Did an independent contractor that improved real property and resold furniture to a related company have to register as a Florida dealer?

Plain-English summary

The Florida Department of Revenue concluded that a company performing real-property improvements and furnishing tangible personal property to a related company had to register as a Florida dealer.

The documents showed that the taxpayer was an independent contractor rather than the related company's agent. For real-property contracts, it was the ultimate consumer and had to remit use tax on the cost of supplies and materials it used.

For furniture and other tangible personal property purchased for resale, it had to collect and remit sales tax on the selling price, including taxable installation labor. It could not rely on the related company to calculate and remit those taxes on its behalf.

What this means for you

Contractors with mixed contracts

Separate materials consumed in real-property improvements from property resold to the customer. The first creates contractor-level tax; the second creates dealer collection duties.

Related companies

Common ownership does not automatically create an agency relationship or transfer the seller's registration and collection obligations.

Common questions

Q: Did the taxpayer have to register as a dealer?
A: Yes.

Q: Who owed tax on materials used in the real-property work?
A: The contractor, as the ultimate consumer.

Q: Who collected tax on furniture and furnishings sold to the related company?
A: The contractor-dealer.

Citations and references

• Fla. Stat. §§ 212.02, 212.05, and 213.22
• Fla. Admin. Code r. 12A-1.051

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 13A-018

Original ruling text

Executive Director
Marshall Stranburg

QUESTION: Is Taxpayer required to be registered as a dealer?

ANSWER: Yes. Upon review of the documents provided, it is clear that Taxpayer is an
independent contractor and not an agent of Related Company. As an independent contractor,
Taxpayer operates as a real property improvement contractor performing improvements to real
property, as well as providing the necessary items of furniture and furnishings, tangible personal
property, that went into the projects. Based upon this determination, Taxpayer should be
registered as a dealer with the Department. Since Taxpayer is the ultimate consumer of the
supplies and materials used in the performance of a real property contract, and is also engaged in
purchasing tangible personal property for resale, the appropriate use tax should be remitted to the
Department by Taxpayer on the cost of the supplies and materials used in the performance of the
contract. In addition, Taxpayer should collect and remit the appropriate sales tax on the tangible
personal property, including the cost of labor involved in the installation of the tangible personal
property, sold to Related Company. Taxpayer may not look to Related Company to determine
and remit the sales and use tax on its behalf.

August 23, 2013

Re:

Technical Assistance Advisement – TAA 13A-018
Sales and Use Tax – Registration
Sections: 212.02 and 212.05, Florida Statutes (F.S.)
Rule: 12A-1.051, Florida Administrative Code (F.A.C.)
Petitioners: XXX (“Taxpayer”)
XXX (“Parent Company”)
XXX (“Related Company”)

Dear XXX:
This letter is a response to your petition dated XXX, for the Department's issuance of a Technical
Assistance Advisement ("TAA") concerning the above referenced party and matter. Your
petition has been carefully examined and the Department finds it to be in compliance with the
requisite criteria set forth in Chapter 12-11, Florida Administrative Code. This response to your
request constitutes a TAA and is issued to you under the authority of Section 213.22, F.S.

Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – James McAdams, Director  Information Services – Tony Powell, Director

www.myflorida.com/dor
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
Page 2
Issue
Whether Taxpayer is required to be registered as a dealer.
Facts
Taxpayer was audited pursuant to Chapter 212, F.S., for the period XXX, through XXX.
Taxpayer protested the assessment, arguing that it was not liable for the tax because it acted
solely as an agent and was therefore not required to register as a dealer. A Notice of Decision
(“NOD”) was issued on XXX, finding that Taxpayer was required to register as a dealer because
it operated as a contractor. Taxpayer then sought a reconsideration of the NOD and a Notice of
Reconsideration (“NOR”) was issued on XXX, upholding the finding that Taxpayer was required
to register. A Closing Agreement compromising the assessed penalty was offered with the NOR
and accepted by Taxpayer. The terms of the Closing Agreement required Taxpayer to request
this TAA concerning the issue.
The current petition sets forth the following information:
A. [Taxpayer] and its Relationship with [Parent Company, Related Company], and
the Related XXX Entities

