Did Florida sales or use tax apply to equipment manufactured and sold outside Florida that was never delivered to or imported into the state?

Plain-English summary

Florida sales and use tax did not apply because the equipment was sold and delivered outside Florida and never entered the state.

The equipment was manufactured in Wisconsin for a cogeneration project outside Florida, but the project was terminated before delivery. The manufacturer stored the equipment outside Florida and later shipped it to an unrelated out-of-state company. With no Florida importation or commingling, the Department found that the equipment never entered Florida's taxing jurisdiction.

What this means for you

The ruling made the proposed energy-production exemption academic: the more basic point was that the transaction and property never reached Florida.

Common questions

Q: Was Florida sales tax due on the manufacturer's sale? A: No.

Q: Was Florida use tax due?
A: No, because the equipment was never imported into Florida.

Q: Could the manufacturer recover the tax it had remitted? A: Yes, after releasing the subcontractor's $18,319 escrow, it could seek a refund or claim a credit with the required proof and records.

Citations and references

• Fla. Stat. § 212.06(1)(a), (2)(b) — use tax and dealers importing property
• Fla. Stat. §§ 212.08(5)(c) and 212.02(20) — proposed machinery exemption and tangible personal property
• Fla. Admin. Code r. 12A-1.014 — refund and credit procedures
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95A-001

Original ruling text

Jan 03, 1995

Re: Technical Assistance Advisement 95(A)-001 Sales Tax - Use Tax On Equipment Never Imported Into Florida Parties: XXX (Herein the "Contractor") XXX (Herein the "Subcontractor") XXX (Herein the "Manufacturer")

Dear :

This response is in reply to your November 4, 1994, petition for the Department's issuance of a Technical Assistance Advisement ("TAA") pursuant to s. 213.22, F.S. Your petition regards the referenced matter and parties. The Department has carefully examined your petition and finds it to meet the criteria set forth in Chapter 12-11, F.A.C., requisite to issuance of a TAA. Therefore, the Department is by this response issuing the requested TAA.

DISCUSSION OF FACTS

Your petition imparts the following information regarding the issue under advisement herein:

"In 1988, the XXX awarded Contract No.... to (the Contractor) to build, own and operate a cogeneration plant on XXX (`AFB'). (AFB) is not in the State of Florida, but is an enclave subject to the exclusive jurisdiction of the federal government. See attachments A (Declaration of Taking), B (Deed of Cession) and C (1989 Florida Public Service Commission Order Finding that the Florida Public Service Commission lacked jurisdiction to regulate the transaction between (the Contractor) and the Air Force because the transaction did not take place in the State of Florida, but on an enclave subject to the exclusive jurisdiction of the federal government).

"In 1990, (the Contractor) hired (the Subcontractor). In

June 1993, (the Subcontractor) ordered equipment from (the Manufacturer) for incorporation into the cogeneration plant. At the time, it was (the Subcontractor's) understanding that no sales tax was due to the State of Florida because (1) the equipment would not be sold or delivered in the State of Florida, but on (AFB), a federal enclave, and/or (2) the Florida Administrative Code specifically exempted the equipment purchased from (the Manufacturer) from sales tax, due to its incorporation into an electric generating facility which would generate electricity for resale (to the Air Force).

"In June 1993, (the Subcontractor) paid for the... equipment, but did not pay the sales tax which (the Manufacturer) claimed was due. Upon receipt of this payment, (the Manufacturer) commenced to manufacture the equipment at its facility in Wisconsin. In September 1993, prior to delivery of the equipment manufactured by (the Manufacturer), the Air Force terminated its contract with (the Contractor), and in connection therewith, discontinued (the Subcontractor's) access to (AFB).

"In October 1993, (the Manufacturer) advised (the Subcontractor) that the equipment was ready to be delivered, and invoiced (the Subcontractor) for Florida sales tax. See attachment D ((the Manufacturer's) invoice). (The Subcontractor), however, advised (the Manufacturer) to store the equipment in XXX. (The Manufacturer) alleges that it paid sales tax in the amount of $18,319 to the state of Florida as part of its October 1993 return. See Attachment E (Statement of Manufacturer's Tax Department employee with attachments).

"In September 1993, (the Subcontractor) transferred its interest in the equipment to an unaffiliated company located in XXX. Prior to agreeing to ship the equipment, however, (the Manufacturer) insisted that (the Subcontractor) provide it with security in the amount of
$18,319 in the event that the sales tax paid by (the Manufacturer) to the State of Florida was required to be paid. (The Subcontractor) placed the required monies into

the trust fund of an attorney representing (the Manufacturer). (The Manufacturer) shipped the equipment to the unaffiliated entity at an address in XXX. See Attachment F.

