Could an interstate common carrier recover tax overpaid on trucks, parts, and separately itemized installation during 1996 and 1997?

Plain-English summary

Florida found that an interstate common carrier could recover sales tax it paid in 1996 and 1997 above the amount due after applying the common-carrier proration exemption to trucks and parts.

The carrier should first obtain refunds from the vendors. If a vendor would not refund the tax, the carrier could apply to the Department with an assignment of the vendor's refund rights.

When an invoice separately listed parts and installation labor, the entire price was subject to the proration calculation rather than treating installation separately.

Common questions

Was the carrier entitled to a refund? Yes, for tax exceeding the properly prorated amount.

Who should pay it first? The vendor; alternatively, the carrier could use an assigned refund right in a Department claim.

Were separately stated installation charges included? Yes. Parts and installation were prorated together.

Citations and references

• Fla. Stat. § 212.08(9)
• Fla. Admin. Code R. 12A-1.064
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99A-013

Original ruling text

SUMMARY

A common carrier is entitled to a refund for taxes paid on
motor vehicles and parts thereof during 1996 and 1997 in
excess of the amount due under the partial exemption based
on proration in section 212.08(9), F.S. Refunds should be
obtained from the vendors. Alternatively, assignments of
refund rights from the vendors should be submitted with
applications for refund made to the Department. In cases
where vendors separately itemized charges for parts and
installation within the total invoice price, the total
price is subject to proration.

Mar 24, 1999

Re: Technical Assistance Advisement (99A-013)
Sales and Use Tax -- Interstate Commerce Proration
Section 212.08(9), F.S.
Rule 12A-1.064, F.A.C.

Dear :

This is in response to your letter to the Florida Department of
Revenue dated January 20, 1999, in which you asked for a
technical assistance advisement concerning the entitlement of
XXX ("Carrier") to proration on certain purchases.

Facts

Carrier operates trucks as a common carrier engaged in
interstate commerce. Carrier has been licensed by or registered
with the Interstate Commerce Commission or its successor agency
within the federal Department of Transportation throughout its
operations. In early 1998 Carrier learned it was entitled to
partial exemption from Florida sales and use tax on purchases of
motor vehicles or parts thereof. Carrier then registered with
the Department as a dealer and received a registration
certificate. During 1996 and 1997, prior to registering,

Carrier made purchases from one Florida vendor ("Vendor"') of
trucks, truck parts, and items to be used on its trucks.
Vendor's invoices separately itemized parts and installation
labor. Carrier paid tax on the full price of all purchases from
Vendor during those years. Carrier has requested a refund from
Vendor of those taxes in excess of what would have been due
using a proration formula, and Vendor has refused.

Carrier has asked for technical advice concerning the following
issues:

1. Is Carrier entitled to a refund of taxes on purchases made
   in 1996 and 1997 based on the difference between taxes
   actually paid and taxes that would have been paid using an
   appropriate proration factor?
2. If Carrier is entitled to a refund, what is the appropriate
   procedure for claiming it?
3. Are separately stated installation charges subject to
   proration or fully taxable?

Law, Discussion, and Analysis

Qualification for Proration

Section 212.08(9)(b), F.S., provides a partial exemption for
motor vehicles used in interstate commerce. It reads as
follows:

(b) Motor vehicles which are engaged in interstate commerce
as common carriers, and parts thereof, used to transport
persons or property in interstate or foreign commerce are
subject to tax imposed in this chapter only to the extent
provided herein. The basis of the tax shall be the ratio
of intrastate mileage to interstate or foreign mileage
traveled by the carrier's motor vehicles which were used in
interstate or foreign commerce and which had at least some
Florida mileage during the previous fiscal year of the
carrier. Such ratio is to be determined at the close of
the carrier's fiscal year. This ratio shall be applied each
month to the total purchases of such motor vehicles and
parts thereof which are used in this state to establish

that portion of the total used and consumed in intrastate
movement and subject to tax under this chapter. The basis
for imposition of any discretionary surtax is set forth in
s. 212.054. Motor vehicles which are engaged in interstate
commerce, and parts thereof, used to transport persons or
property in interstate and foreign commerce are hereby
determined to be susceptible to a distinct and separate
classification for taxation under the provisions of this
chapter. Motor vehicles and parts thereof used exclusively
in intrastate commerce do not qualify for the proration of
tax. For purposes of this paragraph, parts of a motor
vehicle engaged in interstate commerce include a separate
tank not connected to the fuel supply system of the motor
vehicle into which diesel fuel is placed to operate a
refrigeration unit or other equipment.

The statute provides for proration of purchases by common
carriers of motor vehicles used in interstate commerce and parts
thereof. Based on the facts presented, Carrier is entitled to
the benefits of the statute.