1. [Taxpayer] is a XXX limited liability company with its principal place of business
   located [outside Florida. Taxpayer] registered to do business with the State of Florida on
   or about XXX. In its application, [Taxpayer] advised that it had been organized on or
   about XXX. . . .
2. [Taxpayer] is a wholly owned subsidiary of [Parent Company], a foreign corporation . . . .
   [Parent Company’s] principal place of business is also located [outside Florida].
3. [Taxpayer] functions as the contract administrator exclusively for those XXX owned or
   operated by [Parent Company. Taxpayer] limits its services to XXX operated by [Parent
   Company. Taxpayer] does not offer its services to other XXX developers or to the public
   at large.
4. Each XXX served by [Taxpayer] is operated by [Parent Company], through [Related
   Company. Parent Company] owns or operated XXX (XXX) XXX within the State of
   Florida. [Related Company] manages the daily operations of each XXX.
5. . . . [Parent Company’s] operations are interrelated with the operations of [Taxpayer] and
   [Related Company]. They share the same principle place of business. They also share
   ownership, management, human resources functions, and accounting functions.
6. Despite the name, [Taxpayer] is not a licensed general contractor in Florida, and it does
   not provide general contracting services. All permitting and real property construction is
   performed by independent contractors who supply their own equipment and labor.

Technical Assistance Advisement
Page 3
Rather, [Taxpayer] is a construction manager charged with the overall responsibility for
site renovation and improvements relating solely to [Related Company] operated XXX.
B. [Taxpayer’s] Business Model

7. In a typical renovation project for a Florida operated XXX, the XXX will contract with
   [Taxpayer] for construction management services, namely to serve as a contract
   administrator for the renovation work, to hire, manage and advise all third party
   providers, and to purchase those materials needed on the project. For example, for the
   audit period resulting in the Closing Agreement executed between [Taxpayer] and DOR,
   three XXX owned and/or operated by [Parent Company] were renovated: [three Related
   XXX Entities]. Copies of the respective construction management agreements
   establishing [Taxpayer’s] duties are attached . . . . These contracts are identical and
   representative of the types of agreements typically executed between [Taxpayer] and
   each XXX.
8. At all times, [Taxpayer] functions solely as the agent for the XXX. It does not purchase
   any materials, supplies or tangible personal property for resale or for its own use. All
   materials are ordered on behalf of the XXX consistent with the needs of each renovation
   project. They are provided to the XXX at cost, without mark-up. Moreover, since the
   XXX owns the materials, they are delivered directly to the property under renovation.
   [Taxpayer] never takes either title or possession of the materials, supplies or tangible
   personal property.
9. Each contract management agreement contains an addendum. Each addendum provides
   in the fourth “whereas” clause that: “[the XXX entity] desires to engage [Taxpayer] to
   perform Work on [the XXX entity’s] behalf as Agent for [the XXX entity] and entered
   into the agreement.”
10. Paragraph 3 of the addendum provides as follows:
    [Taxpayer] shall, for purposes of administrative efficiency and for purposes of
    accurately monitoring purchases and engagements of other Work-related professionals
    (“Third Parties”), purchase materials and goods, engage Third Parties and otherwise incur
    costs and expenses on behalf of [the XXX entity] (“Costs and Expenses”) and shall
    maintain clear records of such Costs and Expenses made on [the XXX entity] as [the
    XXX entity’s] agent for Property and Work.
11. Paragraph 4 of the addendum further provides:
    [The XXX entity] agrees that [Taxpayer’s] purchase of goods and materials and
    [Taxpayer’s] engagement of Third Parties is strictly on behalf of, for the benefit of and as
    agent for [the XXX entity] and not on behalf of or for the benefit of [Taxpayer], and that
    [the XXX entity] shall remain liable for any and all Costs and Expenses incurred by

Technical Assistance Advisement
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[Taxpayer] for [XXX entity’s] behalf for Work at Property. For purposes herein, Costs
and Expenses shall include, without limitation except as set forth in the Agreement, the
costs and expenses for all goods, materials, labor, expert fees, Third Parties, sales and use
taxes, permits and registrations and the like.

