When were drain-line bacteria and application devices exempt as Florida pollution-control bioaugmentation products?

Subject

Equipment, Machinery, and Other Materials for Pollution Control

Plain-English summary

The bacteria were bioaugmentation products, but they and their application devices were exempt only at qualifying fixed production locations. They consumed grease, sugars, starches, and gelatin that could obstruct wastewater systems, bringing their use within a pollution rule implemented by the Department of Environmental Protection.

The customer location also had to manufacture, process, compound, or produce tangible personal property for sale. Because franchisees provided monthly bioremediation services and consumed the bacteria and devices, each franchisee—not its service customer—had to provide the purchaser certificate and account for tax on items used at nonqualifying locations.

What this means for you

Classification as a pollution-control product was only one requirement. The user's fixed-location activity, the applicable environmental rule or permit, and purchaser documentation all had to qualify.

Common questions

Q: Were the microorganisms bioaugmentation products? Yes.

Q: Were all service locations exempt? No.

Q: Who supplied the purchaser certificate? The franchisee that bought and used the products and devices.

Citations and references

• Fla. Stat. § 212.051(1)-(3) — pollution-control and bioaugmentation exemption
• Fla. Admin. Code rr. 62-604.200(12) and 62-625.400(2)(c) — pollution and prohibited wastewater discharges
• Alachua County v. Department of Revenue, 466 So. 2d 1186 (Fla. 1st DCA 1985)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-010

Original ruling text

SUMMARY

QUESTION: Company produces and sells to its franchisees
microorganisms for the control of greases, sugars,
starches, and gelatins in the drain lines of restaurants,
wastewater treatment plants, and manufacturers. Company
contends that the microorganisms are "bioaugmentation
products" and should be exempt from sales tax pursuant to
s. 212.051, F.S.

ANSWER - Based on Facts Below: The microorganisms sold by
Company are bioaugmentation products pursuant to subsection
(3) of the exemption statute because they are used to meet
a law implemented by the Department of Environmental
Protection. However, the microorganisms and the devices
that apply the microorganisms are not exempt from tax
unless those items are installed or used at a fixed
business location where tangible personal property is
manufactured, processed, compounded, or produced for sale,
and the required purchaser's certificate has been produced
to Company.

Feb 06, 2001

Re: Technical Assistance Advisement 01A-010
Sales and Use Tax
Equipment, Machinery, and Other Materials for Pollution
Control
Section 212.051, F.S.

Dear :

This is in response to your letter of January 18, 2001,
which requests a technical assistance advisement concerning the
taxability of microorganisms (bacteria) sold by XXX (hereinafter
"Company") to your franchisees. Your letter generally contends
that your microorganisms are "bioaugmentation products" and
should be exempt from sales tax pursuant to s. 212.051, F.S.

RELEVANT AUTHORITY

Section 212.051, F.S. (2000), provides:

212.051 Equipment, machinery, and other materials for
pollution control; not subject to sales or use tax. -

(1) Notwithstanding any provision to the contrary, 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 pollution or
contaminants 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 that the facility, device, fixture,
equipment, structure, specialty chemical, or
bioaugmentation product to be exempted is required to meet
such law or condition.

(2) Equipment, machinery, or materials required to meet any
law implemented by, or any condition of a permit issued by,
the Department of Environmental Protection that are
purchased for the monitoring, prevention, abatement, or
control of pollution or contaminants at privately owned or
operated landfills or construction and demolition debris
disposal facilities shall be exempt from taxation as
otherwise imposed by this chapter; however, such exemption
shall not be allowed unless the purchaser signs a
certificate stating that the equipment, machinery, or
materials to be exempted are required to meet such law or
condition. This exemption does not include solid waste

collection vehicles, compactors, graders, or other
earthmoving equipment.

(3) For the purposes of this section, "specialty chemicals"
means those chemicals used to enhance or further treat
wastewater, including, but not limited to, defoamers,
nutrients, and polymers, and "bioaugmentation products"
means the microorganisms used in waste treatment plants to
break down solids and consume organic matter.

