Could an expanding manufacturer satisfy Florida's 10% output-increase test without producing during every month of the two 12-month measurement periods?

Plain-English summary

Florida ruled that an expanding manufacturer satisfied the productive-output test even though it was not operating during every month of the two statutory 12-month measurement periods.

The facility began production in July 2008, finished installing an assembly system in September, and shut down in May 2009 because of housing-industry economic problems. It produced 158,171 board feet during the two pre-installation months and 2,025,061 board feet during the nine post-installation months.

The exemption required at least a 10% output increase measured over the 12 months before and after installation. Florida distinguished the measurement windows from actual continuous production: the statute did not require production in every month or require partial output to be annualized or averaged.

Actual post-installation output exceeded pre-installation output by 1,180%, so the manufacturer met the criterion.

What this means for you

Use the statutory windows and actual production records. A startup, seasonal gap, or shutdown does not automatically fail the test when the statute does not require continuous monthly production.

Common questions

Was 12 full months of production required? No.

Did Florida annualize the partial periods? No.

What increase did the taxpayer show? 1,180%.

Citations and references

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

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 09A-057

Original ruling text

SUMMARY
QUESTION: Whether the taxpayer has satisfied the productive output increase requirement for
an expanding business for the measurement periods as specified under the exemption provisions
of Section 212.08(5)(b), F.S., and Rule 12A-1.096, F.A.C.
ANSWER: Even though the taxpayer did not have production for all 12 continuous months
immediately following the completion of installation of machinery or equipment, nor for all 12
continuous months immediately preceding such installation, there is no express statutory
requirement that an expanding business must actually be in continuous production for those
entire time periods. Since the taxpayer’s productive output did actually increase by more than 10
percent based on the statutory time periods, the taxpayer has satisfied the exemption criterion.
November 6, 2009
XXX
XXX
XXX
Re: Technical Assistance Advisement 09A-057
Sales and Use Tax
Productive output increase requirement for an 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 October 1, 2009, for a Technical Assistance
Advisement (TAA) pursuant to section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding
a tax exemption issue for XXX (“Taxpayer’s”) manufacturing facility. 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. This
tax exemption issue has been previously addressed in Letter of Technical Advice (LTA) 09A899, dated September 24, 2009.
Background
In February 2008, Taxpayer purchased a facility in Florida to manufacture tangible
personal property for sale to the housing industry. In May 2008, Taxpayer applied for an
exemption from sales and use tax as an expanding business pursuant to Section 212.08(5)(b),
F.S. Taxpayer was approved for the exemption and issued a Temporary Tax Exemption Permit
under New and Expanding Business Determination Letter (NXB) 08A-537, dated May 13, 2008.
Production at the facility commenced in July 2008. During July and August 2008, Taxpayer
purchased and was in the process of installing a XXX assembly system for use in the production
process. That XXX assembly system was not operational until September 2008. Taxpayer

conducted productive operations until May 2009, when the Florida facility was shut down due to
economic problems in the housing industry.
During the July and August 2008 two-month time period prior to the final installation and
use of the XXX assembly system, the Florida facility produced 158,171 board feet (BF or bd. ft.)
of finished product. During the September 2008 through May 2009 nine-month time period
following the installation and use of the XXX assembly system, the facility produced 2,025,061
BF of product. Neither the pre-installation measurement period nor the post-installation
measurement period had a full twelve months of production activity.
Issue
Whether Taxpayer has satisfied the productive output increase requirement for an
expanding business for the measurement periods as specified under the exemption provisions of
Section 212.08(5)(b), F.S., and Rule 12A-1.096, F.A.C.
Discussion
The exemption statute and administrative rule both provide that in order for an expanding
business to qualify for the exemption, the expanding business must demonstrate that the
productive output of the business has increased by not less than 10 percent. Pursuant to subsubparagraph 6.b. of Section 212.08(5)(b), F.S., “[i]ncreases in productive output shall be
measured by the output for 12 continuous months immediately following the completion of
installation of such machinery or equipment over the output for the 12 continuous months
immediately preceding such installation.” It is important to note that the exemption statute
requires the productive output to be measured over 12 continuous month time periods, but the
statute does not expressly require that production itself be continuous over those time periods.
There is no express statutory requirement that an expanding business must be in
production for at least twelve months before purchasing additional or replacement machinery
and equipment. Further, there is no statutory requirement that requires the actual productive
output within the measurement periods to be annualized or averaged for an entire 12-month
measurement period.
Conclusion
Since Taxpayer’s productive output for the post-installation measurement period has
substantially exceeded the productive output for the pre-installation period (1,180 percent),
Taxpayer has satisfied the productive output increase requirement for exemption by an
expanding business under the provisions of Section 212.08(5)(b), F.S.
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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