When was shop cutting of glass taxable fabrication for a Florida real-property contractor?

Subject

Taxation of Fabrication Costs

Plain-English summary

Cutting glass in the shop to the size or shape required for a particular real-property job was taxable fabrication. The cut transformed raw sheets into customized components the contractor would use in performing the contract, even if installation was the only remaining job-site step.

A shop cut made solely to reduce handling and transport risk was not taxable fabrication when the glass still required final job-specific cutting at the site. Other shop steps that converted materials into finished windows, doors, mirrors, or assemblies remained taxable fabrication.

What this means for you

The line was whether shop work produced the job component itself or merely made raw material safer to move before job-site fabrication.

Common questions

Q: Was custom shop cutting taxable? Yes.

Q: Was every preliminary transport cut taxable? No.

Q: Did job-site cutting create shop fabrication tax? No; job-site activity was treated as improving real property.

Citations and references

• Fla. Stat. § 212.06(1)(b) — use tax on fabricated property
• Fla. Admin. Code r. 12A-1.043 — fabricated cost
• Fla. Admin. Code r. 12A-1.051(2), (10) — contractor fabrication
• Pederson v. Green, 105 So. 2d 1 (Fla. 1958)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00A-046

Original ruling text

SUMMARY

QUESTION: Is cutting glass at the shop for installation in
real property jobs taxable as fabrication for the
contractor's own use?

ANSWER - Based on Facts Below: Cutting glass at the
contractor's shop to the sizes needed for a real property
job is taxable as fabrication of tangible personal property
for the contractor's own use. Cutting glass exclusively to
facilitate handling and transport to the job site, with
custom cutting to the sizes needed for the job to be
performed at the job site, is not taxable fabrication.

Aug 25, 2000

Bill Carson, President
Glass Association of Florida
P.O. Box 950368
Lake Mary, Florida 32746

Re: Technical Assistance Advisement 00A-046
Glass Association of Florida
Sales and Use Tax -- Taxation of Fabrication Costs
Section 212.06(1)(b), F.S.

Dear Mr. Carson:

This is in response to your letter to the Florida Department of
Revenue dated February 28, 2000, in which the Glass Association
of Florida (the "Association") as the representative of its
members requests a technical assistance advisement ("TAA")
indicating that certain activities are not taxable fabrication.
Rules permitting the Department to issue a TAA to an association
requesting guidance for its membership became effective on June
28, 2000. You have provided the additional representations
required under those rules, and your request now satisfies the
requirements for issuance of a TAA to an association as the

representative of its members.

Facts

The Association represents glass companies in Florida. The
member companies carry on numerous activities. The TAA request,
however, is limited to situations in which Association members
install flat glass in real property jobs, including windows,
glass doors, permanently affixed mirrors, shower doors, and
commercial exterior glass.

Flat glass purchased from suppliers arrives at the shops in
large sheets. Glass referred to in the industry as 1/4 inch
glass weighs approximately 3 pounds per square foot. A standard
5 foot by 8 foot sheet weighs approximately 120 pounds. An 8
foot by 11 foot sheet weighs approximately 264 pounds. You
supplied a letter from one Association member who orders in
standard sizes of 11 feet by 5 feet up to 11 feet by 17 feet. An
11 foot by 17 foot sheet of 1/4 inch glass weighs approximately
560 pounds. Cutting pieces of glass that large requires special
suction cups with overhead cranes and cutting tables. Standard
flat glass may be up to an inch think and weigh over 12 pounds
per square foot. An 11 foot by 17 foot piece of one inch glass
weighs over 2,000 pounds. Specialty glasses may weigh even
more. For example, some bullet proof glass weighs almost 30
pounds per square foot.

Handling large sheets of glass poses risks. The weight makes
droppage more likely than with smaller sheets. The danger of
breakage from bending increases with the size of the sheet of
glass, because it is more difficult to move a large sheet
without some bending. Manufacturers of flat glass sell their
product subject to certain specification tolerances. Chips,
scallops and other normal imperfections in the edges could be as
deep as 1/8 inch. Such imperfections are often the starting
points for breaks. Assuring clean cut edges is therefore another
factor in preventing breakage and reducing the risk of injury.
In general, edges cut under the better conditions and using the
equipment available at the shop will be stronger than edges cut
in the field. There are therefore significant safety reasons
for cutting large sheets into smaller ones that can be handled

with more ease and less risk of damage to the glass and injury
to those handling it. Many Association members cut large sheets
into smaller ones for these reasons. Cutting that could be done
at the job site is performed at the shop to reduce the dangers
of breakage or injury during transport.

