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