Were security services protecting foreign banks' currency shipments to and from Florida exempt because the purchaser's primary benefit was outside Florida?

Subject

Security Services

Plain-English summary

The currency-shipment security services were not subject to Florida sales tax because the foreign banks received the primary benefit outside Florida. The banks owned the currency, contracted for the protection, were compensated for loss, and were billed at addresses outside the state.

About 90% or more of the service mileage occurred at foreign locations or in international airspace. Currency's temporary physical presence in Florida during inbound or outbound trips did not move the purchaser's primary benefit into Florida.

What this means for you

Protection-service sourcing followed the purchaser's primary benefit, not merely where the protected property traveled. The seller still needed the required log for qualifying out-of-state-use transactions.

Common questions

Q: Were the services exempt? Yes.

Q: Did currency entering Florida make the service taxable? No.

Q: What facts showed an out-of-state benefit? Foreign bank ownership, contracting, loss protection, billing address, and predominantly foreign mileage.

Citations and references

• Fla. Stat. § 212.05(1)(j) — detective and protection services
• Fla. Admin. Code r. 12A-1.0092(2)(f) — sourcing protection services by primary benefit
• Fla. Admin. Code r. 12A-1.0161(2)(d) — seller transaction log
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-045

Original ruling text

SUMMARY

QUESTION: Is the primary benefit of security services
occurring outside of Florida, and therefore, are the
security services exempt from tax?

ANSWER - Based on Facts Below: The purchaser's primary
benefit of the security services occurs outside of Florida
because the delivery address is outside of Florida;
therefore, the security services are not subject to Florida
sales or use tax.

Aug 06, 2001

Re: Technical Assistance Advisement 01A-045
Sales and Use Tax - Security Services
Section: 212.05(1)(j), F.S.
Rule: 12A-1.0092, F.A.C.
Petitioner: XXX (herein "Taxpayer")
FEI: XX

Dear :

This letter is a response to your petition dated July 19, 2001,
for the Department's issuance of a Technical Assistance
Advisement ("TAA") concerning the above referenced party and
matter. Your petition 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.

FACTS

This petition follows Letter of Technical Advice #01A-610, dated
June 25, 2001.

The petition describes the facts as follows:

[Taxpayer] is responsible for providing security services
to international banks located outside of Florida for the
transfer of large sums of currency. Two-thirds of the
transactions are from the international bank location to
Florida while one-third is from Florida to the
international bank location. The security services are
performed throughout the entire trip from the international
bank location to the destination in Florida, and the
reverse. The contracting entities are all international
banks, et al. (sic) The terms and conditions of the
security transportation are agreed to between [Taxpayer]
and the international banks. Approximately one-third of
the international banks [is] National Central banks that
are considered to be part of the foreign government.
Approximately 90 percent of more of the security services
performed, on a mileage basis, [are] performed outside of
Florida at either the foreign location or in international
air space. The international banks are compensated in the
event of loss of the currency. [Taxpayer] bills the
international bank for the service at an address outside of
Florida.

REQUESTED ADVISEMENT

Advice is sought whether the described security services are
exempt from Florida sales and use tax.

LAW AND DISCUSSION

Section 212.05(1)(j), Florida Statutes, provides in pertinent
part that tax is due and payable:

(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)....

3. Charges for detective, burglar protection, and other
   protection security services performed in this state but
   used outside this state are exempt from taxation. Charges

for detective, burglar protection, and other protection
security services performed outside this state and used in
this state are subject to tax. (Emphasis Supplied)

Rule 12A-1.0092, Florida Administrative Code, provides in
pertinent part:

(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, or are those investigative services which
are rendered to obtain evidence or other information for
legal, business, employment, or personal purposes of a kind
typically performed by detective or investigative agencies.
These taxable services include:

1. Armored car service;

6. Guard service;

10. Protective service, guard; and

11. Security guard service.

(b) The services in paragraph (a) above are taxable for all
persons, businesses, residences, or nonresidential
properties....

(f) The services which are subject to tax in this rule are
taxable when performed within or outside this state and
used within this state by the purchaser or when the
purchaser's primary benefit of the services is within this
state. The services which are subject to tax in this rule
are exempt when performed within this state but used
outside this state by the purchaser or when the purchaser's
primary benefit of the services is outside this state. The
seller must maintain a log pursuant to Rule 12A1.0161(2)(d), F.A.C., documenting any transaction where
services are performed in this state but used by a
purchaser outside this state.

***

3. Example: A California art gallery has loaned an
   important work of art to a Florida art gallery. Security
   services must be hired to protect this work of art. If the
   California art gallery is invoiced for the security
   services, it will be presumed that the primary benefit of
   the services is to protect the California art gallery's
   tangible personal property. Since the services are used by
   a purchaser who is located outside this state, the security
   services will not be taxable. If the Florida art gallery is
   invoiced for the security services, it will be presumed
   that the primary benefit of the services is to protect the
   activities of the Florida art gallery, and the charges will
   be subject to tax. (Emphasis Supplied)

A taxable service is subject to Florida sales tax when performed
within or outside this state and used within this state by the
purchaser or when the purchaser's primary benefit of the service
is within this state. If the taxable service is performed
within this state but used outside this state by the purchaser
or when the purchaser's primary benefit of the service is
located outside this state, then the service is considered to be
exempt. See Section 212.05(1)(j)3., F.S., and Rule 12A1.0092(2)(f), F.A.C.

The example found in Rule 12A-1.0092(f)3., F.A.C., provides a
description of a nontaxable protection service. Although the
example deals with protection of tangible personal property
rather than currency, it is relevant to the discussion. Like
the example, Taxpayer is protecting currency that belongs to a
non-Florida bank. Since the owner of the currency is located
outside of Florida (and billed at an address outside of
Florida), the primary benefit of the service is considered to
have occurred outside of Florida. This is true even though the
currency has physical situs in Florida for part of the duration
of the provision of the protection service. Therefore, the
protection of the currency is not subject to Florida sales and
use tax.

CONCLUSION

The purchaser's primary benefit of the security services
described herein occurs outside of Florida; therefore, the
security services are not subject to Florida sales or use tax.

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 upon 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 from that which is 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 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,

Sara D. Faulkenberry
Tax Law Specialist
Technical Assistance and Dispute Resolution
850/414-9838

Control #46063