Was a provider's lump-sum charge for insecticide applied to Florida golf-course soil subject to sales tax as a product sale?

Subject

Insecticide Used on the Soil of Golf Courses

Plain-English summary

The Department concluded that the provider's lump-sum charge was a taxable sale of insecticide to the golf-course operator. The provider sold a product used to control mole crickets and other turf-damaging insects and had trained contract agents apply it to golf-course soil with specialized equipment.

The application was not taxed as the statutory category of nonresidential pest-control service. That service category followed an industry classification covering services to dwellings and other buildings, while the stated work involved golf-course grounds and no building.

The transaction was still taxable because its true object was the insecticide itself. Title transferred after application, the provider invoiced $313 per acre in a lump sum, and sales tax appeared as a separate line item. Florida taxed retail sales of tangible personal property unless a specific exemption applied.

The agricultural exemption did not help. It covered insecticides, herbicides, and fungicides used on crops or groves, and the Department said a golf course was outside that exemption.

What this means for you

The ruling distinguished the label and statutory source of tax from the bottom-line result. Application to outdoor turf was not the enumerated building-related pest-control service, but the chemical sale itself remained taxable.

Bundling product and application into one price did not make the transaction exempt when the Department found the product was the true object and no golf-course exemption applied.

Common questions

Q: Was golf-course application a taxable nonresidential pest-control service? Not under the cited service provision, because that classification concerned pest control connected with buildings or structures.

Q: Why was the transaction taxable anyway? It was a retail sale of tangible personal property—the insecticide—to the golf-course operator.

Q: Did the crop exemption cover golf-course turf? No. The ruling limited that exemption to application on crops or groves.

Q: How did the provider bill the work? It charged a lump sum of $313 per acre and separately stated sales tax on the invoice.

Citations and references

• Fla. Stat. § 212.05(1)(a)1.a. — tax on retail sales of tangible personal property
• Fla. Stat. § 212.05(1)(k)1.b. — specified nonresidential pest-control services
• Fla. Stat. § 212.08(5)(a) — crop-or-grove exemption for specified agricultural chemicals
• Fla. Stat. § 212.21(3) — taxable privileges taxed unless specifically exempt
• Fla. Admin. Code R. 12A-1.001(5) and 12A-1.009 — golf-course spraying and pest-control guidance
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-025

Original ruling text

Apr 07, 1997

Re: Technical Assistance Advisement 97(A)-025 Insecticide Used on the Soil of Golf Courses Section 212.05(1)(a)1.a., and (1)(k)1.b., 212.08(5)(a), 212.21(3), F.S. Rule 12A-1.001(5)(a), 12A-1.009, F.A.C. XXX (herein Provider) XXX (a trademarked insecticide, herein Product)

Dear :

This is a response, styled a Technical Assistance Advisement, to your letter dated December 12, 1996, in which you ask whether the written agreements between Provider and operators of Florida golf courses, whereby Provider contracts to apply the Product on the soil of such courses, result in sales of the Product to the golf course operators, or represent sales of pest control services to such operators. You assert that Provider is selling the Product to the operators, and in accordance with this position, Provider has been collecting sales tax on the sales of the Product. You ask the Department to affirm that the transactions described below result in taxable sales of tangible personal property, rather than the sales of pest control services.

On the first page of your letter you describe a certain chemical as "... the active ingredient in [the Product], [and that it] is an insecticide that has proven to be very successful in controlling mole crickets and other insects." You then add that "[m]ole crickets are insects indigenous to the southern United States that destroy turf and are a particular nuisance to Turf Managers of golf courses."

The Product is formulated, manufactured or compounded either by Provider at its plant outside Florida, or by independent firms at plants in or outside Florida.

In your letter you also state that the Product is applied to the

soil of the golf courses in 4 acre sections. The charge for application of the Product is a lump-sum amount of $313 per acre. Sales tax is added by a separate notation on the invoice.

You state that the Product is only applied "... through slitapplication equipment by [Provider's] trained Agents, who represent Provider to the customer throughout the transaction". You state that slit-applicators are the only equipment used to apply the Product. You add that "[t]itle to the [Product] does not transfer until after application to infested areas."

