Did 22 work areas in a cement-plant expansion qualify for Florida sales-tax exemptions, and could the manufacturer recover $50,000 paid early?

Plain-English summary

A cement manufacturer expanded production capacity under design-build and equipment contracts. Florida reviewed 22 categories of electrical, utility, building, environmental, safety, material-handling, and site work and found each qualified under one or more of three treatments: exempt expanding-business machinery and equipment, exempt pollution-control property, or nontaxable professional services.

Examples included production electrical systems and accessories, pollution-control ponds and drainage, permit-required paving and landscaping, protective structures, tire-fuel handling equipment, soil testing, and a roofed additive-storage building. Several conclusions depended on the items' exclusive or primary production/pollution-control function and on the project satisfying the statutory production-increase test.

The taxpayer had also paid $50,000 of use tax in April 2006 while equipment was still subject to deposits and progress payments. Because title and possession did not transfer until after July 1, 2006—when the former $50,000 threshold had been removed—the tax was not yet imposed when paid. Florida allowed a refund or later-return credit.

Expanding-business relief and recovery of the payment remained unavailable until the taxpayer submitted Form DR-1214 and met the required productive-output increase.

What this means for you

Classify each component by its actual function and permit requirement, not merely by whether it looks like real property. Preserve project specifications, production-use evidence, environmental permits, delivery dates, and proof that statutory application and output conditions were met.

Common questions

Did all 22 reviewed work areas qualify? Yes, under the documentation and conditions described.

Why was the $50,000 recoverable? The purchases were not completed before the threshold disappeared, so the early payment was made when no tax was due.

Was the credit automatic? No. The ruling required the exemption application and statutory production increase first.

Citations and references

• Fla. Stat. §§ 212.051, 212.08(5)(b), and 212.08(7)(v), as applied in the advisement
• Fla. Admin. Code r. 12A-1.096 (industrial machinery and equipment)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 08A-015

Original ruling text

SUMMARY
QUESTIONS:

1. Whether twenty-two (22) specifically described areas of work in a contract for the expansion
   of the production capacity of a cement manufacturing facility, completed after July 2006, qualify
   for exemptions from sales and use tax.
2. Whether the taxpayer may take a credit for a payment of $50,000 in use tax made in April
   2006 for the expansion project purchases.
   ANSWERS:
3. Based on the documentation provided, the twenty-two (22) specifically described areas of
   work in the expansion project qualify for an exemption as machinery and equipment for
   pollution control, or as machinery and equipment used in a qualifying expanding business, or as
   professional services.
4. Since the tax threshold payment made in April 2006 was applicable to purchases that were
   not completed until after July 1, 2006, the tax was not yet “imposed” within the provisions of the
   expanding business exemption statute. Accordingly, the use tax was paid when no tax was due,
   and the taxpayer may take a credit for that tax.
   May 22, 2008
   XXX
   XXX
   XXX
   XXX
   Re:

Technical Assistance Advisement 08A-015
Sales Tax – Cement Manufacturing Facility
Sections 212.051, 212.08(5)(b), and 212.08(7)(v), Florida Statutes (F.S.)
Rule 12A-1.096, Florida Administrative Code (F.A.C.)

Dear XXX:
This is in response to your letter of February 7, 2008, requesting a Technical Assistance
Advisement (TAA) concerning the applicability of certain sales and use tax exemptions to the
construction of a cement manufacturing facility by XXX, hereinafter “Taxpayer.” This response
to your request constitutes a TAA under Chapter 12-11, Florida Administrative Code (F.A.C.),
and is issued to you under the authority of Section 213.22, Florida Statutes (F.S.).
Stated Facts
Taxpayer is a manufacturer of XXX cement for sale in Florida. Taxpayer is in the

