(1) This rule shall
govern the taxability of transactions in which contractors manufacture or
purchase supplies and materials for use in public works contracts, as that term
is referred to in Section
212.08(6), F.S.
This rule shall not apply to non-public works contracts for the repair,
alteration, improvement, or construction of real property, as those contracts
are governed under the provisions of Rule
12A-1.051, F.A.C. In applying
this rule, the following definitions are used.
(a)
1.
"Contractor" is one that supplies and installs tangible personal property that
is incorporated into or becomes a part of a public facility pursuant to a
public works contract with a governmental entity exercising its authority in
regard to the public property or facility. Contractors include, but are not
limited to, persons engaged in building, electrical, plumbing, heating,
painting, decorating, ventilating, paperhanging, sheet metal, roofing, bridge,
road, waterworks, landscape, pier, or billboard work. This definition includes
subcontractors.
2. "Contractor"
does not include a person that furnishes tangible personal property that is not
affixed or appended in such a manner that it is incorporated into or becomes a
part of the public property or public facility to which a public works contract
relates. A person that provides and installs tangible personal property that is
freestanding and can be relocated with no tools, equipment, or need for
adaptation for use elsewhere is not a contractor within the scope of this
rule.
3. "Contractor" does not
include a person that provides tangible personal property that will be
incorporated into or become part of a public facility if such property will be
installed by another party.
4.
Examples.
a. A vendor sells a desk, sofas,
chairs, tables, lamps, and art prints for the reception area in a new public
building. The sales agreement requires the vendor to place the furniture
according to a floor plan, set up the lamps, and hang the art prints. The
vendor is not a contractor within the scope of this rule, because the vendor is
not installing the property being sold in such a way that it is attached or
affixed to the facility.
b. A
security system vendor furnishes and installs low voltage wiring behind the
walls, motion detectors, smoke alarms, other sensors, control pads, alarm
sirens, and other components of a security system for a new county courthouse.
The components are direct wired, fit into recesses cut into the walls or other
structural elements of the building, and are held in place by screws. The
vendor is a contractor within the scope of this rule. The security system is
installed and affixed in such a manner that it has been incorporated into the
courthouse.
c. A vendor enters an
agreement to provide and install the shelving system for a new public library.
The shelves are built to bear the weight of books. The shelf configuration in
each unit maximizes the number of books the shelves can hold. The number and
size of the units ordered is based on the design for the library space. The
units will run floor to ceiling and will be anchored in place by bolts or
screws. The vendor is a contractor within the scope of this rule. The shelving
system will be affixed in such a manner that it becomes a part of the public
library.
d. A vendor agrees to
provide and install the computer terminals, monitors, keyboards, servers, and
related equipment for a county tax collector's office in central Florida. The
job includes connecting the equipment to the structural cabling system that has
been installed by an electrical contractor. The cables running to the computer
terminals are held in place by screws that fit into the back of the terminal
units. The vendor is not a contractor within the scope of this rule. The
computer equipment has not been affixed in such a way as to become a part of
the facility. The equipment has not been attached to any structural element of
the building.
e. A manufacturer
agrees to provide the prestressed concrete forms for a public parking garage. A
construction company is awarded the bid to install those forms and build the
garage. The manufacturer is not a contractor within the scope of this rule,
because the manufacturer will not install any tangible personal property that
becomes a part of the garage. The construction company is a contractor within
the scope of this rule.
(b) "Governmental entity" includes any agency
or branch of the United States government, a state, or any county,
municipality, or political subdivision of a state. The term includes
authorities created by statute to operate public facilities using public funds,
such as public port authorities or public-use airport authorities.
(c) "Public works" are defined as projects
for public use or enjoyment, financed and owned by the government, in which
private persons undertake the obligation to do a specific piece of work that
involves installing tangible personal property in such a manner that it becomes
a part of a public facility. For purposes of this rule, a public facility
includes any land, improvement to land, building, structure, or other fixed
site and related infrastructure thereon owned or operated by a governmental
entity where governmental or public activities are conducted. The term "public
works" is not restricted to the repair, alteration, improvement, or
construction of real property and fixed works, although such projects are
included within the term.
