Did Florida's sales-tax exemption for a nonprofit youth organization cover both its purchases and its sales or leases of donated property?

Subject

Organizations Providing Benefits to Minors

Plain-English summary

The nonprofit youth organization was exempt on qualifying purchases for its customary activities, but not on its own sales or leases of tangible property. The organization rehabilitated and educated dependent, delinquent, and other youth through marine, wilderness, environmental, education, and work programs. It held a consumer's certificate of exemption and qualified under the youth-organization statute.

Donors often gave it boats because of its marine programs. The organization sold some boats and leased others, often with purchase options. Florida said the youth-organization exemption removed tax from purchases made for the organization's customary work, but did not excuse it from collecting tax on those outgoing boat and property transactions.

The Department contrasted youth organizations with churches. The statute expressly covered tangible-property sales by churches, while the youth, charitable, educational, and scientific provisions were interpreted as purchase exemptions. A sale or lease by the youth organization still could be exempt under a different rule, such as an occasional or isolated sale, but not merely because of the seller's youth-organization status.

What this means for you

A nonprofit exemption certificate does not necessarily work in both directions. It may protect the organization's purchases while leaving its retail sales, rentals, and leases taxable.

Organizations receiving donated vehicles, boats, equipment, or other property should analyze the later disposition separately, including frequency, leasing activity, purchase options, registration, and any occasional-sale rule.

Common questions

Q: Did the organization qualify as a youth organization? Yes. The Department had issued it a consumer's certificate classifying it that way.

Q: Were purchases for its customary programs exempt? Yes.

Q: Were its sales and leases of donated boats exempt? No merely because it was a youth organization; it had to collect and remit tax unless another transaction-specific exemption applied.

Q: Why did the ruling discuss churches? The church exemption expressly covered sales by churches, unlike the youth-organization provision as interpreted by the Department.

Citations and references

• Fla. Stat. § 212.08(7)(n) — organizations providing educational, cultural, recreational, and social benefits to minors
• Fla. Stat. § 212.08(7)(o) — religious, charitable, scientific, educational, and veterans' organizations
• Fla. Admin. Code r. 12A-1.001(3)(a) — exempt organizational purchases and church sales
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-029

Original ruling text

SUMMARY

Taxpayer requested advisement as to whether an organization providing benefits to minors is exempt from sales tax on its sales, as well as its purchases, because it is an organization described in Section 212.08(7)(n), F.S. The position of the Department, which is supported by legislative history, is that unless the sales or leases made by such groups are exempt as occasional or isolated sales, sales tax must be collected and remitted.

Apr 23, 1998

Re: TAA 98A-029
Sales Tax
Organizations Providing Benefits to Minors Section 212.08(7)(n), Florida Statutes XXX (Organization) F.E.I. XXX

Dear :

This is in response to your letter of August 12, 1996, in which you request, on behalf of your client, Organization, the issuance of a Technical Assistance Advisement as to whether Organization is exempt from sales tax on its sales as well as its purchases. Your letter of August 12, 1996, provides the following information:

A. Taxpayer Information

[Organization] is a nonprofit corporation organized under Chapter 617 of the laws of the State of Florida. A copy of its current Articles of Incorporation and Bylaws are attached as Attachment 1. [Organization] has received a Consumer['s] Certificate of Exemption from the Department of Revenue (Attachment 2). [Organization's] purposes, as stated in its Articles of Incorporation, include:

1. Rehabilitating dependent and delinquent youth by providing education, training, discipline and productive work; and

2. Conducting marine, wilderness and other environmental,
   education and rehabilitation programs for dependent, delinquent and other problem youth.

[Organization's] programs include an active education component with state qualified teachers. Minors often leave [Organization] programs with GEDs or substantial progress in their public education. In addition, [Organization] is a charitable organization described in Section 501(c)(3) of the Internal Revenue Code. A copy of [Organization's] determination letter from the Internal Revenue Service indicating its status as a Section 501(c)(3) organization is attached as Attachment 3.

B. Transaction Information.

[Organization] receives donations, including tangible personal property, from various contributors. Contributors often donate boats to [Organization] because many of
[Organization's] programs are marine related. Some of the boats are sold outright. Others are leased. Typically, the lease arrangement includes an option for the lessee to purchase the boat. Currently, [Organization] is collecting and remitting sales tax on sales and leases of boats and other tangible personal property.

