be presumed that the legislature intended every part of a statute for a particular purpose and that effect should be given to each of its provisions. Vocelle v. Knight Bros. Paper Co., 118 So.2d 664 (Fla. 1st DCA 1960). Moreover, the categories in this statute are listed in the disjunctive -- the wordor' is used to separate the
categories of use. Use of the word `or' is generally
construed in the disjunctive in a statute, and normally
indicates that alternatives were intended. Sparkman v.
McClure, 498 So.2d 892 (Fla. 1986); Piper Aircraft Corp. v.

Schwendemann, 564 So.2d 546 (Fla. 3d DCA 1990).

"The title of the pertinent statutory provision (`Machinery
and equipment used to increase productive output') also is
instructive of the legislature's intent. Clearly, the new
machinery and equipment to be purchased by this taxpayer
for the purpose of processing linens for hospitals will
increase productive output. As a matter of sound public
policy, it should make no difference whether tangible
personal property is processed for sale or for a fee as
will be the case here. In either event there will be an
identical increase in productive output. In either event
sales tax must be paid by the party who purchased the
property or the party for whom it was processed for a fee.

"The taxpayer respectfully submits that it meets the
statutory test for a sales tax exemption because:
a. it is purchasing industrial machinery and equipment
b. for use in a new business
c. which will process items of tangible personal
property
d. at a fixed location.
Contrary to the interpretation stated in the Department's
rejection letter, there is no requirement in the statute
that items of tangible personal property be `processed for
sale' in order to be exempted by section
212.08(5)(b)1.[,F.S.]

"It is respectfully requested that the Department determine
that the taxpayer here was and is entitled to the sales tax
exemption for which it applied."

DETERMINATION

The special session of the 1978 Legislature passed Senate
Bill 1-D, which was enacted as Chapter 78-299, Laws of Florida.
A portion of this law was incorporated into Section 212.08(5),
F.S., by providing an exemption for machinery and equipment
purchased for use in new and expanding businesses "which
manufacture, process, compound, or produce for sale items of
tangible personal property."

The Department disagrees with your interpretation that the
words "for sale" only apply to the term "produce." The terms
"manufacture", "process", "compound", and "produce" are not
stand-alone concepts. Instead, they are all synonyms for
"making." The maxim of statutory construction of expressio
unius est exclusio alterius (the expression of one thing is the
exclusion of another) is appropriate in the understanding of
this statutory exemption.

Section 212.08(5)(b), F.S., is generally an exemption for
manufacturing businesses. However, if the statute only stated
"manufacturing," businesses that make tangible personal property
but are not in the common meaning "manufacturing" that product
would be excluded. For example, orange juice is considered to
be processed as opposed to manufactured and chemicals are often
considered to be compounded. Accordingly, the Legislature
intended to exempt a broad range of making activities by
specifically stating that manufacturing, processing,
compounding, and producing activities were eligible for the
exemption. The use of the word "or" preceding the word
"produce" is meant as a disjunctive offering choices between
manufacture, process, compound, and produce.

It was not necessary for the Legislature to have modified
each of the terms "manufacture", "process", "compound", and
"produce" by the words "for sale." Although stating "for sale"
after each term may have made the statutory intent clearer, such
language would have been grammatically very wordy.

In 1989, the Legislature enacted the Spaceport Florida
Authority Act, Chapter 89-300, Laws of Florida. In part, this
legislation amended Section 212.08(5)(b), F.S., by including
businesses which purchase machinery and equipment to
manufacture, process, compound, or produce tangible personal
property for exclusive use in spaceport activities. This is the
only category of the exemption where tangible personal property
does not have to be sold. The use of the word "or" preceding
the phrase "for exclusive use" is meant as a disjunctive
indicating that the previous activities are for sales purposes
while the subsequent activity is not for a sales purpose.

Taxpayer is a commercial laundry. Taxpayer receives soiled
linens belonging to others, washes the linens, and returns the
cleaned linens to the owners. Within this transaction, no sale
of tangible personal property has taken place. Taxpayer is
performing a service within the purview of Rule 12A-1.042,
F.A.C. Since Taxpayer is not manufacturing, processing,
compounding, or producing tangible personal property for sale,
nor for exclusive use in spaceport activities, Taxpayer is not
eligible for the exemption provided by Section 212.08(5)(b),
F.S.

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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