TAA 22A-007 Machinery and Equipment

QUESTION: Is the machinery and equipment used by Taxpayer at its limestone quarry and aggregate plants eligible for the Florida sales and use tax exemption provided under s. 212.08(7)(jjj), F.S., Certain Machinery and Equipment. 

ANSWER: The machinery and equipment used by Taxpayer at its limestone quarry and aggregate plants is eligible for the Florida sales and use tax exemption provided under s. 212.08(7)(jjj), F.S., Certain Machinery and Equipment. For Taxpayer to purchase the qualifying machinery and equipment exempt from tax, it should furnishes the selling dealer with a signed certificate certifying its entitlement to the exemption as provided under s. 212.08(7)(jjj)1., F.S. 

April 7, 2022

Technical Assistance Advisement 22A-007

Florida Sales and Use Tax

XXXX (“Taxpayer”)

BP#: XXXX

Sections 212.02(19), 212.05, 212.055, 212.08(7)(jjj), Florida Statutes (F.S.)

Dear XXXX: 

This letter is in response to your request dated February 23, 2022, and received in this office on February 23, 2022, for issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section 213.22, F.S., and Rule Chapter 12-11, F.A.C., concerning manufacturing exemptions. An examination of your request has established you complied with the statutory and regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting your request for a TAA. 

REQUESTED ADVISEMENT

Is the machinery and equipment used by Taxpayer at its limestone quarry and aggregate plants eligible for the Florida sales and use tax exemption provided under s. 212.08(7)(jjj), F.S., Certain Machinery and Equipment.

STATED FACTS 

Taxpayer is a single member LLC, and that member is XXXX. The activities Taxpayer performs at the quarry and aggregate plants fall under NAICS¹ code 327410 — Lime Manufacturing² . 

The primary business activity at the limestone quarry and aggregate plants of Taxpayer is principally to produce or manufacture limestone, which are used for building and construction materials. Taxpayer is engaged in mining the deposits or rocks and processing the rocks, with the objective of producing limestones. All of these activities are done in the same vicinity or campus where the mining is done. The mining area, the crushing plant, and the production of the limestones are all on the same campus. 

The machinery and equipment used at the quarry and aggregate plants are tangible personal property³ that has a depreciable life of 3-years or more and that is an integral part to the production and processing of tangible personal property, limestone, for sale.

Overview of the Limestone Quarrying Process 

The Quarries and Aggregate plants of Taxpayer are not only engaged in mining the deposits, but are also engaged in manufacturing the rocks mined, and principally producing limestones, a form of Aggregate. These activities are all done on the same campus or in close vicinity of the Quarry. A quarry is any such working on the surface of the earth where minerals are extracted. Quarrying is the process of removing rock, sand, gravel, or other minerals from the ground to use them to produce materials for construction or other uses. 

Quarrying at the plant begins with preparing the mine site, called stripping, site preparation, or removing the overburden. The overburden is commonly known as the vegetation trees, grass, topsoil, organic materials, and unwanted rock layers. Anything that is organic can rot, so it is very important to remove all the overburden before processing the aggregates. It is also very important to clear or grade the road before manufacturing starts to efficiently transport the materials around and out of the mining area, thereby increasing productivity. When roads are not cleared or graded, mining cannot start. The equipment used in removing the overburden, grading, and clearing the haul roads are earth moving machineries and equipment, such as, but are not limited to, motor graders, front-end loaders, forklifts, and bulldozers. 

After the stripping or removal of the overburden, they drill holes to be able to load and blast or mine the deposits or heavy rocks. The next step is blasting, which is a controlled explosion normally used to release or break up the large body of rocks from the mine site. Just enough explosive is used in blasting to break the rock from the face of the earth. The drilling and blasting are done to break up the rock formation to be able to dig the deposits or rocks. 

After the drilling and blasting process, to break the rock formation, an electric dragline is used to dig or excavate the deposits and extract the minerals or heavy rocks. The excavated minerals are then moved and loaded into haul trucks using front-end loaders and powerful excavators, and then transported to the crushing plant to continue manufacturing. The haul trucks transport the extracted deposits from the Quarry to the crushing plant, which is in the same campus where the quarry is located.