(d) "Real
property" within the meaning of this rule includes all fixtures and
improvements to real property. The status of a project as an improvement or
fixture to real property will be determined by reference to the definitions
contained in subsection
12A-1.051(2),
F.A.C.
(2) The purchase
or manufacture of supplies or materials by a public works contractor, when such
supplies or materials are purchased for the purpose of going into or becoming
part of public works, whether the purchase or manufacture occurs inside or
outside Florida, is taxable to the public works contractor if the public works
contractor also installs such supplies or materials, since the public works
contractor is the ultimate consumer of such supplies or materials. Public works
contractors that purchase or manufacture such supplies and materials in Florida
are liable for sales tax or use tax on such purchases and manufacturing costs.
A public works contractor that purchases supplies or materials that may be sold
as tangible personal property or may be incorporated into a public works
project may purchase such supplies or materials without tax by issuing a copy
of the contractor's Annual Resale Certificate and accrue and remit tax upon
withdrawing such supplies or materials from inventory to go into or become a
part of public works. Public works contractors that purchase or manufacture
such materials outside the State of Florida are liable for use tax, subject to
credit for any sales or use tax lawfully imposed and paid in the state of
purchase or manufacture.
(3) The
purchase or manufacture of tangible personal property for resale to a
governmental entity is exempt from tax, provided this exemption shall not
include sales of tangible personal property made to, or the manufacture of
tangible personal property by, public works contractors when such tangible
personal property goes into or becomes a part of public works.
(4)
(a) The
exemption in Section 212.08(6),
F.S., is a general exemption for sales made directly to the government. A
determination whether a particular transaction is properly characterized as an
exempt sale to a governmental entity or a taxable sale to or use by a
contractor shall be based on the substance of the transaction, rather than the
form in which the transaction is cast. The Executive Director or the Executive
Director's designee in the responsible program will determine whether the
substance of a particular transaction is a taxable sale to or use by a
contractor or an exempt direct sale to a governmental entity based on all of
the facts and circumstances surrounding the transaction as a whole.
(b) The following criteria that govern the
status of the tangible personal property prior to its affixation to real
property will be considered in determining whether a governmental entity rather
than a contractor is the purchaser of materials:
1. Direct Purchase Order. The governmental
entity must issue its purchase order directly to the vendor supplying the
materials the contractor will use and provide the vendor with a copy of the
governmental entity's Florida Consumer's Certification of Exemption.
2. Direct Invoice. The vendor's invoice must
be issued to the governmental entity, rather than to the contractor.
3. Direct Payment. The governmental entity
must make payment directly to the vendor from public funds.
4. Passage of Title. The governmental entity
must take title to the tangible personal property from the vendor at the time
of purchase or delivery by the vendor.
5. Assumption of the Risk of Loss. Assumption
of the risk of damage or loss by the governmental entity at the time of
purchase is a paramount consideration. A governmental entity will be deemed to
have assumed the risk of loss if the governmental entity bears the economic
burden of obtaining insurance covering damage or loss or directly enjoys the
economic benefit of the proceeds of such insurance.
(c)
1. To
be entitled to purchase materials tax exempt for a public works project, a
governmental entity is required to issue a Certificate of Entitlement to each
vendor and to the governmental entity's contractor to affirm that the tangible
personal property purchased from that vendor will go into or become a part of a
public work. This requirement does not apply to any agency or branch of the
United States government.
2. The
governmental entity's purchase order for tangible personal property to be
incorporated into the public works project must be attached to the Certificate
of Entitlement. The governmental entity must issue a separate Certificate of
Entitlement for each purchase order. Copies of the Certificate may be
issued.
3. The governmental entity
will also affirm that if the Department determines that tangible personal
property sold by a vendor tax-exempt pursuant to a Certificate of Entitlement
does not qualify for the exemption under Section
212.08(6), F.S.
and this rule, the governmental entity will be liable for any tax, penalty, and
interest determined to be due.
4.
