Could Broward County use an owner direct-purchase program to buy construction materials tax-free for a convention-center expansion and county-owned hotel?

Plain-English summary

Florida approved Broward County's owner direct-purchase program for materials used in a county-owned convention-center expansion and new headquarters hotel.

The County owned the convention center and would own the completed hotel and related waterfront improvements. Although a private developer and design-builder performed development and construction services, the project was government-financed, government-owned, and intended for public use or enjoyment. It therefore qualified as public works under Fla. Admin. Code R. 12A-1.094.

The County's described purchasing process satisfied the five factors used to identify the government as the actual purchaser before materials are incorporated into the project: direct purchase order, direct invoice, direct payment, passage of title, and assumption of risk of loss.

What this means for you

Government project owners

Public ownership of the completed facility was not enough by itself. The government also had to make and control each exempt material purchase.

Developers, contractors, and vendors

The owner direct-purchase documents and transaction flow must match the rule. Contractors are generally consumers of materials they buy for real-property work.

Common questions

Was the convention-center and hotel project public works? Yes.

Could Broward County buy project materials tax-free? Yes, through the approved direct-purchase process.

Could the private developer simply make exempt purchases for the County? The exemption depended on the County itself satisfying the direct-purchase criteria.

Citations and references

• Fla. Stat. Sec. 212.08(6)
• Fla. Stat. Sec. 212.08(7)(p)
• Fla. Admin. Code R. 12A-1.094(1) and (4)
• Fla. Admin. Code R. 12A-1.051(4)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 22A-001

Original ruling text

January 27, 2022
XXXXXX
XXXXXX
XXXXXX

Re:

Technical Assistance Advisement (“TAA”) TAA 22A-001
Sales and Use Tax – Public Works Contract
XXXXXX
FEIN: XXXXXX
Business Partner Number: XXXXXX
Sections: 212.08(7)(p) and 212.08(6), Florida Statutes (F.S.), and
Rules: 12A-1.094(1) and (4), 12A-1.038(1), and 12A-1.051(4), Florida Administrative Code
(F.A.C.)

Dear XXXXXX:
This letter is a response to your petition received on XXXXXX, for issuance of a Technical
Assistance Advisement (“TAA”) pursuant to Section 213.22, F.S., and Rule Chapter 12- 11,
F.A.C., concerning the taxability of purchases to fulfill real property improvement contracts
involving public works projects. An examination of your request has established you complied
with the statutory and regulatory requirements for issuance of a TAA. Therefore, the Department
is hereby granting your request for a TAA.
REQUESTED ADVISEMENT
Taxpayer is seeking a determination as to whether, based on the information and documentation
presented in this advisement, XXXXXX is eligible to claim tax-exempt status for direct materials
purchased.
STATED FACTS
XXXXXX (hereinafter “XXXXXX”) is the governing body of a Florida county. The XXXXXX
approved an expansion project to expand the size of the XXXXXX Convention Center and
development of a new headquarters hotel. XXXXXX wholly owns the XXXXXX Convention
Center and will own the new headquarters hotel. This project will take full advantage of the

Technical Assistance Advisement
Page 2

waterfront facility to make it a tradeshow venue. With the addition of flexible indoor and outdoor
contemporary event space, the County expects to attract more convention business with the
enhanced mix of accommodations, meeting space and amenities for visitors and local residence
to enjoy by XXXXXX.
This initiative is known as the "XXXXXXX" (hereinafter “Project”). The completed Project will
include more than XXXXXX sq. ft., including a XXXXXX sq. ft. contiguous exhibition hall, a new
XXXXXX sq. ft. waterfront ballroom, an upscale XXXXXX-room headquarters hotel, the latest in
new technology, new dining concepts, enhanced water taxi access, and an iconic waterfront
plaza with public access, all wholly owned by XXXXXX County.
XXXXXX County entered into a “Master Development Agreement” (hereinafter “Agreement”)
with XXXXXXX, Inc., a Texas Corporation (hereinafter “Developer”), to provide complete
development services for the Hotel Project and Convention Center Expansion, in accordance
with Master Developer Agreement XXXXXX, Development Documents, and all applicable Legal
Requirements. Article 2, Section 2.1, “Appointment of Developer” of the Agreement states
the following in part:
. . . Developer shall act as the developer in connection with the permitting, design,
development, construction, equipping and furnishing the Projects in accordance with the
Development Documents in order to achieve Substantial Completion of each of the
Projects for an aggregate amount not to exceed the Project Cost Limitation for each
Project and the amounts identified in each GMP Contract Amendment (subject to
adjustments as permitted in this Agreement and such GMP Contract Amendment) for
each Project and not later than (i) the Hotel Project Substantial Completion Deadline for
the Hotel Project, (ii) the West Expansion Project Substantial Completion Deadline for the
West Expansion Project, and (iii) the East Expansion Project Substantial Completion
Deadline for the East Expansion Project, subject to extensions for performance permitted
hereunder and CPEAMs, Change Directives, and Change Orders Approved by County.
Article 2, Section 2.3, “Relationship; Authority” of the Agreement states the following:
Developer is an independent contractor retained by County to perform the Developer
Services. Developer has no power or authority to enter into, execute, make or
acknowledge any contract, covenant, agreement or representation pertaining to the
Project in the name of or on behalf of County except with respect to those matters for
which County has expressly authorized Developer to enter into and execute pursuant to
the terms hereof.
Article 2, Section 2.8, “Design Builder,” states in part:
Developer has contracted with Design Builder in connection with certain pre-construction
and design services related to the services required by Developer under the Design
Services Agreement and will contract with Design Builder for construction administration
services, construction phase design services, design-assist services, and the construction
of the Projects as described in Exhibit C under the terms of the Design Build Agreement.
The Design Build Agreement must be consistent with the terms and conditions of this