In addition to cutting large sheets of glass into smaller pieces
solely for safety and ease of handling purposes, Association
members may cut glass into special sizes and shapes suited to a
particular job. In addition to squares and rectangles, rhombus,
parallelogram, trapezoid, octagon, hexagon, racetrack oval,
right triangle, and equilateral triangle shapes can be provided
based on measurements alone. Almost any shape can be produced
using patterns.

Glass cut to size for a particular purpose often requires
further processing. Clean cut edges are sharp and have some
irregularities. They are sufficient for window installation
where the glass is fit into the window frames with sealant and a
bead. Edges that will be left exposed, such as those in unframed
mirrors, must be treated in some way. The treatment may be
simple grinding or polishing to create a smooth edge or more
elaborate (e.g., beveled, double beveled, or bullnose edges).
This work is normally performed in the shop and may require
special equipment.

Other processes that may occur at a factory or shop prior to
transporting glass to the job site include:

Double glazing. Placing two sheets of glass together into
a single unit, thoroughly drying the air between them to
eliminate condensation, and sealing the edges. This
produces glass with superior insulating properties.

Extrusion. Producing aluminum shapes by forcing hot metal
through a die. The aluminum pieces may then be used in
window frames or shower doors.

Glazing. Installing glass in a frame. In the case of
window glass, this often occurs at the job site. Shower
door glass, windows, or mirrors may be installed into

frames at the shop.

Etching, engraving, silk screening, mitring, or similar
processes. Decorating glass by creating designs with acid,
lathes, cutting wheels, stencils, or other means.

Association members may perform other steps to prepare glass for
a particular application. For example, holes are drilled in
mirrors to permit attaching them to walls with rosettes and
screws. Drawer pulls, door handles, or hinges may be attached
to glass drawer fronts or cabinet doors.

Requested Advisement

The Association has requested an advisement on whether cutting
glass in the shop for installation in a real property
improvement constitutes taxable fabrication.

Taxpayer Position

The Association argues that in order for any activity to be
classified as taxable fabrication there must be some assembling
or change in the composition, quality, or character of the
materials. The Association asserts that cutting glass, whether
it occurs in the shop or at the job site, does not involve any
assembly or change in the glass that should be characterized as
fabrication.

Law and Analysis

Section 212.06(1)(b), F.S., provides:

(b) Except as otherwise provided, any person who
manufactures, produces, compounds, processes, or fabricates
in any manner tangible personal property for his or her own
use shall pay a tax upon the cost of the product
manufactured, produced, compounded, processed, or
fabricated without any deduction therefrom on account of
the cost of material used, labor or service costs, or
transportation charges,....

This section was enacted in 1969. Its purpose is to equalize
the sales and use tax burden of Florida taxpayers who fabricate
for their own use, out-of-state taxpayers who bring selffabricated items into Florida, and taxpayers who do not
fabricate and must purchase at retail. The statute was upheld in
Gore Newspaper Co. v. Department of Revenue, 398 So.2d 945 (Fla.
4th DCA 1981). The court upheld the assessment of tax on the
costs of producing letterhead, memo pads, and forms in house and
stated:

... [T]his is the only result which is consistent with the
recognized purpose of a use tax, i.e., to complement the
sales tax so as to make uniform the taxation of the
property subject to the tax.... [A]ll memo pads, for
example, are subject to sales tax at the time of their
retail purchase. Not so, however, with appellant's memo
pads since they were manufactured and utilized in house.
Consequently, a use tax is necessary to assure uniform
taxation and Section 212.06(1)(b) provides ample
justification for its imposition.

This decision recognizes that the tax burden on a memo pad
should be approximately equal whether it is sold at retail by
the manufacturer of the memo pad or used in the manufacturer's
own business. Similarly, the tax burden on glass products made
by an Association member to use in performing a real property
contract should be approximately equal to the tax burden on
those same products if sold at retail by that member to another
contractor. (The tax burden is not completely equalized.
Section 212.06(1)(b), F.S., imposes tax only on specific
fabrication costs of a product made for one's own use. The
retail sales price paid by a purchaser will reflect all direct
and indirect costs of production plus profit on the item.)

