What did Florida's original TAA 98A-099 say about tax on produce-ripening concentrate, and was that result later revised?

Plain-English summary

The original 1998 TAA held that the taxpayer's produce-ripening concentrate was taxable. The generator converted the concentrate into ethylene gas, which triggered fruit to ripen, but the Department found that the gas did not become a component or ingredient of the produce and left no residue. The industrial-materials exclusion therefore did not apply.

The Department also said federal pesticide registration did not automatically make the product exempt; the product's ultimate use controlled. It instructed the supplier to collect sales tax on the concentrate.

The original ruling separately said the loaned generators could be subject to Florida use tax unless the taxpayer proved that a similar sales tax had been lawfully paid or that the generators had been used outside Florida for at least six months before importation.

This original result was later replaced. Revised TAA 98A-099R, issued July 30, 2004, conditionally exempted the specific ripening agent if it was registered by the Florida Department of Agriculture and Consumer Services as a plant regulator. The revised ruling, not this original taxable conclusion, is the later Department response.

Common questions

Why did the original ruling tax the concentrate? The ethylene gas accelerated ripening but did not become part of the produce or leave a residue.

Did federal pesticide registration create an exemption? Not under the original TAA. It said registration alone did not control taxability.

What did the original ruling say about the generators? Florida use tax could apply unless tax had already been paid or the six-month prior-use condition was met.

Is the original taxable result the Department's later answer? No. Revised TAA 98A-099R replaced it in 2004 with a conditional plant-regulator exemption.

Citations and references

• Fla. Stat. §§ 212.02(14)(c), 212.05, and 212.06(1)(b), (8)(a)
• Fla. Admin. Code r. 12A-1.063(1)(a)
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-099

Original ruling text

SUMMARY

Based on the information supplied, the Department concludes
that ethylene gas used by produce warehouses does not meet
the criteria established in Section 212.02(14)(c), F.S., to
be exempt from tax. Furthermore, the fact that Ripener I
Concentrate has been registered with the United States
Environmental Protection Agency as a pesticide does not
automatically preclude it from sales tax. The ultimate use
of the concentrate governs its taxability status.
Therefore, it has been determined that the sale of Ripener
I Concentrate is governed by Section 212.05, F.S., and is a
taxable transaction. As such, sales tax should be
collected on the sale of this concentrate.

See Revised TAA 98A-099R dated July 30, 2004

Dec 28, 1998

Re: Technical Assistance Advisement 98A-099
Sales and Use Tax - Tangible Personal Property Consumed in
Processing
Petitioner: XXX (herein "Taxpayer")
FEI: XXX
Section 212.02(14)(c), F.S.
Rule 12A-1.063(1)(a), F.A.C.

Dear:

This letter is a response to your petition dated June 8, 1998,
for the Department's issuance of a Technical Assistance
Advisement. 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. This response to
your request constitutes a Technical Assistance Advisement and
is issued to you under the authority of section 213.22, F.S.

DISCUSSION OF FACTS

In your letter, you presented the following scenario:

[Taxpayer] is in the business of supplying XXX and loaning
XXX to produce warehouses. These products are used to
ripen their produce so that it is ready to sell to the
consumer.

For example, in the case of produce warehouses who carry
bananas: when the warehouse purchases bananas from its
supplier, the fruit is in an unripened state and is stone
green in color. These bananas are not salable at the time
they are received. These bananas are then placed in
atmospherically controlled rooms, called ripening rooms.
An XXX (which is loaned to the warehouse at no charge) is
placed in this room and filled with XXX. XXX contains
92.46% ethanol. When put through an XXX, ethylene gas is
produced. This gas triggers the banana's natural ripening
process. Once the ripening process is triggered, the
bananas produce their own ethylene gas. The rooms are then
vented and cooled. At this point the bananas are ready for
sale to the consumer, as the ripening has been triggered.

This process is used for various other fruits and
vegetables such as tomatoes, kiwi, avocados, etc.

REQUESTED ADVISEMENT

Is the XXX mentioned above exempt from sales and use tax?

