How did Florida tax manufactured buildings, trusses, and structural steel when the manufacturer sold them versus permanently installed them?

Subject

Metal Structures

Plain-English summary

The tax treatment changed depending on whether the manufacturer sold the metal structure or permanently installed it. Factory-built buildings, trusses, and structural steel sold for installation by someone else were taxable sales of tangible personal property.

When the manufacturer permanently installed the items, it acted as a real-property contractor and owed use tax instead of collecting tax from the customer. Qualifying factory-built buildings were taxed on the cost of materials used in manufacture. Trusses and structural steel were not finished factory-built buildings and were taxed on their full fabricated cost. On-site installation under the real-property contracts was not separately taxed.

What this means for you

A dual operator must track whether inventory is ultimately resold or consumed in a real-property contract. Product completion at the factory and the party performing permanent installation affected both the tax base and who remitted tax.

Common questions

Q: Were sale-only contracts taxable? Yes.

Q: Who owed tax under permanent-installation contracts? The manufacturer-contractor.

Q: Did trusses receive the factory-built-building cost rule? No.

Citations and references

• Fla. Stat. §§ 212.02(7), (19), 212.05, and 212.06(1), (14) — factory-built buildings, property, sales, and fabricated cost
• Fla. Admin. Code rr. 12A-1.007(11), 12A-1.043, and 12A-1.051 — manufactured buildings and real-property contractors
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-013

Original ruling text

SUMMARY

QUESTION: What are the tax obligations of a company that
manufactures and sells factory-built buildings, trusses,
and structural steel either when they install these items
in real property or when they do not install?

ANSWER - Based on Facts Below: The taxpayer will be
required to charge sales tax to its purchasers on the sales
price of the factory-built buildings, trusses, and
structural steel components when they do not install,
because the contracts are for the sale of tangible personal
property by the taxpayer. The taxpayer is the ultimate
consumer of the tangible personal property and owes use tax
on it when installing factory-built buildings, trusses, and
structural steel components in real property.

Mar 05, 2001

Re: Technical Assistance Advisement 01A-013
Sales and Use Tax -- Metal Structures
Sections 212.02(7), (19), 212.05, 212.06(1), (14), F.S.
Rule 12A-1.007(11), 12A-1.043, 12A-1.051, F.A.C.

Dear :

This is in response to your letter to the Florida Department of
Revenue dated December 19, 2000. You have asked for a technical
assistance advisement indicating that, for sales and use tax
purposes, certain of the taxpayer's activities are treated as
sales of tangible personal property and others are treated as
real property improvement.

Facts

You state that the taxpayer is the surviving entity after the
merger of three companies. It manufactures, sells and installs
metal structures. It plans to enter into four different types of

contracts with contractors, as either a supplier or
subcontractor. We understand that the contracts are structured
as follows:

"Contract A," - taxpayer manufactures and installs
completed factory built buildings.
"Contract B," - taxpayer manufactures and sells factorybuilt buildings to a customer who contracts
for installation.
"Contract C," - taxpayer manufactures and installs trusses
and/or other structural steel components on
real property as permanent structures.
"Contract D," - taxpayer manufactures and sells trusses
and/or other structural steel to a customer
who contracts for installation.

You state that metal buildings supplied in Contracts A and B
meet the definition of "factory-built buildings" set out in
Section 212.02(7), F.S. With respect to Contracts C and D, you
state that Rule 12A-1.051(17)(q) and (ll), F.A.C., which defines
the provision of foundations, and structural steel and concrete
installation as real property improvements, would include
trusses and structural steel components. You state that it is
the taxpayer's position that the trusses and structural steel
components create a part of a factory-built building because the
trusses and structural steel components are manufactured as a
finished product, are installed onto real estate, and create a
significant part of a completed building.

You exclude from your inquiry any structure that would be
defined as a "mobile home" for the purposes of the motor vehicle
licensing provisions of Chapter 320, Florida Statutes. You state
that the factory-built buildings, trusses, and structural steel
components are installed, either by the taxpayer or by a third
party, into real property as a permanent structure. You say
further that the erection and installation performed by the
taxpayer involves attaching the factory-built buildings,
trusses, or structural steel components, all of which are
manufactured by the taxpayer, to the building foundation or real
property with bolts, straps, or by other means intended to be
permanent. You state that Contracts A and C will separately

itemize installation charges.

Requested Advisement

You are requesting advisement that:

The taxpayer will be entitled to present a resale
certificate for the purchase of all materials and inventory
used in connection with the completion of Contracts A, B,
C, and D, and therefore, will not be subject to tax at the
time of purchase of any such materials.

Consistent with the provisions set forth under Rule 12A1.043(1)(b), F.A.C., the taxpayer will be required to pay a
use tax only on the cost price of items used in the
manufacture of the factory-built buildings. Consequently,
the taxpayer will pay use tax with respect to Contracts A
and C only on its cost of materials, and not on the other
elements of cost such as labor, transportation, and other
costs, set forth in rule 12A-1.043(1)(b), F.A.C.

The taxpayer will be required to charge sales tax to its
purchasers on the sales price of the factory-built
buildings under Contract B and with respect to the trusses
and structural steel components under Contract D, because
the Taxpayer will be considered to be a seller of tangible
personal property with respect to Contracts B and D.

