How did Florida tax repairs, additions, and installations of fire and security alarm systems?

Subject

Alarm Systems and Services

Plain-English summary

Repairing an existing fire or security alarm system was a taxable protection service. Parts supplied with the repair were also taxable unless the contractor separately sold and charged for them, in which case it could buy those parts for resale.

Installing a new system or expanding an existing one was taxable either as a sale of tangible personal property or as a real-property contract, depending on the job's nature. For a mixed installation involving structural wiring and attached components plus tangible property such as a desktop computer, the contractor could apply the predominant nature of the whole job or separate the two components and apply the appropriate rules to each.

What this means for you

Alarm work did not have one universal treatment. Repair versus installation, permanent attachment, contract structure, and separate parts billing changed how tax applied.

Common questions

Q: Were repairs to an existing alarm system taxable? Yes, as protection services.

Q: Were new installations always retail sales of equipment? No. Some were real-property contracts.

Q: Could a mixed job be divided? Yes, or it could follow its predominant nature.

Citations and references

• Fla. Stat. § 212.02 — definitions
• Fla. Stat. § 212.05 — sales and use tax
• Fla. Admin. Code r. 12A-1.0092 — protection services
• Fla. Admin. Code r. 12A-1.051 — contractors and real property
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00A-058

Original ruling text

SUMMARY

QUESTION: How do the sales and use tax laws apply to
various transactions in which a taxpayer repairs, modifies,
expands, and installs fire alarm and security alarm system
wiring and equipment?

ANSWER - Based on Facts Below: When the taxpayer repairs an
existing system, it is a taxable protection service. The
taxpayer also owes tax on any parts supplied in making the
repairs unless the taxpayer separately sells and charges
for the parts provided, in which case the taxpayer can
purchase the parts using a resale certificate. When
taxpayer installs a new system or expands an existing
system, the transaction is taxable either as a sale of
tangible personal property or as a real property contract,
depending upon the nature of the job. When the taxpayer
performs an installation contract that involves both real
property (structural wiring and attached components) and
tangible personal property (e.g., desktop computer), the
taxpayer may either treat the job entirely in accordance
with its predominant nature or may separate the two parts
of the job and apply the appropriate tax principles to each
part.

Oct 18, 2000

Re: Technical Assistance Advisement 00A-058
Sales and Use Tax -- Alarm Systems and Services
Sections 212.02, 212.05, F.S.
Rules 12A-1.0092, 12A-1.051, F.A.C.

Dear :

This is in response to your letters to the Florida Department of
Revenue dated June 8 and August 21, 2000, in which you request a
technical assistance advisement concerning certain transactions.
You have provided the additional information I requested on

August 8, 2000. Your request now satisfies the requirements for
issuance of a technical assistance advisement. My letter
requested that you provide sample copies of written contracts if
such contracts were used. You have provided one sample job
proposal and several sample invoices. It is assumed that
written contracts ordinarily are not used. If written contracts
are used, their terms could affect the discussion in this
response.

Facts

XXX ("Taxpayer") is in the alarm and low voltage contracting and
service business. Taxpayer has described several typical fact
patterns.

Scenario 1. A building has an existing fire alarm system. When
a portion of the premises is "built out" for a particular tenant
and is improved, Taxpayer is hired to add devices or relocate
devices to accommodate building changes or to meet building code
changes. A permit is generally required to make these
modifications, which vary in cost from a couple hundred dollars
to over ten thousand dollars. Taxpayer may be hired directly by
the building owner or tenant or may work as a subcontractor. No
written contract was provided for this type of job. Taxpayer
did provide two invoices to illustrate transactions in this
category. The first involved supplying and installing two surge
protectors, wiring new sprinkler devices, loading program
changes, and testing the newly installed devices. Taxpayer did
not charge any tax. The second involved providing and
installing two horn strobes, two strobes, and a signal expander.
There is no indication that these items were new installations
as opposed to replacements. Taxpayer charged tax on the full
invoice amount.