process of expanding its cement manufacturing facility. The expansion project will involve two
separate contracts. The first contract is a design-build agreement. Work under this contract
began on July 24, 2006. This contract generally involves the preparation of the land at the fixed
location for the installation of the process facilities and machinery and equipment. As a part of
this preparation, certain improvements must be made in order to comply with the requirements of
the facility’s operating permit as issued by the Florida Department of Environmental Protection
(DEP). The second contract is an equipment purchase agreement. Under the provisions of this
contract, Taxpayer is required to make various progress payments in advance of the fabrication
and delivery of the production machinery and equipment to the facility. By May 2006, payments
were made toward the purchase of the machinery and equipment. In addition, Taxpayer remitted
$50,000 in use tax on its April 2006 sales and use tax return. That amount represents the tax
threshold requirement as provided in s. 212.08(5)(b), F.S. (2005). None of the machinery and
equipment arrived at the facility before October 1, 2006.
Issues
The following issues have been presented with respect to Taxpayer’s expansion project at
the XXX cement manufacturing facility.
Issue 1. SWITCHYARD Whether the equipment located at the switchyard, which
controls the electricity of the entire plant, is subject to sales and use tax.
Issue 2. SWITCHGEAR Whether the switchgear, which is used to route and split the
electricity to the five different sub-process areas, qualifies as exempt machinery and equipment.
Issue 3. ARCHTECTURAL BUILDINGS Whether Electrical Room 1 (ER1), a stand
alone architectural building, and four additional electrical rooms, specifically designed and
constructed to house electrical equipment and located at the plant’s sub-process areas, are
exempt from sales and use tax.
Issue 4. DUCT BANK CONDUITS Whether duct banks, including cables, wires, and
concrete, which run from the switchyard to ER1, and whether duct banks, including cables,
wires, and concrete, which run from ER1 to the four electrical rooms, will qualify for exempt
status.
Issue 5. TRANSFORMERS Whether the transformers in the sub-process production
areas are subject to sales and use tax.
Issue 6. MOTOR CONTROL CENTERS (MCCs), VARIABLE FREQUENCY DRIVES
(VFDs), AND CONTROL SYSTEMS Whether the MCCs, VFDs, and control systems used to
operate and control the machinery and equipment in the production areas are subject to sales and
use tax.
Issue 7. POWER CABLES, CABLE TRAYS, AND CONDUITS Whether the power
cables, cable trays, and conduits that run above ground in each sub-process area are subject to
sales and use tax.

Issue 8. AIR CONDITIONING Whether the air conditioning systems that will ventilate
the electrical rooms will be subject to sales and use tax.
Issue 9. FIRE DETECTION AND ALARM Whether the fire detection and alarm
systems that will be installed at each of the electrical rooms are subject to sales and use tax.
Issue 10. LIGHTING CONTROL DISTRIBUTION PANELS Whether the lighting
control distribution panels that allow the use of lighting at the machinery and equipment are
subject to sales and use tax.
Issue 11. RECEPTACLE DEVICES Whether the receptacle devices that are installed
throughout the plant for repair and maintenance purposes of the machinery and equipment are
subject to sales and use tax.
Issue 12. LINERS Whether the liners that are used to line the retention ponds are subject
to sales and use tax.
Issue 13. DRAINAGE PIPES Whether the drainage pipes that are used within the
production areas and to route storm water run-off to treatment ponds are subject to sales and use
tax.
Issue 14. MANHOLES/INLETS/CATCH BASINS Whether the manholes, inlets, and
catch basins that are used within the production areas and to route storm water run-off to
treatment ponds are subject to sales and use tax.
Issue 15. HDPE PIPES AND FITTINGS Whether the new HDPE pipes and fittings that
are used to supply water to the expanded production areas and to hydrants at the facility are
subject to sales and use tax.
Issue 16. PAVING Whether the paving of roads in compliance with the DEP permit will
be exempt, notwithstanding the fact that paving is a real property improvement.
Issue 17. LANDSCAPING/SEEDING Whether the landscaping and seeding in
compliance with the DEP permit will be exempt, notwithstanding the fact that such items are real
property improvements.
Issue 18. SIDING/ROOFING Whether siding and roofing, and the structures and
foundations necessary to support those items, installed at the kiln, kiln feed area, coal mill, and
finish mill are subject to sales and use tax.
Issue 19. LIGHTNING PROTECTION Whether lightning protection equipment, which
does not serve a production function, is subject to sales and use tax.
Issue 20. TIRE FUEL HANDLING EQUIPMENT Whether that portion of the tire fuel
handling equipment that will be incorporated into, and will initially only service, the existing tire