In a telephone conversation on January 29, 1997, the Department learned that the sales effort in Florida is conducted solely by employees of Provider. After the application of the Product, which is achieved by contract personnel and not by employees of Provider, the golf course operator is billed a lump-sum by, and pays the invoiced amount directly to, Provider. Pursuant to a separate contract, Provider pays its agents for the work of applying the Product to the grounds of the golf course.

You assert that Provider is selling the Product to the golf course operator. You consider the lump-sum sale of the Product to be taxable to such operator. You cite Rule 12A-1.001(5)(a), F.A.C., which, while providing an exemption to insecticides which are used in the cultivation of crops, does describe the spraying of golf courses as taxable. You opine that since the billing is by a lump-sum amount, without an enumeration of materials and labor, the entire lump-sum is taxable.

You also cite Rule 12A-1.009(7), F.A.C., which describes the application of insecticides to lawns as not taxable. You conclude on page 2. that "[o]ne can logically argue that the application of insecticide to golf courses would also fall within the boundaries of this rule and would not be subject to sales tax. However, the materials and labor are not separately stated so the entire transaction must be evaluated."

You conclude that the true object of the sale is the Product itself. In support of this view you add that:

"[t]he service is provided with the product in order to

comply with EPA standards which prohibit the over-thecounter sale of [a certain chemical]. The service is then incidental to the retail sale of the product to the customer. Since insecticides are taxable when applied to golf courses, and the application of the Product is incidental to the sale of this insecticide, we maintain that the entire transaction is subject to Florida sales tax. The tax is passed on to the customer as a separate line item on the invoice/purchase order."

You request confirmation of this view by the Department.

Department Response

Section 212.05(1)(k)1.b., F.S., levies sales tax on "... nonresidential pest control services (SIC Industry Group Number 734)." The designation "SIC" means, Standard Industrial Classification Manual, 1987.

The tax is levied on the privilege of engaging in the business of providing this enumerated service. Thus, the statute taxes the furnishing of the service of nonresidential pest control. However, such service must be rendered in conjunction with a building or structure because SIC Industry Group Number 734 is entitled Services to Dwelling and Other Buildings.

Thus, the statute, s. 212.05(1)(k)1.b., F.S., taxes pest control services rendered to nonresidential buildings. Consequently, the application of the Product to Florida golf courses, under the facts you provide which include no reference to pest control to a golf course building, is not a taxable transaction described in s. 212.05(1)(k)1.b., F.S., or in Rule 12A-1.009, F.A.C., which interprets the statute.

However, Provider is engaged in the privilege of selling the Product to the golf course operator. Section 212.05(1)(a)1.a., F.S., imposes the tax on the sale of tangible personal property. Provider invoices, in a lump sum, the sales of the Product to the golf course operators and as you state, the sales tax is separately stated on the invoice.

Section 212.21(3), F.S., declares the legislative intent "... to tax each and every taxable privilege made subject to the tax or taxes, except such sales, admissions, uses, storages, consumptions, or rentals as are specifically exempted...." There is no exemption granted to the sales of the Product to the golf course operators.

The statutes do include a specific exemption granted in s. 212.08(5)(a), F.S. which exempts insecticides, herbicides, and fungicides used for application on "crops or groves." However, this provision does not provide an exemption to the sale of the Product to a golf course operator, because a golf course does not come within the reach of the exemption.

Thus, s. 212.05(1)(a)1.a., F.S., levies the tax on the transaction you describe. Rule 12A-1.001(5), F.A.C., describes the spraying of golf courses as taxable.

Albeit not part of your inquiry, it is noted that since Provider is engaged in the business of selling the Product, its acquisition by Provider from another seller, or in the instance of manufacture or compounding by provider is not subject to tax.

In sum, The department affirms the collection of sales tax by Provider from the golf course operators on the sale of the Product.

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 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,

Robert G. Parsons
Tax Law Specialist
Tax Policy and Dispute Resolution

Ctrl. No. 27472