Scenario 2. Taxpayer services fire alarm systems on an "as
needed" basis with no underlying maintenance contracts. Each
call is billed based on materials and labor actually required.
Common examples of parts replaced in such jobs are batteries,
horns, circuit boards, or smoke detectors. Taxpayer itemizes
and prices any parts that are supplied, charges on an hourly
basis for labor, and on a per-trip basis to cover travel and

other expenses. Taxpayer provided an invoice to illustrate these
transactions. Taxpayer replaced a faulty fire alarm panel board.
Taxpayer provided one "Master Control, 1500" for $194.68. The
job required two trips at $31.00 each and two hours of work at
$65.00 per hour. Taxpayer charged tax on the total price of
$386.68.

Scenario 3. Taxpayer acts as an alarm system subcontractor on
construction projects. Taxpayer provides design services,
equipment, and specified support services for new alarm system
installations by electrical contractors. The electrical
contractor performs the structural wiring work and equipment
installation (including wiring the components directly to the
structural wiring and attaching the components to walls and
other structural components of the building). Taxpayer provides
technical support during the installation phase. After
installation is complete, Taxpayer's employees perform the final
hookup to control panels and program and test the system.

Taxpayer provided a sample proposal issued to an electrical
contractor on an apartment project. The proposal listed
drawings, specified equipment, tax, and final checkout of
installation as included in the proposal. The proposal
specifically excluded certain items and work, including wire,
conduit, permits, and installation of wire and equipment. The
total proposed price was $28,125.00. Taxpayer included a
progress-billing invoice for the job. It itemized two charges
for fire alarm equipment at $1405.15 each, sales tax of $189.70
on the price of the equipment, and untaxed termination labor of
$800.00, for a total of $3800.00.

Scenario 4. Taxpayer acts as a contractor for card access
control systems. Taxpayer furnishes and installs structural
wiring, components that are direct wired and attached to the
doors and walls of a building (e.g., card readers, motion
detectors, switches), personal access cards to be issued to
individuals with access to the secured areas, and usually, a
desktop computer for user interface with the system. The
computer is intended to be dedicated to monitoring and control
of the system but could be used for other purposes. The system
as a whole cannot be removed or relocated except by experienced,

trained personnel. No documentation associated with these jobs
was provided.

Scenario 5. Taxpayer acts as a contractor that furnishes and
installs a fire alarm system that is a real property
improvement. Taxpayer provided the final invoice for such a job
that involved a total contract price of $8,975.00. The final
invoice reflected a contract payment due of $2,975.00. Taxpayer
charged tax on the full amount and billed a total of $3183.25.

Requested Advisements

Scenario 1. Are jobs where systems are added to or modified to
accommodate new tenants or building code changes taxable as fire
alarm maintenance or are they real property improvements?

Scenario 2. Is Taxpayer correct to treat the service jobs
described in Scenario 2 as fire alarm maintenance? Is there a
definition of the term "service" for purposes of Rule 12A1.0092, F.A.C., and, if so, does that term include parts as well
as labor? Is Taxpayer required to pay tax on the acquisition of
parts that are separately itemized and priced on the invoices
for such maintenance jobs?

Scenario 3. When Taxpayer provides alarm system design
services, drawings, equipment, on-site technical support,
programming, and testing services to an electrical contractor,
should Taxpayer pay use tax on the material it supplies or
collect sales tax on the price charged to the electrical
contractor? If labor and design charges are separately stated,
are they exempt from tax?

Scenario 4. When Taxpayer supplies structural wiring and other
components of a card access system, should the transaction be
treated in its entirety as a real property improvement or should
certain portions (e.g., the desktop computer) be separately
itemized and taxed differently?

Scenario 5. When Taxpayer charges and collects tax on the full
contract price for a real property improvement, is Taxpayer also
required to accrue and remit use tax on the materials it

supplies in performing the contract?

Applicable Law, Discussion, and Analysis

Scenario 1. Section 212.05(1), F.S., enumerates transactions
that are subject to sales and use tax. In relevant part, it
provides as follows:

(1) ..., a tax is levied on each taxable transaction or
incident, which tax is due and payable as follows:

(a)1.a. At the rate of 6 percent of the sales price of each
item or article of tangible personal property when sold at
retail in this state, computed on each taxable sale for the
purpose of remitting the amount of tax due the state, and
including each and every retail sale.