fuel system at the plant, is subject to sales and use tax.
Issue 21. SOIL COMPACTION AND TESTING Whether soil compaction and testing
services that will be performed at the site where the additional machinery and equipment will be
erected are subject to sales and use tax.
Issue 22. ADDITIVE STORAGE BUILDING Whether the pre-engineered additive
storage building that will be installed at the plant in compliance with the DEP permit will be
subject to sales and use tax.
Issue 23. PAYMENT OF THE FIRST $50,000 OF SALES TAX Whether Taxpayer
should have remitted the $50,000 in use tax for calendar year 2006, when the transactions at
issue were not completed prior to July 1, 2006. Further, whether Taxpayer may take a credit for
the $50,000 payment on a subsequent sales and use tax return.
Applicable Authority
The following passages from the Florida Statutes (F.S.) and the Florida Administrative
Code (F.A.C.) are applicable to the issues under consideration. The passages, as presented, are
those that were in effect for the time period of Taxpayer’s transactions. Specific citations may
be different under current statutes and rules.
Section 212.051, F.S., provides in part:
(1) Notwithstanding any provision to the contrary, sales, use, or privilege taxes
shall not be collected with respect to any facility, device, fixture, equipment, machinery,
specialty chemical, or bioaugmentation product used primarily for the control or
abatement of pollution or contaminants in manufacturing, processing, compounding, or
producing for sale items of tangible personal property at a fixed location, or any
structure, machinery, or equipment installed in the reconstruction or replacement of such
facility, device, fixture, equipment, or machinery. To qualify, such facility, device,
fixture, equipment, structure, specialty chemical, or bioaugmentation product must be
used, installed, or constructed to meet a law implemented by, or a condition of a permit
issued by, the Department of Environmental Protection; however, such exemption shall
not be allowed unless the purchaser signs a certificate stating that the facility, device,
fixture, equipment, structure, specialty chemical, or bioaugmentation product to be
exempted is required to meet such law or condition.
Section 212.06(14), F.S., provides in part:
(b) “Fixtures” means items that are an accessory to a building, other structure, or
land and that do not lose their identity as accessories when installed but that do become
permanently attached to realty. However, the term does not include . . . industrial
machinery or equipment. For purposes of this paragraph, industrial machinery or
equipment is not limited to machinery and equipment used to manufacture, process,
compound, or produce tangible personal property. . . .

Section 212.08(5)(b), F.S. (2006), provides in part:

2. Industrial machinery and equipment purchased for exclusive use by an
   expanding facility which is engaged in spaceport activities as defined by s. 212.02 or for
   use in expanding manufacturing facilities or plant units which manufacture, process,
   compound, or produce for sale items of tangible personal property at fixed locations in
   this state are exempt from any amount of tax imposed by this chapter upon an affirmative
   showing by the taxpayer to the satisfaction of the department that such items are used to
   increase the productive output of such expanded facility or business by not less than 10
   percent.
   3.a. To receive an exemption provided by subparagraph 1. or subparagraph 2., a
   qualifying business entity shall apply to the department for a temporary tax exemption
   permit. The application shall state that a new business exemption or expanded business
   exemption is being sought. Upon a tentative affirmative determination by the department
   pursuant to subparagraph 1. or subparagraph 2., the department shall issue such permit.
   ...
   d. In the event a qualifying business entity fails to apply for a temporary
   exemption permit or if the tentative determination by the department required to obtain a
   temporary exemption permit is negative, a qualifying business entity shall receive the
   exemption provided in subparagraph 1. or subparagraph 2. through a refund of previously
   paid taxes. No refund may be made for such taxes unless the criteria mandated by
   subparagraph 1. or subparagraph 2. have been met and commencement of production has
   occurred.
   ...
3. For the purposes of the exemptions provided in subparagraphs 1. and 2., these
   terms have the following meanings:
   a. “Industrial machinery and equipment” means tangible personal property or
   other property that has a depreciable life of 3 years or more and that is used as an integral
   part in the manufacturing, processing, compounding, or production of tangible personal
   property for sale or is exclusively used in spaceport activities. A building and its
   structural components are not industrial machinery and equipment unless the building or
   structural component is so closely related to the industrial machinery and equipment that
   it houses or supports that the building or structural component can be expected to be
   replaced when the machinery and equipment are replaced. Heating and air-conditioning
   systems are not industrial machinery and equipment unless the sole justification for their
   installation is to meet the requirements of the production process, even though the system
   may provide incidental comfort to employees or serve, to an insubstantial degree,
   nonproduction activities. The term includes parts and accessories only to the extent that
   the exemption thereof is consistent with the provisions of this paragraph. . . .
   Section 212.08(7)(v), F.S., provides in part:
4. Also exempted are professional, insurance, or personal service transactions
   that involve sales as inconsequential elements for which no separate charges are made.

