Did machinery for new deep-rib roof deck and composite floor deck qualify for Florida's new-business sales-tax exemption?

Plain-English summary

Florida classified the new decking production as a new business activity, allowing the machinery exemption under section 212.08(5)(b). The manufacturer already made general-purpose roof deck and non-composite form deck, but those products could not meet long-span requirements for high-rise and canopy construction.

The new deep-rib roof deck could span substantially longer distances. The new composite floor deck also became an integral structural part of a concrete floor, unlike non-composite form deck, which primarily served as a concrete form. Technical publications treated composite and non-composite decking as distinct materials.

Although the old and new products used related steel roll-forming processes and shared industry classifications, Florida found the functional and market differences more than a change in size, style, or model line.

What this means for you

For the 1999 new-business machinery exemption, similarity in raw material or manufacturing method was not decisive. Florida examined whether the added product performed differently and opened an economic activity the existing products could not serve.

Common questions

Q: Did the Department treat this as merely an expansion? No.

Q: Why did the new products count as a distinct activity? They met long-span and structural uses the existing decking could not perform, including markets the manufacturer previously could not supply.

Q: Did appearance alone control? No. The Department relied heavily on engineering performance and technical publications.

Citations and references

• Fla. Stat. § 212.08(5)(b) — industrial machinery and equipment for new businesses
• Fla. Stat. § 213.22 — Technical Assistance Advisements
• Epic Metals Corp. v. Souliere, 99 F.3d 1034 (11th Cir. 1996) — cited for the functional character of composite-floor-deck profiles

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99A-068

Original ruling text

SUMMARY

QUESTION: Are the purchase and installation of machinery
and equipment necessary to produce deep rib roof deck and
composite floor deck exempt from sales and use tax as a new
business pursuant to s. 212.08(5)(b), F.S.? The business
previously produced general purpose roof deck and noncomposite form deck. However, the business was not able to
produce the specialized profiles of steel decking that are
required by the high rise construction industry.

ANSWER - Based on Facts Below: The prior steel decking
products made by the business were not viable building
material choices when the design of a building calls for
long span decking products. As a result, the business had
been excluded as a supplier of decking to the high rise
industry. Further, authoritative technical publications
consider composite floor decking to be a distinct and
separate building material from non-composite form deck.
Therefore, the production of deep rib roof deck and
composite floor deck represents an economic activity that
is distinct and separate from the prior steel decking
products. Accordingly, the business qualifies for
exemption as a new business.

Dec 09, 1999

Re: Technical Assistance Advisement 99A-068
Sales and Use Tax
New Business Exemption for Steel Decking Plant
Section 212.08(5)(b), F.S.

Dear :

This is in response to your letter of October 26, 1999,
which requests the issuance of a Technical Assistance Advisement
concerning the applicability of an exemption from sales and use
tax pursuant to s. 212.08(5)(b), F.S., to purchases of machinery

and equipment by your client, XXX (hereinafter "Taxpayer").

BACKGROUND

Taxpayer is a manufacturer of cold-formed steel decking.
In June 1999 Taxpayer submitted an Application for Temporary Tax
Exemption Permit (Form DR-1214) seeking a full exemption from
sales and use tax as a new business pursuant to subparagraph 1.
of s. 212.08(5)(b), F.S. The exemption application related to
purchases of approximately $1,000,000 in machinery and equipment
that is necessary to produce two kinds of decking known as "type
N deep rib roof deck" and "type CF composite floor deck" for
sale to the high rise and canopy construction industries. The
prior types of decking produced by Taxpayer were types "B" and
"F" roof deck and types "SF" and "HF" non-composite form deck.
In a letter dated July 12, 1999, it was the expressed opinion of
the Department that the purchase of the machinery and equipment
necessary to produce deep rib roof deck and composite floor deck
represented an expansion of Taxpayer's business pursuant to
subparagraph 2. of the above indicated exemption statute.
Accordingly, Taxpayer would only be exempt from that amount of
tax imposed in excess of $50,000 for the calendar year and have
to show that the facility's productive output has increased by
not less than 10 percent. Taxpayer disagrees with the
Department's determination of July 12, 1999, and is requesting
the Department to reconsider its position.

ISSUE

Whether the production of deep rib roof deck and composite
floor deck by Taxpayer qualifies as a new business pursuant to
subparagraph 1. of s. 212.08(5)(b), F.S.