Rule 12A-1.051, F.A.C., discusses the application of the tax on
fabricated costs to real property contractors. Relevant parts
of the rule read as follows:

(2) Definitions. For purposes of this rule, the following
terms have the following meanings:

(a) "Fabricated cost" means the cost to a real property
contractor of fabricated items, as defined in the following
paragraph. The elements of cost included in fabricated cost
are set forth in Rule 12A-1.043, F.A.C. Fabricated cost
does not include the cost of transporting fabricated items
from the contractor's plant to the job site or the cost of
labor at the job site where the fabricated items are
incorporated into the real property improvement.

(b) "Fabricated items" means items contractors manufacture,
produce, process, compound, or fabricate for their own use
in performing contracts for improvements to real property.
The term applies only to items the contractor manufactures,
produces, processes, compounds, or fabricates at a plant or
shop maintained by the contractor. For this purpose, a
temporary facility established at a job site that is used
exclusively in connection with performing a contract for a
real property improvement at that job site is not
considered to be a plant or shop maintained by the
contractor....

(10) Use tax on fabrication costs. Contractors may maintain
shops, plants, or similar facilities where they
manufacture, produce, compound, process, or fabricate items
for their own use in performing contracts. Contractors are
required to pay use tax on the fabricated cost of those
items. The elements that must be included in the taxable
cost of such items are set forth in Rule 12A-1.043, F.A.C.
In the case of real property contractors, the taxable cost
of an item manufactured, produced, compounded, processed,
or fabricated for use in performing a contract does not
include labor that occurs at the job site where the item
will be incorporated into a real property improvement or
transportation from the plant where an item was fabricated
to the job site. Examples of real property contractors who
are subject to tax under this subsection include cabinet
contractors who build custom cabinets in their shops,
roofing contractors who operate tile plants, or heating/air
conditioning/ventilation contractors who maintain sheet
metal shops for making ductwork. Real property contractors
that are required to remit use tax on fabricated items must

register as dealers for purposes of remitting such tax if
they are not already registered as dual operators.

The Association argues that it is inappropriate to tax cutting
glass at a member's shop when the same activity at the job site
is not taxable fabrication. This distinction is based on the
statutory purpose of equalizing the tax base of the member who
fabricates for that member's own use with the competitor who
buys at retail or who fabricates in another state. If a
contractor came to a member's shop and purchased glass products
for a job, the retail sales price would reflect any shop
fabrication performed to produce those products for that
customer. Any further cutting, edging, assembling, or other
necessary activities that the contractor performed at the job
site would not be taxed. Pursuant to s. 212.06(1)(a), F.S., an
out-of-state fabricator who brings glass products into Florida
to install is taxed on the cost of the products at the "moment
of commingling" with property in Florida, generally at the
moment of importation. This would not include job-site
fabrication in Florida. The glass contractor who fabricates in
Florida is not taxed on job-site labor involved in preparing
glass products for a specific contract because the retail
purchaser and out-of-state fabricator are not taxed on those
costs.

It may be that s. 212.06(1)(b), F.S., would still serve the
purpose of equalizing Florida fabricators, out-of-state
fabricators, and those who buy rather than fabricating if all
job-site fabrication were taxed. This interpretation, however,
would present considerable administrative problems for taxpayers
and the Department. Only the costs of fabricating tangible
personal property are taxable. Job site labor involved in
making real property improvements is not subject to sales or use
tax. At some point labor becomes installation or attachment of
items that become real property, rather than fabrication of the
items that are installed or attached. The Department's
interpretation draws a clear line. Costs are taxable only if
they relate to shop fabrication. Activity at the job site is
considered improving real property rather than fabricating
tangible personal property. Neither the Department nor the
contractor is required to make numerous and difficult

determinations concerning which particular job site activities
should be viewed as taxable fabrication and which should not.

The basic issue presented in the Association's request is
whether cutting glass at the shop is a taxable fabrication
activity. No definition of the term "fabrication" is provided
by statute. It is, therefore, necessary to look to principles
of statutory construction. Words of common usage, when used in
statutes, should be given their plain and ordinary meaning.
Pederson v. Green, 105 So.2d 1 (Fla. 1958). The word
"fabricate" is defined in Webster=s Third International
Dictionary, Unabridged, 1986, as follows: "to form by art and
labor;... to produce;... to form into a whole by uniting parts;
to shape". In accordance with these definitions, and to provide
guidance to contractors, Rule 12A-1.051, F.A.C., contains the
following definition:

(2) Definitions. For purposes of this rule, the following
terms have the following meanings:

(f) "Manufacture, produce, compound, process, or fabricate"
means:

1. to convert or condition tangible personal property by
   changing the form, composition, quality, or character of
   the property;

2. to make, build, create, produce, or assemble components
   or items of tangible personal property in a new or
   different manner;

3. to physically apply materials and labor necessary to
   modify or change the characteristics of tangible personal
   property.