Rule 12A-1.096, F.A.C. (2006), provides in part:
(1) Definitions - The following terms and phrases when used in this rule shall
have the meaning ascribed to them except where the context clearly indicates a different
meaning:
...
(b) “Industrial machinery and equipment” means tangible personal property or
other property with a depreciable life of 3 years or more that is used as an integral part in
the manufacturing, processing, compounding, or production of tangible personal property
for sale or is exclusively used in spaceport activities. Buildings and their structural
components are not industrial machinery and equipment unless the building or structural
component is so closely related to the industrial machinery and equipment that it houses
or supports that the building or structural component can be expected to be replaced
when the machinery and equipment itself is replaced. Heating and air conditioning
systems are not considered industrial machinery and equipment, unless the sole
justification for their installation is to meet the requirements of the production process,
even though the system may provide incidental comfort to employees, or serves, to an
insubstantial degree, non-production activities. For example, a dehumidifier installed for
the sole purpose of conditioning air in a factory, where the manufacturing of electronic
components requires a controlled-humidity environment, will be considered industrial
machinery and equipment. (See subsection (9) of this rule.)
(c) “Integral to” means that the machinery and equipment provides a significant
function within the production process, such that the production process could not be
complete without that machinery and equipment.
...
(9) Types of industrial machinery and equipment that will or will not qualify for
the exemption.
(a) For the purpose of this exemption industrial machinery and equipment
includes:

1. Special foundations required for the support of such qualifying machinery and
   equipment;
2. Electrical wiring from the nearest power panel or disconnect box to the
   qualifying machinery and equipment; and
3. Plumbing connections necessary to connect the machinery and equipment to
   the nearest water supply or drain line.
   ...
   (f) Pollution control equipment, or sanitizing and sterilizing equipment that is an
   integral part of the production process qualifies for exemption.
   ...
   (s) General or task lighting fixtures will not qualify for the exemption. . . .
   Discussion and Response
   Subparagraph 2. of s. 212.08(5)(b), F.S., provides an exemption from sales and use tax to
   expanding businesses that manufacture, process, compound, or produce tangible personal

