Which systems in a new newspaper-printing facility qualified for Florida's expanding-business machinery exemption?

Plain-English summary

Florida classified twenty-six areas or systems in a replacement newspaper-printing facility as fully or partly exempt machinery and equipment. The production press itself qualified, along with dedicated press floors, platforms, foundations, rail systems, epoxy finishes, fire protection, pollution-control, compressed-air, and ink-filter systems.

Production-handling items also qualified, including dock levelers for paper rolls, a freight elevator serving the press, forklifts and their charging area, inserting equipment, the end-of-line palletizing system, and quality-control skid scales. General plant-maintenance tools did not qualify; only specialized tools needed to calibrate or keep the press in optimum condition did.

Shared building systems required allocation. Based on reported airflow, 76.2% of the air-handling units served production areas. The ruling applied that same production percentage to related drives, ductwork, cooling towers, chillers, piping, boilers, centrifugal pumps, and the facility electrical system.

What this means for you

A manufacturing exemption can extend beyond the core machine to dedicated foundations, safety systems, material handling, environmental controls, and end-of-line equipment. Shared systems need a supportable production-use allocation.

Common questions

Did the printing press qualify? Yes.

Did specialized foundations and structural supports qualify? Yes, including the press piles, mat, table, columns, and the extra slab thickness supporting the equipment.

Were shared HVAC and related systems fully exempt? No. The ruling used a 76.2% production allocation.

Did general maintenance tools qualify? No; only specialized press-calibration or optimum-condition tools did.

Citations and references

• Fla. Stat. § 212.08(5)(b) and Fla. Admin. Code r. 12A-1.096, as cited throughout the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 09A-031

Original ruling text

SUMMARY
QUESTION: Company is constructing a new state-of-the-art facility to replace an
existing facility for the printing and publishing of newspapers. The company seeks a
determination as to which major areas and systems of the new facility may be considered
as machinery and equipment qualifying for exemption from sales and use tax as an
expanding business.
ANSWER: Based on the exemption statute and rule, and based on a tour made by
Department personnel of a similar printing facility in 2005, it has been determined that
twenty-six major areas or systems at the new facility fully or partially qualify for
exemption.
June 30, 2009

XXX
XXX
XXX
XXX
Re: Technical Assistance Advisement 09A-031
Sales and Use Tax
Expanding Business
Section 212.08(5)(b), F.S.
Rule 12A-1.096, F.A.C.
Dear :
This is in response to your request dated May 22, 2009, for a Technical Assistance
Advisement (TAA) pursuant to section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding
XXX (“Taxpayer’s”) new newspaper printing facility in XXX. An examination of your letter
has established that you have complied with the statutory and regulatory requirements for
issuance of a TAA. Therefore, the Department is hereby granting your request for a TAA.
The facility has already been approved for an exemption from sales and use tax as an
expanding business pursuant to Section 212.08(5)(b), F.S., under New and Expanding Business
Determination Letter (NXB) 07A-966, dated August 13, 2007. The Department has also
previously addressed specific exemption issues relating to this facility in Letter of Technical
Advice (LTA) 09A-366, dated April 13, 2009. You now seek the Department’s formal position
with respect to these same and three additional issues. These issues are as follows.
Press
The press is designed to be free standing on a steel structure that is a part of the press
equipment. The press line consists of six high printing towers. Each tower has eight printing

