How did Florida's $5,000 discretionary-surtax limit apply to furniture sets, itemized pieces, and split deliveries?

Subject

Discretionary Surtax on Furniture Sets and Deliveries

Plain-English summary

A furniture suite advertised, sold, and invoiced for one unitemized price counted as one item for Florida's county discretionary surtax, so the surtax applied only to the first $5,000 of the suite price. If the dealer itemized the individual pieces, the surtax applied to the first $5,000 of each piece instead.

The same one-item treatment could apply to goods normally sold in bulk. The Department's example treated 15 conference-room chairs sold for $400 each as one $6,000 sale, with surtax only on the first $5,000, if selling chairs in multiples was the dealer's usual practice and the sale was documented as one transaction.

Installment deliveries did not necessarily split a transaction. A written purchase order or agreement for a specific quantity to be delivered within a definite stated time was one sale even if delivery and invoicing occurred in installments. Without those written terms, each delivery was a separate sale; deliveries under indefinite-quantity or open-end orders were also separate sales.

The Department did not decide whether furniture fastened to walls or floors became real property. That depended on the parties' intent, the manner of attachment, and whether removal would significantly damage the building.

What this means for you

For the discretionary-surtax limit, invoices and ordinary business practice matter. A single package price for a furniture suite can produce one $5,000 surtax base, while a separately itemized invoice can create a separate $5,000 base for every piece.

Dealers using staged deliveries should put the specific quantity and definite delivery period in a written order if they intend the installments to be treated as one sale. An open-ended order does not receive that treatment.

Common questions

Q: How much of a $6,000 unitemized furniture suite was subject to discretionary surtax? The first $5,000, assuming the suite was advertised, sold, and invoiced as one unit.

Q: What if the couch, love seat, and table were separately itemized? The first $5,000 of each separately sold piece was subject to surtax.

Q: Can multiple identical chairs count as one item? They could under the ruling's example if the dealer normally sold them in multiples and documented them as one sale.

Q: Do split deliveries always create separate sales? No. A definite written order for a specific quantity delivered within a specified time remained one sale. Without that writing, each delivery was a separate sale.

Q: Did bolting furniture to a wall or floor make it real property? The Department did not decide. It said the analysis depended on intent, attachment, removability, and possible damage to the realty.

Q: Can another furniture seller rely on this ruling? No. The advisement binds the Department only for the requester and the facts described.

Citations and references

• Fla. Stat. § 212.054(2)(b)1 — discretionary surtax and the $5,000 item limitation
• Fla. Admin. Code r. 12A-15.004 — furniture sets, bulk sales, written orders, and installment deliveries
• Fla. Stat. §§ 212.05(1), 212.02(19) — sales tax and tangible personal property
• Fla. Admin. Code r. 12A-1.051 — real-property contractor and fabrication rules
• Kings Bay Yacht & Country Club v. Green, 173 So. 2d 509 (Fla. 1st DCA 1965) — taxpayer's burden on real-property-improvement classification
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-013

Original ruling text

SUMMARY

If a furniture dealer advertises that a group of furniture pieces (i.e. couch, love seat, table, etc.) are on sale for
$6000 and does not itemized each piece, the discretionary surtax would only apply to the first $5000, if the items are itemized then the tax applies to the first $5000 of each of these items.

Mar 19, 1998

Re: TAA 98(A)-013
Sales and Use Tax - Discretionary Surtax - Furniture Sales Sections 212.02(19), F.S., 212.02(10)(h), 212.054 F.S. Rules 12A-1.051, 12A-15.004, F.A.C. XXX ("Taxpayer")

Dear :

This response is in reply to your September 22, 1997, petition for the Department's issuance of a Technical Assistance Advisement ("TAA") pursuant to s. 213.22, F.S., concerning the captioned matter and party. 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. Therefore, the Department is herewith granting your request for the issuance of a TAA and the ensuing discourse shall embody said ruling.

DISCUSSION OF FACTS

Your petition imparts the following significant information regarding the issues under advisement herein:

FROM YOUR PETITION

The Taxpayer (TP) is a manufacturer, distributor, and retailer of furniture including dining sets, conference

tables, bookshelves, wall files (attached), desks, chairs, modular work stations, and other related products. TP is a calendar year, accrual basis taxpayer. TP operates a facility [in Florida]. The Taxpayer's customers are primarily located in Florida but some are located in other parts of the United States and other countries.

The Taxpayer prepares customer orders (CO) for all of its sales. The COs include detailed specifications of each piece of furniture showing description, measurements, colors, fabrics, quantities, and price. A CO may include goods requested by more than one authorized customer representative and customer representatives at more than one customer location. More than one customer purchase order may be included in a single CO.

For example, a CO may be placed by customer A. Customer A will authorize employees X and Y to initiate purchase orders (POs) to TP. All of the products included in the POs are included in a single CO. The completed products may be delivered to multiple customer locations. Copies of a sampling of COs are attached.