property for sale at a fixed location. In order to qualify for exemption, the additional or
replacement industrial machinery and equipment that is purchased by the expanding business
must increase the productive output of the business by not less than 10 percent. However, it is
important to understand that pursuant to subparagraph 3. of that exemption statute, no exemption
exists until such time as the expanding business has applied for the exemption by submitting an
Application for Temporary Tax Exemption Permit, form DR-1214.
Generally, the exemption begins at that point in the production process where raw
materials are received, and the exemption ends at that point where the product is packaged for
sale or is in saleable form if packaging is not done. Industrial machinery and equipment that is
integral to the production process will qualify for exemption. Rule 12A-1.096(9), F.A.C.,
provides some guidelines as to the various types of machinery and equipment that will or will
not qualify for exemption. It should be noted that the administrative rule has been written from
the perspective of a manufacturing operation that is contained within a factory building.
Accordingly, the rule makes a distinction between machinery and equipment issues and real
property improvement issues. Taxpayer’s production process is, effectively, an operation that is
performed completely outdoors. However, the Department has often encountered outdoors
manufacturing operations. When such situations do occur, the exemption can still be
consistently administered between interior and exterior operations.
Section 212.051, F.S., provides an exemption from sales and use tax on purchases by
manufacturing operations and by landfill operations for pollution control purposes. The scope of
the exemption is somewhat different for the two different operations. Unlike the industrial
machinery and equipment exemption for expanding businesses, neither type of operation is
required to submit any kind of exemption application to the Department before making tax
exempt purchases of pollution control items. Instead, the purchaser must sign a certificate
stating that the items to be exempted are required to meet a law implemented by, or a condition
of a permit issued by, the Department of Environmental Protection. The Department of Revenue
has not established, nor would it be possible to establish, a comprehensive list of the kinds of
items that would or would not qualify for the pollution control exemption. Generally, it may be
stated that the kinds of items qualifying for exemption must be purchased to meet required
provisions of a law implemented by, or a condition of a permit issued by, the Department of
Environmental
Protection. Items purchased in accordance with non-mandatory or optional permit provisions or
suggestions for best business practices will not satisfy the conditions for exemption under s.
212.051, F.S.
Your letter asks whether Taxpayer’s various systems and structures would be subject to
sales and use tax or whether such items would qualify for an exemption from sales and use tax.
In general terms, these systems and structures may be classified as electrical systems, water
systems, special purpose buildings, and site work. Many of these systems and structures are
interrelated and complex. Accordingly, the three following flowcharts have been prepared for
the electrical systems and the water systems to assist in the overall understanding of the
processes and the conclusions in this letter. Various steps within the flowcharts have been
numbered. These numbers directly correspond to numbered issues as presented in your request
for technical advice. Other steps within the flowchart are not numbered. No specific question

has been asked with respect to these steps. These steps are included to assist in the
understanding of the overall operations at Taxpayer’s facility.

Electrical System
(1 of 2)

1. Switchyard
   4.

←(Duct Bank Conduit)

3. Electrical Room (ER) 1
   4.

Subprocess
1

2. Switchgear (On/Off Controls for all Subprocesses)
   4.
   3.Architectural
   Building for
   Subprocess 2

4.
3.Architectural
Building for
Subprocess 3

4.

4.

3.Architectural
Building for
Subprocess 4

3.Architectural
Building for
Subprocess 5

Electrical System
(2 of 2)
Architectural Building
(Subprocess 1, 2, 3, 4, or 5)

5. Transformer

6. Power Cables
   Cable Trays
   Conduits

7. Air
   Conditioning

8. Fire
   Detection
   and Alarm

9. Motor
   Control Center
   (MCC)

10. Variable
    Frequency
    Drives (VFDs)

11. Control
    System

Production Machinery
and Equipment

4. Duct Bank Conduit

5. Lighting
   Control
   Distribution
   Panels

6. Receptacle
   Devices

Facility Water Systems
Fixed
Location

Process
Water
Source

Storm
Water
Run-off

15. HDPE Pipe
    and Fittings

16. Manholes
    Inlets
    Catch Basins

Hydrants

Production Machinery
and Equipment

13. Drainage
    Pipe

14. Liners

Retention
Ponds

Conclusions
Issue 1. SWITCHYARD The switchyard controls the electricity of the entire plant. This
is the electrical service entrance to the fixed location. It could be thought of as the large-scale
equivalent of an electrical masthead for a factory building and, as such, would be a real property
improvement. The purchase of machinery and equipment for the switchyard is subject to sales
and use tax.