couples (printing units comprised of printing cylinders and an inking system). Press section 1
contains four towers, one folder, and four autopasters. Press section 2 contains two towers, one
folder, and two autopasters. Plate making and bending equipment complete the major
components of the press itself. The press can print full-color broadcast or tabloid pages. This
machinery and equipment qualifies for exemption as integral to the production process pursuant
to Rule 12A-1.096(1)(b) and (c), F.A.C.
Press Auxiliary Components
There are a number of structural requirements that come with the press. These items or
features are specified by the press manufacturer as necessary for the press to function properly.
The following items are considered to be integral to the press and qualify for exemption pursuant
to Rule 12A-1.096(1)(c) and (8)(a) and (i), F.A.C.
Insulated double floor within the press area
Crosswalks at ground floor, and first and second level
Platforms, stairs, and railings
Illumination within the press area
Press leveling pads
Tubing for air and water within the press
Decentralized grease lubrication of each printing unit
Decentralized ventilator for blowing air off turner bars and former boards
Dampening solution recirculation unit
Test device for spray bars
Heat exchanger for the dampening solution preparation and supply plant
Ink bulk storage tanks
Ink system, which brings the ink from the tanks to the press
Rotary fly wheel generator/power conditioner
Pursuant to Rule 12A-1.096(8)(m), F.A.C., only those specialized tools that are required
to keep the press calibrated or in optimum condition will qualify for exemption. Tools for
general plant maintenance do not qualify for exemption.
Auger Cast Piles
Augered piles have been drilled and cast in concrete as part of the support system for the
press. As a part of the foundation for the qualifying machinery and equipment, the auger cast
piles qualify for exemption pursuant to Rule 12A-1.096(8)(a)1., F.A.C.
Press Columns, Press Mat, and Press Table
The press columns, press mat, and press table are a part of the support system for the
press. As a part of the foundation for the qualifying machinery and equipment, these items
qualify for exemption pursuant to Rule 12A-1.096(8)(a)1., F.A.C.
Concrete Slab

All concrete used throughout the facility has the same thickness and psi rating. However,
the concrete slab under the machinery and equipment is two inches thicker than the slab in other
areas of the facility. The concrete and reinforcing bar comprising this additional two inches of
thickness will qualify for exemption as a part of the machinery and equipment pursuant to Rule
12A-1.096(8)(a)1., F.A.C. Any sales or use tax paid for this additional concrete and reinforcing
bar by the contractor will be eligible for a refund pursuant to the procedures as described under
Rule 12A-1.096(5), F.A.C.
Press Rail System
A press rail system is necessary and will be used to assist in the initial installation of the
printing press. The press rail system will also be necessary in the event of any major repairs to
the press and could also be used for future press expansion. The press crane rail system is
specialized machinery and equipment, which serves no purpose other than the initial installation
and the subsequent maintenance of the press. Given the close and integral proximity of the
system to the press, the rail system is an installed part of the presses. Accordingly, the press rail
system will qualify for exemption pursuant to Rule 12A-1.096(8)(m), F.A.C.
Epoxy Floor and Wall Covering
The concrete slab and table, upon which the press sits, and the walls of the press room are
covered in an epoxy paint material. This finish is reported as being required for the proper
functioning of the press and to insure that the paint is of a type that does not chip and fall into the
press. The epoxy contains a grit to texture, presumably, horizontal surfaces to prevent slipping.
The epoxy is not used throughout the rest of the facility. Even though the epoxy does not
provide a known function in the actual manufacturing of tangible personal property, it is an
integral element of the press room. Accordingly, the application of the epoxy finish to the press
room will qualify for exemption as an integral part of machinery and equipment pursuant to Rule
12A-1.096(1)(c), F.A.C.
Dock Levelers
There will be ten dock levelers installed at the facility to handle the two-ton weight of the
rolls of paper used in the printing process. Pursuant to Rule 12A-1.096(1)(f), F.A.C., the
production process generally begins at the point where raw materials are delivered to the facility.
Accordingly, these dock levelers will qualify for exemption as part of the production process.
Fire Safety Equipment
Fire safety equipment is mounted in the lower portion of the press tables where the rolls
of paper feed the press. The fire safety equipment also includes sprinklers in the ceiling over the
press. Although the fire protection system does not actively participate in the printing of the
newspapers, it is an integral part of the press area, and it is required by fire codes. Accordingly,
the fire protection system will qualify for exemption as a part of the machinery and equipment.

