TAA 23A-002 Pollution Control

QUESTION: Based on the facts provided below, are Taxpayer’s purchases of equipment, materials, and/or specialty chemicals, which are used for its court appointed closure activities at Facility, exempt from Florida sales tax pursuant to either s. 212.051(1), F.S. or s. 212.08(6), F.S.? 

ANSWER: Based on the facts provided, Taxpayer’s purchases of equipment, materials, and/or specialty chemicals, which are used for its court appointed closure activities at Facility, are not exempt from Florida sales tax pursuant to either s. 212.051(1), F.S. or s. 212.08(6)(a), F.S. 

January 25, 2023

Technical Assistance Advisement – TAA #: 23A-002

_________ (“Taxpayer”)

Sales and Use Tax – Pollution Control Exemption

Sections 212.08(6)(a), 212.051, 213.22, Florida Statutes - (“F.S.”)

Rules 12A-1.038, 12A-1.096, Florida Administrative Code - (“F.A.C.”)

FEI #: _________

BP #: _________

Dear _________: 

This is in response to your letter dated October 06, 2022, requesting this Department’s issuance of a Technical Assistance Advisement (“TAA”) pursuant to s. 213.22, F.S., and Rule Chapter 12-11 F.A.C, Florida Administrative Code, regarding the matter discussed below. Your request has been carefully examined, and the Department finds it to be in compliance with the requisite criteria set forth in Chapter 12-11, F.A.C. This response to your request constitutes a TAA and is issued to you under the authority of s. 213.22, F.S.

REQUESTED ADVISEMENT 

Based on the facts provided below, are Taxpayer’s purchases of equipment, materials, and/or specialty chemicals, which are used for its court appointed closure activities at Facility, exempt from Florida sales tax pursuant to either s. 212.051(1), F.S. or s. 212.08(6), F.S.? 

FACTS

At the center of this is a _________ complex first built in _________ to manufacture fertilizer from phosphate (“Facility”). Facility holds stacks of phosphogypsum, a byproduct of fertilizer production, and reservoirs of water (the “Stack System”). The water is contaminated wastewater leftover from the former operations at Facility and contains phosphorus, nitrogen, acid and heavy metal particulate. The Stack System contains four elevated ponds, holding approximately 420 million gallons of water. Fertilizer production operations at Facility were terminated in the mid or late 1990s. The owner of the Facility is believed to be insolvent. The mortgageholder initiated foreclosure proceedings in _________ naming, among others, the Florida Department of Environmental Protection (“FDEP”).

On April 3, 2021, the Governor issued an Executive Order in response to increased flows from a leak at Facility. The Executive Order declared a state of emergency and gave FDEP authority to take any actions necessary to abate the imminent hazard and to minimize adverse environmental impacts. On August 5, 2021, FDEP filed a motion in the Foreclosure Case to appoint Taxpayer as receiver for Facility pursuant to s. 403.4154(3)(e), F.S. FDEP’s Motion provided: … 

The Receiver should be charged with addressing three overriding concerns: 1) the dayto-day maintenance of the phosphogypsum stack system to prevent spills and other discharges; 2) the treatment, discharge or disposal of process water to lessen the danger of a catastrophic spill; and 3) the closure of the phosphogypsum stack system in accordance with Department rules.

On August 25, 2021, the Circuit Court entered an Order appointing Taxpayer to take control of Facility and oversee its closure based on FDEP’s Motion and Stipulated Motion for Order Appointing Receiver. 

Pursuant to the Order, Taxpayer is charged with the responsibility of “maintaining, managing and closing as efficiently and expeditiously as possible Facility in accordance with all applicable State and Federal laws.” 

On September 22, 2021, Taxpayer and FDEP entered into a Maintenance and Funding Agreement (a copy of which was provided to the Department of Revenue for purposes of this request).

Facility must be reconfigured so that it no longer holds wastewater. To make the necessary changes, the Stack System must be drained to permit the deployment of equipment and start remediation activities. While most of the activities will be performed by contractors and subcontractors, Taxpayer has and will be purchasing equipment, materials, and specialty chemicals used for closure activities. 