Issue 2. SWITCHGEAR The switchgear receives electricity from the switchyard (Issue
1.). The switchgear is used to route and split the electricity to the five different sub-process
areas. Power for the five sub-process areas can be turned on and off at the switchgear. The
switchgear would be the large-scale equivalent of a main power panel (fuse box/circuit breaker
box) in a factory building and, as such, would be a real property improvement. The purchase of
the switchgear would not qualify for an exemption as industrial machinery and equipment.
Issue 3. ARCHTECTURAL BUILDINGS Electrical Room 1 (ER1) is a stand alone
architectural building that has been specifically designed to house electrical equipment. That
equipment is all of the switchgear for the sub-processes and all of the controlling electrical
equipment for sub-process 1. Notwithstanding the fact that ER1 encloses the nonexempt
switchgear, ER1 still conforms to the definition of industrial machinery and equipment as
provided in Rule 12A-1.096(1)(b), F.A.C., in that it also provides an enclosure for a part of the
exempt production machinery and equipment for sub-process 1. Accordingly, the ER1 structure
will qualify for an exemption as industrial machinery and equipment.
The four additional electrical rooms are structures located in the same sub-process areas
that they serve. The four additional electrical rooms conform to the definition of industrial
machinery and equipment as provided in Rule 12A-1.096(1)(b), F.A.C., in that they provide an
enclosure for a part of the production machinery and equipment for sub-processes 2 through 5.
Accordingly, the four additional electrical room structures will qualify for an exemption as
industrial machinery and equipment.
Issue 4. DUCT BANK CONDUITS The duct banks, including cables, wires, and
concrete that run from the switchyard (Issue 1.) to ER1 (Issue 3.) all occur before the first items
of exempt electrical equipment. Such items are real property improvements. As such, these
items will not qualify for exemption as industrial machinery and equipment.
The duct banks, including all cables, wires, and concrete that run from the switchgear
(Issue 2.) within ER1 (Issue 3.) to the five sub-processes, all occur after the nearest point in the
facility’s electrical system where power can be disconnected to those sub-processes. These
items conform to the description of qualifying industrial machinery and equipment as provided
in Rule 12A-1.096(9)(a)2., F.A.C. As such, these items will qualify for exemption.
Issue 5. TRANSFORMERS The transformers in the sub-process production areas are
dedicated to specific industrial machinery and equipment. The transformers are integral to the
production process and will qualify for an exemption as industrial machinery and equipment.
Issue 6. MOTOR CONTROL CENTERS (MCCs), VARIABLE FREQUENCY DRIVES
(VFDs), AND CONTROL SYSTEMS The motor control centers (MCCs), variable frequency
drives (VFDs), and control systems are used to operate and control the industrial machinery and
equipment in the production areas. These items will qualify for an exemption as industrial
machinery and equipment.

Issue 7. POWER CABLES, CABLE TRAYS, AND CONDUITS The power cables,
cable trays, and conduits that run above ground in each of the sub-process areas carry electrical
power from the transformers (Issue 5.) to the MCCs, VFDs, and control systems (Issue 6.).
These items will qualify for an exemption as industrial machinery and equipment.
Issue 8. AIR CONDITIONING The primary purpose of the air conditioning systems in
the electrical rooms (Issue 3.) is to ventilate those structures and to prevent extreme temperatures
from damaging the MCCs, VFDs, and control systems (Issue 6.). The air conditioning systems
will qualify for an exemption as industrial machinery and equipment.
Issue 9. FIRE DETECTION AND ALARM The fire detection and alarm systems will be
installed at each of the electrical rooms (Issue 3.) in compliance with National Fire Protection
Association (NFPA) code requirements. Although the fire detection and alarm systems do not
actively participate in the production process, they are integral to the operation of the production
plant. Consistent with prior determinations by the Department, the fire detection and alarm
systems will qualify for an exemption as industrial machinery and equipment.
Issue 10. LIGHTING CONTROL DISTRIBUTION PANELS The lighting control
distribution panels allow the use of lighting at the machinery and equipment. This equipment
does not relate to general yard or area lighting at the facility. This lighting will be installed at, or
mounted directly on, the production machinery and equipment itself for the purpose of providing
light to the operators of the machinery and equipment. Notwithstanding the provisions of Rule
12A-1.096(9)(s), F.A.C., such lighting controls are integral to the industrial machinery and
equipment. These items may also be considered as accessories pursuant to the definition
provided by s. 212.08(5)(b)6.a., F.S. The lighting control distribution panels will qualify for an
exemption as industrial machinery and equipment.
Issue 11. RECEPTACLE DEVICES The receptacle devices are installed throughout the
plant for repair and maintenance purposes to prevent stoppages of the machinery and equipment.
Although it has not been expressly stated, it is presumed that, similar to the lighting in Issue 10.,
the receptacle devices will also be installed at, or mounted directly on, the production machinery
and equipment itself. These devices serve no purpose other than for maintenance of the
production equipment. Accordingly, they may also be considered as accessories pursuant to the
definition provided by s. 212.08(5)(b)6.a., F.S. As such, the receptacle devices may be
considered as machinery and equipment qualifying for exemption.
Issue 12. LINERS The liners at the retention ponds are used to collect waste cooling
water from production machinery and equipment and storm water run-off. The liners are an
integral part of the pollution control system for the production process and are required as a
condition of the permit issued by DEP. Accordingly, the liners may be considered as exempt
parts of the production process pursuant to Rule 12A-1.096(9)(f), F.A.C., as well as exempt
pursuant to s. 212.051(1), F.S., as items used primarily for the control or abatement of pollution
or contaminants in manufacturing.
Issue 13. DRAINAGE PIPES The drainage pipes are used within the production areas to