"As is readily apparent, the equipment was originally intended to be shipped to a federal enclave for use in the generation of electricity for resale to the United States of America, but was never delivered to (the Subcontractor) or to Florida or to the federal enclave. Instead, it was shipped to XXX under the care of an XXX company. Therefore, (the Subcontractor) believes that the sales tax it paid for the benefit of (the Manufacturer) should be returned."

REQUESTED ADVISEMENT

You endeavor to elicit the Department's advice regarding the following:

"Please (1) provide us with a legally binding ruling that no Florida sales tax was due to be paid by (the Subcontractor) to (the Manufacturer) on the transaction described above, (2) provide us with instructions on how to get our money back from (the Manufacturer's) attorney, and (3) provide us with instructions on how (the Manufacturer) can obtain a refund of the sales tax it paid to the State of Florida in connection with the transaction described above." DISCUSSION OF LAW

STATUTORY AUTHORITY:

The statutory authority for the specific exemption in question is s. 212.08(5)(c), F.S., which is quoted below:

"(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." (Emphasis Supplied)

Section 212.02(20), F.S., provides in pertinent part:

"'Tangible personal property' means and includes personal property which may be seen, weighed, measured, or touched or is in any manner perceptible to the senses, including electric power or energy,..." (Emphasis Supplied)

The determination of whether the equipment would have been exempt under the provisions of s. 212.08(5)(c), F.S., becomes academic if the equipment was never imported into the state of Florida. Tangible personal property becomes susceptible to Florida use when it is imported into Florida and commingled with the general mass of property of this state. Section 212.06, F.S., governs the application of use tax and provides in relevant part the following:

"(1)(a) The aforesaid tax at the rate of 6 percent of the retail sales price as of the moment of sale, 6 percent of the cost price as of the moment of purchase, or 6 percent of the cost price as of the moment of commingling with the general mass of property in this state, as the case may be, shall be collectible from all dealers as herein defined on the sale at retail, the use, the consumption, the distribution, and the storage for use or consumption in this state of tangible personal property or services taxable under this part. The full amount of the tax on a credit sale, installment sale, or sale made on any kind of

deferred payment plan shall be due at the moment of the transaction in the same manner as on a cash sale.... "(2) ... (b) The term `dealer' is further defined to mean every person, as used in this chapter, who imports, or causes to be imported, tangible personal property from any state or foreign country for sale at retail; for use, consumption, or distribution; or for storage to be used or consumed in this state...." (Emphasis Supplied)

CONCLUSIONS OF LAW

Provided that the equipment was never imported into Florida, as your petition indicates, then the equipment never came within the taxing jurisdiction of this state. Accordingly, in the absence of any entry or commingling of the equipment in Florida, the equipment never became susceptible to Florida use tax. Moreover, the information submitted indicates that the original sale and delivery of the equipment occurred outside the state of Florida.

Consequently, the sale of the equipment from the Manufacturer to the Subcontractor, having occurred outside Florida, was not subject to Florida sales tax. Inasmuch as the equipment never became subject to Florida sales or use tax, the Manufacturer need not have remitted Florida sales tax on its sale of the equipment to the Subcontractor.

Therefore, if the Manufacturer releases to the Subcontractor the escrowed amount of $18,319 paid in trust to the Manufacturer's attorney by the Subcontractor to cover the cost of the Florida sales tax remitted by the Manufacturer, then the Manufacturer will be authorized to either file a refund claim with the Department for a corresponding amount or to claim a credit on a subsequent return for such amount. In order to claim a refund, the Manufacturer must complete a refund application (Form DR-26, enclosed) and submit it together with proof of remittance of the tax to the Department (copy of sales tax returns and cancelled check) and proof that the tax (escrowed amount) was refunded to the Subcontractor. If in the alternative the Manufacturer wishes to claim a credit rather than a refund, the credit should be shown on line 6 of the Sales and Use Tax Return (DR-15)

entitled "less refunds or lawful deductions." In the case of a credit, the Manufacturer would be required to maintain records equivalent to those described above as necessary to support a refund application and such documentation would be subject to audit verification by the Department. The refund or credit procedures described above are authorized under Rule 12A-1.014, F.A.C. (enclosed).

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 confidential information, we request you notify the undersigned in writing within 15 days of any deletions you wish made to the request or this response.

Sincerely,

Daniel M. Wagner, Jr.
Tax Law Specialist

DW/
Control No. 18451
Enclosure