Did a permit-required replacement wastewater pipeline and its associated structures qualify for Florida's pollution-control sales-tax exemption?

Plain-English summary

The Florida manufacturing process generated regulated wastewater. DEP required the taxpayer to replace and relocate its discharge system, including a large pipeline, pumping station, building, oxygen-integration system, controls, instrumentation, and diffuser.

The Department found all three statutory criteria satisfied: an eligible manufacturer operated at a fixed location; the facilities and equipment were used primarily to control pollution created by that operation; and DEP law or permit conditions required them.

The system qualified in full even though easements or rights of way might place parts of it on property the taxpayer did not own. The equipment was fixed, essential to continued operation, solely pollution-control related, and produced no operating-cost savings.

What this means for you

Permit scope and actual function define the exemption. Off-site placement did not defeat it where the fixed system remained necessary to control the manufacturer's own pollution.

Common questions

Did the replacement system qualify? Yes.

Did every associated item qualify automatically? Only the structures and equipment specifically described and required by the DEP permit.

Did crossing other property defeat the exemption? No.

Citations and references

• Fla. Stat. §§ 212.051 and 403.0885, as cited in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 12A-001

Original ruling text

SUMMARY
QUESTION: Whether the facilities and equipment associated with a replacement wastewater
system as required for compliance with DEP’s water quality standards meet the requirements for
exemption under the provisions of s. 212.051, F.S.
ANSWER: All three of the exemption criteria under the provisions of s. 212.051(1), F.S., have
been satisfied by Taxpayer. Accordingly, the new system and all of its associated structures and
equipment, as specifically described and required in the Industrial Wastewater Facility Permit as
issued by DEP, qualify for exemption as pollution control equipment.
January 4, 2012
XXX
XXX
XXX
Re: Technical Assistance Advisement 12A-001
Sales and Use Tax
Pollution control exemption
Section 212.051, Florida Statutes (F.S.)
Dear
This is in response to your request dated October 31, 2011, for a Technical Assistance
Advisement (TAA) pursuant to section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding
the applicability of an exemption from sales and use tax pursuant to s. 212.051(1), F.S., to
purchases of machinery and equipment by your company (hereinafter “Taxpayer”). 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.
BACKGROUND
Taxpayer operates a manufacturing facility in Florida. The manufacturing process
utilizes chemicals and generates XXX wastewater. The presence of these chemicals in the
wastewater is [regulated] by the federal Environmental Protection Agency (EPA) and the Florida
Department of Environmental Protection (DEP). Accordingly, the facility operates under an
Industrial Wastewater Facility Permit issued by DEP. This permit also serves as the federal
National Pollutant Discharge Elimination System (NPDES) permit, as that permitting process is
described in s. 403.0885, F.S. The standards, rules, and regulations as established by the EPA
are enforced, implemented, and permitted by DEP.

Taxpayer is required to treat its wastewater from the manufacturing process. [A] XXX
schedule of compliance was established for Taxpayer to achieve applicable water quality
standards as set forth in Chapter 62-302, Florida Administrative Code (F.A.C.), by a specific
date.
Water quality samples have now been evaluated by DEP and it has been determined that
XXX, Taxpayer is now required by DEP to relocate the facility’s wastewater discharge from the
current [location] to an alternate [location] of the state.
The new requirements imposed on Taxpayer by DEP include the construction of an
underground large-diameter pipeline made from concrete-lined ductile iron pipe. The subaqueous portion of the pipeline will be made from high-density polyethylene. In addition to the
pipeline itself, requirements generally include site preparation, as well as obtaining rights of way
and easements where necessary, the construction of a pumping station, the construction of an
MCC building, and the installation of a high-purity oxygen integration system, instrumentation,
electrical controls, and a diffuser for low-impact discharge into the alternate [location].
Once completed, the new pipeline will not result in any operational cost savings to
Taxpayer. The equipment and systems to be installed are subsequent to the actual production
process and are solely for the purpose of pollution control.
ISSUE
Whether the facilities and equipment associated with the pipeline as required for
compliance with DEP’s water quality standards meet the requirements for exemption under the
provisions of s. 212.051, F.S.
RELEVANT AUTHORITY
The following passage from the Florida Statutes (F.S.) is pertinent to the exemption issue
in this advisement.
Section 212.051, F.S., provides in part:
Equipment, machinery, and other materials for pollution control; not subject to
sales or use tax. —
(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.
DISCUSSION
Three general criteria must be met before an exemption may be granted under s.
212.051(1), F.S. First, subsection (1) limits the exemption to those businesses that manufacture,
process, compound, or produce tangible personal property for sale at a fixed location. Second,
the facility, device, fixture, equipment, machinery, specialty chemical, or bioaugmentation
product installed, reconstructed, or replaced by the eligible business must be used primarily for
the control or abatement of pollution or contaminants created by those business operations.
Third, those items “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.”
Taxpayer is a manufacturer with a fixed location in Florida. In connection with that
manufacturing facility, XXX the replacement of the existing [wastewater] system is required by
DEP. The pipeline and all of the associated structures and equipment have no purpose other than
to control pollution.
It is noted that it may be necessary to obtain rights of way or easements in the event that
portions of the new pipeline or other equipment must be placed upon property that does not
belong to Taxpayer. Although the exemption statute may contemplate that the pollution control
equipment will be located at the very same fixed location as the manufacturing operations, there
is no express requirement for that scenario. It is obvious that the pipeline and its associated
structures and equipment are not mobile. Once installed or constructed, such items will remain
in place for years to come. The exemption provisions of s. 212.051, F.S., could be narrowly
construed to only apply to those pollution control items that are exclusively on Taxpayer’s
property. However, such a narrow construction would be contrary to the findings of the court in
Alachua County v. Department of Revenue, 466 So.2d 1186 (Fla. 1st DCA 1985). There, the
court stated that “[a]lthough an exemption in a taxing statute should be strictly construed against
the person claiming it, the construction must not be so strained that it forces a conclusion that is
unreasonable. . . .” Without the new pipeline, Taxpayer will not be allowed to operate its
manufacturing facility. Further, Taxpayer must bear the entire cost of the system. Therefore, it
would be unreasonable to disallow the exemption on any portion of the pipeline system based on
its physical location.
CONCLUSIONS
It is clear that all three of the general criteria for exemption have been satisfied by
Taxpayer. Accordingly, the new, replacement pipeline and all of its associated structures and
equipment, as generally described above and as specifically described and required in the
Industrial Wastewater Facility Permit issued by DEP, qualify for exemption as pollution control
equipment under the provisions of s. 212.051(1), 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
id: 113505