route waste cooling water and storm water run-off to the lined treatment ponds (Issue 12.). The
drainage pipes are integral parts of the pollution control system for the production process and
are required as a condition of the permit issued by DEP. The drainage pipes may be considered
as exempt parts of the production process pursuant to Rule 12A-1.096(9)(f), F.A.C., as well as
exempt pursuant to s. 212.051(1), F.S., as items used primarily for the control or abatement of
pollution or contaminants in manufacturing.
Issue 14. MANHOLES/INLETS/CATCH BASINS The manholes, inlets, and catch
basins are used within the production areas to collect waste cooling water and storm water runoff for transport through the drainage pipes (Issue 13.) to the lined treatment ponds (Issue 12.).
The manholes, inlets, and catch basins are integral parts of the pollution control system for the
production process and are required as a condition of the permit issued by DEP. The manholes,
inlets, and catch basins may be considered as exempt parts of the production process pursuant to
Rule 12A-1.096(9)(f), F.A.C., as well as exempt pursuant to s. 212.051(1), F.S., as items used
primarily for the control or abatement of pollution or contaminants in manufacturing.
Issue 15. HDPE PIPES AND FITTINGS The new HDPE (high-density polyethylene)
pipes and fittings are used to supply water for cooling of machinery and equipment in the
expanded production areas and to hydrants (for fire protection) at the facility. The expanding
business exemption parameters for water systems are equivalent to those for electrical systems.
The exemption for electrical systems starts at, but does not include, the nearest panel box or
disconnect to the industrial machinery and equipment. Similarly, the exemption for water
systems starts at, but does not include, the nearest water supply or drain line connection at the
fixed location. Accordingly, the new HDPE pipes and fittings that connect to the existing plant
water system for the expanded production areas will qualify for exemption under the provisions
of s. 212.08(5)(b), F.S. It is noticed in the DEP permit conditions that Taxpayer is required to
use water for dust suppression. If water is drawn from production area supply points or from the
hydrants for dust suppression purposes as well as production purposes, then all of the new HDPE
piping and fittings would also qualify for exemption pursuant to s. 212.051(1), F.S., as items
used primarily for the control or abatement of pollution or contaminants in manufacturing.
Issue 16. PAVING The paving of roads at the fixed location will be performed in
compliance with DEP’s “Conditions of Certification” and “Section II. Facility-wide Specific
Conditions” for the air construction permit. Paving is consistent with the definition of “fixture”
as provided in s. 212.06(14)(b), F.S., in that paving is an accessory to land that does not lose its
identity when installed. Since the pollution control exemption pursuant to s. 212.051(1), F.S.,
extends to “fixtures,” the paving will qualify for exemption as an item that is a condition of a
permit issued by the Department of Environmental Protection.
Issue 17. LANDSCAPING/SEEDING Landscaping and seeding at the fixed location
will be performed in compliance with DEP’s “Conditions of Certification” and “Section II.
Facility-wide Specific Conditions” for the air construction permit. Landscaping and seeding are
consistent with the definition of “fixture” as provided in s. 212.06(14)(b), F.S., in that
landscaping and seeding are accessories to land that do not lose their identity when installed.
Since the pollution control exemption pursuant to s. 212.051(1), F.S., extends to “fixtures,” the
landscaping and seeding will qualify for exemption as items that are conditions of a permit