Neither the taxpayer nor its customers will be subject to
the Florida sales tax on installation charges with respect
to Contracts A and C.

Law, Discussion, Analysis and Conclusion

Real property contractors are the consumers of tangible personal
property used in performing contracts. They pay sales or use
tax on that property but collect no tax from their customers.

A vendor of tangible personal property charges sales tax to his
customer on the sales price of the tangible personal property,
including installation. See Sections 212.05(1) and 212.06(1)(a),

F.S.; Rule 12A-1.051(4), F.A.C.

Section 212.06(14)(a), F.S., defines "real property" to mean the
land and improvements thereto and fixtures and is synonymous
with the terms "realty" and "real estate." Buildings that are
attached to foundations in a permanent manner are considered to
be improvements to the land on which they rest. Section
212.02(19), F.S., provides that "tangible personal property"
means personal property which may be seen, weighed, measured, or
touched or is in any manner perceptible to the senses.

Rule 12A-1.051, F.A.C., states where relevant:

...
(17) Specific activities classified as real property
contracts. Contractors who are engaged in the following
activities are generally considered to be real property
contractors, although any particular job may be determined
not to involve an improvement to real property:
...
(q) Foundations;
...
(ll) Structural steel and concrete installation....

Pursuant to section 212.06(1)(b), F.S., a real property
contractor that fabricates tangible personal property to use in
performing contracts must pay use tax on the fabricated cost of
that property, including transportation, labor, and services as
well as materials. There is a special provision, however, for
"factory-built buildings" used by the manufacturer in real
property contracts. This statute provides that the tax on
fabrication in the case of factory built buildings is imposed
only on the "cost price of items used in the manufacture of such
buildings." Section 212.02(7), F.S., defines "factory-built
building" as "a structure manufactured in a manufacturing
facility for installation or erection as a finished
building;...."

You are correct that the erection and installation that involves
attaching the factory-built buildings to the building foundation
or real property with bolts, straps, or by other means intended

to be permanent, qualify as real property improvement. However,
your contention that the trusses and structural steel components
create a part of a factory-built building, because the trusses
and structural steel components are manufactured as a finished
product, are installed onto real estate, and create a
significant part of a completed building, is incorrect. Under
Section 212.02(7), F.S., F.S., a structure is a finished
building when it leaves the factory. It is not assembled on
site.

If the taxpayer is erecting factory-built buildings in the
course of performing real property contracts, the taxpayer is
subject to tax on its fabrication under the special rule for
factory-built buildings in Section 212.06(1)(b), F.S.,
interpreted by Rule 12A-1.043, F.A.C. The taxpayer should pay
tax on the materials used in the fabrication of its buildings to
be in compliance with that statute and rule.

Trusses and structural steel components do not qualify for
special treatment as factory-built buildings under Section
212.06(1)(b), F.S. Their full-fabricated cost is subject to use
tax. Rule 12A-1.051(10), F.S., provides that contractors that
maintain facilities where they manufacture or fabricate items
for their own use in performing contracts 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 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.

Rule 12A-1.007(11)(g), F.A.C., provides in part:

The sale... of a... manufactured building before such unit
is affixed to realty is taxable as tangible personal
property....

Similarly, the sale of components or materials to another who
will attach them to realty is taxable as a sale of tangible

personal property. In the case of contracts B and D, the
taxpayer is a dealer who must collect tax on the full sale
price. Rule 12A-1.051(9), F.A.C., deals with contractors termed
"dual operators" who both use materials themselves in the
performance of contracts and resell materials. Those contractors
should register as dealers. When they purchase materials that
they may either use themselves or that they may resell, they may
issue a resale certificate. Florida tax should be remitted when
a subsequent event determines the appropriate taxation of the
materials. If the materials are subsequently resold, tax should
be collected from the buyer and remitted to the state. If the
contractor uses the materials, use tax should be paid to the
State instead.

Advisement

The taxpayer will be entitled to present a resale
certificate for the purchase of all materials and inventory
used in connection with the completion of the Contracts,
use tax will be due on fabrication cost. Tax will be due
when the taxpayer either resells the tangible personal
property as such or when it uses it in a real property
contract.

Consistent with the provisions set forth under Rule 12A1.043(1)(b), F.A.C., the taxpayer will be required to pay
fabrication tax only on the cost price of items used in the
manufacture of the factory-built buildings when it uses
such buildings in performing real property improvement
contracts. Consistent with the provisions set forth under
Rule 12A-1.051, F.A.C., the taxpayer will be required to
pay fabrication tax on the full-fabricated cost of the
trusses and steel structural components.

The taxpayer will be required to charge sales tax to its
purchasers on the sale price of the factory-built buildings
under Contract B and on the trusses and structural steel
components under Contract D, because the contracts are for
the sale of tangible personal property by the taxpayer.

Neither the taxpayer nor its customers will be subject to

the Florida sales tax on on-site installation charges with
respect to Contracts A and C, because these are real
property improvement contracts. In these contracts, the
taxpayer is the ultimate consumer of the tangible personal
property and owes use tax on it.

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 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 Company. Your response should be received
by the Department within 15 days of the date of this letter.

Sincerely,

Karen Kugell
Senior Attorney
Technical Assistance and Dispute Resolution
(850) 922-4834

KK/
Control #: 43468