The terms do not include activities that do not result in
any change in the character or quality of tangible personal
property. For example, a repair or restoration of property
to return it to its original state and level of
functionality is not included within the defined
activities.

Most activities that Association members perform in their shops
are clearly taxable under this definition in the rule. Starting
with large sheets of glass from the factory or a wholesaler, a
series of operations is performed that results in the production
of finished mirrors, windows, doors, shower doors, or other
products that will be transported to a job site and installed as
part of real property. When an item leaves the shop, all of the
steps that have been performed to convert, assemble, or modify
the materials comprising that item are fabrication. Assembling a
shower door frame, cutting glass to fit the frame, and
installing the glass are all taxable steps in an integrated
fabrication process by which those materials are converted into
a finished shower door assembly. Cutting glass, silvering the
back, beveling the edges, etching a design, and drilling holes
for attachment are all steps in a fabrication process that
results in a decorative mirror. Any of the steps in such
processes that occur at the shop are taxable fabrication,
including the custom cutting of the glass for the item. Tax can
be avoided by performing some or all of those steps at the job
site, but any steps performed at the shop will remain taxable.

The more difficult question is whether taxable fabrication
occurs when glass is cut in the shop and no further processing
other than installation into real property at the job site will
occur. This would be the case if window glass is installed
directly into frames that have been built into or already
installed in the exterior walls of a building. Glass cut to
size may be installed in that case without treating the edges or
performing any other preparatory steps. The Association argues
that because there are safety reasons for cutting at the shop
rather than at the job site, cutting the glass in itself should
not be viewed as fabrication no matter where it occurs. This is
not the case. Under the definition cited above, fabrication
includes the physical application of "materials and labor
necessary to modify or change the characteristics of tangible
personal property." Cutting glass involves the physical
application of tools or equipment and labor. As a result there
are changes in the characteristics of size, weight, ease of
handling, and utility. These are significant changes in
character or quality. Twenty 2 foot by 3 foot window panes

custom cut for a job are not the same as the 11 foot by 17 foot
sheet of glass from which they were cut. The correctness of
this conclusion can be tested by considering the case of the
contractor who purchases those twenty panes at retail. The
sales price on which that contractor is taxed will reflect the
cost of cutting the panes to order.

This does not mean that all cutting of glass is taxable
fabrication. As stated in Rule 12A-1.051(10), F.A.C.,
contractors are taxable on the costs incurred at their shops to
fabricate items "for their own use in performing contracts."
When a contractor cuts glass to the sizes required for a job, he
has fabricated an item he will use in performing a contract. If
an Association member cuts a large sheet of glass into smaller
sheets solely to reduce the risks associated with carrying the
larger sheet and will do further cutting at the job site to the
sizes required to perform the contract, the initial cutting at
the shop is not taxable fabrication. It does not result in the
items of tangible personal property the member will use in
performing the real property contract but merely makes the
material that will be used to produce those items easier and
safer to transport to the job site where those items will be
fabricated.

Advisement

If glass is cut to size for a particular job at the shop,
regardless of whether any further activities are performed in
regard to the glass at the shop, that cutting is taxable
fabrication because the glass has been transformed from raw
material (the uncut piece of glass) into customized components
to be used in performing a real property contract. If glass is
cut at the shop solely to facilitate its safe handling and
transport to a job site for further cutting, processing, and
installation, the cutting that occurs at the shop is not taxable
fabrication because it does not result in the product that will
be used in performing the real property contract.

Closing Statement

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, 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. Ordinarily, confidential
information, such as the identity of the person to whom an
advisement is issued, must be deleted before public disclosure.
In the situation in which a taxpayer association is seeking an
advisement on behalf of its members, having the identity of the
requesting association remain in the published advisement is
useful to those using the advisement for guidance. No specific
taxpayer information is included in an advisement issued to a
taxpayer association, and concerns about protecting proprietary
information are not present under such circumstances. However,
in light of statutory requirements as to confidentiality, a
taxpayer association must give its consent to the Department to
allow its name to be included in the published advisement. The
taxpayer association to which this advisement is issued has
given written consent to allow the disclosure of its identity.

Sincerely,

Linda W. Bridges, Senior Attorney
Technical Assistance and Dispute Resolution
(850) 922-9412

LWB/
Control #: 40454