The following is the format of the Certificate of Entitlement to be issued by
the governmental entity:
CERTIFICATE OF ENTITLEMENT
The undersigned authorized representative of_________________
(hereinafter "Governmental Entity"), Florida Consumer's Certificate of
Exemption Number____________________, affirms that the tangible personal
property purchased pursuant to Purchase Order Number______ from ___________
(Vendor) on or after _______ (date) will be incorporated into or become a part
of a public facility as part of a public works contract pursuant to contract #
___________ with ______________ (Name of Contractor) for the construction of
_____________________________.
Governmental Entity affirms that the purchase of the tangible
personal property contained in the attached Purchase Order meets the following
exemption requirements contained in Section
212.08(6),
F.S., and Rule 12A-1.094, F.A.C.:
You must initial each of the following
requirements.
____ 1. The attached Purchase Order is issued directly to the
vendor supplying the tangible personal property the Contractor will use in the
identified public works.
____ 2. The vendor's invoice will be issued directly to
Governmental Entity.
____ 3. Payment of the vendor's invoice will be made directly
by Governmental Entity to the vendor from public funds.
____ 4. Governmental Entity will take title to the tangible
personal property from the vendor at the time of purchase or of delivery by the
vendor.
____ 5. Governmental Entity assumes the risk of damage or
loss at the time of purchase or delivery by the vendor.
Governmental Entity affirms that if the tangible personal
property identified in the attached Purchase Order does not qualify for the
exemption provided in Section
212.08(6), F.S.
and Rule 12A-1.094, F.A.C., Governmental
Entity will be subject to the tax, interest, and penalties due on the tangible
personal property purchased. If the Florida Department of Revenue determines
that the tangible personal property purchased tax-exempt by issuing this
Certificate does not qualify for the exemption, Governmental Entity will be
liable for any tax, penalty, and interest determined to be due.
I understand that if I fraudulently issue this certificate to
evade the payment of sales tax I will be liable for payment of the sales tax
plus a penalty of 200% of the tax and may be subject to conviction of a third
degree felony.
Under the penalties of perjury, I declare that I have read
the foregoing Certificate of Entitlement and the facts stated in it are
true.
____________________ ____________________
Signature of Authorized Representative Title
____________________
Purchaser's Name (Print or Type) Date
Federal Employer Identification Number: ___________
Telephone Number:________________________
You must attach a copy of the Purchase Order to this
Certificate of Entitlement.
Do not send to the Florida Department of Revenue. This
Certificate of Entitlement must be retained in the vendor's and the
contractor's books and records.
(d) Sales to contractors, including
subcontractors, are subject to tax.
(e) The governmental entity may not transfer
liability for such tax, penalty, and interest to another party by contract or
agreement.
(f) In the case of
contracts with any agency or branch of the United States government in which
the federal governmental agency or branch is not required to produce a
Certificate of Entitlement, the purchase must comply with the five criteria
provided in paragraph (b), for the purchase of tangible personal property to be
exempt from sales and use tax. If the criteria in paragraph (b) are not met,
the contractor is the ultimate consumer of such tangible personal property and
is liable for sales or use tax on such purchases and manufacturing
costs.
(5) Contractors,
including subcontractors, that manufacture, fabricate, or furnish tangible
personal property that the contractor incorporates into public works are liable
for tax in the manner provided in subsection (10) of Rule
12A-1.051, F.A.C. The contractor
and subcontractors, not the governmental entity, are deemed to be the ultimate
consumers of the articles of tangible personal property they manufacture,
fabricate, or furnish to perform their contracts and may not accept a
Certificate of Entitlement for these articles.
(6) Contractors that supply raw materials
such as rock, shell, fill dirt, and similar materials for incorporation into
public works shall be liable for tax in the manner provided in subsection (10)
of Rule
12A-1.051, F.A.C.
(7) Contractors that manufacture and
incorporate asphalt into public works projects are liable for tax on their
costs, as provided in subsection (12) of Rule
12A-1.051, F.A.C., subject to a
partial exemption, as provided in Section
212.06(1)(c),
F.S.