The Florida Legislature has appropriated _________ to fund Taxpayer’s activities. FDEP disburses the funds to Taxpayer pursuant to budgets submitted by Taxpayer.

To maintain quality control and avoid markup of the costs of the materials by contractors, Taxpayer will source and acquire most of the materials directly. The materials to be purchased by Taxpayer are required to complete the closure of the stacks in compliance with state and federal environmental laws. The primary components are:

Materials Acquisition for Closure of the Stack Compartments

• Soil
• Sand tailings
• High-Strength Woven Geotextile
• HDPE Liner Materials
• HDPE Pipe and Fittings
• Aggregates and gravel
• Non-Woven Geotextile
• Bi-Planar HDPE Geonet-Geotextile Composite
• Concrete Erosion Control Mat
• Concrete and Reinforcing Steel
• Grassing, seeds, and sod

All materials are tested by the engineers and must comply with standards required by Chapter 62-673, F.A.C, the Administrative Order, and Permit. 

Equipment, Materials, and Chemicals for Maintenance of the Property 

In addition to the acquisition of materials for stack closure activities, Taxpayer is also required to maintain Facility. Chapter 62-673, F.A.C, the Administrative Order, and Permit all require continuous testing and monitoring. Equipment, materials, and chemicals used in maintenance activities are:

• Ford F350 4WD pickup truck
• Ford Explorer 4WD SUV
• 2 Kubota 4WD UTVs
• New Holland Tractor
• Bobcat Utility machine with bush hog and front-end loader
• Generators
• Pumps
• Pipes and fittings
• Building materials
• Sand, soil, and gravel
• Cement
• Personal protective equipment (hardhats and reflective vests)
• Misc. hand tools
• Lab equipment and chemical supplies
• Testing equipment
• Herbicide and sprayers
• Misc. parts for repairs
• Gasoline and diesel fuel
• Modular Office and furniture
• Office equipment and supplies
• Polymer
• Caustic - Sodium Hydroxide (50%)
• Bleach
• HCL (25-35%) (Hydrochloric Acid)
• Sodium Bisulfite (40%)
• Bleach

LAW AND DISCUSSION 

Unless a specific exemption applies, s. 212.05, F.S., provides it is the legislative intent that every person is exercising a taxable privilege that engages in the business of selling tangible personal property¹ in this state. For exercising such a privilege, a tax is levied on each taxable transaction or incident. 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 received for each item or article of tangible personal property when sold at retail in this state.

Section 212.051(1), F.S., provides that “sales, use, or privilege taxes shall not be collected with respect to any facility, device, fixture, equipment, machinery, specialty chemical, or bioaugmentation product used primarily for the control or abatement of pollution² or contaminants³ in manufacturing, processing, compounding, or producing for sale items of tangible personal property at a fixed location, or any structure, machinery, or equipment installed in the reconstruction or replacement of such facility, device, fixture, equipment, or machinery. To qualify, such facility, device, fixture, equipment, structure, specialty chemical, or bioaugmentation product must be used, installed, or constructed to meet a law implemented by or a condition of a permit issued by, the Department of Environmental Protection; however, such exemption shall not be allowed unless the purchaser signs a certificate stating the facility, device, fixture, equipment, structure, specialty chemical, or bioaugmentation product to be exempted is required to meet such law or condition.” (Emphasis added.)

In the instant case, Facility is no longer in operation. Taxpayer’s purchases are not being made in conjunction with the previously conducted manufacturing of fertilizer for sale. Instead, the activity that is being conducted at Facility is in the nature of “clean up” and “closure.” The exemption provided under s. 212.051(1), F.S., is not for the clean-up of contaminated facilities or locations, as is currently being done at Facility. Rather, the exemption is for the control or abatement of pollution occurring during the manufacturing process of tangible personal property.

Section 212.08(6)(a), F.S., provides: 

There are also exempt from the tax imposed by this chapter sales made to the United States Government, a state, or any county, municipality, or political subdivision of a state when payment is made directly to the dealer by the governmental entity. 

