Were materials and equipment bought by a high-speed rail owner for incorporation into its rail system exempt from Florida sales tax?

Plain-English summary

The Florida Department of Revenue concluded that materials and equipment purchased by the owner of a high-speed rail system were exempt when incorporated into the system as component parts.

The statutory definition of the rail system was broad and included the corridor, structures, rail lines, stations, facilities, and equipment used exclusively for design, construction, operation, maintenance, or financing. But machinery, tools, supplies, and other property merely used in construction or operation were not exempt if they did not become component parts.

For building materials used by contractors to improve real property, the owner also had to follow the direct-purchase criteria in Rule 12A-1.094(4)(b).

What this means for you

High-speed rail owners

Document that each exempt purchase becomes an incorporated component of the statutory rail system.

Contractors and procurement teams

Structure owner purchases of real-property materials to satisfy the direct-purchase rules; contractor purchases do not receive the exemption automatically.

Common questions

Q: Were incorporated rail-system components exempt?
A: Yes.

Q: Were tools or equipment merely used on the project exempt?
A: No, unless they became component parts of the system.

Citations and references

• Fla. Stat. §§ 341.8203(4), 341.840, 212.08(6), and 213.22; ch. 212
• Fla. Admin. Code r. 12A-1.094(4)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 15A-007

Original ruling text

Executive Director
Leon M. Biegalski

QUESTION: DOES THE PURCHASE OF MATERIALS AND EQUIPMENT BY TAXPAYER FOR
INCORPORATION INTO THE HIGH-SPEED RAIL SYSTEM OWNED BY TAXPAYER, INCLUDING
THE ITEMS DESCRIBED IN XX, QUALIFY FOR THE EXEMPTION FROM THE SALES AND USE
TAX AS PROVIDED IN SECTION 341.840 FLORIDA STATUTES?
ANSWER: BASED ON THE INFORMATION PROVIDED IN THE TAA REQUEST, THE
MATERIALS AND EQUIPMENT PURCHASED BY TAXPAYER FOR INCORPORATION INTO
THE HIGH-SPEED RAIL SYSTEM OWNED BY TAXPAYER, INCLUDING THE ITEMS
DESCRIBED IN XX, QUALIFY FOR THE EXEMPTION FROM THE SALES AND USE TAX AS
PROVIDED IN SECTION 341.840 FLORIDA STATUTES.
June 5, 2015
Re:

Technical Assistance Advisement 15A-007
Sales and Use Tax
Tangible Personal Property Purchased by the Owner of a High-Speed Rail System for
Incorporation into the System.
Chapter 212 F.S.; Section 341.840, F.S.
XX (hereinafter “Taxpayer”)

Dear XX:
This is in response to your request dated April 2, 2015, for a Technical Assistance Advisement (TAA)
pursuant to section 213.22, Florida Statutes (F.S.), and Rule Chapter 12-11, Florida Administrative Code
(F.A.C.), regarding the exemption from sales and use tax contained in s. 341.840 F.S. applicable to the
purchase of tangible personal property by the owner of a high-speed rail system for incorporation into that
system as a component part thereof. An examination of your letter has established that you have complied
with the statutory and regulatory requirements for issuance of a TAA. Therefore, the Florida Department
of Revenue (hereinafter “the Department”) is hereby granting your request for a TAA.
ISSUE
Whether the purchase of the items tangible personal property by Taxpayer for incorporation into the highspeed rail system owned by Taxpayer, including the items described in XX, will be exempt from sales and
use tax imposed by Chapter 212.

Child Support – Ann Coffin, Director 
General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director 
Information Services – Damu Kuttikrishnan, Director