12. [Taxpayer’s] role in connection with each renovation project is to ensure both that the
    XXX entities that owned the project actually received the materials, supplies, tangible
    personal property, and services promised by third party vendors and contractors and; that
    the renovation services provided by the independent contractors complied with the
    application plans and specifications[.]
13. The nature and extent of each renovation project, including the selection of third party
    vendors, is controlled by the XXX.
14. The third party vendors who provide the materials, supplies, tangible personal property,
    and services for the XXX entities’ renovation projects are paid in one of three ways:
    (1) invoices are directed to and paid by [Taxpayer] with funds advanced by the individual
    XXX entities from segregated bank accounts;
    (2) invoices are directed to the individual XXX and paid directly by the XXX; or
    (3) invoices are directed to [Taxpayer] then forwarded by [Taxpayer] to the individual
    XXX entities for direct payment to the vendor.
15. Many of the vendor invoices are issued with appropriate Florida sales tax included. Such
    invoices are paid in full, together with the stated sales tax either by [Taxpayer], using the
    monies deposited for such purpose by the individual XXX entities, or directly by the
    XXX entities.
16. When the vendor invoices did not include sales tax, the XXX pay the use tax on such
    materials, supplies, tangible personal property, and services directly to DOR.
    Taxpayer’s Argument
    Taxpayer acknowledges that dealers who are engaged in taxable activities must register as
    dealers and states that taxable activities include the sale of tangible personal property and certain
    enumerated services. However, Taxpayer argues that it should not be required to register as a
    dealer because it does not sell tangible personal property or provide taxable services. Taxpayer
    argues that its sole function is to provide a nontaxable service to Related Company, specifically
    that of an agent providing construction management services. Taxpayer states that the NOD and
    NOR previously issued failed to analyze its agency role in relation to Related Company and that
    the Notices summarily concluded that it was required to register as a dealer pursuant to Rule
    12A-1.051, F.A.C. Taxpayer argues that it is not engaged in any of the activities contemplated
    or delineated in that rule; that it is not a “contractor” as defined by the rule; that it is not the end

Technical Assistance Advisement
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user of any of the material purchased; that it did not perform any real property improvements
because it did not contract to perform any improvements to land; and that it did not furnish any
tangible personal property to Related Company. Taxpayer cites Technical Assistance
Advisements (individually a “TAA”) 05A-011 and 09A-045 1 in support of its argument.
Law and Discussion
Two questions must be answered in determining whether Taxpayer is required to register as a
dealer. First, is Taxpayer an agent of Related Company? Second, if Taxpayer is not an agent of
Related Company, is Taxpayer’s contract with Related Company a real property improvement
contract or a contract for the provision of tangible personal property?
Is Taxpayer an agent of Related Company?
Whether someone is an agent of another is not determined by statute, but has instead been
addressed by the courts on a case-by-case basis. The courts have looked at a variety of factors to
determine whether a relationship between parties was one of agency or independent contractor.
In Cantor v. Cochran, 184 So.2d 173 (Fla.1966), the Florida Supreme Court approved the factors
set out in Restatement (Second) of Agency, § 220 (1958) for making this determination. Those
factors include:
• the extent of control that, by the agreement, the master exercises over the details of the work;
• whether or not the one employed is engaged in a distinct occupation or business;
• the kind of occupation, with reference to whether, in the locality, the work is usually done
under the direction of the employer or by a specialist without supervision;
• the skill required in the particular occupation;
• whether the employer or the worker supplies the instrumentalities, tools, and the place of work
for the person doing the work;
• the length of time for which the person is employed;
• the method of payment, whether by the time or by the job;
• whether or not the work is a part of the regular business of the employer;
• whether or not the parties believe they are creating the relation of master and servant;
• whether the principal is or is not in business.
The Cantor Court found that the individual in question was an employee [i.e., agent] and not an
independent contractor because 1) the employer had the power to set work hours, approve time
off work and to fire the individual without cause; 2) the individual was not engaged in a business