APPLICABLE LAW

Section 212.02(14)(c), F.S.(1998 Supplement), states in
pertinent part:

"Retail sales," "sale at retail," "use," "storage," and
"consumption"...
...
The term also does not include the sale, use, storage, or
consumption of industrial materials, including chemicals
and fuels except as provided herein, for future processing,
manufacture, or conversion into articles of tangible

personal property for resale when such industrial
materials, including chemicals and fuels except as provided
herein, become a component or ingredient of the finished
product...

Section 212.05, F.S., states in pertinent part:

Sales, storage, use tax.It is hereby declared to be the legislative intent that
every person is exercising a taxable privilege who engages
in the business of selling tangible personal property at
retail in this state, including the business of making mail
order sales, or who rents or furnishes any of the things or
services taxable under this chapter, or who stores for use
or consumption in this state any item or article of
tangible personal property as defined herein and who leases
or rents such property within the state.

(1) For the exercise of such privilege, a tax is levied on
each taxable transaction or incident, which tax is due and
payable as follows:

(a)1.a. At the rate of 6 percent of the sales price of each
item or article of tangible personal property when sold at
retail in this state, computed on each taxable sale for the
purpose of remitting the amount of tax due the state, and
including each and every retail sale.

Section 212.06(1)(b), F.S., states in pertinent part:

Except as otherwise provided, any person who manufactures,
produces, compounds, processes, or fabricates in any manner
tangible personal property for his or her own use shall pay
a tax upon the cost of the product manufactured, produced,
compounded, processed, or fabricated without any deduction
therefrom on account of the cost of material used, labor or
service costs, or transportation charges, notwithstanding
the provisions of s. 212.02 defining "cost price."

Section 212.06(8)(a), F.S., states:

Use tax will apply and be due on tangible personal property
imported or caused to be imported into this state for use,
consumption, distribution, or storage to be used or
consumed in this state; provided, however, that, except as
provided in paragraph (b), it shall be presumed that
tangible personal property used in another state, territory
of the United States, or the District of Columbia for 6
months or longer before being imported into this state was
not purchased for use in this state. The rental or lease
of tangible personal property which is used or stored in
this state shall be taxable without regard to its prior use
or tax paid on purchase outside this state.

DISCUSSION AND DETERMINATION

The Department of Revenue has consulted with the Department of
Agriculture regarding this issue. The Department has learned
that ethylene gas is the ripening agent that occurs in nature
which causes fruit to ripen and decay. This gas can be used in
fruit processing as a means to accelerate the ripening process.
Exposing the fruit or vegetables to ethylene gas causes certain
genetic responses in the fruit/vegetable cells, which promotes
ripening. Furthermore, the Department of Agriculture advised the
Department of Revenue that ethylene gas itself does not become a
component part of the fruit and does not leave a residue once
the source of the gas has been removed.

Based on this information, the Department concludes that the
ethylene gas does not meet the criteria established in Section
212.02(14)(c), F.S., to be exempt from tax. Furthermore, the
fact that XXX has been registered with the United States
Environmental Protection Agency as a pesticide does not
automatically preclude it from sales tax. The ultimate use of
the concentrate governs its taxability status. Therefore, it
has been determined that the sale of XXX is governed by Section
212.05, F.S., and is a taxable transaction. As such, sales tax
should be collected on the sale of this concentrate.

As an additional note, please be advised that pursuant to
Section 212.06(8)(a), F.S., the XXX are subject to use tax in
Florida unless one of the following situations exist:

1) Proof that sales tax or a similar tax has been lawfully
imposed and paid on the generators that are brought into
Florida, or

2) Proof that the generators have been used outside the State
of Florida for a period of six months or longer from the
date they were manufactured (assuming the taxpayer is the
manufacturer of the generators).

This response constitutes a Technical Assistance Advisement
under section 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 section 213.22, F.S. Our
response is predicated upon 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 from that which is 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 section 213.22,
F.S. Your name, address, and any other details that 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 this response.

Sincerely,

Leslie Strauss
Tax Law Specialist

Control #34492