The CO may be reviewed, revised, and supplemented several times before the customer accepts. Once the CO is accepted and a deposit is made, the CO becomes the contract, and the manufacturing process begins. The COs are fixed fee or lump-sum type contracts. In four-to-six weeks initial product delivery begins. For small orders one delivery is sufficient. For large orders multiple deliveries are required, continuing for periods of two-to-six months. No fixed delivery date is specified on the CO.

A separate invoice is rendered for deliveries made on separate days. Deliveries made on the same day are aggregated on one invoice.

Prices per item range from well below to well above $5,000. Several items may be included in a set and would be shown on the CO as a set. In cases where sets are shown on the CO, the CO may show the specifications of each component of

the set; in other cases, only the set would be described without detail of the components.

Products are usually delivered and installed by TP. Delivery charges are usually additional installation charges are usually included. Installation may include affixing to walls and/or floors with screws, bolts, or other fasteners.

Where installation is required, it is sometimes necessary to reinforce the walls so the furnishings, such as hanging wall files and certain other products, can be securely fastened. Detailed measurements are taken to assure the products will fit exactly into place and that fixtures, such as lighting and power access will function as specified. Lighting is generally connected by the TP.

REQUESTED ADVISEMENT

You elicit the following advice from the Department:

1. Are sales of furniture under the practices outlined
   [above] considered one item for purposes of the discretionary surtax exemption of $5,000 (FAC Rule 12A15.004)?

A. Would your response change if the customer order specified a delivery date?

2. Are sales of furnishings which are installed as
   discussed above by fastening to the walls and/or floors considered improvements to real property for sales tax purposes (FAC Rule 12A-1.051)?

DISCUSSION OF LAW

The following passages from the Florida Statutes (F.S.) and the Florida Administrative Code (F.A.C.) are pertinent to the issues raised in your request.

Section 212.054, F.S., authorizes counties to impose

discretionary surtaxes on transactions subject to sales tax under chapter 212. The sales amount in excess of $5,000 "on any item of tangible personal property" is exempt from surtax. Two or more items may count as one if they "are sold to the same person at the same time and under accepted business practice or industry standards are usually sold in bulk or are items that, when assembled comprise a working unit or part of a working unit." See Section 212.054(2)(b)1.

Rule 12A-15.004, F.A.C., which provides guidance for interpreting the statute, states the following:

(1) Except as provided in this section, any transaction subject to the state sales and use tax imposed on sales, use, rentals, admissions, and other transaction by Part I, Chapter 212, F.S., is subject to the surtax, if the transaction occurs in a taxing county. A transaction that is not subject to state sales and use tax is not subject to the surtax. (2)(a)1. The surtax does not apply to the sales amount above $5,000 on any item of tangible personal property. However, the surtax does apply to the first $5,000 of the sales amount on any item of tangible personal property and to all other transactions which are subject to the state tax imposed on sales, use, rentals, and other transactions by Part I, Chapter 212, F.S., without limitation, except as provided in (3) below.... (b)1. For purposes of administering the $5,000 limitation on any item of tangible personal property, if two or more taxable items of tangible personal property are sold to the same purchaser at the same time and, under generally accepted business practice or industry standards or usage, are normally sold in bulk or are items which, when assembled, comprise a working unit or part of a working unit, such items shall be considered a single item for purposes of the $5,000 limitation when supported by a charge ticket, sales slip, invoice, or other tangible evidence of a single sale or rental. 2.a. Example: An automobile dealer normally sells

automobiles or trucks one at a time or one per invoice. Thus, if the dealer lists two or more automobiles or trucks on the same invoice, the surtax would apply to the first
$5,000 of the charge for each automobile or truck. b. Example: Where furniture dealers advertise, sell, and invoice furniture suites or sets for a certain amount, without itemization of individual pieces that make up the suite or set, the surtax applies to the first $5,000 of each such suite or set of furniture. If the invoice contains other items not included in the suite or set, the surtax applies to the first $5,000 of each of these items. Further, in the case of furniture dealers who sell and invoice furniture by the piece, each piece is subject to the surtax on the first $5,000. f. Example: When a lumber and supply dealer sells lumber of various kinds and sizes, nails of different sizes, rolls of felt, squares of shingles, or other building materials normally sold in bulk and the sale's on one invoice, the sale will be considered to be a single item and the surtax applies to the first $5,000 of the total invoice. If, however, the invoice contains items not normally sold in bulk (e.g., hammers, saws, shovels, power drills, refrigerators, stoves, washing machines, dryers and other appliances, ceiling fans) the surtax will apply to the first $5,000 for each item not usually sold in bulk....