(b) At the rate of 6 percent of the cost price of each item
or article of tangible personal property when the same is
not sold but is used, consumed, distributed, or stored for
use or consumption in this state; ....

(j)1. At the rate of 6 percent on charges for all:

a. Detective, burglar protection, and other protection
services (SIC Industry Numbers 7381 and 7382)....

2. As used in this paragraph, "SIC" means those
   classifications contained in the Standard Industrial
   Classification Manual, 1987, as published by the Office of
   Management and Budget, Executive Office of the
   President....

The transactions described in Scenario 1 could, depending on the
nature of the job and the system involved, fall under paragraph
(a), (b), or (j) as cited above. If Taxpayer is providing
protection services under paragraph (j), tax is imposed on all
of Taxpayer's charges for such services. The statute refers to
the Standard Industrial Classification ("SIC") Manual, 1987 (the
"Manual"), as published by the Office of Management and Budget
for guidance in determining what services are taxable under the

statute. The Manual's description for SIC code 7382 is entitled
"Security Systems Services" and includes businesses "engaged in
monitoring and maintaining security systems devices, such as
burglar and fire alarms". The description notes that the
activities of sales and installation or installation only fall
under SIC code 1731 (which includes electrical contractors and
is considered a construction industry rather than a service
industry).

Rule 12A-1.0092, F.A.C., provides guidance on the scope of the
activities that are considered to be protection services taxable
under section 212.05(1)(j), F.A.C. In relevant part, that rule
provides as follows:

12A-1.0092 Detective, Burglar Protection, and Other
Protection Services.

(1) Persons who provide any of the services enumerated in
Industry Numbers 7381 and 7382 of the Standard Industrial
Classification Manual, 1987, are dealers in a taxable
service and are required to charge sales tax on the total
taxable sales price of the service.

(2)(a) Detective, burglar protection, and other protection
services are those services which are rendered to minimize
or prevent loss or damage to life, limb, or property and
are of a kind typically performed by security or alarm
system companies,.... These taxable services include:
...

2. Burglar or fire alarm or other security system devices
   monitoring and maintenance;

a. The installation of alarm or security systems that
remain tangible personal property is governed by the
provisions of Rule 12A-1.016, F.A.C.

b. The installation of alarm or security systems that
become a part of real property is governed by the
provisions of Rule 12A-1.051, F.A.C.

c. The monitoring or maintenance of alarm or security

systems is a taxable service for systems that are
considered to be either tangible personal property or a
part of real property. The term maintenance includes any
inspection of an alarm or security system to confirm its
proper working order. The term maintenance does not include
the expansion or upgrade of an existing system, but does
include the replacement of defective components....

Maintenance services are taxable in full regardless of whether
the system itself would be considered tangible personal property
or a real property improvement. Maintenance services include
replacements of defective components but do not include
installations of new systems or expansions or upgrades of
existing systems. For this purpose, an "upgrade" involves
materially increasing the capabilities of a system. If a job
described in Scenario 1 involves replacing existing components
with new components that do not result in any substantial
improvement to the system, the job is a taxable maintenance
service under section 212.05(1)(j), F.A.C.

If a job would fall into the upgrade, expansion, or original
installation classifications, it will be necessary to determine
if Taxpayer is providing and installing tangible personal
property or improving real property. A real property
transaction would be taxed under the guidelines of Rule 12A1.051, F.A.C. The relevant portions of the rule provide as
follows:

12A-1.051 Sales to or by Contractors Who Repair, Alter,
Improve and Construct Real Property.

.... (2) Definitions. For purposes of this rule, the
following terms have the following meanings:
...
(c)1. "Fixture" means an item that is an accessory to a
building, other structure, or to land, that retains its
separate identity upon installation, but that is
permanently attached to the realty. . . .