At issue is whether the Organization is exempt from sales tax on its sales, as well as its purchases, because it is an organization described in Section 212.08(7)(n), F.S., and whether sales tax can be imposed on entities which purchase from Organization.

Statutory Authority

Section 212.08(7)(n) and (o), F.S., provide in pertinent

part as follows:

(n) Organizations providing special educational, cultural, recreational, and social benefits to minors.--There shall be exempt from the tax imposed by this chapter nonprofit organizations which are incorporated pursuant to chapter 617 or which hold a current exemption from federal corporate income tax pursuant to s. 501(c)(3) of the Internal Revenue Code the primary purpose of which is providing activities that contribute to the development of good character or good sportsmanship, or to the educational or cultural development, of minors. This exemption is extended only to that level of the organization that has a salaried executive officer or an elected nonsalaried executive officer.

(o) Religious, charitable, scientific, educational, and veterans' institutions and organizations.--

1. There are exempt from the tax imposed by this chapter
   transactions involving:

a. Sales or leases directly to churches or sales or leases of tangible personal property by churches;

b. Sales or leases to nonprofit religious, nonprofit charitable, nonprofit scientific, or nonprofit educational institutions when used in carrying on their customary nonprofit religious, nonprofit charitable, nonprofit scientific, or nonprofit educational activities, including church cemeteries; and

c. Sales or leases to the state headquarters of qualified veterans' organizations and the state headquarters of their auxiliaries when used in carrying on their customary veterans' organization activities. If a qualified veterans' organization or its auxiliary does not maintain a permanent state headquarters, then transactions involving sales or leases to such organization and used to maintain the office of the highest ranking state official are exempt from the tax imposed by this chapter.

Rule 12A-1.001(3)(a), F.A.C., states in part:

(3) RELIGIOUS, EDUCATIONAL, CHARITABLE, VETERANS' AND SCIENTIFIC ORGANIZATIONS, HOMES FOR THE AGED, NURSING HOMES OR HOSPICES, FEDERAL AND STATE CHARTERED CREDIT UNIONS, FLORIDA RETIRED EDUCATORS ASSOCIATION AND LOCAL CHAPTERS, ORGANIZATIONS PROVIDING SPECIAL EDUCATIONAL AND SOCIAL BENEFITS TO MINORS, STATE THEATER CONTRACT ORGANIZATIONS, MILITARY MUSEUM FUNDRAISERS, COAST GUARD AUXILIARIES, AND CEMETERY ASSOCIATIONS.

(a) A sale or lease directly to or sales or leases of tangible personal property by churches, or a sale or lease directly to nonprofit religious, nonprofit educational, nonprofit charitable institutions, and veterans' organizations, for use in the course of their customary nonprofit religious, nonprofit educational, nonprofit charitable activities, and for use by veterans' organizations, including church cemeteries, are exempt from the tax imposed by Chapter 212, F.S. Also exempt are scientific organizations and organizations providing special educational and social benefits to minors; State Theater Contract Organizations; Florida Retired Educators Association; and certain nonprofit corporations qualified as homes for the aged or licensed as a nursing home or hospice....

Discussion

The Department, in construing the above statutory exemptions must adhere to, and be guided by, the long-standing and fundamental precept of statutory construction, established by the Florida Supreme Court, which mandates that exemptions from, or exceptions to, taxing statutes are special privileges granted by the legislature and must be strictly construed against the taxpayer and in favor of the administering agency. See Asphalt Pavers v. Department of Revenue, 584 So.2d 55, 57 (Fla. 1st DCA 1991); Dade County Taxing Authorities v. Cedars of Lebanon Hospital Corporation, Inc., 355 So.2d 1202, 1205 (Fla. 1978), reh. den. April 5, 1978; Williams v. Jones, 326 So.2d

425, 435 (Fla. 1975), reh. den. March 4, 1976; Straughn v. Camp, 293 So.2d 689, 695 (Fla. 1974); United States Gypsum Company v. Green, 110 So.2d 409, 413 (Fla. 1959).