www.floridarevenue.com
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
Page 2 of 3
FACTS PROVIDED BY THE TAXPAYER
Taxpayer is constructing a high-speed rail system between the cities of XX and XX.
Taxpayer has been determined by XX to be the owner of a high-speed rail system, within the meaning of
Sections 341.8203 F.S. and 341.840, F.S. XX's letter of March 12, 2014 is XX.
Construction of the rail line will require the construction or reconstruction of multiple bridges, crossings,
stations, maintenance facilities, and other real property improvements. Taxpayer intends to retain one or
more contractors to do the real property improvements. The contracts will be structured to comply with
the principals of a direct purchase agreement in Rule 12A-1.094(4), F.A.C. Under that structure,
Taxpayer will be the direct purchaser of the various building materials that will be used in the
improvements.
Taxpayer will also purchase rolling stock (trains), equipment to maintain trains and tracks, and other
property that will be used within the facilities related to the rail system. An initial listing of the items
required is contained on XX.
Taxpayer has determined that the tangible personal property detailed in XX will be purchased in
connection with, and incorporated into, the high-speed rail system and will become a component part
thereof within the meaning of Section 341.840, F.S.
LEGAL AUTHORITY
XX is responsible for public transportation in the State of Florida. Accordingly, XX is the XX responsible
for administering the provisions of Chapter 341, F.S. (Public Transit).
Sections 341.8201 through 341.842, F.S., of Chapter 341, F.S., comprise the Florida Rail Enterprise Act,
which governs high speed rail in Florida. Section 341.8225, F.S., provides that (with one exception) no
government entity other than XX may acquire, construct, maintain, or operate the high speed rail system
except upon specific authorization of the Legislature.
Section 341.8203(4), F.S., defines “high-speed rail system” to mean “any high-speed fixed guideway
system for transporting people or goods, which system is, by definition of the United States Department of
Transportation, reasonably expected to reach speeds of at least 110 miles per hour, including, but not
limited to, a monorail system, dual track rail system, suspended rail system, magnetic levitation system,
pneumatic repulsion system, or other system approved by the enterprise. The term includes a corridor,
associated intermodal connectors, and structures essential to the operation of the line, including the
land, structures, improvements, rights-of-way, easements, rail lines, rail beds, guideway structures,
switches, yards, parking facilities, power relays, switching houses, and rail stations and also includes
facilities or equipment used exclusively for the purposes of design, construction, operation,
maintenance, or the financing of the high-speed rail system.” (emphasis added)
Section 341.840(1) F.S. provides, in pertinent part, “The design, construction, operation, maintenance and
financing of a high speed rail system by . . . the owner . . . thereof, as herein authorized, constitutes the
performance of an essential public function.”

Technical Assistance Advisement
Page 3 of 3
Section 341.840(3), F.S., provides:
(a) Purchases or leases of tangible personal property or real property by the enterprise, excluding
agents of the enterprise, are exempt from taxes imposed by chapter 212 as provided in s.
212.08(6). Purchases or leases of tangible personal property that is incorporated into the highspeed rail system as a component part thereof, as determined by the enterprise, by agents of the
enterprise or the owner of the high-speed rail system are exempt from sales or use taxes imposed
by chapter 212. Leases, rentals, or licenses to use real property granted to agents of the enterprise
or the owner of the high-speed rail system are exempt from taxes imposed by s. 212.031 if the real
property becomes part of such system. The exemptions granted in this subsection do not apply to
sales, leases, or licenses by the enterprise, agents of the enterprise, or the owner of the high-speed
rail system. (emphasis supplied)
(b) The exemption granted in paragraph (a) to purchases or leases of tangible personal property
by agents of the enterprise or by the owner of the high-speed rail system applies only to property
that becomes a component part of such system. It does not apply to items, including, but not
limited to, cranes, bulldozers, forklifts, other machinery and equipment, tools and supplies, or
other items of tangible personal property used in the construction, operation, or maintenance of the
high-speed rail system when such items are not incorporated into the high-speed rail system as a
component part thereof.
DISCUSSION AND ANALYSIS
Taxpayer has provided, as XX to its request, a letter from XX determining: (a) that the project described
in the lease entered into between XX and the Taxpayer is a “high-speed rail system” under Section
341.8203(4), F.S.; and (b) that Taxpayer is the “owner” of a high-speed rail system within the meaning of
section 341.840, F.S.
Taxpayer has indicated that the tangible personal property detailed in XX will be purchased in connection
with, and incorporated into the high-speed rail system and will become a component part thereof. The key
requirements for exemption are that the property will be "incorporated" into the "high speed rail system"
and will become a "component part” of the system. The term "high speed rail system" is defined in
Section 341.8203(4), F.S., very broadly. The component parts of a “high speed rail system” include all of
the things that come together to become a part of the high-speed rail network including, without
limitation, the items on XX. The components become incorporated into the system when they are
combined with other components to become part of the overall “high-speed rail system.”
CONCLUSION
The purchase by Taxpayer of materials and equipment for incorporation into the high-speed rail system
owned by Taxpayer, including the items identified in XX, will be exempt from Sales and Use Tax
imposed by Chapter 212, F.S., provided, however, purchases of materials by taxpayer for use by a
contractor to improve real property will be exempt only if the criteria as outlined in Rule 12A-1.094(4)(b),
F.A.C., are used to make the purchases.

Technical Assistance Advisement
Page 4 of 4
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,

Thomas K. Butscher
Assistant General Counsel
Office of the General Counsel