In applying the statute to Carrier's situation, certain judicial
and regulatory interpretations should be considered. By its
terms, the statute purports to apply to total purchases of motor
vehicles and parts that are used in Florida. The scope was
limited, however, by the stipulation agreement entered into by
the Department in Atlantic Coast Line Railroad v. State Revenue
Commission, Circuit Court, 2d Judicial District, Leon County,
Florida, March 25, 1965. Under that stipulation agreement, the
Department agreed to interpret the predecessor statute of
section 212.08(9), F.S., so as to levy sales or use tax only
against rail cars and parts thereof that were purchased or
delivered to the purchaser in Florida. Moreover, the Department
agreed to apply the statute in like manner to similarly situated
taxpayers, including interstate motor carriers. Although the
single statutory provision involved in the 1965 stipulation
agreement subsequently evolved into separate provisions for
different types of interstate carriers, the stipulation
agreement remains in effect. Therefore, Carrier would owe sales
or use tax on the purchases from Vendor that were delivered in
Florida but would not be subject to Florida tax on purchases

where delivery occurred outside Florida just because the motor
vehicle was subsequently used in the state.

A second judicial clarification deals with the computation of
the proration factor. Under the wording of the statute, the
ratio would be derived by using "intrastate mileage" to
"interstate or foreign mileage" and considering those "motor
vehicles which were used in interstate or foreign commerce and
which had at least some Florida mileage." This provision was
interpreted in United Parcel Service, Inc. v. State, Office of
the Comptroller, 443 So.2d 263 (Fla. 1st DCA 1983). The court
held that the appropriate method to calculate the proration
factor was to use Florida miles traveled by the carrier in the
prior fiscal year as the numerator and use total miles traveled
by the carrier's vehicles that had some Florida miles as the
denominator. In that case, vehicles used to transport goods
moving in interstate commerce were found to be engaged in
interstate commerce, and eligible for proration, even if the
individual vehicle never left the State of Florida. Such a
vehicle's miles should be included in both the numerator and the
denominator. On the other hand, a vehicle that is used
exclusively in intrastate commerce is not eligible for
proration, and its miles should not be included in the
calculation. The mileage of a vehicle that had no Florida miles
at all during the prior fiscal year should not be included in
the denominator. Carrier's proration factor should be
calculated by applying these guidelines.

The Department has provided additional regulatory guidance for
motor vehicle common carriers in Rule 12A-1.064(4), F.A.C.,
which reads, in relevant part, as follows:

(4) Motor Vehicles.

(a)1. Motor vehicles which are licensed as common
carriers... and parts thereof used to transport persons or
property in interstate or foreign commerce are subject to
the tax imposed by... Chapter 212, F.S., only to the extent
provided herein. The basis of the tax shall be the ratio of
intrastate mileage to interstate or foreign mileage
traveled by the carrier's motor vehicles which were used in

interstate or foreign commerce and which had at least some
Florida mileage during the previous fiscal year of the
carrier. Such ratio shall be determined at the close of
such carrier's fiscal year. The ratio shall be applied
each month to the total purchases by the carrier of such
motor vehicles and parts thereof which are used in Florida
to establish that portion of the total used and consumed
within this state and subject to tax under... Chapter 212,
F.S. Motor vehicles and parts thereof used exclusively in
intrastate commerce do not qualify for proration of tax.
Prior to claiming this partial exemption, common carriers
who make any purchases hereunder must register as dealers
with the Department and extend in writing at the time of
purchase a resale certificate in lieu of tax, stating the
specific reasons for exemption....

(f) Fire extinguishers, hand trucks, step ladders,
tarpaulins, furniture pads and burlaps which are used and
carried as standard equipment by vehicles which...
transport persons or property in interstate or foreign
commerce are taxable, subject to proration....

Paragraph (f) expands the scope of the exemption to include
accessories carried on motor vehicles that could not be
considered "parts." This provision was in effect during 1996
and 1997 and would be available to Carrier for purchasers made
during those years. It should be noted, however, that the
Florida Legislature issued a statutory mandate to all state
agencies to review their rules and identify those that had no
basis in statute. Paragraph (f) was so identified by the
Department and is in the process of being repealed. Unless
there is a statutory change to extend proration to accessories
as well as to motor vehicles and parts of motor vehicles,
proration of accessories will no longer be permitted upon the
effective date of the repeal of the rule. You should check the
Florida Administrative Weekly, which is available at the Florida
Department of State internet site, for developments in this
regard.

In addition to discussing the scope of the partial exemption,
Rule 12A-1.064(4), F.A.C., provided a procedure for claiming it.

