Did the redacted equipment planned for a Florida enterprise-zone facility qualify for the business-property sales-tax refund under the 2003 statute?

Plain-English summary

Florida found that the business's listed equipment was eligible for the enterprise-zone business-property refund, provided every other statutory condition was met. The ruling applied the version of section 212.08(5)(h) in effect in 2003 to equipment planned for a new operation in a Florida enterprise zone.

The property test

The Department read the statute to cover qualifying tangible personal property with a five-year class life. Each eligible unit generally had to cost at least $5,000. The submitted equipment list was heavily redacted, but the Department stated that all listed items met the eligibility requirements.

Hardware and software were treated differently

Computer hardware could qualify if the minimum per-unit price was met. Software did not independently qualify as the federal property described in the ruling. The Department said software could be included when an entire system was billed as one unit at one price.

The refund had additional conditions

Under the quoted 2003 statute:

• The refund was the lesser of 97% of sales tax paid or $5,000 per purchase.
• The ceiling rose to $10,000 if at least 20% of qualifying employees were enterprise-zone residents.
• No refund was granted unless more than $100 of tax was paid on purchases within a 60-day period.
• The application had to be filed within six months after tax became due.
• Buying multiple eligible items in one purchase still produced only one purchase-level refund ceiling.

What this means for you

This ruling is useful for understanding how the former provision classified equipment, bundled hardware and software, and applied purchase-level limits. It should not be treated as proof that an enterprise-zone refund is currently available; verify the law for the purchase date.

Common questions

Q: Did Florida approve the submitted equipment?
A: Yes, subject to all other statutory requirements.

Q: Did separately priced software qualify?
A: No. The ruling distinguished nonqualifying software from qualifying hardware, while allowing a single-price integrated system to be treated as a unit.

Q: Was the limit applied to each item?
A: No. The ruling said the maximum applied per purchase, even if one purchase contained multiple eligible items.

Q: Was there a filing deadline?
A: Yes. The quoted statute required an application within six months after the tax was due.

Citations and references

• Fla. Stat. § 212.08(5)(h) — historical enterprise-zone business-property refund
• I.R.C. § 38 and former I.R.C. § 168(c) — federal property tests cited in the ruling
• Treas. Reg. § 1.1245-3 — personal property definition cited in the ruling
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 03A-052

Original ruling text

SUMMARY

QUESTION: Are the items which will be purchased by the
taxpayer eligible for the Enterprise Zone Business Property
Refund?

ANSWER - Based on Facts Below: Yes, the items which will be
purchased by the taxpayer are eligible for the Enterprise
Zone Business Property Refund, provided all of the other
statutory requirements for refund eligibility are met.

Nov 10, 2003

Re: Technical Assistance Advisement 03A-052
Sales and Use Tax - Enterprise Zone Business Property
Refund
Paragraph 212.08(5)(h), F.S.
XXX, hereinafter referred to as "A"

Dear :

Your letter of XX, requested a Technical Assistance Advisement
addressing the eligibility of the items of equipment listed
therein, for a sales tax refund under the referenced statute.
This response to your request constitutes a Technical Assistance
Advisement under Chapter 12-11, Florida Administrative Code, and
it is issued to you under the authority of s. 213.22, Florida
Statutes.

FACTS

Your letter of XX, states that "A" is considering opening an
operation in a Florida enterprise zone, and requests a
determination regarding the eligibility of items which will be
purchased for the facility, listed in the letter and the
appendix to the letter, for the Enterprise Zone Business
Property Refund under paragraph 212.08(5)(h), F.S.

LAW

Section 212.08(5)(h), F.S., states in part:

1. Business property purchased for use by businesses
   located in an enterprise zone which is subsequently used in
   an enterprise zone shall be exempt from the tax imposed by
   this chapter. This exemption inures to the business only
   through a refund of previously paid taxes. A refund shall
   be authorized upon an affirmative showing by the taxpayer
   to the satisfaction of the department that the requirements
   of this paragraph have been met.

4. An application for a refund pursuant to this paragraph
   must be submitted to the department within 6 months after
   the tax is due on the business property that is purchased.