3. The determination whether an item is a fixture depends
   upon review of all the facts and circumstances of each

situation. Among the relevant factors that determine
whether a particular item is a fixture are the following:

a. The method of attachment. Items that are screwed or
bolted in place, buried underground, installed behind
walls, or joined directly to a structure's plumbing or
wiring systems are likely to be classified as fixtures....

b. Intent of the property holder in having the item
attached....

d. Customization....

e. Permits and licensing....

The foregoing list of factors relevant to determining
whether an item is a fixture is intended to be illustrative
only. Additional factors may exist in any particular case,
and the weight to be given to the factors will also vary in
each case....

(g) "Real property" means land, improvements to land, and
fixtures. It is synonymous with the terms "realty" and
"real estate".
...
(3) Classification of contracts by pricing. The taxability
of purchases and sales by real property contractors is
determined by the pricing arrangement in the contract.
Contracts generally fall into one of the following
categories:

(a) Lump sum contracts....

(b) Cost plus or fixed fee contracts....

(c) Upset or guaranteed price contracts....

(d)Retail sale plus installation contracts. These are
contracts for improvements to real property in which the
contractor or subcontractor agrees to sell specifically
described and itemized materials and supplies at an agreed

price or at the regular retail price and to complete the
work either for an additional agreed price or on the basis
of time consumed. In order for a contract to fit in this
category, all the materials that will be incorporated into
the work must be itemized and priced in the contract before
work begins. If a contract itemizes some materials but does
not itemize other materials that will be incorporated into
the work, the contract is not included in this category.
Because the sale of the materials is a separable
transaction from the installation, the purchaser must
assume title to and risk of loss of the materials and
supplies as they are delivered, rather than accepting title
only to the completed work. The contractor may remain
liable for negligence in handling and installing the items.

(e) Time and materials contracts. These are contracts in
which the contractor or subcontractor agrees to furnish
materials and supplies and necessary services for a price
that will be calculated as the sum of the contractor's cost
or a marked up cost for materials to be used plus an amount
for services to be based on the time spent performing the
contract.... Time and materials contracts differ from
contracts described in paragraph (d), because the materials
are not completely identified, itemized, and priced in the
contract in advance and because the property owner is
contracting for a finished job rather than the purchase of
materials.

(4) General rule of taxability of real property
contractors.

Contractors are the ultimate consumers of materials and
supplies they use to perform real property contracts and
must pay tax on their costs of those materials and
supplies, unless the contractor has entered a retail sale
plus installation contract. Contractors performing only
contracts described in paragraphs (3)(a), (b), (c), or (e)
do not resell the tangible personal property used to the
real property owner but instead use the property themselves
to provide the completed real property improvement. Such
contractors should pay tax to their suppliers on all

purchases.... They should charge no tax to their customers,
regardless of whether they itemize charges for materials
and labor in their proposals or invoices, because they are
not engaged in selling tangible personal property....

As described, the systems Taxpayer works on involve structural
wiring and components that are directly wired and mounted in
place with screws or a similar form of attachment. Permits are
often required for these jobs. Such fire alarm and protection
systems are generally intended to remain in place indefinitely.
While each job must be considered on its own facts and
circumstances, based on the information provided, it appears the
systems Taxpayer expands or upgrades would be viewed as real
property improvements. Taxpayer's invoices indicate that
Taxpayer charges on a time and materials basis. Taxpayer should
therefore pay tax on the cost of the materials it installs and
charge no tax to the customer pursuant to Rule 12A-1.051(4),
F.A.C., when performing installations, expansions, or upgrades
of systems that are real property improvements.

A single job could involve protection services that are taxable
to the customer and use of tangible personal property in a real
property installation that would be taxable to Taxpayer. In any
case where a single job that involves taxable protection
services also has elements that are not subject to tax as such
services, the burden is on Taxpayer to maintain adequate
documentation to establish the consideration for the various
elements. If this is not done, tax must be collected and
remitted on the full sales price to the customer. See section
212.05(1)(j)4., F.S.

