Which parts of a sponsor-branded solar golf-course radio system were exempt, and were sponsor payments taxable as equipment leases?

Subject

Solar Powered Radio System

Plain-English summary

The solar panel, solar batteries, and metal housing that structurally supported the batteries were exempt solar-energy components. The decorative plastic golf-ball shell, radio transmitters and receivers, and conventionally powered indoor base did not collect or store solar energy or serve as integral solar accessories, so they were taxable.

Sponsor payments were not taxable equipment-lease charges. Sponsors supplied logo lettering but did not possess, operate, or maintain the radio systems; the manufacturer retained ownership. The Department treated the payments as charges for a service.

What this means for you

A product powered by solar energy was not exempt as a whole. Each component's collection, storage, or support function mattered, and branding alone did not give a sponsor enough use or control to create a lease.

Common questions

Q: Were the solar panel and batteries exempt? Yes.

Q: Was the decorative housing exempt? The metal battery support was; the decorative plastic golf ball was not.

Q: Were the radios exempt solar components? No.

Q: Were sponsor payments taxable rentals? No, under the stated lack-of-control facts.

Citations and references

• Fla. Stat. § 212.08(7)(jj) — solar energy systems and components
• Fla. Admin. Code r. 12A-1.071(43) — advertising space on vehicles
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-053

Original ruling text

SUMMARY

QUESTION 1: Taxpayer manufactures and provides solar
powered radio systems for installation at golf courses.
Taxpayer contends that certain components of the system are
exempt from sales and use tax pursuant to s. 212.08(7)(jj),
F.S.

ANSWER 1 - Based on Facts Below: The cost of the solar
panel, solar batteries, and the metal housing which is a
structural support for the solar batteries are not subject
to tax. Taxpayer will owe tax on the decorative elements of
the solar powered radio system.

QUESTION 2: In exchange for the exclusive sale of their
products at a country club, sponsors, such as soft drink
companies, pay Taxpayer to emplace a solar powered radio
system at the golf course. Taxpayer places the sponsors'
name or logo on the system. Taxpayer contends that the
transaction with the sponsors is not subject to tax as a
lease of advertising space on the system.

ANSWER 2 - Based on Facts Below: The sponsors' "use" of the
solar powered radio systems is not sufficient to create a
taxable lease or license to use tangible personal property.
Therefore, the charge that Taxpayer makes to the various
sponsors is for the provision of a service and is not
subject to tax.

Aug 22, 2001

Re: Technical Assistance Advisement 01A-053
Sales and Use Tax
Solar Powered Radio System
Section 212.08(7)(jj), F.S.

Dear :

This is in response to your letter of June 19, 2001, which
requests an "official binding statement" (Technical Assistance
Advisement or TAA) concerning a solar powered radio system that
your company (hereinafter "Taxpayer") installs at country club
golf courses.

BACKGROUND

Based on information that Taxpayer has provided, the
following is known about the solar powered radio system. The
system is comprised of an outdoor and an indoor unit. The
outdoor unit, in the shape of a 20-inch in diameter bisected
golf ball, is mounted on top of a post. Approximately three
feet of the post is buried in the ground for stability. The
post is typically not embedded in concrete and is easily
removeable. Overall height of the outdoor unit is approximately
60 inches. The bisected golf ball, made from ABS plastic,
contains the solar components and a UHF radio. The indoor unit
is a hand-held UHF radio with a charging base that is
conventionally powered through a cord that is plugged into an
electric outlet.

The outdoor unit is emplaced between holes 8 and 9 on a
golf course. The indoor unit is located in the country club's
restaurant. The system allows golfers to call-in their food
order to the golf course's restaurant. This will allow the
meals to be prepared in advance and be ready for the golfers
when they get to the restaurant. In exchange for the exclusive
sale of their products at a country club, sponsors, such as soft
drink companies, pay Taxpayer to emplace a radio system at the
golf course. Taxpayer retains ownership of the radio system. A
sponsor will provide Taxpayer with decal-like transfer lettering
to place the sponsor's name or logo on the outdoor unit. No
formal contract exists between Taxpayer and the sponsors. The
amount of the informal contract is negotiated for each separate
installation. There is no cost to the country club for the
system. In the event of a breakdown in the system, it is
Taxpayer 's responsibility to make the necessary repairs.