Overview of the Limestone Aggregate Process of Taxpayer 

The aggregate process starts with the crushing activity. Once the extracted deposits reach the crushing plant, the rocks go into three levels of crushing to break the rocks down to produce sand and different sizes of rocks. The three levels of crushing are the primary, secondary, and tertiary crushing. After the rocks are crushed or manufactured, the rocks pass through a series of vibrating screens that sift the rocks into different sizes. Rocks may also go through further crushing stages. 

Conveyors are used in the whole process once the rocks are dumped into the crushing plant. The conveyor takes the rocks from the primary crusher, then to the secondary crusher, and then to the tertiary crusher.

Once the Limestones are manufactured and are in saleable form, they are ready for sale to the clients, and the manufacturing process ends. After production, they create a stockpile or inventory and sell the products to the customers and internal plants. 

Conveyors, forklifts, and front-end loaders are used in loading the limestones in the rail cars to ship the products to Taxpayer’s distribution yards where they will be sold to the customers. This equipment may also be used when loading into the customers dump trucks or over the road customer trucks.

The final product produced at our Quarry and Aggregate plants is limestones. Aggregates are granular materials that are used with a cementing medium to form concrete or hydraulic mortar. Aggregate materials help to make concrete mixes more compact. They also decrease the consumption of cement and water and contribute to the mechanical strength of the concrete, making them an indispensable ingredient in the construction and maintenance of rigid structures. 

Aggregates can be classified according to their size, origin, mode of fragmentation, and composition. Aggregates are key ingredients in the manufacture of concrete, mortar, and other construction materials, and are used in the construction and maintenance of structures such as highways, walkways, parking lots, airport runways and railways. Aggregate materials are obtained from natural mines of sand or sand and gravel, quarries, deposits, and underground sediments. Concrete aggregates are composed of geological materials such as gravel, sand, and crushed rock. The size of the particles determines whether it is a coarse aggregate (e.g., gravel) or a fine aggregate (e.g., sand).

Equipment used in the Limestone Quarry and Aggregate Plants 

The Motor Grader is used in grading the road which is a significant function within the mining operation. Grading haul roads and leveling uneven areas with a motor grader is integral in the mining operation and is ensuring the efficiency of the mine’s operations such as efficiently transporting materials around and out of the mining area. This is an integral equipment. The actual mining operation could not be started nor completed when roads are not graded. 

Another equipment is the Bulldozer. This is used to prepare the benches in an open pit for raw material extraction. It helps remove the undesirable materials and prepare the materials for extraction. It is integral in pushing large amounts of materials being mined, such as rocks, particularly very large and heavy rocks at the mine site.

Other machineries and equipment used in the different stages of the actual mining operation, such as, extraction of materials, processing, and material hauling or transportation activities within the Quarry are, but not limited to haul trucks or other offroad vehicles, tractors, forklifts, excavators, wheel loaders, draglines, and conveyors. 

Each equipment or machinery has a different function that is directly related to the processing and manufacturing of raw materials in the Quarry. A brief description of the function of each equipment is as follows:

• Haul Trucks – to haul raw materials from the quarry (pit) or mining site, to the primary crusher or processing facility which is usually in the same location as the quarry or mine site, for processing. 
• Tractors - used in stripping overburden prior to blasting; to move materials within the quarry; used to push large quantities of soil, sand, rubble, or other materials. It is typically equipped at the rear with a claw-like device (known as a ripper) to loosen densely compacted materials. 
• Forklift – is used as a material handler, in moving materials and overburden within the quarry. 
• Excavator – used for maintaining drainage ditches and moving the dredge anchors when needed; also used to load the materials from the yard to the conveying system. May also be used for material handling within the yard. 
• Front-end Loaders - used to load aggregates from the quarry into the trucks to be transported to the primary, secondary, and tertiary crushers, as well as to move crushed aggregates into piles and conveyor belts for crushing; may also be used to load customer trucks and railcars with finished products. 
• Draglines - used to dig materials (blasted inventory) from quarry lake bottom and place on bank for drying. 
• Conveyors – equipment used to transport raw materials or the rocks from the primary crusher, then to the secondary crusher, and then to the tertiary crusher.