Rule 12A-1.038(1) and (4), F.A.C., further provide: 

(1) It is the specific legislative intent that each and every sale…or rental is taxable, unless such sale…or rental is specifically exempt. The exempt nature of the transaction must be established by the selling dealer. Unless the selling dealer shall have taken from the purchaser the required documentation…the sale shall be deemed to be taxable.

**** 

(4) Sales made directly to governmental units. 

(a) Any state, or any county, municipality, or political subdivision of a state that holds a valid Consumer’s Certificate of Exemption (Form DR-14) issued by the Florida Department of Revenue may issue a copy of its certificate to the selling dealer to purchase or rent taxable items or services tax-exempt in lieu of paying sales tax…

(b) Payment for tax-exempt purchases or rentals of property or services must be made directly to the selling dealer by the governmental unit of a state, or any county, municipality, or political subdivision of a state...When the payment for taxable property or services is made with the personal funds of an authorized representative of the governmental unit, the purchase is subject to tax, even if the representative is subsequently reimbursed with the governmental unit’s funds.” (Emphasis added.) 

****

As provided in s. 212.08(6)(a), F.S., and Rule 12A-1.038, F.A.C., for a sale to a governmental entity to be exempt, two criteria must be met: 1) Payment for tax-exempt purchases or rentals of property must be made directly to the selling dealer by the governmental entity and 2) the governmental entity must extend a valid exemption cerficiate at the time of the sale. Under the facts presented, Taxpayer purchases or rents the equipment and services it needs directly from vendors and then seeks reimbursement from FDEP. Under the facts presented, FDEP cannot extend a valid exemption certificate at the time of sale. 

While Taxpayer is working under the direction of FDEP, and it is being reimbursed by FDEP, it does not “work for” FDEP. Nothing in the documentation provided indicates that Taxpayer is an “instrumentality” of FDEP. Taxpayer, as a court appointed Receiver, works for the Circuit Court.

Paranthetically, ss. 212.08(6)(b) and (c), F.S., provide for situations wherein a contractor or agent of a government or political subdivision purchases tangible personal property tax exempt as part of a “public works” project. The facts presented do not support a “public works” exemption. Among the reasons is the fact that Taxpayer is responsible for performing clean-up and closure duties under the direction of FDEP (who is acting under its statutory regulatory obligations). Taxpayer is not being engaged to build or construct a public work that is owned by a government or political subdivision. FDEP does not own Facility.

In the instant case, Taxpayer has not complied with the exemption criteria in s. 212.08(6)(a), F.S. Therefore, Taxpayer’s purchases of equipment, materials, and/or specialty chemicals, are not exempt from Florida sales tax pursuant to s. 212.08(6)(a), F.S. 

As to your contention regarding a previously issued TAA, it is important to note that a TAA has no precedential value except to the taxpayer who requests the advisement. See s. 213.22, F.S.

CONCLUSION 

Based on the facts provided, Taxpayer’s purchases of equipment, materials, and/or specialty chemicals, which are used for its court appointed Receiver activities at Facility, are not exempt from Florida sales tax pursuant to either s. 212.051(1), F.S. or s. 212.08(6)(a), F.S. 

This response constitutes a TAA 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, 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 TAA, 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 ten (10) days of the date of this letter.

Alesia L. Pride 

Tax Law Specialist 

Technical Assistance & Dispute Resolution

^{(1) 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.} 

^{(2) “Pollution” is the presence in the outdoor atmosphere or waters of the state of any substances, contaminants, noise, or manmade or humaninduced impairment of air or waters or alteration of the chemical, physical, biological, or radiological integrity of air or water in quantities or at levels which are or may be potentially harmful or injurious to human health or welfare, animal or plant life, or property or which unreasonably interfere with the enjoyment of life or property, including outdoor recreation unless authorized by applicable law. See s. 403.031(7), F.S.} 

^{(3) “Contaminant” is any substance which is harmful to plant, animal, or human life. See s. 403.031(1), F.S.}