Which fuels, machinery, purchases, labor, and engineering charges at a Florida municipal power plant were exempt from sales tax?

Subject

Machinery and Equipment Used in Production of Electrical Energy

Plain-English summary

The described coal and refuse-derived fuel were exempt, and most of the listed machinery and equipment qualified for the electrical-generation exemption under the integrated-plant approach. The Department approved the furnace, boiler, turbine generator, most coal and refuse handling equipment, pollution-control systems, wastewater and process-water systems, condensate polisher, and cooling tower. It rejected the listed bottom-dumping railroad cars, thickener tank, CSI facility, and landfill under that machinery exemption.

Direct municipal purchases of qualifying property could be exempt, but materials bought by a contractor for a public-works project were taxable to the contractor as ultimate consumer. A municipality seeking direct-purchase treatment had to issue its own purchase orders, buy and pay vendors directly, take title and possession before incorporation, bear risk and insurance costs, and adjust contractor bonds and insurance.

The ruling also rejected the idea that every plant repair or replacement automatically became a real-property improvement. Repairs involving furnished parts were taxable unless the property itself qualified for an exemption; labor-only repairs required records proving no property was supplied. Professional engineering services were exempt when they did not include sales of tangible property.

What this means for you

The ruling applies several separate exemptions and cannot be reduced to "municipal power-plant purchases are exempt." Equipment function, who buys the property, whether a contractor is the consumer, the labor-material mix, and the exemption-affidavit procedure all matter.

Common questions

Were coal and refuse-derived fuel exempt? Yes, on the described utility-generation use.

Did every listed plant system qualify under the generation-machinery exemption? No. Four listed categories were rejected.

Were contractor purchases exempt because the project was municipal? No. Public-works materials purchased by the contractor were taxable to the contractor.

Could the municipality buy materials directly without tax? Yes, if it followed the direct-purchase controls described in the ruling.

Were all repair labor charges exempt? No. The answer depended on whether parts were furnished and whether the repaired property independently qualified for exemption.

Citations and references

• Fla. Stat. §§ 212.02(10)(h), 212.08(5)(c), (6), (7)(v)1., 212.085, 213.22, and 403.703(13)
• Fla. Admin. Code rr. 12A-1.001, 12A-1.006, 12A-1.051, 12A-1.059, and 12A-1.094
• Jacksonville Electric Authority v. Department of Revenue, 486 So. 2d 1350 (Fla. 1st DCA 1986)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94A-041

Original ruling text

Jul 14, 1994

Re: Technical Assistance Advisement 94A-041
Sales and Use Tax; Machinery and Equipment Used in
Production of Electrical Energy.
Sections: 212.08(5)(c); 212.08(6); 212.08(7)(v)1., F.S.
Rules: 12A-1.001; 12A-1.006; 12A-1.051; 12A-1.059; 12A1.094, F.A.C.

Dear :

This is in response to your letter of February 3, 1994,
wherein you requested a technical assistance advisement
concerning the exemption of pulverized coal and refuse derived
fuel used in the generation of electrical power, the replacement
and repair of machinery and equipment for an existing electric
generating plant, as well as the identification of necessary and
qualifying exemptions. Your request is on behalf of the XXX
(hereafter "Municipality"), which operates XXX (hereafter
"Plant") together with the XXX (hereafter "Utility").

FACTS

Your letter provides the following relevant facts:

"1. [Municipality] (a municipality) and [Utility] (a
municipally-owned electric utility) jointly own and operate
[Plant], which is an existing electric generating plant.
Pulverized coal is the primary boiler fuel burned by
[Plant] to produce electricity. The secondary fuel is
refuse derived fuel. Rule 12A-1.059(10), F.A.C., does not
include coal or refuse derived fuel in the list of fuels
that are residual oil'. "2. The furnace, boiler and turbine generator equipment for [Plant] are used at a fixed location. (See exhibitA' for
a general list of [Plant's] machinery and equipment; see
exhibit `B' for a general description of the power plant.)
From time to time, this equipment must be replaced or
repaired.

