Must a Florida sign company collect sales tax on both materials and labor when its contract treats installed signs as tangible personal property?

Plain-English summary

The sign company had to collect Florida sales tax on its full charge, including both materials and labor.

The company's signed contract said the seller retained title for security until full payment and that the sign would remain severable and could not be claimed as part of the buyer's real property until then. The Department therefore treated the signs as tangible personal property rather than real-property improvements.

Florida's definition of sales price included services that were part of the sale and labor and materials used to alter, maintain, or repair tangible personal property. As a result, separately identifying labor did not remove it from the taxable price under these contract terms.

What this means for you

A sign's physical attachment to land or a building did not control the outcome by itself. The parties' binding contract expressly classified the signs as severable personal property, so the Department taxed the complete sale and service price. Sign businesses should review title, severability, and real-property language before deciding whether to tax materials, installation, or repair labor.

Common questions

Q: Were only the sign materials taxable?
A: No. The Department required tax on the total sales price, including labor and materials.

Q: Did separately stating installation labor make it exempt?
A: No. Installation services were part of the taxable sale of tangible personal property under the facts described.

Q: Why were permanently located or building-mounted signs treated as personal property?
A: The signed contract kept them severable and said they could not be claimed as the buyer's real property until the purchase price was fully paid.

Citations and references

• Fla. Stat. § 212.02(17) — sales price, including services and repair labor
• Fla. Admin. Code r. 12A-1.016(3)(a) — installation of tangible personal property
• Fla. Admin. Code r. 12A-1.051 — contractor treatment of signs
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-003

Original ruling text

Jan 12, 1996

Re: Technical Assistance Advisement 96A-003
Sales and Use Tax - Signs: Installation and Repair
Section: 212.02, F.S.
Rules: 12A-1.016, 12A-1.051, F.A.C.
Petitioner: XXXX ("Company")
FEI: XXX

Dear :

This is a response to your petition received December 5,
1995, for the Department's issuance of a Technical Assistance
Advisement ("TAA") concerning the above referenced party and
matter. Your petition has been carefully examined and the
Department finds it to be in compliance with the requisite
criteria set forth in Chapter 12-11, F.A.C. This response to
your request constitutes a TAA and is issued to you under the
authority of s. 213.22, F.S.

DISCUSSION OF FACTS

Your letter imparts the following discussion concerning the
matter under advisement:

Company has a Florida sales and use tax number (XXX) and
has collected and remitted tax to the State of Florida on
the total of all items, including labor. In your letter,
you stated that Company provides the following services:

A. Manufacturing and installing an electrical or
nonelectrical sign on a buyer's property. Of the total
contract price, on-site labor represents approximately 12%
of the selling price. You provided an example of this
service in Invoice #2585 which provides:

"Service to parking lot lights per attached.

"Materials (ballasts, lamps & fuses)

"Labor

"Applicable tax

"Total

$330.00

$400.00

$ 43.80

$773.80

B. Responding to calls for service to signs and other
lighting devices in order to maintain use and/or electrical
operation. You provided an example of this service in
Invoice #2441 which provides:

"Refinish signs per attached schedule

"Applicable tax

"Total

$15,527.00

934.32

$16,506.32

You faxed me a typical contract which provided the
following information:

"The total purchase price is composed of the following:

"Sale price

$3,337.00

"Freight(if applicable)

incl.

"Installation(if applicable)

incl.

"Supervised installation by Seller's

incl.

field engineer(if applicable)

"Other costs (permit change)

"Taxes

135.00

208.32

"Total Purchase Price

$3,680.32

"Less(down payment)

$1,800.00

"Total unpaid balance due

$1,880.32

upon completion...

"4. Title to the display system. Title to the display
system is retained by Seller for security and will pass to
Buyer when the entire price has been paid and Buyer has
fully performed all covenants and agreements herein
contained. Buyer agrees to allow seller access to service
sign as required and remove sign if necessary in event of
default on the part of the buyer. Sign shall remain
therefor severable and cannot be claimed as real property
of the buyer or existing property aggrandizement until the
purchase price on the face of this agreement is paid in
full...."

In a conversation with your wife, she further described
your sign work by stating that Company's sign work included the
following: 1) signs which are erected on the site where they are
to be permanently located and also have their own supports
anchored into the ground; 2) signs which are affixed permanently
to a building; or 3) signs or lettering on walls, floors, doors,
and windows of buildings.

REQUESTED ADVISEMENT

Should Company charge tax on labor and materials in the
above-described sign work?

DISCUSSION, ANALYSIS AND CONCLUSION OF LAW

Rule 12A-1.051, F.A.C., provides in part:

"(16) Materials purchased for use in the performance of
lump sum, cost plus, fixed fee or guaranteed price
contracts for the improvement of real property are taxable
to all contractors, including but not limited to the
following contractors...

"Sign; when signs become a part of real property...

"(18)(b) Sales tax is collectible on the full selling price

of the following manufactured items when sold as tangible
personal property:...

"Signs"

Rule 12A-1.016(3)(a), F.A.C., provides:

"(3)(a) The total consideration received for labor or
services used in installing tangible personal property
which is sold and does not become a part of realty, is
taxable even though such charge may be separately stated."

Section 212.02(17), F.S., defines "sales price" as:

"Sales price' means the total amount paid for tangible personal property, including any services that are a part of the sale...Sales price' also includes the
consideration for a transaction which requires both labor
and materials to alter, remodel, maintain, adjust, or
repair tangible personal property."

Company's contract makes the following provision: "Title to
the display system is retained by Seller for security and will
pass to Buyer when the entire price has been paid and Buyer has
performed all covenants and agreements herein contained... Sign
shall remain therefor severable and cannot be claimed as real
property of the buyer or existing property aggrandizement until
the purchase price on the face of this agreement is paid in
full..." This contract is signed and binding on both parties.
Therefore, both parties have agreed that Company's signs are
tangible personal property, not real property. As such, Company
is selling tangible personal property and is required to charge
tax on the total sales price. Pursuant to Section 212.02(17),
F.S., the total sales price includes all materials and labor.

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 upon 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 from that
which is 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 that 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 this response.

Sincerely,

Leigh L. Ceci
Senior Tax Specialist

/LLC
Control #24086