RELEVANT AUTHORITIES

The following passage from the Florida Statutes (F.S.) is
pertinent to the exemption issues in this advisement.

Section 212.08(5)(b), F.S. (1999), provides in part:

1. Industrial machinery and equipment purchased for

exclusive use by a new business in spaceport activities as
defined by s. 212.02 or for use in new businesses which
manufacture, process, compound, or produce for sale items
of tangible personal property at fixed locations are exempt
from the tax imposed by this chapter upon an affirmative
showing by the taxpayer to the satisfaction of the
department that such items are used in a new business in
this state. Such purchases must be made prior to the date
the business first begins its productive operations, and
delivery of the purchased item must be made within 12
months of that date....

For primary assistance in the resolution or understanding
of technical issues, the following publications have been
consulted:

Publication No. 28, Steel Deck Institute Design Manual,
Copyright 1992 by the Steel Deck Institute.

Ramsey/Sleeper Architectural Graphic Standards, Seventh
Edition, Copyright 1981 by John Wiley & Sons, Inc.

DISCUSSION

Steel Decking Described

Steel decking is a construction material utilized by
professional contractors, not homeowners or remodelers. It is
made by feeding rolls of coiled flat steel into a long machine
that bends or roll-forms the steel into a variety of ribbed
(corrugated, zigzag, or accordion-like) profiles. Depending on
the particular profile, the decking may be categorized or subcategorized as roof deck, acoustical deck, form deck, cellular
floor deck, or composite floor deck. This advisement will limit
itself to the specific types of decking that are being
manufactured by Taxpayer.

Roof Decking

Roof decking is supported by steel joists and is used as a
permanent support for rigid insulation and finished roofing

materials. Roof decking is not a finished roofing material such
as aluminum standing seam roofing or any of the various other
types of metal roofing collectively or generically known as "tin
roofs." Once construction of the roof is completed, roof decking
may only be viewed, if at all, from the interior or attic space
of the building.

Form Decking

The purpose of form decking is to provide the surface upon
which a poured-in-place concrete floor system is constructed.
It is of limited strength (stiffness) by itself and must be
supported by steel joists at regular, short intervals and may
also be supported by temporary shoring. Once the concrete has
hardened, the form deck has served its purpose and could be
removed. However, removal is not practical, since the form
decking is now wedged between the concrete and the joists.
Therefore, the form decking is abandoned in placed. If the form
deck is viewable from the finished interior of the building, it
may be painted and would then only serve as an aesthetic
element.

Composite Floor Decking

The purpose of composite floor decking is also to provide
the surface upon which a poured-in-place concrete floor system
is constructed. The ends of the decking are supported by major
beams at long intervals. The decking does not require the
intermediate support of steel joists like form deck does.
However, depending on the span involved, composite floor decking
may be supported by temporary shoring during the concrete pour.
Once the concrete has hardened and any temporary shoring is
removed, the composite floor deck cannot and must not be
removed, since it is now an integral part of the floor
structure. This is because composite floor decking is
manufactured with rolled-in keys or embossments that lock the
hardened concrete with the decking to combine the tensile
strength of the steel with the compressive strength of the
concrete to form a single or "composite" unit.

It is important to note that not only is the functionality

of composite steel decking supported by engineering data, but
that fact has also been established in a recent court case. In
a trade dress infringement suit between two manufacturers of
composite floor decking, the court concluded that the details of
the profile of composite floor deck are functional and are not
"arbitrary arrangements of predominately ornamental features."
Epic Metals Corp. v. Souliere, 99 F.3d 1034 (11th Cir. 1996).

Decking Choices

The choice of the decking profile to be used is not a
casual decision. Many factors need to be considered before a
particular decking profile is chosen. Among these factors are
the design of the building, space or height requirements,
construction schedules, budget, and building code requirements.
Although it is not possible for this advisement to provide an
authoritative treatise on engineering subjects, the following
simplified explanation is offered for the sake of clarification.