It is possible that Taxpayer may also perform installation,
expansion, or upgrades that would be sales, repairs, or
maintenance of tangible personal property. For example,
Taxpayer may add a desktop computer to interface with an
existing system but not replace or add any structural wiring or
attached components. That job would be a retail sale of the
computer and Taxpayer should collect tax on the full price,
including installation. See section 212.02(16), F.S., and Rule
12A-1.016, F.A.C. Taxpayer could purchase the computer using a
resale certificate since it would be resold as tangible personal

property in a taxable retail sale. See section 212.02(14), F.S.

Scenario 2. Scenario 2 involves transactions in which Taxpayer
responds to calls to service alarm systems that are not
functioning properly. Taxpayer supplies the parts and labor
necessary to restore the system to proper operations. This is
properly classified as maintenance of the existing system rather
than installation, expansion, or upgrade. These jobs,
therefore, are services described in SIC code 7382 and taxable
under section 212.05(1)(j), F.S., and Rule 12A-1.0092(2)(a)2.,
F.A.C., as discussed above.

Taxpayer asks if there is a definition of "service" for purposes
of the tax on "detective, burglar protection, and other
protection services" imposed by the statute. In particular,
Taxpayer questions whether replacement parts as well as labor
charges should be considered part of the "service" that is
intended to be taxed. There is no such definition set forth in
section 212.05(1)(j), F.S., or in the description under SIC code
7382 in the Manual. When Taxpayer is called in, however, the
customer clearly expects to be charged for labor and for any
parts required to maintain the system in working order. Both
are provided as part of the service transaction, just as an auto
mechanic supplies parts and labor when servicing an automobile.

Taxpayer notes that Rule 12A-1.0092(6), F.A.C., provides that
"protection service providers are considered the ultimate users
or consumers of the tangible personal property sold to them and
used in connection with their service and are required to pay
the tax imposed upon such sales of tangible personal property to
their dealers". Taxpayer feels that this results in double
taxation when Taxpayer's customer is also required to pay tax on
the replacement parts provided as part of a maintenance service
transaction. When Taxpayer purchases items for Taxpayer to use,
that purchase is taxable under section 212.05(1)(a), F.S. When
Taxpayer performs protection services described in SIC code
7382, that service is taxable under section 212.05(1)(j), F.S.
When tax is imposed on two separate transactions, there is no
forbidden double taxation, even though the same property may be
involved in both transactions. See Florida Hotel and Motel
Association, Inc. v. Department of Revenue, 635 So.2d 1044 (Fla.

1st DCA 1994)(hotels owe tax on furniture, linens, soap, etc.,
furnished to guests as part of taxable transient rental);
American Video Corp. v. Lewis, 389 So.2d 1059 (Fla. 1st DCA
1980)(cable television service provider owes tax on purchase of
converter boxes and cables provided to customers as part of
service).

If parts are sold at retail to a customer rather than being
provided as an undifferentiated part of maintenance services,
Taxpayer would not be taxable on its purchases of those parts.
Section 212.02(20), F.S., defines a taxable "use" as "the
exercise of any right or power over tangible personal property
incident to the ownership thereof, or interest therein, except
that it does not include the sale at retail of that property in
the regular course of business". If Taxpayer sells a
replacement part, Taxpayer is entitled to purchase the part
using a resale certificate. If this is done, that part is taxed
only on the final transfer to the customer. The burden is on
Taxpayer to prove that parts have been sold as such to the
customer rather than simply used by the provider in the course
of the service transaction. The sample invoice provided by
Taxpayer for a job described in this scenario indicates that
Taxpayer itemizes and prices any parts that are supplied, states
the number of hours involved with the hourly charge and
resulting total charge for labor, and provides a per-trip charge
to cover travel and overhead expenses. Taxpayer then totals the
charges for parts, labor, and trips to reach the total price to
the customer. The invoice therefore indicates that Taxpayer is
selling the parts to the customer and would not be required to
pay tax on the purchase of those parts for resale.