DISCUSSION/OPINION

It is the Department of Revenue's (DOR's) understanding
that Company, through its franchisees, provides remediation
services to businesses that have sewage blockages associated
with the accumulation of greases, sugars, starches, and
gelatins. These businesses include, but are not limited to,
food service establishments, wastewater treatment plants,
hospitals, hotels, bakeries, bottling plants, and pharmaceutical
companies. Once a blockage has occurred because of the
accumulation of greases, sugars, starches, or gelatins, these
substances must traditionally be removed by mechanical routing
(plumber's snake) or through the application of caustic
chemicals. Company 's approach is to control or prevent the
occurrence of blockages through the introduction of bacteria
that "eat" (bioremediate) the greases, sugars, starches, or
gelatins. The bacteria are not poured down the drain like
traditional chemicals. Instead, the franchisee installs a
container filled with the bacteria at the service location,
attaches a pump and timer to the container, and installs a pumpout line to the drain line. This "system" then automatically,
periodically sprays bacteria into the drain line and the
bacteria begin consuming the organic matter. The container is
typically replaced with new or additional bacteria every 14
days.

It is your contention that the bacteria sold by Company are
exempt as bioaugmentation products under s. 212.051, F.S. Based
on available information, the bacteria are bioaugmentation
products as defined in subsection (3) of the exemption statute.
However, the exemption is not available until two criteria are

satisfied.

First, the law limits the exemption to certain users of the
bioaugmentation products. Generally, these users are
manufacturers, but the exemption is available to any business
that manufactures, processes, compounds, or produces tangible
personal property for sale. Accordingly, restaurants or similar
businesses with food service operations would be eligible for
the exemption. Although subsection (2) of the exemption, which
is applicable to landfills and demolition debris disposal
facilities, does not specifically mention bioaugmentation
products, that subsection does extend to "materials," and
bioaugmentation products can be considered materials for the
purposes of subsection (2) of the exemption.

The second exemption criterion is that the bioaugmentation
products must be used "to meet a law implemented by, or any
condition of a permit issued by, the Department of Environmental
Protection." It is DOR's understanding that the Department of
Environmental Protection (DEP) does not specify the devices or
materials that must be used to control pollution. Instead, DEP
specifies that a facility may not discharge specific pollutants
in excess of certain amounts into the air or water. Therefore,
in the administration of the exemption, DOR considers those
devices or materials used to meet, or not exceed, the stated
pollution limits as qualifying for the exemption.

The immediate problem confronting the second exemption
criterion for Company's remediation products is that there is
apparently no permitting process or regulation that covers the
specific discharged substances that Company's remediation
products help control. In DEP's April 2000 issue of the
Pretreatment Communicator, the subject of grease discharges was
discussed. Mr. Bob Heilman of DEP wrote: "The FDEP does not
have direct authority to regulate the discharge of grease, other
than through the prohibited discharge standards in Chapters 62604 and 62-625, Florida Administrative Code. The prohibitions
essentially state that no solid or viscous substances that would
cause a blockage in any component of the wastewater system may
be discharged. The FDEP's authority is limited to permitting
collection systems within the public right-of-way. There

appears to be no statutory authority for the FDEP to regulate
grease traps on private property."

A review of Chapters 62-604 and 62-625 of the Florida
Administrative Code has been made. Rule 62-625.400(2)(c),
F.A.C., is pertinent to the issues now under consideration. In
general terms, that rule prohibits the introduction of solid or
viscous pollutants in amounts which will cause obstruction to
the flow of a wastewater system. Greases, sugars, starches, and
gelatins are viscous substances that, in sufficient quantities,
can obstruct the flow of sewage systems. Although these
substances are not traditionally thought of as pollutants, Rule
62-604.200(12), F.A.C., defines "pollution" in part to mean the
presence of "any substances" in air or water in quantities or
levels that "may be potentially harmful or injurious" to life or
property. If a wastewater system becomes obstructed due to the
accumulation of greases, sugars, starches, or gelatins, at a
minimum that wastewater system has been harmed, and life and
other property may be harmed.

In the matter of Alachua County v. Department of Revenue,
466 So.2d 1186 (Fla. 1st DCA 1985), the court stated that
"[a]lthough an exemption in a taxing statute should be strictly
construed against the person claiming it, the construction must
not be so strained that it forces a conclusion that is
unreasonable...." The strictest construction of s. 212.051,
F.S., would tend to deny an exemption to Company's products,
since the apparent intent of the exemption statute is to only
provide an exemption for the control of substances traditionally
considered as toxins. However, the elimination or control of
any unwanted substances in the wastestream appears to be a
public policy goal of DEP. Therefore, the strictest
construction of the exemption statute against Company's products
would be an unreasonable conclusion.

