Could an airline buy a contractor-built automated people mover tax free for installation in its leased county airport terminal?

Subject

Automated People Mover ("APM") Contract

Plain-English summary

The airline could purchase the automated people mover, its qualifying parts, and its manufacturing and fabrication tax free for purchases on or after July 1, 2000. The system met the statutory people-mover definition, and the airline acted as agent for the county operating the public-use airport.

Public funds paid for the system, and the installed APM and its parts became part of the county-owned terminal. Those public ownership, funding, and agency facts brought the contractor's manufacture and installation agreement within section 212.08(7)(bbb).

What this means for you

A private airline's project qualified because the contract and lease made it the county's purchasing agent for a publicly funded system that became county property—not merely because the system was located at an airport.

Common questions

Q: Was the installed APM exempt? Yes.

Q: Did the exemption include component and fabrication costs? Yes.

Q: What purchase date did the ruling cover? Purchases on or after July 1, 2000.

Citations and references

• Fla. Stat. § 212.08(7)(bbb) — public people-mover systems exemption
• Fla. Stat. § 332.004(14) — public-use airport definition
• Fla. Admin. Code r. 12A-1.039 — exemption certificate format
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-051

Original ruling text

SUMMARY

QUESTION: What procedures will permit an airline that is
leasing a terminal from a county to have an automated
people mover constructed and installed in that terminal so
as to qualify for the sales and use tax exemption provided
by Section 212.08(7)(bbb), F.S.?

ANSWER - Based on Facts Below: The airline, as agent for
its county lessor, may enter into a contract with a
contractor to purchase an automated people mover system tax
exempt. A "people-mover system" is defined in s.
212.08(7)(bbb), F.S. Both the system, its parts, and
fabrication are exempt from the tax imposed under Chapter
212 because the airline is acting as agent for the a county
under its lease; the system is purchased with public funds;
and the system and parts become part of publicly owned
facilities, i.e., the county owned terminal.

Aug 15, 2001

Re: Technical Assistance Advisement 01A-051
XXX ("Taxpayer")
Sales and Use Tax - Automated People Mover ("APM") Contract
Section 212.08(7)(bbb), F.S.

Dear :

This is in response to your letter to the Florida Department of
Revenue dated February 22, 2001, supplemented by your letters of
March 15 and 19, 2001 and May 29, 2001. You asked for a
technical assistance advisement confirming that the construction
project described in your letter would qualify for tax-exempt
purchases for an APM at a County airport.

Facts

Your letter of February 22, 2001 states that you are writing on

behalf of the Taxpayer, a for profit corporation qualified to do
business in the State of Florida, in the business of operating a
commercial airline. The Taxpayer has entered into a contract
with a Corporation ("ontractor") for supplies for, and
installation of, an APM at a particular Terminal of a particular
County owned Airport. The County eventually will lease the
Terminal in question to the Taxpayer for use in its business.
The Taxpayer seeks a technical assistance advisement ("TAA")
from the Department of Revenue, confirming that there will be a
sales and use tax exemption for the purchase and manufacture of
an APM and parts of that system by Contractor to become part of
the Airport.

Supplied with your letters are the following:

A copy of the General Provisions of the "[Airport] North
Terminal Automated People Mover ("APM") System,
Supply/Installation Contract Agreement," between Taxpayer
and Contractor, dated October 29, 1999, at Tab No. 1 to
your letter February 22, 2001.

A copy of the "Lease, Construction and Financing Agreement
between the [Taxpayer and the County]," ("Lease"), at Tab
No. 2 to your letter of March 15, 2001.

A copy of Resolution No. R-872-99, at Tab No. 3 to your
letter of March 15, 2001.

A copy of County Ordinance 95-127, at Tab No. 4 to your
letter of March 15, 2001.

A copy of "[Airport], North Terminal, Automated People
Mover (APM) System, Instruction to Bidders" ("Instruction
to Bidders"), at Tab No. 5 to your letter of March 15,
2001.