Taxpayer's invoice indicates that sales tax is charged and
collected on the full price to the customer. This is the proper
treatment of the service transaction, regardless of whether it
is a lump sum service call charge or a taxable sale of parts
combined with taxable labor and trip charges. The itemization
does, however, indicate that Taxpayer's purchase of the parts
may be treated as an exempt sale for resale rather than a sale
for Taxpayer's use that would also be taxable under Rule 12A1.0092, F.A.C.

Scenario 3. In the case of Scenario 3, Taxpayer provides design
services, drawings, technical support, and programming/testing
services as well as the equipment needed for a system. The
customer is an electrical contractor that provides and installs
structural wiring as well as the equipment acquired from
Taxpayer. The sample proposal specifically identifies equipment
installation as a function Taxpayer will not perform. Taxpayer
correctly believes that the system it designs and for which it
provides the equipment is a real property improvement once
installed. Taxpayer does not, however, perform the function of
converting the equipment into real property by wiring and
attaching the components. The term "real property contract" is
defined in Rule 12A-1.051(2)(h), F.A.C. That definition
specifically provides that the term does not include a contract
"to furnish tangible personal property that will be installed or
affixed in such a way as to become a fixture or improvement to
real property if the person furnishing the property has not also
contracted to affix or install it". In this scenario, Taxpayer
is not a real property contractor. Taxpayer is merely selling
tangible personal property to a real property contractor and
providing related non-installation services as part of that
sale.

Pursuant to sections 212.05(1) and 212.06(1), F.S., Taxpayer is
required to collect from the contractor sales tax on the full
sales price of the tangible personal property sold. "Sales
price" is defined in section 212.02(16), F.S., as "the total
amount paid for tangible personal property, including any
services that are a part of the sale". In this case the
drawings, technical support during installation, and
programming/testing services prior to final acceptance are all
part of the transaction. All of the services are directly
related to the equipment and insuring that it functions
properly. In fact, the proposal indicates a single lump sum for
the equipment and all of the related services, although the
final invoice separately states charges for equipment and for
"termination labor". Charges for services that are part of a
sale of tangible personal property, however, are taxable as part
of the sales price by definition. Separately stating such
charges does not remove them from the tax base.

Scenario 4. The access control system described in Scenario 4
involves structural wiring and components that are directly
wired and attached to the building structure. This form of
attachment indicates the permanence required for treatment as
real property under the definitional guidelines in Rule 12A1.051(2), F.A.C. Taxpayer furnishes and installs those
components and also provides a desktop computer and access cards
for use with the system. The computer and access cards do not
become real property. For purposes of discussion, it is assumed
the cost of providing and installing the wiring and affixed
components substantially exceeds the cost of the computer and
access cards.

Rule 12A-1.051(8), F.A.C., deals with contracts that involve
both real property and tangible personal property. It provides,
in relevant part, as follows:

(8) Mixed contracts. A real property contract may also
include materials and labor that are not real property
improvements. A contract that includes both real property
work and tangible personal property is referred to in this
subsection as a mixed contract.... A mixed contract is one
that involves a real property improvement, maintenance, or
repair and also involves providing tangible personal
property that remains tangible personal property and does
not become part of the real property. In the case of a
mixed contract, taxability depends upon the predominant
nature of the work performed under the contract and upon
the contract terms.

(a) If the predominant nature of a mixed contract is a
contract for real property improvements, taxability will be
determined as if the contract were entirely for real
property. For example, a residential developer routinely
provides some items of tangible personal property, such as
free standing appliances, with new homes sold under costplus contracts. The predominant nature of the contract is
for a dwelling. The developer should pay sales or use tax
on the appliances....

(b) If the predominant nature of a mixed contract is a

contract for tangible personal property, taxability of the
contract will be determined as if the contract were
entirely for tangible personal property....

(c) The determination of the predominant nature of a
contract will depend upon the facts and circumstances of
each case. Consideration will be given to the description
of the project and the responsibilities of the contractor
as set forth in the contract. Consideration will also be
given to the relative cost of performance of the real
property and tangible personal property components of the
contract.