1

The issue addressed in TAA 09A-045 involved whether the contract between a utility company and a management
company created a taxable license to use real property. Taxpayer cites a statement made in the TAA to the effect
that “[a] management agreement is typically in the nature of an employment contract, under which the [m]anager
would be considered as in the nature of an agent or employee….” However, Taxpayer also states that the
contractual intent of the parties governs. Therefore, the proper focus of this TAA should be on the specific facts at

Technical Assistance Advisement
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separate and distinct from that of the employer; 3) the individual needed no special knowledge,
training, or skills to perform work; 4) tools to perform the work were provided by the employer;
5) the individual worked for the employer for seven years; 6) the work was part of the regular
business of the employer; and 7) the employer was in business and the individual’s work was in
furtherance of that business. 2
The relationship of Taxpayer and Related Company is governed by a written contract. This
contract is titled “Standard Form of Agreement Between Owner and Construction Manager
where the Construction Manager is also the Constructor, and where the Basis of Payment is the
Cost of the Work plus a Fee and there is no Guarantee of Cost” (hereafter referred to as the
“Standard Agreement”). This contract is document number A131 CMc - 2003, promulgated by
the American Institute of Architects and the Associated General Contractors of America.
Document number A201 – 1997, “General Conditions of the Contract for Construction,”
(hereafter referred to as the “General Conditions”) is incorporated by reference under Section 1.2
of the Standard Agreement. 3 Section 1.2 of the Standard Agreement specifically provides that
the term “contractor” as used in the General Conditions shall mean the construction manager.
The contract is between “Owner” (Related Company) and “Construction Manager” (Taxpayer). 4
Article 2 of the Standard Agreement sets out Taxpayer’s responsibilities relevant to the
preconstruction phase, including evaluation of Related Company’s program, budget, and
schedule requirements; consultation with Related Company and the architect; preparation of a
project schedule; preparation of cost estimates; and the like. Taxpayer’s responsibilities relevant
to the construction phase are detailed in Article 3 of the General Conditions, and include
supervision and direction of the construction; purchase and payment of labor, materials,
equipment, tools, and other facilities and services necessary for completion of the work; and
securing and paying for building and other permits. Payment from Related Company to Taxpayer
is addressed in Article 7 of the Standard Agreement and is to be made in progress payments.
Neither the Standard Agreement nor the General Conditions contain any provision related to
third-party invoices being submitted to and paid directly by Related Company. Taxpayer is
responsible for the purchase and maintenance of both workers’ compensation and employers’
liability insurance and commercial general liability insurance, including coverage for explosion,
collapse, and underground hazards. Neither party can terminate the contract except for cause, as
provided in General Conditions Article 14.
issue and not a general statement as to what is “typical.” Since the facts of the 2009 TAA are so far removed from
those found here, the holding of the 2009 TAA can have no bearing here.
2
The Cantor case has been cited and discussed dozens of times by other Florida courts. However, no case involved
facts substantially similar to those herein. Therefore, in the interests of brevity, the Department declines to cite and
analyze those cases here.
3
Taxpayer did not provide a copy of the General Conditions. All references to specific provisions are based on a
sample copy obtained from the American Institute of Architect’s website.
4
Taxpayer provided a copy of a document titled “Addendum to Agreement by and between Owner and Manager,”
which specifically states that “Manager is engaged by Owner as Agent for Owner to provide professional services of
management of Work as defined and set forth in Agreement.” However, section 9.2.2 of the Standard Agreement
provides that the Agreement and other documents incorporated by reference represent the entire agreement, and may
only be amended by a written instrument signed by both parties. The addendum is not mentioned in the Standard
Agreement and is not signed by either party; therefore, it cannot be considered as part of the contract.