"`NECESSARY' MACHINERY AND EQUIPMENT

"Most of the items listed in exhibit A' are machinery and equipment that isnecessary in the production of electric
or steam energy resulting from the burning of boiler fuels
other than residual oil.' Section 212.08(5)(c), F.S.
Therefore, any replacement of, or repair to, the machinery
and equipment listed in exhibit A' should be entitled to the sales tax exemption provided by section 212.08(5)(c), F.S. However, some items in exhibitA' are not machinery
or equipment, such as the landfill, and these items may not
be entitled to the exemption provided by section
212.08(5)(c), F.S. In addition, the Department may
determine that some of the machinery and equipment
purchased for [Plant] is not `necessary' and therefore does
not qualify for the exemption provided by section
212.08(5)(c), F.S.

"OTHER MUNICIPAL PURCHASES

"Most of the machinery and equipment purchased for [Plant]
is entitled to the exemption provided by section
212.08(5)(c), F.S. In addition, purchases of tangible
personal property other than machines and equipment and parts and accessories therefor used in the generation, transmission or distribution of electrical energy' for [Plant] are exempt from sales taxes by section 212.08(6), F.S., when purchased directly by a governmental entity. Therefore, purchases ofnecessary' machinery and equipment
for [Plant] are exempt, and [Municipality's] purchases of
items other than machinery and equipment also are exempt.

"We believe that purchases for landscaping, construction
facilities, roads and parking lots, certain buildings, site
work, and other purchases that are not machines and equipment and parts and accessories therefor' are entitled to the sales tax exemption provided by section 212.08(6), F.S., although the items will be used in conjunction with a power plant. In addition, a portion of the machinery and equipment incorporated into [Plant] is notused in' the

generation of electricity. In Jacksonville Electric
Authority v. Department of Revenue, 486 So.2d 1350 (Fla.
1st DCA 1986), and in numerous TAAs, it has been determined
that several items purchased for power plants are not
necessary' to produce electricity, such as control buildings. Generally, any item that is notnecessary'
also is not used in' the generation of electricity. For example, exhibitB' of the JEA/FPL declaratory statement
classifies the control building as machinery and equipment
that is not entitled to the exemption provided by section
212.08(5)(c), F.S. We believe purchases of tangible
personal property for a control building are nevertheless
exempt from sales tax by section 212.08(6), F.S., when
purchased directly by a municipal entity. Although some of
the equipment housed within a control building is used in' the generation of electricity, and such equipment may not qualify for the governmental exemption, the building itself is used to house people and equipment, and the building is notused in' the generation of electricity. Therefore,
the building should qualify for the governmental sales tax
exemption. Although there may be cases when machines and
equipment are not necessary in,' but they areused in,'
the generation of electricity, we believe these cases are
the exception.

"LABOR CHARGES

"... We believe that the installation or replacement of any
machinery, equipment, parts or accessories for [Plant]
constitutes an improvement to real property, and the onsite labor charges are not subject to sales taxes, even if
the specified transaction does not qualify for the
exemption provided by section 212.08(5)(c) or 212.08(6),
F.S. Rule 12A-1.051(2)(f), F.A.C., exempts from sales
taxes installation charges for improvements to real
property when the installation charges are separately
stated and the contract itemizes the parts and materials
that will be sold to the purchaser at an agreed price. In
addition, rule 12A-1.051(2)(e), F.A.C., exempts the entire
contract from sales taxes when a contractor uses materials
and supplies to fulfill a lump sum, cost plus, fixed fee or

guaranteed price contract for improvements to real
property. Rule 12A-1.051(5)(f), F.A.C., also exempts from
sales taxes any expenses for fabrication labor incurred at
the job site in the performance of constructing or
improving real property. Therefore, we believe that any onsite labor charges are exempt from sales taxes.

"PROFESSIONAL SERVICES

"We believe that charges incurred for engineering services
required to repair, replace or upgrade [Plant's] equipment
or facilities are professional services that qualify for
the sales tax exemption provided by section 212.08(7)(v),
F.S.