Consider two supporting elements (i.e., walls, beams, or
joists) and a horizontal element (i.e., decking) resting upon
those supports. The span is the distance between the two
supports. Any given or specific horizontal element will have a
certain inherent amount of strength or stiffness. As the span
increases, that horizontal element will start to deflect (sag or
bend) under its own load (weight). When an additional load
(i.e., people, furniture, or machinery) is placed on top of the
horizontal element, it will deflect even more and may ultimately
break or pull away from its supports and collapse. To prevent
or limit deflection under a given load, either the depth
(vertical profile) of the horizontal element must be increased
or the distance of the span must be decreased.

Manufacturers, professional agencies, and associations test
building materials and publish their findings about the
attributes, capabilities, or limitations of those tested
materials. Span tables are collections of data about specific
building materials that support or are supported over horizontal
distances. A typical span table will in part tell how much of a
load can be supported by a specific building material for a
given span before the capabilities of that material are

exceeded.

Example 1: The span table for 1 1/2-inch deep type "F" roof
deck shows that, at a span of 5 feet, the decking can support a
load of 118 pounds per square foot. The table also shows that,
if the span is increased to 6 feet, the decking can now only
support a load of 82 pounds per square foot. This would tell an
architect that, if he has to support a weight of 100 pounds per
square foot on the roof, it could be supported if the joists are
5 feet apart, but the roof may collapse if the joists are 6 feet
apart.

Example 2: For any of a variety of reasons, an architect
may decide that a span of 12 feet between roof joists in a
building is necessary and cannot be decreased. Based on span
tables, Taxpayer's prior 1 1/2-inch depth type B or F roof deck
can only span a maximum distance of 10 feet and, therefore,
cannot be used. However, Taxpayer's new 3-inch type N deep rib
roof deck can span a maximum distance of 14 feet 6 inches and
can be used.

Example 3: For any of a variety of reasons, the height of
each story of a high rise building must be kept to a minimum.
Taxpayer's prior type SF and HF form decks cannot span the
interior 12-foot wide bays of the building without the
intermediate support of joists. However, if joists were to be
used, it would add 25 inches in height (the depth of the joists)
to each story of the building. However, Taxpayer's new 3-inch
type CF composite floor deck can span the 12-foot distance
without the use of joists.

Taxpayer's Machinery and Equipment

The process necessary to manufacture Taxpayer's existing
and additional products is essentially the same, cold rollforming steel sheet. However, the existing and new roll-forming
machines operate differently.

Taxpayer's existing roll-forming machinery uses 33 ksi
(33,000 pounds per square inch) minimum yield strength steel in
40 1/2 and 48-inch wide sheets. These roll-forming machines can

only produce deck panels with a maximum rib height of 1 1/2
inches at 6 inches on center. Each roll-forming machine is
dedicated to the production of a single profile (SF form deck,
HF form deck, F roof deck, or B roof deck). It is not practical
to change a roll-forming machine to produce an alternate profile
of decking, since it can take nearly two weeks to adjust and
align the 20 rolling stations of the machine.

Taxpayer's new roll-forming machine uses 40 ksi minimum
yield strength steel in 36, 40, and 47 inch wide sheets. This
roll-forming machine can produce deck panels with a maximum rib
height of 3 inches at 12 inches on center. The rolling stations
of this machine, called "rafts," can be changed to produce the
profiles of 2-inch CF composite deck, 3-inch CF composite deck,
and 3-inch N deep rib deck. It takes production personnel
approximately 3 to 4 hours to change out one raft configuration
to another.

New Versus Expanding Business

Section 212.08(5)(b), F.S., provides an exemption from
sales and use tax to businesses that manufacture, process,
compound, or produce tangible personal property for sale. The
amount of the exemption that is available will depend on whether
that business is classified as "new" or "expanding." At its most
basic level, a new business is one that buys machines and begins
production for the first time at a fixed location. An expanding
business is one where a product is already being made at a fixed
location and the business is buying more machines to make more
of that same product. When a similar, but not identical, product
is made at a facility, the determination whether that business
should be classified for the exemption as new or expanding must
be made on a case-by-case basis.

In the past, that determination has depended on whether the
existing and additional products were "physically comparable."
However, the determination process has evolved. The
classification of a business as new or expanding now depends on
whether the additional product represents an economic activity
that is distinct and separate from a product, or a group of
products, that is already being made at a facility. The

Department will be guided by the following factors when making a
determination:

1. The general nature of the business' predominant existing
   activities;
2. The Standard Industrial Classification (SIC) or North
   American Industry Classification System (NAICS) industry number
   of the existing product(s) versus the additional product;
3. The raw materials or components used to make the
   existing product(s) versus the additional product;
4. Whether the additional product is an alternative to, or
   represents a replacement for, the existing product(s);
5. The differences in machinery and equipment needed to
   make the existing product(s) versus the additional product; and
6. The units used to measure production of the existing
   product(s) versus the additional product.