Technical Assistance Advisement
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Applying the Cantor factors to the present facts, we find the following:

1. Related Company has limited control over the details of the work, especially on a day-today basis. Taxpayer, not Related Company, sets the work hours and is responsible for
   work schedules of subcontractors and other hired labor. Related Company cannot fire
   Taxpayer without cause.
2. Taxpayer’s business (building construction and renovation) is separate and distinct from
   Related Company’s business (XXX operations).
3. Building construction and renovation is not normally done under the control and
   supervision of the ultimate owner. Building construction and renovation requires special
   knowledge, training and skills, as evidenced by the various building codes and regulation
   of the industry by the state and local officials.
4. Related Company has no responsibility to provide any tools, material, or equipment
   needed for the work.
5. Taxpayer is employed only until the specific job was finished and is paid by the job, not
   by time.
6. The construction and renovation of the XXX is not part of the normal Related Company’s
   regular business, that of operating a XXX.
   Taken as a whole, the facts support a finding that relationship of Taxpayer to Related Company
   is that of an independent contractor and not that of an agent.
   Taxpayer states that TAA 05A-011, issued February 9, 2005, is squarely on point with the facts
   here. First, it must be pointed out that a TAA has no precedential value except to the taxpayer to
   whom the TAA was issued and only for the specific transaction addressed. Second, Taxpayer’s
   statement that the 2005 TAA is squarely on point is not supported by the facts. In the 2005
   TAA, the taxpayer procured goods and services, such as landscaping services, washroom
   supplies, and elevator maintenance services, under a property management service contract with
   the property owner. The goods and services were provided by third-party vendors directly to the
   property and were never held in the taxpayer’s inventory. The taxpayer did not take title or
   possession of the goods. Upon approval of the invoices by the owner, the owner would deposit
   money into a segregated bank account from which the taxpayer could make payment. The
   taxpayer had no liability for the goods or services in the event of nonpayment by the property
   owner. The TAA held that the taxpayer was an agent of the property owner, and that there was
   no resale from the taxpayer to the owner because the goods were sold directly to and paid by the
   owner.
   The facts in the 2005 TAA are fundamentally different from the facts at issue. Section 3.4 of the
   General Conditions provides that Taxpayer will purchase and pay for all material necessary for
   the job. Under section 9.6, Related Company has no liability to vendors for any materials
   purchased by Taxpayer. Related Company is only required to make progress payments to
   Taxpayer, which include a variety of costs incurred by Taxpayer, including labor costs,
   subcontractor costs, machinery and equipment, and travel and expense costs, in addition to

Technical Assistance Advisement
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material costs. Neither the Standard Agreement nor the General Conditions contain any
provision related to third-party invoices being submitted to and paid directly by Related
Company. Unlike the 2005 TAA, the materials purchased from third-party vendors can only be
seen as being purchased by Taxpayer for use by Taxpayer or for resale to Related Company.
If Taxpayer is not an agent, did Taxpayer sell tangible personal property to Related Company?
Section 212.05, F.S., imposes tax on several privileges, including the privilege of selling tangible
personal property at retail in this state and the privilege of furnishing any of the services taxable
under Chapter 212. It is undisputed that Taxpayer is not engaged in the provision of any of the
taxable services enumerated in section 212.05, F.S. Since we have already determined that
Taxpayer is an independent contractor and not an agent of Related Company, the only remaining
issue is whether Taxpayer engages in the sale of tangible personal property to Related Company.
Section 212.06(14), F.S., defines the terms “real property,” “fixtures,” and “improvements to real
property” as follows:
(a) "Real property" means the land and improvements thereto and fixtures and is
synonymous with the terms "realty" and "real estate."
(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 the following items,
whether or not such items are attached to real property in a permanent manner: property
of a type that is required to be registered, licensed, titled, or documented by this state or
by the United States Government, including, but not limited to, mobile homes, except
mobile homes assessed as real property, or 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. For an item to be considered a fixture, it is not necessary that the owner of the
item also own the real property to which it is attached.
(c) "Improvements to real property" includes the activities of building, erecting,
constructing, altering, improving, repairing, or maintaining real property.
Rule 12A-1.051, F.A.C., titled Sales to or by Contractors Who Repair, Alter, Improve and
Construct Real Property, provides further information concerning real property improvements.
Rule 12A-1.051, F.A.C., provides, in pertinent part:
(1) Scope of the rule. This rule governs the taxability of the purchase, sale, or use of
tangible personal property by contractors and subcontractors who purchase, acquire, or
manufacture materials and supplies for use in the performance of real property contracts
other than public works contracts performed for governmental entities, which are
governed by the provisions of Rule 12A-1.094, F.A.C. If a real property project involves
multiple subcontractors, each subcontractor is responsible for paying, accruing,
collecting, and remitting tax on his subcontract in accordance with this rule.