"... Therefore, we respectfully request that the Department
issue a Technical Assistance Advisement confirming the
exempt status of the items listed in exhibit `A', and the
exempt status of any charges for labor and professional
services incurred for [Plant]..."

RELEVANT AUTHORITY

STATUTORY AUTHORITY:

The following passages quoted from the Florida Statutes
(F.S.) are particularly germane to the matter under
consideration:

Section 212.08, F.S.
"(5)(c) Machinery and equipment used in production of
electrical or steam energy. - The purchase of machinery and
equipment for use at a fixed location which equipment and
machinery are necessary in the production of electrical or
steam energy resulting from the burning of boiler fuels
other than residual oil is exempt from the tax imposed by
this chapter. Such electrical or steam energy must be
primarily for use in manufacturing, processing,
compounding, or producing for sale items of tangible
personal property in this state. However, the exemption
provided for in this paragraph shall not be allowed unless

the purchaser signs an affidavit stating that the item or
items to be exempted are for the exclusive use designated
herein. Any person furnishing a false affidavit to the
vendor for the purpose of evading payment of any tax
imposed under this chapter shall be subject to the penalty
set forth in s. 212.085 and as otherwise provided by
law....
"(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. This exemption shall not inure to any
transaction otherwise taxable under this chapter when
payment is made by a government employee by any means,
including, but not limited to, cash, check, or credit card
when that employee is subsequently reimbursed by the
governmental entity. This exemption does not include sales
of tangible personal property made to contractors employed
either directly or as agents of any such government or
political subdivision thereof when such tangible personal
property goes into or becomes a part of public works owned
by such government or political subdivision thereof....
"(7) MISCELLANEOUS EXEMPTIONS.
"(v) Professional services.
"1. Also exempted are professional, insurance, or personal
service transactions that involve sales as inconsequential
elements for which no separate charges are made."

REGULATORY AUTHORITY:

The following provisions of the Florida Administrative Code
(F.A.C.), are pertinent to the transactions described in your
letter:

"12A-1.001 Specific Exemptions.
"(7) FUELS. Fuels used by public or private utilities,
including municipal corporations and rural cooperative
associations, in generating electric power or energy for
sale to the general public are exempt from all taxes
imposed under Chapter 212, F.S. (For other exempt and

taxable fuels, see Rule 12A-1.059.)"

"12A-1.006 Charges by Dealers Who Adjust, Apply, Alter,
Install, Maintain, Remodel, or Repair Tangible Personal
Property.
"(1) Where parts are furnished by the repairman, the entire
charge he makes to his customer for adjusting, applying,
installing, maintaining, remodeling or repairing tangible
personal property is taxable....
"(4) Charges for repairs of tangible personal property
which require labor or service only are taxable unless the
repairman (dealer) can establish by evidence in his records
that he furnished no tangible personal property which was
incorporated into or attached to the repaired item. It is
immaterial that the cost of the material furnished is
insignificant when compared to the cost of the labor
involved...."

"12A-1.051 Sales to or by Contractors Who Repair, Alter,
Improve and Construct Real Property.
"(1) This rule shall govern the taxability of purchases or
use of tangible personal property by contractors who the
performance of non public works contracts. This rule shall
not apply to contractors who perform public works contracts
in view of the fact that those contracts are governed by
the provisions of Rule 12A-1.094, F.A.C."(Emphasis
supplied.)

12A-1.059 Fuels and Lubricants.
"(10) Boiler' fuels. When purchased as a combustible fuel, purchases of natural gas, residual oil, recycled oil, waste oil, solid waste material as defined in s. 403.703(13), F.S., coal, sulfur, wood, wood residues, or wood bark used in an industrial manufacturing, processing, compounding, or production process at a fixed location in this state shall be exempt from the taxes imposed by this chapter; provided, however, that this exemption shall not apply to such fuels that are not used in manufacturing, processing, compounding, or producing items of tangible personal property for sale,... The termfixed location' shall mean
being permanently affixed to one location or plant site, or

any portable plant which may be set up for a period of not
less than six months in a stationary manner so as to
perform the same industrial manufacturing, processing,
compounding, or production process that could be performed
at a permanent location or plant site. This exemption shall
not be allowed, however, unless the purchaser furnishes the
seller a certificate stating that the fuel is used in an
industrial manufacturing, processing, compounding, or
production process." (Emphasis supplied.)