(d) Where a purchase order is issued by the purchaser to the selling dealer, or an agreement is made between the selling dealer and the purchaser which is reduced to writing, that provides for the purchase of a specific quantity of tangible personal property which, according to the terms and conditions set out in the purchase order or agreement, is to be delivered to the purchaser within a definite specified time, such transaction constitutes one sale for purposes of the $5000 limitation. Delivery of the tangible personal property so ordered within the time specified in the purchase order or agreement will constitute one sale notwithstanding that due to the nature of the property it must be delivered in installments or that multiple deliveries may be necessary to consummate

delivery to the purchaser. In the absence of a written purchase order or written agreement reflecting the above conditions, each individual delivery of tangible personal property is to be one sale. Each individual delivery of tangible personal on purchase orders for indefinite quantities or open-end purchase orders is considered to be one sale.

Section 212.05(1) imposes tax on sales of tangible personal property, not real property. Section 212.02(19), F.S., defines "tangible personal property" as "personal property which may be seen, weighed, measured, or touched or is in any manner perceptible to the senses...." To determine which tax rules apply -- the ones relating to tangible personal property or to real property -- it is essential to ascertain whether the installation of the property at issue becomes part of real property or retains the characteristics of tangible personal property. Black's Law Dictionary defines "Fixture" at 327 (5th ed. 1983) as "An article in the nature of personal property which has been so annexed to the realty that it is regarded as a part of the land.... e.g., a furnace affixed to a house or other building; counters permanently affixed to the floor of a store; a sprinkler system installed in a building."

Rule 12A-1.051, F.A.C., provides guidance on the taxability of improvements or repairs to real property by contractors. If a contractor both furnishes materials and provides installation labor for a real property improvement, the contractor is considered the ultimate consumer of the materials used. If the contractor conducts fabrication of items at the contractor's own premises prior to delivery to the job site, the contractor is taxable on the fabricated cost of those items under Rule 12A1.051(5), F.A.C.

CONCLUSIONS OF LAW

In regard to your first question stated above, as stated in the above example, where furniture dealers advertise, sell, and invoice furniture suites or sets for a certain amount, without itemization of individual pieces that make up the suite or set, the surtax applies to the first $5,000 of each such suite or set

of furniture. If the invoice contains other items not included in the suite or set and not ordinarily sold in bulk, the surtax applies to the first $5,000 of each of these items. Therefore, if all pieces of a suite are delivered at one time and the suite is invoiced as a unit rather than as components, only the first
$5,000 of the total price of the suite is subject to the tax. The rule also provides that if items are ordinarily sold in bulk, a number of such items sold in a single sale will be considered a single item. If your client usually sells conference room chairs in multiple quantities, for example, a single sale of 15 such chairs for $400 each or a total of $6,000 would be subject to surtax only on the first $5,000.

The second part of your first inquiry, whether the response would change if the customer order specified a delivery dates relates to when an order for multiple items will be considered a single sale. Ordinarily, in the example used above, all 15 chairs would have to be delivered at the same time and invoiced on a single invoice to be considered a single sale. If however, a purchase order is issued by the purchaser to the selling dealer, or an agreement is made between the selling dealer and the purchaser, and that document provides for the purchase of a specific quantity of tangible personal property which, according to the terms and conditions set out in the purchase order or agreement, is to be delivered to the purchaser within a definite specified time all deliveries and invoices made pursuant to that order are viewed as one transaction for purposes of the $5,000 exemption. Therefore, your client could deliver 10 chairs on one date and the rest on a different date and still treat the sale of the chairs as a single $6,000 sale.

However, in the absence of a written purchase order or written agreement reflecting the above conditions, each individual delivery of tangible personal property is to be considered one sale. Each individual delivery of tangible personal on purchase orders for indefinite quantities or open-end purchase orders is considered to be one sale.

Regarding your second question, without knowing the intention of the parties and without actually viewing the property installed, we cannot determine for you whether or not the items to be

affixed to the walls and floors are so annexed to the building to virtually become a part of that real estate. Under Kings Bay Yacht & Country Club v. Green, 173 So.2d 509 (Fla. 1st DCA 1965), it is the taxpayer's burden to show whether a given transaction is primarily and predominantly one involving improvements to real property or installation of tangible personal property.

Using the guidance given by the definition of "fixture" in Black's Law Dictionary and the guidance given by the rules, you must carefully look at what you are installing and the manner in which it is installed to determine whether or not the item installed is of a type that can be readily removed without significant damage to realty. If the property can be readily removed without such damage and the parties so intend it to be removed, then it is likely that the property retains its character as tangible personal property and does not become a "fixture." In contrast, if the removal of the item would significantly harm the realty, then it is more likely that the property would be viewed by the Department and by a Court of Law as a fixture.

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,

Leola B. Carter
Senior Tax Specialist
Technical Assistance and Dispute Resolution (850) 922-4835

LBC\
Control No. 29382
Enclosure
Corrected Version