Technical Assistance Advisement
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(2) Definitions. For purposes of this rule, the following terms have the following
meanings:

(h)1. "Real property contract" means an agreement, oral or written, whether on a lump
sum, time and materials, cost plus, guaranteed price, or any other basis, to:
a. Erect, construct, alter, repair, or maintain any building, other structure, road, project,
development, or other real property improvement.

c. Furnish and install tangible personal property that becomes a part of or is directly
wired or plumbed into the central heating system, central air conditioning system,
electrical system, plumbing system, or other structural system that requires installation of
wires, ducts, conduits, pipes, vents, or similar components that are embedded in or
securely affixed to the land or a structure thereon.

There can be no dispute that a XXX is a building affixed to land and is therefore properly
classified as real property. The question then becomes whether Taxpayer’s contract with Related
Company constitutes a “real property contract” as defined in the rule or whether it is a contract
for nontaxable services.
As set out above, Taxpayer has responsibilities during both the preconstruction and construction
phases, including such items as evaluation of Related Company’s program, budget, and schedule
requirements; consultation with Related Company and the architect; preparation of a project
schedule; preparation of cost estimates; supervision and direction of the construction; purchase
and payment of labor, materials, equipment, tools, and other facilities and services necessary for
completion of the work; and securing and paying for building and other permits. These activities
fall squarely within the types of activities included within the definition of a “real property
contract” in Rule 12A-1.051(2)(h), F.A.C. The fact that Taxpayer may not be a licensed
contractor under Florida law is immaterial to this conclusion. 5 Taxpayer’s argument that it is
engaged solely in the provision of nontaxable services is not supported by the evidence.
Accordingly, the provisions of Rule 12A-1.051, F.A.C., related to the potential taxability of the
contract apply.
Rule 12A-1.051(3), F.A.C., states that the taxability of a real property contract is determined by
the pricing agreement. Subsection (4) of the rule provides that contractors engaged in lump sum
contracts, cost plus or fixed fee contracts, upset or guaranteed price contracts, or time and
5

Contrary to Taxpayer’s assertion, the term “contractor” is not defined under Chapter 212, F.S., or within Rule 12A1.051, and neither the statutes nor rules given any indication that licensure is a condition precedent to taxability.
However, even if we accept that licensure should be a factor in making our determination, it must be noted that
Taxpayer is licensed as a contractor in the state of Rhode Island.