12A-1.094 Public Works Contracts.
"(1) This rule shall govern the taxability of transactions
in which contractors manufacture or purchase supplies and
materials for use in public works, as that term is referred
to in Section 212.08(6), F.S....
"(a) Contractor' is one who is engaged in the repair, alteration, improvement or construction of real property. Contractors include, but are not limited to, persons engaged in building, electrical, plumbing, heating, painting, decorating, ventilating, paperhanging, sheet metal, roofing, bridge, road, waterworks, landscape, pier or billboard work. This definition includes subcontractors. "(b)Public works' are defined as construction projects
for public use or enjoyment, financed and owned by the
government, in which private persons undertake the
obligation to do a specific piece of work. The term
public works' is not restricted to the repair, alteration, improvement, or construction of real property and fixed works where the sale of tangible personal property is made to or by contractors involved in public works contracts. Such contracts shall include, but not be limited to, building, electrical, plumbing, heating, painting, decorating, ventilating, paperhanging, sheet metal, roofing, bridge, road, waterworks, landscape, pier or billboard contracts. "(c)Real property' within the meaning of this rule
includes all fixtures and improvements to real property.
The status of a project as an improvement or affixture to
real property is determined by the objective and presumed
intent of the parties, based on the nature and use of the
project and the degree of affixation to realty....

"(2) The purchase or manufacture of supplies or materials
by the contractor for incorporation into a public works
project is taxable to the contractor since he is the
ultimate consumer. The applicable tax rate shall be
determined on the basis of the invoice date, not the date
of the contract, as follows:...
"(b) If invoiced on or after February 1, 1988, the tax rate
shall be 6 percent.
"(3)(a) The purchase or manufacture of tangible personal
property for resale to a governmental body is exempt from
tax provided this exemption shall not include sales of
tangible personal property made to contractors employed
either directly or as agents of the United States
Government, a state, or any county, municipality, or
political subdivision of a state when such tangible
personal property goes into or becomes a part of public
works financed or owned by such governmental bodies or
political subdivisions.
"(b) ... A finding of exempt status, however, requires
something more than the implication of traditional agency
notions, so that to resist a state's taxing power, a
private taxpayer must actually stand in the government's
shoes as a principal, rather than as a contractor employed
either directly or as the government's agent. A contractor
will not be deemed to actually stand in the government's
shoes if the contractor has a substantial independent role
in making purchases. Accordingly, the fact that title
passes directly to the government and payment is made with
government funds, in and of itself, cannot characterize the
transaction as an exempt purchase if the purchasing entity,
in its role as a purchaser, is sufficiently distinct from
the government.

"(4) ... A determination of whether a particular
transaction is properly characterized as an exempt sale to
a government entity or a taxable sale to a contractor shall
be based on the substance of the transaction, rather than
the form in which the transaction is cast.... The
Executive Director or... designee in the responsible
division will give special consideration to factors which
govern the status of the tangible personal property prior