(8) Contractors that install
people mover systems in public works projects are exempt from sales and use tax
on their purchases of such systems or components of such systems and on any
other costs incurred in the manufacture of such systems that would be taxable
under the provisions of subsection (10) of Rule
12A-1.051, F.A.C.
(a) A "people mover system" includes wheeled
passenger vehicles and related control and power distribution systems that form
a transportation system owned by a public entity and used by the general
public. The vehicles may be operator-controlled, driverless, self-propelled, or
externally powered. They may run on roads, rails, guidebeams, or other
permanent structures that are an integral part of the system. "Related control
and power distribution systems" includes electrical or electronic control or
signaling equipment that distributes power or signals from the control center
or centers or from the power source throughout the system. Embedded wiring,
conduits, or cabling and the roads, rails, guidebeams, or other permanent
structures on which the vehicles run are not included within the term "people
mover system." A contractor that installs such embedded wiring, conduits, or
cabling or that builds such a road, rail, guidebeam, or permanent structure is
taxable on the purchase or use of tangible personal property incorporated into
the project.
(b) A people mover
system contractor should claim the exemption by providing a vendor with a
certificate of entitlement to the exemption. The vendor must maintain copies of
certificates until tax imposed by Chapter 212, F.S., may no longer be
determined and assessed under Section
95.091, F.S. Possession by a
vendor of such a certificate from the purchaser relieves the vendor from the
responsibility of collecting tax on the sale, and the Department shall look
solely to the purchaser for recovery of tax if it determines that the purchaser
was not entitled to the exemption. A suggested form of certificate follows:
SUGGESTED PURCHASER'S EXEMPTION CERTIFICATE PEOPLE MOVER
SYSTEMS AND PARTS
_________________ (Purchaser's Name) certifies that the
tangible personal property purchased on or after _______ (date) will be used as
part of a people mover system that will become a part of a publicly owned
facility pursuant to a contract with the United States, a state, a county, a
municipality, a political subdivision of a state, or the public operator of a
public-use airport as defined in Section
332.004, F.S. Such contract
requires Purchaser to purchase the tangible personal property for use in
manufacturing, installing, manufacturing and installing, repairing, or
maintaining, all or part of a people mover system operated by the governmental
entity as a public facility.
_______________ (Purchaser's Name) further certifies:
a) that all of the tangible personal property
purchased pursuant to this certificate is or will be part of a wheeled
passenger vehicle or of related control or power distribution systems that are
part of a transportation system for use by the general public; and
b) none of the tangible personal property
purchased pursuant to this certificate will be used as embedded wiring,
conduits, or cabling to transmit signals among the vehicles, control equipment,
power distribution equipment, and signaling equipment that make up the people
mover system.
The undersigned understands that if such tangible personal
property does not qualify for this exemption, the undersigned will be subject
to sales and use tax, interest, and penalties. The undersigned further
understands that when any person fraudulently, for the purpose of evading tax,
issues to a vendor or to any agent of the state a certificate or statement in
writing in which he or she claims exemption from the sales tax, such person, in
addition to being liable for payment of the tax plus a mandatory penalty of
200% of the tax, shall be liable for fine and punishment provided by law for
conviction of a felony of the third degree, as provided in Section
775.082,
775.083 or
775.084, F.S.
____________________________
Purchaser's Name (Print or Type)
___________________________ _______
________________________
Signature and Title Date Florida Sales Tax Number
____________________________ ________________________
Federal Employer Identification Telephone Number
Number or Social Security Number
Retain in vendor's records. Do not send to the Department of
Revenue.
(c)
Contractors that maintain an inventory of parts that may be incorporated into
people mover system components that are sold as tangible personal property, may
be used in performing real property contracts, and may be incorporated into
exempt people mover systems pursuant to a public works contract may purchase
such inventory parts by issuing a copy of the contractor's Annual Resale
Certificate in lieu of providing a certification of specific eligibility under
the people mover system exemption. If appropriate, tax should be remitted upon
subsequent taxable sale or use of such parts.
