Was a school board's sale and leaseback of K-12 instructional textbooks subject to Florida sales tax?

Subject

Sale/Leaseback of Tangible Personal Property

Plain-English summary

Neither leg of the school board's textbook sale-and-leaseback was subject to Florida sales tax. The school board sold instructional textbooks to a lessor, and the lessor immediately leased the same books back under related agreements.

The initial sale was exempt as a purchase for resale. The lessor was registered as a dealer and gave the school board a valid resale certificate before buying property exclusively for leasing.

The leaseback was independently exempt under Florida's school-book provision. The textbooks were used exclusively for K-12 educational purposes in regularly prescribed courses at public schools.

What this means for you

A sale-and-leaseback requires each leg to be analyzed separately. The lessor's purchase depended on dealer registration, exclusive leasing purpose, and a valid resale certificate; the school board's rental depended on the specific K-12 textbook exemption.

This ruling did not create a blanket exemption for all school equipment or all government sale-leasebacks. The property was instructional textbooks used in qualifying courses.

Common questions

Q: Why was the sale from the school board to the lessor exempt? The registered lessor bought the textbooks exclusively to lease them and provided a valid resale certificate.

Q: Why was the leaseback exempt? The school-book statute covered books used in regularly prescribed K-12 courses at public, parochial, or nonprofit schools.

Q: Would a lessor purchase before dealer registration be exempt? No under the rule quoted in the TAA; purchases before registration were taxable.

Q: Did the ruling cover noninstructional school property? No. It addressed the submitted textbooks and their stated educational use.

Citations and references

• Fla. Stat. § 212.08(7)(q) — exemption for qualifying school books
• Fla. Admin. Code r. 12A-1.071(2)(a)1. — property purchased exclusively for leasing by a registered dealer
• Fla. Admin. Code r. 12A-1.039 — resale and exemption certificate
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-025

Original ruling text

SUMMARY

A School Board sold tangible personal property (textbooks) that it owned to a Lessor. The Lessor subsequently leased the property back to the School Board. Since the Lessor provided a resale certificate to the School Board, no sales tax is due on the sale of the textbooks to the Lessor. With regard to the leaseback of the textbooks to the School Board, pursuant to Section 212.08(7)(q), F.S., no tax would be due. This sections provides in part:

(7) Miscellaneous Exemptions.-...
(q) School books and school lunches - This exemption applies to school books used in regularly prescribed courses of study... in public, parochial, or nonprofit school operated for and attended by pupils of grades 1 through 12...

Apr 22, 1998

Re: Technical Assistance Advisement (98A-025) Sales and Use Tax Sale/Leaseback of Tangible Personal Property Section 212.08(7)(q), F.S., Rule 12A-1.071(2), F.A.C. XXX ("School Board") XXX ("Lessor")

Dear :

This Technical Assistance Advisement is in response to your letter dated December 18, 1997, in which you request a determination of the taxable status of a certain sale and leaseback transaction that the School Board was involved in. The School Board sold tangible personal property (textbooks) that it owned to a Lessor. The Lessor subsequently leased the property back to the School Board. Your letter provides in pertinent part:

Pursuant to Purchase Agreement dated July 3, 1997,... the
[School Board] sold to [Lessor] certain instructional textbooks used exclusively for public school grades K-12 educational purposes (the "Textbooks"). [Lessor] delivered to the School Board the "Purchaser's Blanket Resale and Exemption Certificate in Accordance with Florida Sales and Use Tax Rule 12A-1.039" dated June 30, 1997 and bearing Certificate Registration No.__ of [Lessor], (the "Exemption Certificate"), a copy of which is attached hereto as Exhibit "B"....
...
Pursuant to Master Agreement dated July 3, 1997, a copy of which is attached hereto as Exhibit "C", [Lessor] leased the Textbooks to the School Board. Simultaneously with the Sale Agreement and the Master Agreement, the School Board and [Lessor] entered into Supplement to Purchase Agreement and Master Agreement dated July 3, 1997, (the "Supplemental Agreement," a copy of which is attached thereto as Exhibit "D,"[)] due to uncertainty of the parties as to whether the sales tax payment and collection requirements of Chapter 212, Florida Statutes, (the "Sales Tax Requirements") applied to the above described sale-leaseback transaction.

DETERMINATION

Rule 12A-1.071, F.A.C., reads in part:

(2)(a)1. Tangible personal property purchased exclusively for leasing purposes may be purchased tax exempt, providing the lessor is registered with the Department as a dealer at the time of purchase and issues the vendor a valid resale certificate in lieu of tax. Any purchases made prior to the time of registration as a dealer are subject to tax.

Therefore, since the Lessor has provided a resale certificate to the School Board, no sales tax is due on the sale of the textbooks to the Lessor. With regard to the leaseback of the textbooks to the School Board, pursuant to Section 212.08(7)((q), F.S., no tax would be due. This section provides in part:

(7) Miscellaneous Exemptions. ...
(q) School books and school lunches - This exemption applies to school books used in regularly prescribed courses of study,..., in public, parochial, or nonprofit schools operated for and attended by pupils of grades 1 through 12....

This response constitutes a Technical Assistance Advisement under s. 213.22, F.S. which is binding on the department only under 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 our 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,

Jonathan E. Swift
Tax Law Specialist
Technical Assistance and Dispute Resolution (850) 922-4840

Control #33319

NOTICE UNDER THE AMERICANS WITH DISABILITIES ACT

Persons needing an accommodation to participate in any proceeding before the Tax Policy and Dispute Resolution Office, should contact that office at 904-488-0717 (voice), or 1-800-DOR-8331 (TDD), at least five working days before such proceeding. You may also call via the Florida Relay System at 1-800-955-8770 (voice), or 1-800-955-8771 (TDD).