to its affixation to real property. Such factors include
provisions which govern bidding, indemnification,
inspection, acceptance, delivery, payment, storage, and
assumption of the risk of damage or loss for the tangible
personal property prior to its affixation to real property.
Assumption of the risk of damage or loss is a paramount
consideration. A party may be deemed to have assumed the
risk of loss if the party either: bears the economic burden
of posting a bond or obtaining insurance covering damage or
loss; or enjoys the economic benefit of the proceeds of
such bond or insurance. Other factors that may be
considered by the Executive Director or ... designee in the
responsible division include whether: the contractor is
authorized to make purchases in its own name; the
contractor is jointly or severally liable to the vendor for
payment: purchases are not subject to prior approval by the
government; vendors are not informed that the government is
the only party with an independent interest in the
purchase; and whether the contractors are formally
denominated as purchasing agents for the government. Sales
made pursuant to so called cost-plus',fixed-fee', lump sum', andguaranteed price' contracts are taxable sales to
the contractor unless it can be demonstrated to the
satisfaction of the Executive Director or... designee in
the responsible division that such sales are, in substance,
tax exempt sales to the government.
"(5) Contractors who manufacture materials for
incorporation into public works shall be liable for tax in
the manner provided in Rule 12A-1.051(5) or (6), F.A.C.
"(6) Contractors who supply raw materials such as rock,
shell, fill dirt and similar materials for incorporation
into public works shall be liable for tax in the manner
provided in Rule 12A-1.051(11)-(14), F.A.C.
"(7) Contractors who purchase tangible personal property
outside the State of Florida, or inside the State but fail
to pay sales tax, and use such property in a public works
project shall be presumed to have the beneficial use of
such property because the property is being used in
furtherance of the contractor's essentially independent
commercial enterprise. Accordingly, such contractors shall
be liable for the use tax." (Emphasis supplied.)

FPL/JEA COURT CASE

As you are aware, the scope of Section 212.08(5)(c), F.S.,
was reviewed by the First District Court of Appeal of Florida in
Jacksonville Electric Authority v. Department of Revenue, 486
So.2d 1350 (Fla. First District Court Appeal, 1986). The case
involved the taxable status of certain machinery and equipment
purchased by the Jacksonville Electric Authority to be used in
the burning of coal to produce electrical energy. The machinery
and equipment fell into three categories: (1) coal handling
equipment; (2) equipment required by state and federal law; and
(3) electrostatic precipitators.

The District Court of Appeal determined that it was the
legislative intent, based on the tape recorded proceedings of
the Florida Senate Committee on Ways and Means, to embrace the
"integrated plant theory" as a basis for interpreting the
exemption for machinery and equipment provided in Section
212.08(5)(c), F.S. Under the "integrated plant theory",
machinery and equipment used in the process of generating
electrical energy, regardless of the fact that such machinery
and equipment was not intrinsically necessary to generate
electrical energy or the sole purpose of such machinery and
equipment was to make the plant function more practically, would
be considered a component part of the manufacturing process.
Therefore, the machinery and equipment used in the process of
generating electrical energy would qualify for the exemption
provided in Section 212.08(5)(c), F.S.

The Court construed Section 212.08(5)(c), F.S., to include
pollution control equipment as "necessary in the production of
steam or electrical energy", notwithstanding that a plant could
theoretically produce electrical or steam energy without the
legally mandated pollution control equipment. The Court stated:

"No matter how theoretical the physics of producing steam
or electrical energy, in reality, no equipment or machinery
in Florida is going to produce electricity without the
mandated pollution control equipment."

DETERMINATION

Rule 12A-1.059(10), F.A.C., provides that boiler fuels,
when purchased for use as a combustible fuel, such as purchases
of solid waste material and pulverized coal, as defined in
s.403.703(13), F.S., used in an industrial manufacturing,
processing, compounding, or production process at a fixed
location in this state are exempt, provided, however, that this
exemption shall not apply to such fuels that are not used in
manufacturing, processing, compounding, or producing items of
tangible personal property for sale. Rule 12A-1.001(7), F.A.C.,
provides that fuels used by public or private utilities,
including municipal corporations and rural cooperative
associations, in generating electric power or energy for sale to
the general public are exempt from all taxes imposed under
Chapter 212, F.S.

When determining whether machinery and equipment qualifies
for the exemption provided in Section 212.08(5)(c), F.S., the
Department of Revenue is guided by the Jacksonville Electric
Authority v. Department of Revenue, supra, court case which
instructed the Department to embrace the "Integrated Plant
Theory." The Department implemented the court's instructions by
amending "Exhibit B" of the JEA/FPL Declaratory Statement.
"Exhibit B" now serves as a guide for the Department when
embracing the "Integrated Plant Theory." A photocopy of
"Exhibit B" is enclosed for your information and convenience.

