TAA 22A-002 Public Works Contracts

QUESTION: Would Taxpayer’s purchases of materials, supplies and equipment for its Training Center and Parking Garage qualify for the exemption in section 212.08(6), F.S., for sales to governmental entities of tangible personal property which becomes part of public works owned by the governmental entity. 

ANSWER: Taxpayer’s purchases of materials, supplies and equipment for its Training Center and Parking Garage would qualify for the exemption in s. 212.08(6), F.S. Taxpayer has established that its purchases would meet the requirements of Rule 12A-1.094(4)(b), F.A.C., and that the items it would be purchasing would “go into or become a part of” public works pursuant to s. 212.08(6), F.S. 

January 28, 2022

Technical Assistance Advisement No. 22A-002

Sales and Use Tax – Public Works Contracts

XXXXXXX (“Taxpayer”)

FEI No. XXXXXXX

BPN: XXXXXXX

Sections 212.06(1)(a), and 212.08(6)(b) and (c), Florida Statutes (“F.S.”)

Rules 12A-1.051(2)(c)1., (2)(g), and (4), 12A-1.056(1)(a), and 1.094(4)(a), (b), and (c), (5), and

(10)(b), Florida Administrative Code (“F.A.C.”)

XXXXXXX (“Contractor”)

FEI No. XXXXXXX

BPN: N/A

Dear XXXXXXX: 

This letter is a response to your petition dated March 12, 2021, for the Florida Department of Revenue’s (the “Department’s”) issuance of a Technical Assistance Advisement ("TAA") with regard to whether XXXXXXX (“Taxpayer”) purchase of materials, supplies and equipment for the construction of its Training Center and Parking Garage would qualify for the exemption for purchases of supplies and materials for use in public works contracts found in section 212.08(6), Florida Statutes. 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, Florida Administrative Code. This response to your request constitutes a TAA and is issued to you under the authority of section 213.22, F.S. 

Requested Advisement 

Whether Taxpayer’s purchases of materials, supplies and equipment for its Training Center and Parking Garage would qualify for the exemption in s. 212.08(6), F.S., for sales to governmental entities of tangible personal property which becomes part of public works owned by the governmental entity.

Facts As Provided 

Taxpayer has entered into an agreement for a construction project (“Project”) which will include the construction of a Training Center and Parking Garage (“Training Center”). Taxpayer states that it is going to use the Direct Purchase procedures “exclusively for the purchase of materials from third party suppliers and not contractors or subcontractors” involved with the Project. Taxpayer states in its letter that purchases for the Project will be made in accordance with the procedures set forth in Rule 12A-1.094(4)(a) and (b)1.-5., F.A.C., in the following manner:

Taxpayer will be issuing its own purchase orders directly to the vendor(s) supplying the materials the contractor(s) will use and provide the vendor(s) with a copy of XXXXXXX Consumer’s Certificate of Exemption.

Vendor’s invoice will be issued to the Taxpayer and not the contractor.

Taxpayer will make payment directly to the vendors utilizing public funds.

Taxpayer will take title to the tangible personal property from the vendor(s) at the

time of purchase or delivery by the vendor(s).

Taxpayer will be assuming the risk of damage or loss at the time of purchase.

Taxpayer’s statements above basically paraphrase Rule 12A-1.094(b)1.-5., F.A.C.

Taxpayer states that its purchases for the Project shall include, but not be limited to, those items identified

in the Schedule of Potential Direct Owner Purchases, which it attached.

Taxpayer has reaffirmed these facts in an email dated January 6, 2022.

Taxpayer’s Argument

Taxpayer states that the definition of “public works” found in Rule 12A-1.094, F.A.C., applies to the project and that purchases will be made in accordance with Rule 12A-1.094(4)(a) and (b)1.-5., F.A.C.¹

 Applicable Law and Discussion 

Sales tax is due at the moment of the transaction. See s. 212.06(1)(a), F.S.; Rule 12A-1.056(1)(a), F.A.C. There is an exemption, however, in s. 212.08(6), F.S., for sales of tangible personal property made directly to governmental entities when these items will go into or become part of public works owned by the governmental entity. Section 212.08(6)(b), F.S., provides that one of the criteria for exemption is that the governmental entity certify to the vendor and its contractor that it is entitled to the exemption by providing them with a Certificate of Entitlement to such exemption. The Department has also adopted a Rule regarding this exemption, i.e., Rule 12A-1.094, F.A.C. See s. 212.08(6)(b) and (c), F.S.

The criteria which must be met in order for a sale to be considered an exempt sale to a governmental

entity of tangible personal property that will become part of public works is set forth in Rule 12A1.094(4)(b), F.A.C., which provides:

(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:2 

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.

Taxpayer indicated that it would follow the steps set forth in subparagraphs (4)(b)1.-5. in its letter, 

The documentation submitted, contracts; direct owner purchases and payments; schedule of potential direct owner purchases; and other documents, indicate that Taxpayer’s procedures do satisfy the requirements for exemption of transactions as sales to a governmental entity. Taxpayer will issue its own purchase orders directly to the vendor of the materials, and it will issue payment for the materials directly to the vendor. Taxpayer also assumes title to the materials at the time they are delivered to the job site. The vendors will issue invoices directly to the Taxpayer, and Taxpayer will issue a Certificate of Entitlement to the vendors, as well as to the contractor.

Conclusion 

Taxpayer’s purchases of materials, supplies and equipment for its Training Center and Parking Garage would qualify for the exemption in s. 212.08(6), F.S. Taxpayer has established that its purchases would meet the requirements of Rule 12A-1.094(4)(b), F.A.C., and that the items it would be purchasing would “go into or become a part of” public works pursuant to s. 212.08(6), F.S.

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 that expressed in this response. You are further advised that this response, your request and related backup documents are public records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions of section 213.22, F.S. Confidential information must be deleted before public disclosure. In an effort to protect confidentiality, we request you provide the undersigned with an edited copy of your request for Technical Assistance Advisement, the backup material, and this response, deleting names, addresses, and any other details which might lead to identification of the taxpayer. Your response should be received by the Department within 15 days of the date of this letter.

Alan R. Fulton 

Revenue Program Administrator I 

Technical Assistance & Dispute Resolution

^{(1) Taxpayer states that the definition of “public works,” as found in Rule 12A-1.094(10)(b), F.A.C., applies to this project. The definition of “public works” is actually found in paragraph (1)(c) of the Rule. 2 The exemption only applies to purchases made by governmental entities and not to purchases made by contractors employed directly to or as agents of the governmental entity. See s. 212.08(6)(b), F.S.}