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

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