After consideration of the above factors, the Department finds
the following:

1. The general nature of Taxpayer's predominant existing
   business activity is to produce cold roll-formed steel decking.
2. The appropriate SIC and NAICS code classifications for
   both of Taxpayer's existing and additional products appear to be
   3316 (Cold-Rolled Steel Sheet, Strip, and Bars) and 331221
   (Rolled Steel Shape Manufacturing) respectively.
3. All of the decking products are made from rolled coils
   of sheet steel that come in several widths. However, the steel
   needed to manufacture the new decking profiles is a different
   strength than the steel needed to make the prior decking
   profiles.
4. When the design of a building requires the use of long
   span decking, types B and F roof deck and types SF and HF noncomposite form deck cannot be substituted.
5. All of the decking products are made by rolling mill
   machinery. However, the previous rolling mills are dedicated to
   only producing one profile of decking. The new rolling mill can
   produce three profiles with the change-out of rafts.
6. Production of all of the decking products is measured in
   square feet.

No single above factor will decide whether the additional
product represents a distinct and separate economic activity.
Products that merely differ in size, color, flavor, style,
packaging, or model line are not considered to be a distinct and
separate economic activity. The business claiming an exemption
as a new business has the burden of demonstrating that the
additional product does represent a distinct and separate
economic activity from a product, or group of products, that is
already being made at the fixed location.

DETERMINATION

As a part of this advisement process, samples of the types
of decking produced at Taxpayer's facility were submitted for
examination. To those people who are unfamiliar with decking
products and have no working knowledge of their use, the samples
are very similar in appearance. However, the ways the different
decking profiles perform are very different.

With respect to Taxpayer's roof deck products, the prior
roof deck profiles and the new deep rib roof deck profile
perform the same function, namely, to serve as the support for
finished roofing materials. The major difference is that the
deep rib roof deck, because of its deeper profile, can span
substantially longer distances and support greater loads. A
review of technical publications makes no significant
distinction between the various profiles of roof deck other than
to present information in the form of span tables for each of
the various profiles.

With respect to Taxpayer's prior non-composite form deck
profiles and the new composite floor deck profiles, the
differences are very distinct. Technical publications do make a
clear distinction between non-composite form deck and composite
floor deck. This is because their capabilities and ultimate
uses are very different. The differences are more than just the
ability to span longer distances. Non-composite form deck is
primarily used as a concrete form, while composite floor deck is
both a concrete form and an integral part of the structure of a
floor system.

The previously discussed new versus expanding business
classification factors do not tend to overtly indicate a
distinction between the previous and additional products made by
Taxpayer. However, the differences in the products are more
than mere changes in size, style, or model line. The
determination as to whether deep rib roof deck and composite
floor deck represent an economic activity that is distinct and
separate from the prior decking products rests heavily on
engineering considerations.

The prior steel decking products made by Taxpayer are not
viable building material choices when the design of a building
calls for long span decking products. This is not an issue
where Taxpayer was not able to provide a competitively priced
product. This is an issue where Taxpayer was not able to provide
the required product at all. As a result, Taxpayer had been
excluded as a supplier of decking to the high rise and canopy
construction industries. Further, authoritative technical
publications consider composite floor decking to be a distinct
and separate building material from non-composite form deck.
Therefore, it is the position of the Department that Taxpayer's
production of deep rib roof deck and composite floor deck
represents an economic activity that is distinct and separate
from the prior decking products. Accordingly, Taxpayer qualifies
under the exemption provisions of s. 212.08(5)(b), F.S., as a
new business.

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, your request
and related documents 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 before disclosure. In an effort to protect the
confidentiality of such information, we request you provide the
undersigned with an edited copy of your request for Technical
Assistance Advisement, backup material and response within
fifteen days of the date of this advisement.

Sincerely,

Jeffery L. Soff
Tax Law Specialist
Technical Assistance and
Dispute Resolution

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