A copy of the General, Special, and Technical Provisions of
the "[Airport], North Terminal, Automated People Mover
(APM) System, Supply/Installation Contract," dated June 7,
1999 at Tab No. 6 to your letter of March 15, 2001.

A copy of the "Commercial Bid" portion of [Contractor's]
Bid Proposal, at Tab No. 7 to your letter of March 15,
2001.

County Ordinance 95-127 amends Section 2-286 of the County Code
of Ordinances to give the County Manager the authority to enter
into an agreement with a tenant, allowing the tenant to enter
into contracts to make improvements to a County airport with
supervision by the County's Aviation Department and the County
Attorney. Under this ordinance, the County is a third party
beneficiary of such contracts. Reimbursement by the County to
the tenant is authorized as well.

The Lease between the Taxpayer and the County, entered into in
October 1995, implements the above authority. Article I Improvements Agreement, Section 2. Construction of the
Improvements Authorized, authorizes improvements identified in
Article I -Improvements Agreement, Section 2.1. The
Improvements. Article I -Improvements Agreement, Section 2.1
Improvement Costs, refers to the cost of the design and
construction of Improvements and other related costs as being
eligible for reimbursement to [Taxpayer]. Article I Improvements Agreement, Section 20. Reimbursement Procedures,
provides, before entering into any agreements authorized by the
Lease, which are subject to reimbursement pursuant to the lease,
the Taxpayer is obligated to establish a separate bank checking
account, in its name, requiring the signature of authorized
representatives of the Taxpayer and the County's Aviation
Department. The Taxpayer is responsible for funding any minimum
account balances required. The account must be used exclusively
for the payment of reimbursable costs under the Lease. When
invoices subject to reimbursement under the Lease are received,
the Taxpayer must first advise the Accounting Division of the
Aviation Department of the amount of the invoice and must obtain
all written approvals of such invoice required by the Aviation
Department. When all required approvals have been secured, the
Taxpayer prepares a check on the bank checking account, payable
to the contracting party, obtains the necessary signatures, and
delivers the check to the County's Accounting Division. The
Accounting Division then mails or delivers the check to the
payee and immediately transfers by wire sufficient funds to the

account to cover the amount of the check. Interest accumulating
in the account accrues to the County.

The Agreement between the Taxpayer and the Contractor was made
the 29th day of October 1999, whereby the Contractor will supply
and install an APM for a lump sum, including Florida sales
taxes. Section 1.1 of the General Provisions, Project
Description, terms the Project, as the design, manufacture,
supply, installation, integration, testing, and demonstration
and commissioning of the Operating System (e.g., vehicles, power
distribution, controls, communication, track, other equipment,
maintenance equipment and the finish-out and outfitting of
facilities) of an Automated People Mover System for the
particular airport terminal and refers to the Technical
Provisions of the Agreement, where the system is described in
detail.

Section 3.14 of the General Provisions of the Agreement requires
the Taxpayer to be liable for all obligations and requirements
under the contract, stating that County is a third-party
beneficiary under the contract. Section 8.1 of the General
Provisions provides that the Taxpayer will pay the Contractor.
Section 8.9 limits the use of the funds paid by the Taxpayer to
the Contractor solely to "the purpose of performance of the Work
and the implementation, furnishing, and equipping of the Work in
accordance with the Plans, Specifications, and Addenda and
payment of bills incurred by the contractor in performance of
the Work." In Section 8.12, the Contractor acknowledges that all
amounts due under the Agreement from the Taxpayer must be paid
for from funds to be received by the Taxpayer from the County
pursuant to the Lease. Any liability of the Taxpayer must be
satisfied from funds actually received from the County. The
contractor waives any claim, right, or cause of action against
the Taxpayer unless to the extent that the Taxpayer has actually
received County funds attributable to the contractor's services
and work.

Section 8.14 of the General Provisions states:

All material and Work covered by progress payments shall,
unless title had previously been vested in the County,

become the sole property of the County....