5. The provisions of s. 212.095 do not apply to any refund
   application made pursuant to this paragraph. The amount
   refunded on purchases of business property under this
   paragraph shall be the lesser of 97 percent of the sales
   tax paid on such business property or $5,000, or, if no
   less than 20 percent of the employees of the business are
   residents of an enterprise zone, excluding temporary and
   part-time employees, the amount refunded on purchases of
   business property under this paragraph shall be the lesser
   of 97 percent of the sales tax paid on such business
   property or $10,000. A refund approved pursuant to this
   paragraph shall be made within 30 days of formal approval
   by the department of the application for the refund. No
   refund shall be granted under this paragraph unless the
   amount to be refunded exceeds $100 in sales tax paid on
   purchases made within a 60-day time period.

9. For the purposes of this exemption, "business property"
   means new or used property defined as "recovery property"
   in s. 168(c) of the Internal Revenue Code of 1954, as
   amended, except:

a. Property classified as 3-year property under s.
168(c)(2)(A) of the Internal Revenue Code of 1954, as

amended;

b. Industrial machinery and equipment as defined in subsubparagraph (b)6.a. and eligible for exemption under
paragraph (b);

c. Building materials as defined in sub-subparagraph
(g)8.a.; and

d. Business property having a sales price of under $5,000
per unit.

Federal Income Tax Regulation s. 1.1245-3, states:

(b) Personal property defined. The term "personal property"
means -

(1) Tangible personal property (as defined in paragraph (c)
of s. 1.48-1, relating to the definition of "section 38
property" for purposes of the investment credit), and

(2) Intangible personal property.

DISCUSSION AND ANALYSIS OF LAW

Subparagraph 212.08(5)(h)1., F.S., provides that taxpayers which
purchase business property for use in an enterprise zone, and
subsequently use such property in an enterprise zone, are
eligible for a refund of sales and use tax paid on the property
if all other criteria of paragraph 212.08(5)(h), F.S., are met.

Subparagraph 212.08(5)(h)9., F.S., provides the definition of
"business property" for purposes of the Enterprise Zone Program.
Specifically, eligible property consists of that which meets the
criteria of s. 38, I.R.C. of 1954, as amended.

Based on the definition of eligible "business property",
provided by subparagraph 212.08(5)(h)9., F.S., and s. 38, I.R.C.
of 1954, as amended, we are left with tangible personal
property, having a five-year class life, and which meets the

criteria of s. 38, I.R.C. of 1954, as amended.

Each of the XXX items of business equipment appearing in XXX of
your letter appears to meet the requirements of subparagraph
212.08(5)(h)9., F.S. That is, XXX item represents s. 38
property, has a five-year class life, and is a unit costing at
least $5,000, with the exception of the XXX which represent XXX,
the XXX which represent XXX, and the XXX which represent XXX.
Therefore, all items, as listed in XXX, meet the eligibility
requirements for the refund, provided all other requirements of
paragraph 212.08(5)(h), F.S., are met.

Based on the description in your letter, it appears that the
each of the XXX would be eligible for a refund of sales tax up
to $5,000, or $10,000 if the 20 percent employment requirement
addressed in subparagraph 212.08(5)(h)5., F.S., is met.

Generally, computer hardware qualifies for the refund under
paragraph 212.08(5)(h), F.S., if the minimum purchase price per
unit criterion is met. Computer software is not deemed to be s.
38 property under the Internal Revenue Code of 1954, as amended.
Therefore, the hardware used for XXX would appear to qualify for
the refund. However, the software used in that application
would not qualify, unless the entire system was billed as a
unit, at one price.

Each XXX, XXX and related XXX would normally qualify for the
refund, along with their respective XXX and XXX, provided each
XXX and XXX is assigned for use with one XXX.

Please note that the provisions of subparagraph 212.08(5)(h)5.,
F.S., allow a maximum refund of $5,000, or $10,000, per purchase
of qualified business equipment. Therefore, although each item
discussed above would qualify as a unit, if two or more of these
items is purchased at one time there would only be one refund
granted per purchase, regardless of the number of eligible items
included in the purchase.

Also, please note that subparagraph 212.08(5)(h)4., F.S.,
requires that refund applications for eligible items must be
submitted within six months after the date the tax is due on the

purchase.

This response constitutes a Technical Assistance Advisement
under s. 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 s. 213.22, F.S. Our response is
based 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 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,

Suzanne C. Paul
Tax Law Specialist
Technical Assistance and
Dispute Resolution

SCP/
Control No.: 57315