Along with your request, you submitted a general list,
("exhibit A'"), of Plant's machinery and equipment, supported by detailed definitions of the system, ("ExhibitB' "), for
examination. The response of this technical assistance
advisement is based on these system definitions . The
determination as to whether a particular line item qualifies or
does not qualify is based on whether that line item matches or
is the equivalent to those items listed in "Exhibit B" of the
JEA/FPL Declaratory Statement.

SYSTEM

QUALIFIES
PURSUANT TO
s. 212.08(5)(c)

I. BASIC ENERGY PROCESSES AND PERTINENT EQUIPMENT

A. Furnace and related equipment

1. Furnace.

Yes

2. Four pulverizers.

Yes

3. Four primary fans.

Yes

4. Two large TLT Babcock forced draft fans.
5. Two regenerative air heaters.

B. Boiler

Yes

Yes

Yes

C. Turbine Generator

Yes

II. EQUIPMENT NOT DIRECTLY INVOLVED IN POWER GENERATION

A. Coal Handling Facility

1. Open trestle.

Yes

2. Bottom-dumping railroad cars.
3. Rotary plow.

No
Yes

4. Underground conveyor.
5. Crushing mill.

Yes
Yes

6. Crushed coal conveyor.
7. Four storage silos.

Yes
Yes

B. Refuse (Garbage) Processor

1. RDF conveyor.

Yes

2. Hammermill.

Yes

3. Pneumatic conveyor.

C. Precipitator

Yes

Yes

D. Scrubber

1. Scrubber.
2. Calcium carbonate [system].
3. Wet ball mix pulverizer.

Yes
Yes
Yes

E. Stack

1. Stack.

Yes

2. Concrete shell.
3. Liner.

Yes
Yes

F. Thickener Tank

G. CSI Facility

H. Landfill

No

No

No

I. Waste Water Treatment Process (WWTP)

1.[Municipality] wastewater treatment plant.

Yes

J. Process Water Treatment System (PWTS)

K. Condensate Polisher

L. Cooling Tower

Yes

Yes

Yes

It is important to note that the exemption provided by
section 212.08(5)(c), F.S., is limited to machinery and
equipment used in the production of electrical or steam energy.
The above line items indicated as not qualifying for the
exemption are either real property improvements, or are not
machinery or equipment, or if they are machinery or equipment,
they are not used in the production of electrical or steam
energy.

It is also important to note that the exemption provided
for in section 212.08(5)(c), F.S., shall not be allowed unless
the purchaser signs an affidavit stating that the item or items
to be exempted are for the exclusive use designated herein. Any
person furnishing a false affidavit to the vendor for the
purpose of evading payment of any tax imposed under this chapter
shall be subject to the penalty set forth in s. 212.085, F.S.,
and as otherwise provided by law.

As provided by section 212.08(5)(c), F.S., and as stated in

your letter, any replacement of, or repair to, the machinery and
equipment listed in exhibit `A' and qualified under section
212.08(5)(c), F.S., is entitled to the sales tax exemption.

Your position regarding purchases of tangible personal
property, other than "machines and equipment and parts and
accessories therefor used in the generation, transmission or
distribution of electrical energy" for Plant, which are exempt
from sales taxes under section 212.08(6), F.S., when purchased
directly by a governmental entity is correct. Therefore,
purchases of "necessary" machinery and equipment for Plant are
exempt, as noted above, and Municipality's purchases of items
other than machinery and equipment, responded to in the negative
above under section 212.08(5)(c), F.S., are exempt under section
212.08(6), F.S.

As provided in the above quoted rules, the purchase or
manufacture of supplies or materials by the contractor for
incorporation into a public works project is taxable to the
contractor since he is the ultimate consumer. Therefore, your
position is correct regarding that the municipal government is
not required to pay sales tax on this type of contract. When a
contractor purchases materials and supplies to fulfill a public
works contract, the contractor should include the sales tax
amounts in his bid for the contract. You are also correct in
that no tax is due with regards to on-site labor charges for the
installation or replacement of parts or accessories which are
incorporated into and which become an improvement to real
property.

