Were materials used to build a specialized process building and boiler building exempt as industrial machinery and equipment for a new Florida manufacturer?

Plain-English summary

Florida exempted materials used to construct a new manufacturer's Process Building and Boiler Building because the reviewed structures were treated as parts of the industrial machinery and equipment they housed and supported.

The Process Building was highly specialized for producing natural citrus and other fruit flavors. About 97% of its roughly 11,300 square feet was process area, it had no administrative or nonproduction space, and most of it lacked HVAC. The adjacent 500-square-foot Boiler Building existed solely to serve the processing machinery.

Buildings normally are not industrial machinery. The cited rule made an exception where a building or structural component is so closely related to the machinery it houses or supports that it would be expected to be replaced when the machinery is replaced. Florida found that standard met on the architectural documents provided.

The taxpayer or its contractors could purchase the construction materials tax-free by giving vendors a copy of the taxpayer's temporary tax exemption permit.

What this means for you

The exemption turned on specialized design and near-exclusive production use, not simply location at a manufacturing facility. Architectural plans and the building's functional relationship to exempt machinery were central evidence.

Common questions

Are manufacturing buildings generally exempt machinery? No. The rule requires an unusually close relationship to the housed or supported equipment.

Why did these two buildings qualify? Their design and functions were dedicated to the manufacturing process and its boiler equipment.

How were contractors to document exempt purchases? By extending a copy of the temporary tax exemption permit to material vendors.

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 10A-022

Original ruling text

SUMMARY
QUESTION: Whether materials used to construct a Process Building and a Boiler Building are
exempt from sales and use tax under the new business exemption.
ANSWER: Based on the provisions of Rule 12A-1.096(1)(b), F.A.C., and the architectural
documents that have been provided, the buildings will be considered as parts of the industrial
machinery and equipment that are housed and supported in those structures. Accordingly, the
materials used in the construction of those buildings will be exempt from sales and use tax.
These materials may be purchased tax exempt by Taxpayer or by Taxpayer’s contractor(s) by
extending a copy of the temporary tax exemption permit to the various construction materials
vendors.
May 12, 2010

XXX
XXX
XXX
XXX
Re: Technical Assistance Advisement 10A-022
Sales and Use Tax
Exemption on construction of manufacturing buildings
Section 212.08(5)(b), F.S.
Rule 12A-1.096, F.A.C.
Dear :
This is in response to your request dated April 6, 2010, 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) 10A141, dated February 17, 2010.
Background
On December 14, 2009, the Department received Taxpayer’s Application for Temporary
Tax Exemption Permit, form DR-1214. The application stated that Taxpayer was in the process
of constructing a facility and purchasing various industrial machinery and equipment to begin
producing all-natural food grade citrus and other fruit flavors for sale to food and beverage
manufacturers. Based on the architectural site plan (drawing number p. AS-101, dated April 17,
2009), the overall facility will consist of three major buildings and one minor building. The

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major three buildings have been identified as the Technical Office Building, the Process
Building, and the Warehouse. The minor building, identified as a Boiler Building, is located
immediately adjacent to the Process Building. Taxpayer was approved for an exemption on
purchases of industrial machinery and equipment under the provisions of s. 212.08(5)(b), F.S., as
a new business and issued a temporary tax exemption permit. (See New and Expanding
Business Determination Letter 10A-022, dated January 11, 2010.)
Issue
Whether materials used to construct the Process Building and the Boiler Building are
exempt from sales and use tax under the new business exemption.
Applicable Authority
The following passage from the Florida Administrative Code (F.A.C.) is pertinent to the
issue under consideration.
Rule 12A-1.096(1), F.A.C., provides in part:
(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. . . .
Discussion
It has been stated that the Process Building is highly specialized and is designed strictly
for the manufacturing equipment and process and will serve no other purpose. Architectural
drawings have been submitted and reviewed. Construction specifications for the Process
Building (drawing numbers P-S-001 and P-S-002, dated April 17, 2009) indicate that the
building will consist of a concrete slab with a steel structure and tilt-up concrete walls. Based on
the mechanical floor plan (drawing number M-201, dated April 14, 2009), the building only has
four delineated areas: the process area, the control room, the motor control center (MCC) room,
and the toilet. The process area makes up about 97 percent of the floor space of the building,
which is approximately 11,300 square feet in size. There are no administrative rooms or spaces
for non-production activities. With the possible exception of the control room, the building is
not serviced by an HVAC system. The Boiler Building, adjacently located to the east of the
Process Building, is approximately 500 square feet in size. The sole function of the boiler in that
building is to service the processing machinery and equipment located in the Process Building.

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Conclusion
Based on the provisions of Rule 12A-1.096(1)(b), F.A.C., and the architectural
documents that have been provided, the Process Building and the Boiler Building will be
considered as parts of the industrial machinery and equipment that are housed and supported in
those structures. Accordingly, the materials used in the construction of those buildings will be
exempt from sales and use tax. These materials may be purchased tax exempt by Taxpayer or by
Taxpayer’s contractor(s) by extending a copy of the temporary tax exemption permit to the
various construction materials vendors.
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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