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