Technical Assistance Advisement
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materials contracts are the ultimate consumers of materials and supplies used in performance of
the contract and must pay tax on their costs of those materials and supplies. Contractors
performing these types of contracts do not resell the tangible personal property used to the real
property owner but instead use the property themselves to provide the completed real property
improvement. Such contractors should pay tax to their suppliers on all purchases. They should
also pay tax on all materials they fabricate for their own use in performing such contracts, as
discussed in subsection (10) of the rule. They should charge no tax to their customers, regardless
of whether they itemize charges for materials and labor in their proposals or invoices, because
they are not engaged in selling tangible personal property. Such contractors should not register as
dealers unless they are required to remit tax on the fabricated cost of items they fabricate to use
in performing contracts.
However, contractors may also enter into “mixed contracts” which are contracts that include both
real property work and the sale of tangible personal property. Rule 12A-1.051(8), F.A.C.,
provides regulatory guidance on mixed contracts. A mixed contract is not the same as a retail
sale plus installation contract described in paragraph (3)(d) of this rule. Paragraph (3)(d) deals
with a real property contract in which the contractor separately itemizes and prices all the
materials that will be incorporated as part of the real property. A mixed contract is one that
involves a real property improvement, maintenance, or repair and also involves providing
tangible personal property that remains tangible personal property and does not become part of
the real property. In the case of a mixed contract, taxability depends upon the predominant
nature of the work performed under the contract and upon the contract terms, or if the contract
clearly allocates the contract price between the various elements of the contract, then the
taxability is in accordance with the allocation.
The contracts provided by Taxpayer include itemized budgets. These reveal that costs of real
property improvements, such as carpentry contractor, custom cabinet, interior paints, mechanical
contractor, plumbing contractor, electrical contractor, ceiling mounted lighting, wood base and
shoe molding, elastomeric membrane roofing, modified bituminous pavement, drywall
contractor, packaged air conditioners, etc., were paid by Related Company to Taxpayer for the
work performed on the XXX property project. In addition, payments were made to Taxpayer for
the purchase of tangible personal property, such as art work, floor lamps, night stands, bed linen,
coffee pot, hangers, pillows, etc. These items remain tangible personal property and must be
viewed as being resold to Related Company. Since the contracts provide for both real property
work and the sale of tangible personal property, the contracts are mixed contracts and should be
taxed in accordance with the allocation. Taxpayer should either pay tax to its suppliers or accrue
tax on any materials that become improvements to real property upon installation. For any
furniture and other items that remain tangible personal property, Taxpayer must collect tax from
the Related Company on the sales price of these items. Because Taxpayer is engaged in the sale
of tangible personal property on which sales tax must be collected and remitted, Taxpayer must
register as a dealer.
Finally, Taxpayer cannot disregard statutory requirements for registration and remittance of sales
and use tax by contractually obligating another party to assume these responsibilities. It is a

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business operating in Florida and making sales of tangible personal property. It cannot avoid its
requirement to register as a dealer and to collect and remit the tax due on the sale of that
property by transferring the responsibility for remittance of the tax to the end user.
Conclusion
Upon review of the documents provided, it is clear that Taxpayer is an independent contractor
and not an agent of Related Company. As an independent contractor, Taxpayer operates as a real
property improvement contractor performing improvements to real property, as well as providing
the necessary items of furniture and furnishings, tangible personal property, that went into the
projects. Based upon this determination, Taxpayer should be registered as a dealer with the
Department. Since Taxpayer is the ultimate consumer of the supplies and materials used in the
performance of a real property contract, and is also engaged in purchasing tangible personal
property for resale, the appropriate use tax should be remitted to the Department by Taxpayer on
the cost of the supplies and materials used in the performance of the contract. In addition,
Taxpayer should collect and remit the appropriate sales tax on the tangible personal property,
including the cost of labor involved in the installation of the tangible personal property, sold to
Related Company. Taxpayer may not look to Related Company to determine and remit the sales
and use tax on its behalf.
Closing Statement
This response constitutes a Technical Assistance Advisement under s. 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 s. 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 backup documents are public
records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions
of s. 213.22, F.S. Confidential information must be deleted before public disclosure. In an effort
to protect confidentiality, we request you provide the undersigned with an edited copy of your
request for Technical Assistance Advisement, the backup material and this response, deleting
names, addresses, and any other details which might lead to identification of the taxpayer. Your
response should be received by the Department within 10 days of the date of this letter.
Sincerely,
Sara D. Faulkenberry
Senior Tax Specialist
Technical Assistance and Dispute Resolution
Control # 138259