This is so without relieving the contractor of its
responsibilities or the Taxpayer of its rights under the
Agreement. Section 18.1 states that immediately upon payment for
any material or the performance of any part of the work, as
between the Contractor and the Taxpayer, the title to the
material will vest in the Taxpayer or the County as required by
the Lease without altering rights or obligations under the
Agreement.

The Insurance Requirements of the Supply Installation Agreement
between the Taxpayer and the Contractor, including
Subcontractors, provide that the Contractor shall not commence
the performance of any work or services under this Contract
until the insurance required under the Agreement has been
obtained and the Taxpayer and the County have accepted the
insurance.

Sections 30.1, 30.2, and 30.3 of the General Provisions of the
Agreement provide for the assumption of the Agreement by the
County under appropriate circumstances and require the
Contractor to consent to such assignment by the Taxpayer and
assumption by the County of the Contract. Section 30.2 of the
Agreement provides that if the County terminates the Taxpayer's
rights under the [Lease] to implement the Project and the County
decides that the Agreement should be assigned to the County,
then, as soon as the paper work is complete, the Taxpayer's
rights and obligations under the Agreement are assigned to the
County.

Requested Advisements

You request an advisement stating that the sale of the APM
constructed and installed for Taxpayer and becoming the property
of the County under the facts set out above qualifies for the
sales and use tax exemption provided by Section 212.08(7)(bbb),
F.S.

Law

Effective July 1, 2000, Section 212.08(7)(bbb), F.S., provides:

People-mover systems, and parts thereof, which are purchased or
manufactured by contractors employed either directly by or as
agents for the United States Government, the state, a county, a
municipality, a political subdivision of the state, or the
public operator of a public-use airport as defined by s.
332.004(14) are exempt from the tax imposed by this chapter when
the systems or parts go into or become part of publicly owned
facilities. In the case of contractors who manufacture and
install such systems and parts, this exemption extends to the
purchase of component parts and all other manufacturing and
fabrication costs. The department may provide a form to be used
by contractors to provide to suppliers of people-mover systems
or parts to certify the contractors' eligibility for the
exemption provided under this paragraph. As used in this
paragraph, "people-mover systems" includes wheeled passenger
vehicles and related control and power distribution systems that
are part of a transportation system for use by the general
public, regardless of whether such vehicles are operatorcontrolled or driverless, self-propelled or propelled by
external power and control systems, or conducted on roads,
rails, guidebeams, or other permanent structures that are an
integral part of such transportation system. "Related control
and power distribution systems" includes any electrical or
electronic control or signaling equipment, but does not include
the embedded wiring, conduits, or cabling used to transmit
electrical or electronic signals among such control equipment,
power distribution equipment, signaling equipment, and wheeled
vehicles.

Discussion, Analysis and Conclusion

The system described by the Agreement qualifies as a People
Mover System under the law in that it "includes wheeled
passenger vehicles and related control and power distribution
systems that are part of a transportation system for use by the
general public, regardless of whether such vehicles are
operator-controlled or driverless, self-propelled or propelled
by external power and control systems, or conducted on roads,
rails, guidebeams, or other permanent structures that are an

integral part of such transportation system." As a result of
its rights and obligations under the Lease, Taxpayer qualifies
as an agent for a county operating a public-use airport as
defined by s. 332.004(14), F.S., for purchase of an APM system
exempt from the tax imposed by Chapter 212, F.S., because the
systems and parts go into or become part of publicly owned
facilities, to wit: the North Terminal of the County's airport.
Since Taxpayer qualifies as an agent of the County and public
funds pay for the APM, the Agreement qualifies as one for the
manufacture and installation of systems and parts, tax exempt as
to the purchase of component parts and for all other
manufacturing and fabrication costs.

Advisement

The sale of the APM, constructed and installed for Taxpayer and
becoming the property of the County under the facts set out
above, qualifies for the sales and use tax exemption provided by
Section 212.08(7)(bbb), F.S. with respect to purchases made on
or after July 1, 2000.

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 taxpayer. 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/
Enclosure: Rule 12A-1.039, F.A.C.
Control #: 45418