issued by the Department of Environmental Protection.
Issue 18. SIDING/ROOFING Siding and roofing, and the structures and foundations
necessary to support those items, will be installed at the kiln, kiln feed area, coal mill, and finish
mill as protection for the industrial machinery and equipment in those production areas. The
siding, roofing, structures, and foundations are consistent with the definition of “industrial
machinery and equipment” as provided in Rule 12A-1.096(1)(b), F.A.C. Accordingly, the
siding, roofing, structures, and foundations will qualify for an exemption as industrial machinery
and equipment.
Issue 19. LIGHTNING PROTECTION The lightning protection equipment does not
serve a direct production function. However, such protection equipment is integral to the safe
operation of the industrial machinery and equipment. These items may also be considered as
accessories pursuant to the definition provided by s. 212.08(5)(b)6.a., F.S. Accordingly, the
lightning protection equipment will qualify for an exemption as industrial machinery and
equipment.
Issue 20. TIRE FUEL HANDLING EQUIPMENT Taxpayer’s facility burns tires as an
alternate fuel source for the production process. A portion of the existing tire fuel handling
system for the facility will be replaced, and eventually, the entire tire fuel system will then
accommodate both the existing and the additional (new) production machinery and equipment.
Provided the productive output of Taxpayer’s facility increases by not less than 10 percent, the
additional/replacement tire fuel handling equipment would qualify for exemption under s.
212.08(5)(b)2., F.S., even though the replacement tire fuel handling equipment only initially
services the existing machinery and equipment.
Issue 21. SOIL COMPACTION AND TESTING Soil compaction and testing services
will be performed at the site where the additional machinery and equipment will be erected. No
tangible personal property will be added to the existing soil in connection with these activities.
The soil compaction and testing is a professional service pursuant to s. 212.08(7)(v), F.S. As
such, these services will not be subject to tax.
Issue 22. ADDITIVE STORAGE BUILDING The pre-engineered additive storage
building will be installed at the plant in compliance with the DEP air construction permit
condition that raw materials must be stored under roof for dust control purposes. This building
is also consistent with the definition of “industrial machinery and equipment” as provided in
Rule 12A-1.096(1)(b), F.A.C., in that it provides protection to raw materials for the production
process. Accordingly, the additive storage building will qualify for an exemption pursuant to
Rule 12A-1.096(1)(b), F.A.C., as well as an exemption pursuant to s. 212.051(1), F.S., as an item
that is a condition of a permit issued by the Department of Environmental Protection and as an
item that is used primarily for the control or abatement of pollution or contaminants in
manufacturing.
Issue 23. PAYMENT OF THE FIRST $50,000 OF SALES TAX Taxpayer began
making expenditures for the expansion project in May 2006. At that time, pursuant to s.
212.08(5)(b)2.a., F.S. (2005), expanding businesses were exempt from any amount of tax

imposed in excess of $50,000 in a calendar year. Effective July 1, 2006, that tax threshold
requirement was removed from the exemption provisions. Tax is “imposed” on a transaction
upon the transfer of title and possession of tangible personal property to the purchaser. Prior to
July 1, 2006, Taxpayer had only made deposits or progress payments for the future delivery of
machinery and equipment. Although Taxpayer remitted $50,000 in use tax in April 2006 on the
machinery and equipment, that tax was not yet due or “imposed.” Since the purchase
transactions were not completed before July 1, 2006, no tax threshold is applicable.
Accordingly, Taxpayer has paid $50,000 in use tax when no tax was due. That tax payment
would be eligible for a refund or allowed as a credit on a subsequent sales and use tax return.
However, pursuant to s. 212.08(5)(b)3.a., F.S., no exemption as an expanding business
for the above issues is available, or refund or credit allowed, until such time as an Application
for Temporary Tax Exemption Permit, form DR-1214, has been submitted, and the statutory
productive output increase requirement has been satisfied.
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 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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