The above rule provisions were promulgated and adopted by the Department to interpret the above statutory exemptions for youth organizations as well as the other nonprofit organizations named therein. The statute, section 212.08(7)(o)1.a., F.S. makes it clear that sales or leases of tangible personal property by churches is free of sales tax. In contrast, section 212.08(7) (o)1.b. and c. make it clear that sales by charitable, educational, scientific and veteran's organizations are not free of the sales tax imposed by Chapter 212 when they are selling tangible personal property. The Department's rule, Rule 12A1.001(3)(a), F.A.C., in accord with the statute, states that sales and leases of tangible personal property to and by churches, and sales and leases to nonprofit religious, nonprofit educational, nonprofit charitable institutions, and veterans' organizations are exempt from the tax imposed by Chapter 212, F.S. The Rule goes on to provide that organizations providing special educational and social benefits to minors, like the charitable, educational and scientific organizations, are exempt from the sales tax on their purchases. The Rule does NOT provide that organizations providing special educational and social benefits to minors are exempt from sales tax on their sales of tangible personal property.

The argument that you propose is that youth/minor organizations are, like churches, free of the responsibility of collecting tax on sales or leases of tangible personal property. The basis for this is the use in those exemption statutes of the phrase "shall be exempt from the tax imposed by this chapter."

The position of the Department, which is supported by legislative history, is that unless the sales or leases made by such groups are exempt as occasional or isolated sales, sales tax must be collected and remitted.

Prior to 1984, the sales tax exemptions for organizations providing special educational and social benefits to minors extended only to the purchases of tangible personal property and

the "exemption" was available only through a refund.

In 1984, a number of bills were introduced to amend the exemption statutes. During the legislative session, the contents of the various bills were consolidated into Committee Substitute for Senate Bill 114 and 173. These bills were passed and became law in Chapter 84-362, L.O.F.

According to the legislative history, the amendments were intended to accomplish the following:

1. To eliminate the burdensome refund requirement for
   youth/minor organizations;

2. To add "recreational" to the youth/minor exemption; and

3. To expand the exemption for purchases of tangible personal
   property by youth/minor, charitable, religious, scientific, educational, and veterans groups to include purchases of non-tangible items such as utility services, lease payments, and transient rental payments.

In order to expand the youth/minor exemption to purchases of items that are not considered tangible personal property, the 1984 amendments struck the language "Purchases of tangible personal property" and replaced it with "there shall be exempt from the tax imposed by Part I of this chapter nonprofit organizations which are...."

The fact that only purchases were contemplated when the language "are exempt from the tax imposed by Part I" of Chapter 212 is underscored by the fiscal impact anticipated, none, and by both the goals enunciated in the legislative history and the explanation of the changes made. For example, in the explanation of House Bill 161, which bill contains the youth/minor amendments which were later incorporated into the bills that passed, Committee Substitute for Senate Bill Nos. 114 and 173, it states that the reasons for the amendments are to eliminate the refund requirement and to extend the exemption to purchases of utility services and the payments for rent or admissions. (See Fiscal Note, Committee on Finance and

Taxation, January 25, 1984.) Later, after House Bill 161 had been incorporated into Committee Substitute for Senate Bill Nos. 114 and 173, the Summary of Legislation produced by the Florida House of Representatives, dated June 11, 1984, it stated that the amendments gave youth/minor organizations an exemption on purchases at the time of purchase thus eliminating the need for refund requests.

The law cited above, section 212.08(7)(o), F.S., is clear that churches may purchase and sell tangible personal property free of sales tax. The law cited above is clear that charitable, educational and scientific organizations may purchase free of Florida's sales tax but they, unlike churches, have not been excused from collecting and remitting sales tax with respect to their sales. Youth/Minor organizations are, pursuant to section 212.08(7)(n), F.S., clearly exempt from paying sales tax on their purchases. However, the legislative history to the youth/minor statutory exemption makes it clear that youth/minor organizations, like the charitable, educational, and scientific organizations, are not excused from collecting and remitting sales tax with respect to their sales. In the Summary of Legislation for Committee Substitute for Senate Bill Nos. 114 and 173, June 11, 1984, it states the following:

d. religious, educational, charitable, veteran, and youth organizations are exempted from the sales tax imposed on all transactions taxable pursuant to Part I, Chapter 212.

Clearly, if sales by these organizations were contemplated, rather than just purchases, this statement would be in conflict with the clear wording of the charitable institutions exemption, the educational institutions exemption, and the exemption for veterans' organizations.

Conclusion

Organization clearly qualifies as an organization falling under the provisions of the exemption afforded by s. 212.08(7)(n), F.S., as evidenced by the Department's issuance of the Consumer's Certificate of Exemption classifying Organization

as a "youth organization," and sales to Organization for use in its customary activities are exempt. However, based on the foregoing analysis, it is the Department's determination that sales made by Organization are subject to sales tax.

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,

Bonnie Everton
Senior Tax Specialist

/e
Cont. #26292