Fire Wall
In addition to the fire safety equipment, there is also a 4-hour concrete fire wall built
around the press. The fire wall is required by local fire code. If the fire wall were not installed,
the press would be required to be housed in a separate building. Pursuant to Rule 12A1.096(1)(b), F.A.C., “[b]uildings 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.” The fire
wall’s only purpose is to contain a fire, should one occur, to the press area. It is reasonable to
expect that if the printing press was to be removed or replaced, the fire wall itself, or a portion
thereof, would also have to be removed. Accordingly, the fire wall will be considered as a part
of the machinery and equipment qualifying for exemption.
Blanket Waste Water Processing Systems
The press operation is a closed loop system that processes and recycles the press waste
water and chemicals. These types of waste systems will fall under the provisions of Rule 12A1.096(8)(f), F.A.C., as pollution control systems qualifying for exemption.
Compressor and Vacuum System
The inserting equipment and the press require the use of a compressed air and vacuum
system to properly function. There is no non-production use of the compressed air and vacuum
system. Accordingly, the compressed air and vacuum system qualifies for exemption as integral
to the production process pursuant to Rule 12A-1.096(1)(c), F.A.C.
Ink Mist Filter System
An ink mist filtering system will be installed in the press room. This system will trap
airborne ink mist particles as well as dust that would otherwise impair the operational efficiency
of the printing press. Accordingly, the ink mist filtering system qualifies for exemption as
integral to the production process pursuant to Rule 12A-1.096(1)(c), F.A.C.
Air Handling Units (AHUs)
The HVAC system at the facility includes twelve air handling units (AHUs). Each of
these AHUs provides heating and cooling to specific areas of the facility. These areas and their
capacities are as follows:

AHU

1 and #2

5

6 and #7

8

Area of Facility
Press Hall and Reel Room
Plate Making
Inserting/Packaging
Insert Storage Area

CFM Air Flow Percentages

#9 and #10

11 and #12

3 and #4

Press Electrical Room
Production Area Computers
Total Production Areas
76.2%
23.8%
Offices
Total Facility
100.0%

Based on the Department’s prior experience with printing facilities, conditioned air is necessary
for the proper operation of machinery and equipment in the production areas. Accordingly, the
AHUs serving the production areas will qualify for exemption pursuant to Rule 12A-1.096(1)(b),
F.A.C. These exempt AHUs are numbers 1 and 2, and 5 through 12. Although newspaper
production does not take place in the insert storage area, the newspaper inserts that are stored in
this area prior to insertion must be kept in an air conditioned environment for proper functioning
of the insertion machinery and equipment. The AHUs do not have identical specifications.
Accordingly, a straight 10/12ths allocation is not appropriate. The total CFM capacity of the
system that services production areas is reported as 76.2 percent. Accordingly, the Taxpayer is
exempt from sales and use tax on 76.2 percent of the total cost of the facility’s AHUs.
Adjustable Frequency Drives
The adjustable frequency drives work directly with the air handling units to control the
climatic conditions within the facility. Accordingly, an exemption for the adjustable frequency
drives should be allocated by utilizing the 76.2 percent exempt portion that is applicable to the
HVAC system.
Ductwork
It is understood that the amount of ductwork at the facility is not evenly distributed, nor is
it all of the same size. The ductwork is directly related and integral to the facility’s HVAC
system. Therefore, the exempt portion of the ductwork may be determined by utilizing the 76.2
percent exempt portion that is applicable to the HVAC system.
Cooling Towers, Chillers, and Piping
Whereas the air handling units provide the driving force and the ductwork provides the
pathway, the cooling towers, chillers, and piping provide the method of cooling the air in the
facility. (The cooling towers are located on the roof of the building, while the chillers are located
inside of the building.) These systems are all directly related. Accordingly, the exempt portion of
the cooling towers, chillers, and piping may also be allocated by utilizing the 76.2 percent
exempt portion that is applicable to the HVAC system.
Boilers
It is understood that in addition to the use of chillers in maintaining proper environmental
temperatures within the facility, boilers are also necessary to provide temperature conditioning
and humidity control. These boilers are also in close proximity to the facility’s AHUs.

