Were chemicals used to sanitize dairy-processing equipment exempt from Florida sales and use tax?

Subject

Tax on Sanitizers Used for Dairy-Processing Equipment

Plain-English summary

The dairy processor had to pay Florida tax on the sanitizing and sterilizing agents used to clean its processing equipment. The chemicals were tangible personal property used on product-contact surfaces; they were not intended to become part of the milk, cream, eggnog, buttermilk, or other finished dairy products sold.

That meant the purchases were not sales for resale. The Department also found no separate statutory exemption for these equipment-cleaning chemicals.

Federal and state regulators required the processor to sanitize and sterilize its equipment, but the Department said a regulatory mandate did not itself create a sales-tax exemption. The rule exempting certain disinfectants used in dairy barns to protect cows or used directly on livestock did not apply to chemicals used on dairy-processing equipment.

What this means for you

A production input is not a resale purchase merely because it is essential or legally required. Under this ruling, the material had to become part of the finished product sold for the resale theory to work.

Manufacturers should separately classify ingredients, packaging, equipment-cleaning supplies, and regulatory-compliance consumables rather than treating all production-related purchases alike.

Common questions

Q: Why did the resale argument fail? The sanitizers cleaned equipment surfaces and were not intended to become part of the finished dairy products.

Q: Did food-safety requirements create an exemption? No. The Department said mandatory use under federal and state regulation did not provide a tax exemption.

Q: What about the dairy-barn disinfectant rule? It covered disinfectants used to protect cows or used directly on livestock, not chemicals used to sanitize processing equipment.

Q: Did the ruling identify any applicable exemption? No. It said no statutory exemption applied to the described purchases and use.

Q: Can another food processor rely on this ruling? No. The advisement binds the Department only for the requester and the specific use described.

Citations and references

• Fla. Stat. § 212.05 — sales and use tax on tangible personal property
• Fla. Admin. Code r. 12A-1.001(5)(b) — disinfectants used in dairy barns or directly on livestock
• State v. Belle, 286 So. 2d 529 (Fla. 1974) — name and citation reproduced exactly as printed in the official scan
• United States Gypsum v. Green, 110 So. 2d 409 (Fla. 1959); Green v. Pederson, 99 So. 2d 292 (Fla. 1957) — strict-construction authorities cited in the ruling
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-005

Original ruling text

SUMMARY

The purchase and use of sanitizing and sterilizing agents
by a processor and seller of dairy products to sterilize

and sanitize the product control surfaces of all equipment
used in the processing, handling, and storage of dairy
products for the purpose of removing or deactivating any
microorganisms is subject to tax as tangible personal
property under section 212.05, F.S. A sale for resale does
not occur as the agents are not intended to be a part of
the finished dairy products but are instead used to

sanitize and sterilize the surfaces of equipment used in
the processing, handling, and storage of the dairy
products. There exists no statutory exemption from tax
for the purchase and use of the agents as described. The
fact that Federal and State regulatory agencies require the
use of the agents on all the equipment used in the
processing, handling, and storage of the dairy products,

does not operate to provide and exemption from tax.

Feb 26, 1998

Re: TAA 98A-005
Purchase of Sanitizing and Sterilizing Agents

Section 212.05, F.S,

Dear:

This is in response to your letter of December 18, 1997, in
which you requested the issuance of a technical assistance
advisement on behalf of your client XXX [hereinafter "Taxpayer"]
regarding the taxability of its purchase and use of sanitizing

and sterilizing agents.

In your letter you explained that Taxpayer is a processor
and seller of fluid dairy products, such as heavy cream, half-
and-half, whole milk, lowfat milk, skim milk, eggnog,

buttermilk, etc. You explained further that Taxpayer is

required by the U.S. Food and Drug Administration (FDA) and
state regulatory authorities to thoroughly sanitize and

sterilize the product-control surfaces of all equipment used in

the processing, handling, and storage of milk products for the
purpose of removing or deactivating any microorganisms present
by using chemical agents such as methylene blue solvent,
hydrochloric acid, thiosulphate, phosphoric acid, potassium
iodine, etc. You wish to know whether Taxpayer's purchase and
use of the sanitizing and sterilizing agents as outlined above

are exempt from sales and use tax or whether they are free of

tax as purchases for resale.

DEPARTMENT RESPONSE

The Taxpayer's purchase and use of the sanitizing and
sterilizing agents as outlined in your letter does not
constitute a sale for resale. In this instance, a sale for
resale implies that the agents become a part of the dairy
products that are sold by the Taxpayer. The agents are not
intended to be a part of the finished dairy products but are
instead used to sanitize and sterilize the surfaces of the
equipment used in the processing, handling, and storage of the
dairy products. Therefore, a sale for resale does not occur.
Exemptions from taxing statutes are special privileges granted
by the legislature and must be strictly construed, "with any
doubt being resolved in favor of the state." State v. Belle, 286
So.2d 529 (Fla. 1974). See also United States Gypsum v. Green,
110 So.2d 409 (Fla. 1959); Green v. Pederson, 99 So.2d 292 (Fla.
1957).

There exists no statutory exemption from tax for the
purchase and use of sanitizing and sterilizing agents by
Taxpayer to be used to sanitize and sterilize the products’
contact surfaces of all equipment used in the processing,
handling, and storage of milk products. The fact that Federal
and State regulatory agencies require Taxpayer to use the
sanitizing and sterilizing agents on all equipment used in the
processing, handling, and storage of the milk products does not
operate to provide an exemption from tax. In the absence of a
specific exemption, such purchases of said items are subject to

tax as purchases of tangible personal property under section

212.05, F.S.

The regulation cited in your letter 12A-1.001(5)(b),
F.A.C., does not apply. It states that disinfectants used in
dairy barns for the purpose of protecting cows or used directly
on livestock are exempt. It provides no exemption from tax for
the purchase and use of sanitizing and sterilizing agents which
are used to sanitize and sterilize dairy products processing

equipment.

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,

Richard S. Harrod
Senior Tax Specialist
Technical Assistance & Dispute

Resolution

RSH/h
Control No. 32390