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