LAW & DISCUSSION 

Unless a specific exemption applies, s. 212.05, F.S., provides the legislative intent that the sale of tangible personal property in Florida is subject to tax. The tax is due and payable at the rate of 6 percent, plus any applicable surtaxes imposed under s. 212.055, F.S., on the total consideration for each item or article of tangible personal property when sold at retail in this state. 

Section 212.08(7)(jjj), F.S., provides that industrial machinery and equipment⁴ purchased by eligible manufacturing businesses which is used at a fixed location in this state for the manufacture, processing, compounding, or production of items of tangible personal property for sale is exempt from the tax. If, at the time of purchase, the purchaser furnishes the seller with a signed certificate certifying the purchaser’s entitlement to exemption pursuant to this paragraph, the seller is not required to collect the tax on the sale of such items, and the department shall look solely to the purchaser for recovery of the tax if it determines that the purchaser was not entitled to the exemption. An eligible manufacturing business means any business whose primary business activity⁵ at the location where the industrial machinery and equipment is located is within the industries classified under NAICS codes 31, 32, 33, 112511, and 423930. To obtain this exemption on the purchase of the qualifying machinery or equipment, a taxpayer would need to complete and then provide to the selling dealer the suggested sample exemption certificate found within Tax Information Publication (TIP) No. 16A01-07 attesting to its eligibility for the exemption.

Taxpayer, NAICS code 327410, is an eligible manufacturing business under s. 212.08(7)(jjj)2.a., F.S. 

Taxpayer is using the machinery and equipment to manufacture, process, and/or produce tangible personal property, limestone, for sale. 

Taxpayer’s primary business activity, manufacturing and processing of limestone, represents more than 50 percent of the activities conducted at the Florida location where the industrial machinery and equipment is located.

The industrial machinery and equipment have a depreciable life of 3-years or more and are used as an integral part in Taxpayer’s manufacturing, processing and/or production of limestone. 

Based on Taxpayer’s description of the usage of the machinery and equipment listed, it is determined that the motor grader, bulldozers, haul trucks, tractors, forklifts, excavators, frontend loaders, draglines, and conveyors meet the eligibility requirements of s. 212.08(7)(jjj), F.S. 

CONCLUSION

The machinery and equipment used by Taxpayer at its limestone quarry and aggregate plants is eligible for the Florida sales and use tax exemption provided under s. 212.08(7)(jjj), F.S., Certain Machinery and Equipment. 

For Taxpayer to purchase the qualifying machinery and equipment exempt from tax, it should furnishes the selling dealer with a signed certificate certifying its entitlement to the exemption as provided under s. 212.08(7)(jjj)1., F.S.

It should be noted that the exemption from tax provided for purchases of machinery and equipment used in manufacturing is subject to audit verification by the Department. 

For more information concerning all the taxes administered by the Department of Revenue, please refer to the Department’s Internet site at: http://floridarevenue.com

This response constitutes a Technical Assistance Advisement under s. 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 s. 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 and related backup documents are public records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions of s. 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.

Xiaoxi Miao 

Tax Law Specialist 

Technical Assistance & Dispute Resolution

^{(1) “NAICS” means those classifications contained in the North American Industry Classification System, as published in 2007 by the Office of Management and Budget, Executive Office of the President.} 

^{(2) NAICS code is defined as follows: This industry comprises establishments primarily engaged in manufacturing lime from calcitic limestone, dolomitic limestone, or other calcareous materials, such as coral, chalk, and shells. Lime manufacturing establishments may mine, quarry, collect, or purchase the sources of calcium carbonate.} 

^{(3) Tangible personal property means and includes personal property which may be seen, weighed, measured, or touched or is in any manner perceptible to the senses. See s. 212.02(19), F.S.} 

^{(4) “Industrial machinery and equipment” means, in part, tangible personal property or other property that has a depreciable life of 3 years or more and that is used as an integral part in the manufacturing, processing, compounding, or production of tangible personal property for sale. See s. 212.08(7)(jjj)2.e., F.S.} 

^{(5) “Primary business activity” means an activity representing more than 50 percent of the activities conducted at the location where the industrial machinery and equipment or postharvest machinery and equipment is located. See S. 212.08(7)(jjj)2.d., F.S.}