Florida vendors are required to collect sales tax from
purchasers unless valid exemption certificates are provided.
Failure to do so subjects the vendor to liability for the tax.
See sections 212.06(1), 212.07(1), F.S. Section 212.183, F.S.,
authorizes the Department to provide by rule for self-accrual of
taxes in cases where taxpayers qualify for proration. Rule 12A1.064, F.S., therefore authorizes common carriers to register as
dealers and issue resale certificates to their vendors. This
permits the vendors to make sales without collecting taxes. It
also facilitates the carrier's calculating tax once a month
based on qualified Florida purchases during the month as set
forth in the rule.

Although the rule characterizes the certificate offered by the
common carrier to the vendor as a resale certificate, because
that is a certificate that vendors are authorized to accept in
lieu of collecting tax, that terminology does not accurately
reflect the nature of the transaction. Common carriers are not
excused from paying tax to vendors because the property is being
purchased for resale. They are excused because they are going
to remit the tax themselves after applying the proration factor.
Therefore, the court in United Parcel Service, supra, held that
failure to be registered at the time of purchase did not
preclude a later refund application. The holding in Department
of Revenue v. Anderson, 403 So.2d 397 (Fla. 1981), that a
purchaser could not claim a refund based on the fact that
property was purchased for resale unless the purchaser was a
registered dealer able to extend a valid resale certificate at
the time of sale does not apply to interstate carriers seeking
proration on a retroactive basis. (While the opinion in Latin
Express Service, Inc. v. Department of Revenue, 687 So.2d 1342
(Fla. 1st DCA 1997), seems to imply that failure to register
prior to entering a transaction results in failure to qualify
for proration, it does not directly address the issue of whether
relief could be sought through a claim for refund by a carrier
who paid the tax at the time of purchase. The Department does
not believe the District Court of Appeal decision should be read
to overrule by implication the direct holding of the Florida
Supreme Court on that issue.)

Procedure for Obtaining a Refund

Based on the foregoing discussion, Carrier is entitled to seek a
refund for taxes paid in 1996 and 1997 on purchases entitled to
proration to the extent the tax paid exceeds the amount owed
under the proration statute. The statute governing refunds is
section 215.26, F.S., which authorizes refunds only to the
person who paid funds into the State Treasury or to "his or her
heirs, personal representatives, or assigns...." Because the
statute does not authorize the Department to make refunds to a
purchaser who paid the funds to a vendor rather than into the
State Treasury, Rule 12A-1.014, F.A.C., requires a purchaser who
overpaid tax to obtain a refund from the dealer, who in turn may
claim credits against taxes the dealer owes or claim a refund
from the Department.

In some cases, dealers are unwilling to make refunds because
they do not want to accept the risk of the Department auditing
their credits or refund application and determining that the
purchaser was not entitled to a refund. In such cases, the
Department will accept a refund claim from the purchaser on Form
DR-26, Application for Refund, if accompanied by an assignment
of the dealer's right to the refund and other documentation
necessary to substantiate the right to and amount of the refund.
The Department is authorized to make refunds to such assignees
by section 215.26, F.S. A suggested form of assignment is
enclosed to facilitate Carrier following this procedure.
Execution of the assignment merely authorizes Carrier to pursue
the claim for any refund that may be due on Vendor's sales to
Carrier and shifts to Carrier the burden of establishing the
claim. It does not involve any representation by Vendor that a
refund is due, and Vendor should be willing to cooperate by
signing the assignment.

Separately Stated Installation Charges

The final issue presented in your request for advice is whether
proration is available for separately stated labor charges if
the part installed is itself eligible for proration. If a
taxable sale occurs, tax applies to the "sales price." That
term is defined in section 212.02(16), F.S., as "the total
amount paid for tangible personal property, including any

services that are a part of the sale,... without any deduction
therefrom on account of the cost of the property sold, the cost
of materials used, labor or service cost, interest charged,
losses, or any other expense whatsoever." The installation
charges for parts purchased from Vendor are part of the taxable
sales price of the part itself, regardless of whether Vendor
chooses to separately state materials and labor. If the part is
eligible for proration, the entire sales price should be
prorated.

Conclusions

1. Carrier is entitled to a refund of taxes for 1996 and 1997
   to the extent that taxes collected by Vendor on purchases
   of trucks, parts, and accessories exceed the amount that
   would have been collected if the appropriate proration
   factor had been applied.
2. The appropriate procedure would be to obtain a refund from
   Vendor or, if Vendor is unwilling to refund the taxes, to
   obtain an assignment of refund claim from Vendor and apply
   directly to the Department on Form DR-26.
3. The entire sales price on Carrier's purchases of parts for
   motor vehicles used in interstate commerce, including
   separately stated installation charges, is subject to
   proration.

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 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 section 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
confidential 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,

Linda W. Bridges
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 922-9412

LWB/
Enclosure: Assignment of Rights Form
Control #: 36384