Section 212.02(10)(h), F.S., defines real property to
includes all fixtures and improvements to real property. The
status of a project as an improvement or affixture to real
property is determined by the objective and presumed intent of
the parties, based on the nature and use of the project and the
degree of affixation to realty. It is important to note that
the exemption provided by Section 212.08(5)(c), F.S., is limited
to machinery and equipment used in the production of electrical
or steam energy, and as such refers to tangible personal
property.

Your belief that the installation or replacement of any
machinery, equipment, parts or accessories for Plant constitutes
an improvement to real property is incorrect. Such items are
classified as tangible personal property. Where parts are
furnished by the repairman, the entire charge he makes to his
customer for adjusting, applying, installing, maintaining,
remodeling or repairing tangible personal property is taxable,
unless it is an item of machinery and equipment which is exempt
under s. 212.08(5)(c), F.S. Charges for repairs of tangible
personal property which require labor or service only are
taxable unless the repairman (dealer) can establish by evidence
in his records that he furnished no tangible personal property
which was incorporated into or attached to the repaired item.
It is immaterial that the cost of the material furnished is
insignificant when compared to the cost of the labor involved.
The provisions of section 212.08(6), F.S., provide for the
exemption from sales tax of sales made to a municipality, or
political subdivision of a state when payment is made directly
to the dealer by the governmental entity.

Your belief that purchases for landscaping, construction
facilities, roads and parking lots, certain buildings, and site
work, are entitled to the sales tax exemption provided by
section 212.08(6), F.S. is incorrect. As provided in the above
quoted rules, the purchase or manufacture of supplies or
materials by the contractor for incorporation into a public
works project is taxable to the contractor since he is the
ultimate consumer. When a contractor purchases materials and
supplies to fulfill a public works contract, the contractor
should include these sales tax amounts in his bid for the
contract.

This does not preclude a governmental entity from making
direct material purchases of supplies, goods, equipment,
appliances and other materials directly from third party
suppliers, which are incorporated into public works projects tax
exempt. The Municipality must comply with the following
provisions in order to maintain this sales tax exemption for
such material purchases:

1. The Municipality must issue its own purchase orders to

the third party vendor, which contain or are
accompanied by the Municipality's exemption
certificate.

2. All materials purchased under the exemption must be
   sold directly to the Municipality.
3. The Municipality must take title and possession of all
   materials purchased tax exempt from the seller before
   they are incorporated into real property.
4. The Municipality must assume all risk of loss on all
   materials purchased tax exempt.
5. The Municipality must bear cost of all insurance on
   all materials purchased tax exempt.
6. The Contractors' bond and insurance provisions must be
   reduced to reflect the Municipality's cost of direct
   materials purchased tax exempt.
7. The Municipality must make direct payment to the third
   party vendor for all such purchases from the
   Municipality's checking account.

In summary, pursuant to Section 212.08(5)(c), F.S.,
machinery and equipment, as described in Appendix "A", purchased
for use at the Municipality's electric generating plant facility
where such qualifying machinery and equipment will be used to
produce electrical energy at a fixed location and is necessary
in the production of electrical energy are exempt from Florida
Sales and Use Tax, provided that the electrical energy is
primarily for use in manufacturing or producing tangible
personal property (electrical power or energy) for sale in the
State of Florida and the proper affidavit procedures are
followed.

Further, pursuant to Section 212.08(7)(v)l., F.S.,
professional services, such as mechanical and electrical
engineering services, are specifically exempt from sales and use
tax when there are no sales of tangible personal property.
Where such services include charges required to repair, replace
or upgrade Plant, and include the sale or use of non qualifying
tangible personal property, such services are taxable under rule
12A-1.006, F.A.C., but may be exempt to the Municipality under
the provisions of section 212.08(6), 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 advice 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 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 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 the response.

Sincerely,

Aleda J. Marshall
Technical Assistant

AJM/pb
Control #13493