(d) If a mixed contract clearly allocates the contract
price among the various elements of the contract, and such
allocation is bona fide and reasonable in terms of the
costs of materials and nature of the work to be performed,
taxation will be in accordance with the allocation. For
example, a residential developer builds and sells a home on
a cost plus basis, but the contract provides separately
stated prices for the sale and installation of certain
optional free standing appliances that are tangible
personal property and are not classified as real property
fixtures. The contractor may purchase those appliances
using a resale certificate and charge sales tax on the
price paid for the appliances, including installation, by
the home buyer. The contractor is responsible for paying
tax on all the materials that are included in the cost plus
price of the home, other than the separately itemized
appliances....

Taxpayer has two choices for dealing with a mixed contract such
as the access control system. Taxpayer may treat the entire
contract as a real property contract and pay use tax on all the
materials used, including the computer and the access cards. No
tax would be charged to the customer. Alternatively, Taxpayer
and the customer can contractually agree that customer will pay
specified prices for the computer and the access cards.
Taxpayer would purchase those items using a resale certificate
and charge the customer tax on the contract price for them. The
balance of the contract could be done on any of the pricing

bases described in Rule 12A-1.051(3), F.A.C., and taxed
accordingly. For example, the balance of the contract could be
for a lump sum or on a time and materials basis. In either
case, Taxpayer would pay use tax on the materials used for that
part of the contract and collect no tax from the customer.

Scenario 5. Pursuant to Rule 12A-1.051(4), F.A.C., Taxpayer
should not collect tax from its customers on real property
contracts unless the contracts meet the requirements of
paragraph (3)(d) of the rule, in which case Taxpayer would
collect on the itemized charges for materials but not on labor.
Taxpayer would be considered a retail seller of tangible
personal property only if Taxpayer and a customer enter a
contract before work begins that itemizes and prices all the
materials to be supplied (including, e.g., the number of screws
and linear feet of wire), and the customer accepts title to the
materials prior to installation. Taxpayer's documentation
indicates that Taxpayer works on either a lump sum or a time and
materials basis. Taxpayer therefore must pay tax as the
consumer of the materials and should charge no tax to the
customer.

Advisements

Scenario 1. When performing modification or build out work
described in Scenario 1, Taxpayer must determine whether the
work is properly classified as maintenance or as installation,
expansion, or upgrading. If the work involves replacing
existing components, even if the replacements are a later or
different model, the job ordinarily should be classified as
maintenance. Tax should be charged to the customer on the full
price. If the job involves extending a system to new areas or
adding additional components, it should be viewed as an
installation, expansion, or upgrading. Those jobs are treated as
real property contracts or as sales of tangible personal
property depending on the nature of the job and the system.
When a job involves both maintenance and installation, Taxpayer
must collect tax on the total price unless the documentation
clearly states the charges related to each aspect of the job.

Scenario 2. When performing a service call job described in

Scenario 2 that requires replacing or repairing components of an
existing system, Taxpayer should collect tax on the full price
to the customer. If Taxpayer separately itemizes and charges
for replacement parts provided to the customer in the course of
the job, Taxpayer is permitted to issue a resale certificate
rather than pay tax on its purchase of the parts.

Scenario 3. When selling equipment to an electrical contractor
and providing related design and support services but not
actually installing the equipment, Taxpayer is not acting as a
real property contractor but rather as a supplier to a real
property contractor. Taxpayer should collect tax from the
contractor on the full sales price for the equipment, including
design and technical support fees that are part of the
transaction.

Scenario 4. An alarm system that involves structural wiring and
directly wired and screwed in place components (e.g., card
readers, motion detectors, switches, and panels) is considered a
real property improvement. If the contract for the system also
involves tangible personal property that is not attached to
realty, such as access cards or a desktop computer, the contract
is a mixed contract. Taxpayer has the choice of treating the
contract entirely in accordance with its predominant nature or
of specifically allocating consideration in the contract to the
real property and tangible personal property portions and
treating each accordingly.

Scenario 5. When performing a contract to install an alarm
system that is a real property improvement, Taxpayer should pay
tax on the cost of its materials and should not charge any tax
to the customer.

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 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.

Sincerely,

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

LWB/
Control #: 42291