SPECIFIC ISSUES

Taxpayer is requesting that the Department of Revenue
concur with the following statements.

"A. Pursuant to s. 212.08(7)(jj), F.S., the purchase of
[the] solar panel, solar batteries[,] and the metal housing
which is a structural support for the solar batteries[,]
would not be subject to tax.

B. ... Rule 12A-1.071(43), F.A.C.,... essentially provides
that charges for advertising space [are] not subject to
tax. Therefore, the charges that [Taxpayer] makes to the
various sponsors for the installation of the solar powered
radio systems [are] not subject to tax."

RELEVANT AUTHORITY

The following passage from the Florida Statutes (F.S.) and
the Florida Administrative Code (F.A.C.) are pertinent to the
issues in this request for advisement.

Section 212.08(7)(jj), F.S. (2000), provides:

Solar energy systems.- Also exempt are solar energy systems
or any component thereof. The Florida Solar Energy Center
shall from time to time certify to the department a list of
equipment and requisite hardware considered to be a solar
energy system or a component thereof. This exemption is
repealed July 1, 2005.

Rule 12A-1.071(43), F.A.C., provides:

Charges made by buses, taxicabs, etc., for advertising
space thereon are exempt.

DETERMINATION

Response to Specific Issue A.

The kinds of items that qualify for exemption as solar
energy systems are determined by the Florida Solar Energy Center
(FSEC). In July 1997, the FSEC certified a list to the

Department of Revenue which described the various systems and
components that are to be considered solar energy systems.
Essentially, that certified list can be divided into the three
categories of collectors, storage units, and integral
accessories for thermal or photovoltaic applications.
Taxpayer's system would be a photovoltaic application.

Taxpayer states that the solar powered radio system
consists of four main components: (1) a solar panel, (2) two
radio transmitter/receivers, (3) solar batteries, and (4) a
metal housing. The solar panel and the solar batteries are
consistent with items that the FSEC has determined to be parts
of a solar energy system. Accordingly, the purchase of these
items by Taxpayer would not be subject to tax pursuant to s.
212.08(7)(jj), F.S. The metal housing would also be exempt from
tax, since that housing is a structural support for the solar
batteries.

Although not an issue in this advisement, it should be
understood that the ABS plastic golf ball is essentially a
decorative element and will not qualify for exemption. Further,
the radio transmitter/receivers do not collect or store solar
energy, nor are they integral accessories to the solar
components. Instead, they are devices that consume the energy
produced by the solar components. Therefore, no exemption is
available for the radio transmitter/receivers, or the
conventionally powered indoor base unit, pursuant to s.
212.08(7)(jj), F.S.

Response to Specific Issue B.

Rule 12A-1.071(43), F.A.C., does not address the issue of
charges for advertising space on a system such as Taxpayer's.
In fact, no statute or rule directly addresses Taxpayer's unique
system and business arrangement. Taxpayer's business
arrangement is actually closer to that of an advertiser's name
or logo being placed on a stadium's scoreboard. The Department
has addressed that topic in prior technical assistance
advisements. (See TAAs 88(A)-302, 92A-032, 96A-041, and 99A033, dated December 16, 1988, April 24, 1992, August 12, 1996,
and July 21, 1999, respectively.)

In consideration of the issues in those advisements, we
find that although the sponsors arrange for Taxpayer to place
the solar powered radio systems on the golf courses, the
sponsors do not take possession of, operate, or maintain the
radio systems. The only physical connection that the sponsors
have with the radio systems is when they provide Taxpayer with
the transfer lettering that is applied to the face of the
outdoor unit. The Department finds that the sponsors' "use" of
the solar powered radio systems is not sufficient to create a
taxable lease or license to use tangible personal property.
Therefore, the charge that Taxpayer makes to the various
sponsors is for the provision of a service and is not subject to
tax. Taxpayer is subject to tax, with the exception of the
above-indicated solar components, on all materials that make up
the radio systems.

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

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