In summary, the bacteria sold by Company and its
franchisees are bioaugmentation products pursuant to s.
212.051(3), F.S. The bacteria and the devices that apply the
bacteria control or eliminate greases, sugars, starches, and
gelatins in drains. Although the primary intent of Company's
services is apparently to reduce or eliminate drain line

stoppages for the customer, if these viscous substances
accumulate in sufficient quantities, an obstruction of a
wastewater system could occur, which would then violate the
provisions of Rule 62-625.400(2)(c), F.A.C. That rule is a law
implemented by DEP.

Therefore, the sales of bacteria, and the devices that
apply the bacteria, are exempt from tax pursuant to s. 212.051,
F.S., when installed or used at a fixed business location where
tangible personal property is manufactured, processed,
compounded, or produced for sale, and the required purchaser's
certificate has been provided.

It is understood that Company's franchisees do not make
retail sales of bacteria and the devices that apply the
bacteria. Instead, the franchisees provide bioremediation
services for a monthly fixed fee, based on the number of systems
installed at a customer's location. As service providers, the
franchisees are the consumers (purchasers) of the tangible
personal property (bacteria and application devices) that are
used in the provision of bioremediation services. Therefore, it
is the franchisees' obligation to complete and provide the
required purchaser's certificate to Company. The franchisee may
extend a blanket certificate to Company in lieu of individual
certificates for each service location. A sample suggested
format for a blanket purchaser's certificate has been enclosed
for your convenience. The franchisees' customers do not need to
provide a purchaser's certificate, since the exemption statute
does not require a certificate from the purchaser of a service.

It is possible that a franchisee may have a customer base
that results in a mixture of exempt and non-exempt
bioremediation services being performed. The exemption statute
does not provide requirements, nor does the Department have an
administrative rule, covering such a situation. Therefore,
Company and the franchisees may use whatever method or
procedures that are administratively efficient and accurate to
insure that sales tax is charged on items used at non-exempt
service locations, and that tax is not charged on items used at
exempt service locations. For example, a franchisee may choose
to keep segregated inventories of tax exempt and tax paid items

in proportion to the percentage of exempt and non-exempt service
locations. Alternately, a franchisee may choose to purchase all
items tax exempt from Company and remit tax on those items used
at non-exempt locations at the time of installation or use.
That tax may either be paid as use tax directly to the
Department of Revenue by the franchisee, or the franchisee may
remit the tax to Company for Company's remittance with its sales
tax return. No matter which procedures are adopted, once a
purchaser's certificate has been extended to Company,
responsibility for the accurate remittance of tax is that of the
franchisee.

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
expressed in this response.

You are further advised that this response, your request
and related documents are public records under Chapter 119,
F.S., which are subject to disclosure to the public under the
conditions of Section 213.22, F.S. Your name, address, and any
other details, which might lead to identification of the
taxpayer, must be deleted before disclosure. In an effort to
protect the confidentiality of such information, we request you
provide the undersigned with an edited copy of your request for
Technical Assistance Advisement, backup material and response
within fifteen days of the date of this advisement.

Sincerely,

Jeffery L. Soff
Tax Law Specialist
Technical Assistance and
Dispute Resolution

encl.
ctrl# 43696

SUGGESTED BLANKET PURCHASER'S CERTIFICATE

[Note: This certificate may be a separate document attached to
purchase order(s) or may be incorporated within the purchase
order(s) itself.]

The undersigned hereby declares that all devices, fixtures,
machinery, equipment, structures, specialty chemicals, or
bioaugmentation products purchased from
_______ (Name of Company) will be installed,
constructed, or used at fixed locations primarily for the
control or abatement of pollution or contaminants in the
manufacturing, processing, compounding, or production of
tangible personal property for sale. Further, the undersigned
declares that said items are required pursuant to a law
implemented by the Florida Department of Environmental
Protection (DEP) or required under the condition of a permit
issued by DEP.

I understand any person furnishing a false certificate to a
vendor for the purpose of evading payment of any tax imposed
under Chapter 212, Florida Statutes, shall be subject to the
penalty set forth in Section 212.085, Florida Statutes, and as
otherwise provided by law.

This certification relieves the vendor from the responsibility
of collecting tax on exempt sales amounts. The Department looks
solely to the purchaser for recovery of tax if the purchaser was
not entitled to the exemption.

Purchaser's Name (Print or Type)

Signature

Date

Florida Sales Tax
Number

_____
Title

Federal Employer Identification

Telephone Number

Number or Social Security Number

Form to be retained in seller's records.
Do not send to the Department of Revenue.