Accordingly, the exempt portion of the boilers may be allocated by utilizing the 76.2 percent
exempt portion that is applicable to the HVAC system.
Centrifugal Pumps
The centrifugal pumps are used to support the hydronic heating and/or cooling systems at
the facility. Cooled water is also piped to the presses and the frequency drive cabinets for those
presses. Since the centrifugal pumps are integral to the production process, the pumps will
qualify for exemption. Again, an exemption for the centrifugal pumps should be allocated by
utilizing the 76.2 percent exempt portion that is applicable to the HVAC system.
Electrical Systems
Generally, Rule 12A-1.096(8)(a)2., F.A.C., extends the exemption to electrical wiring
from the machinery and equipment back to the first panel box or disconnect. This rule provision
contemplates a generic factory building where a variety of machinery and equipment may be
installed at any number of spots in the building and/or removed at a later date. At the Taxpayer’s
facility, the press will be the largest draw of electricity. There is limited ability to break apart the
facility’s electrical system and identify specifically which parts feed production and nonproduction areas. Accordingly, the exempt portion of the parts and materials that comprise the
facility’s electrical system may be allocated by utilizing the 76.2 percent exempt portion that is
applicable to the HVAC system.
Freight Elevator
The freight elevator has exits on three floors, including the floors where the mechanical
operation of the press takes place, and the press deck. It is reported that approximately ninetyfive percent of the usage of the elevator is to take production supplies to the press deck and to
bring personnel to the mechanical controls of the press. The freight elevator is required due to
the height of the press. Effectively, the freight elevator is specialized machinery and equipment,
which serves the press. Accordingly, the freight elevator will qualify for exemption as a part of
the production process.
Forklifts
Forklifts will be used to bring production materials and supplies to the press and are not
used outside of the production process. They are required due to the weight of paper and other
materials used in the production process. The forklifts are integral to the production process
pursuant to Rule 12A-1.096(1)(c), F.A.C., and will qualify for exemption.
Forklift Recharging Area
The production area contains a reinforced concrete pad that holds the forklifts while their
batteries are being recharged. The battery chargers are used exclusively to recharge the forklift
batteries. Since the forklifts are machinery and equipment that are integral to the production
process, and the battery chargers are specialized machinery and equipment, which serve the

forklifts, the battery chargers will also qualify for exemption as a part of the production process.
The reinforced concrete pad is, effectively, a special foundation required for the support of
qualifying machinery and equipment. As such, the reinforced concrete pad will qualify for
exemption pursuant to Rule 12A-1.096(8)(a)1., F.A.C.
Inserting Equipment
This equipment is used in the production process to place advertising and informational
inserts into newspapers and other publications prior to packaging the publications for sale. The
inserting equipment includes: a jogging table that vibrates to smooth and ready the inserts for
placement into the publications, a label applicator for pasted advertising or pasted informational
inserts that can be adhered to a page and subsequently removed by the reader, and an insert
storage system that holds the inserts as they are being pulled into the papers. This equipment is
integral to the production process pursuant to Rule 12A-1.096(1)(c), F.A.C., and will qualify for
exemption.
Palletizing System
This equipment is used at the end of the production process. The equipment receives the
publications from a conveyor system connected to the production line and then stacks the
bundles of publications for shipping and distribution. The palletizing system also includes the
machinery that ties the bundles of papers together prior to being stacked and palletized for
shipment. Pursuant to Rule 12A-1.096(1)(f), F.A.C., the production process will generally
include palletizing operations at the end of a production line, since bulk palletized products are a
common sales unit in many industries. However, palletizing operations in a warehouse to make
up a specific customer’s order are not considered to be a part of the production process.
Skid Scales
Skid scales are used to weigh inserts or other materials for quality control purposes. It is
reported that a sample quantity of inserts is weighed and that weight is compared with the total
weight of a pallet of inserts to determine the total number of inserts on the pallet. This will allow
the Taxpayer to know whether there are a sufficient number of inserts available for a particular
printing run. The physical counting of inserts before a production run is not practical. The skid
scales qualify for exemption as integral to the production process.
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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