Technical Assistance Advisement
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Agreement. Developer represents to County that the Design Build Agreement will (i)
obligate Design Builder to perform all of the obligations which Developer has agreed to
perform herein with regard to construction administration services, construction phase
design services, design-assist services, and the construction the Projects as set forth in
the Design Build Agreement, in a manner that is consistent with the terms of the
Development Documents; (ii) provide that Design Builder is bound to Developer to the
same extent Developer is bound to County with respect to the design and construction of
the Projects; (iii) provide that Design Builder is subject to the terms and conditions of this
Agreement to the extent of the obligations set forth in the Design Build Agreement and
that to the extent there are conflicting or inconsistent terms, this Agreement shall control;
(iv) provide that should this Agreement be terminated for any reason, Design Builder
shall, at County's option, perform the Design Build Agreement for County, or another
party designated by County, without any additional or increased cost to County; and (v)
name County as a third party beneficiary with the rights to enforce all obligations of
Design Builder and the rights of Developer thereunder. Developer shall cause Design
Builder to recognize the rights of County with respect to the Design Build Agreement by
separate written agreement or acknowledgement in the Design Build Agreement, the
form and substance of which shall be subject to the Approval of County, which shall not
be unreasonably withheld. Nothing contained herein or in the Design Build Agreement
imposes on County any obligation to assume the Design Build Agreement, make any
payments to Design Builder or any Design Builder Subcontractor, or to enforce the terms
of the Design Build Agreement. Developer shall cause Design Builder to perform in a
manner consistent with the terms hereof, including causing Design Builder to take such
actions as may be necessary to ensure completion of the Projects in accordance with the
Development Documents, as may be modified or extended as permitted herein . . ..
Article 2, Section 2.9, “Design Consultant,” states in part:
Design Builder has contracted with Design Consultants for the design of the Project.
Developer shall cause Design Builder to require the Design Consultants to perform in a
manner consistent with the terms hereof. Except as permitted herein, Developer shall not
cause Design Builder to remove, replace, otherwise terminate any of the Design
Consultants or otherwise permit Design Builder to remove, replace or otherwise
terminate any of the Design Consultants without the prior Approval of County.
Article 2, Section 2.10, “Single Point-of-Contact,” states the following:
The Parties agree that in order to facilitate an efficient working relationship, Developer
will be the single point-of-contact to Design Builder and Developer Consultants, in
connection with the design, development, construction, equipping, furnishing, and
completion of the Projects. Developer will actively involve and cause Design Builder and
Developer Consultants to participate in regularly scheduled planning and progress
meetings with the Contract Administrator, County Consultants and other representatives
of County, to be held at least every two weeks through the Term. Developer will, and will
cause Design Builder and Developer Consultants to, present ideas, concepts, and
ultimately plans, specifications, budget and other proposals to the Contract Administrator
in an effort to provide updates on progress and to solicit input, feedback, and when

Technical Assistance Advisement
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appropriate, decisions and/or Approvals on material matters pertaining to the
development and delivery of the Projects.
The Direct Purchase procedures will be used exclusively for the purchase of supplies, goods, and
materials from third party suppliers, and not from contractors or subcontractors providing
construction services for the project to be permanently affixed to the public works project.
In this request for advisement, Broward County references Rule 12A-1.094, F.A.C., and states
“’public works’ . . . applies to this project and purchases will be made in accordance with [Rule
12A-1.094(4)(b)1. through 5., F.A.C.], in the following manner:

1. Direct Purchase Order - XXXXXX County will be issuing purchase orders directly to the
   vendor(s) supplying the contractor’s materials and will provide the vendor(s) with a copy
   of XXXXXX County's Florida Consumer's Certification of Exemption.
2. Direct Invoice - Vendor's invoice will be issued to XXXXXX County and not the
   contractor.
3. Direct Payment - XXXXXX County will make payment directly to the vendors, utilizing
   public funds.
4. Passage of Title - XXXXXX County will take title to the tangible personal property from
   the vendor(s) at the time of purchase or delivery by the vendor(s).
5. Assumption of the Risk of Loss - XXXXXX County will be assuming the risk of damage
   or loss at the time of purchase.”
   XXXXXX County further refers to Rule 12A-1.094(4)(c)1. Through 4., F.A.C., and states “. . .
   purchases will be made in accordance in the following manner:
6. Issuance of a Certificate of Entitlement (Attachment C) to each vendor and to the
   XXXXXX County contractor(s) affirming tax-exempt purchase will go into or become a
   part of the public works project.
7. Attaching a Certificate of Entitlement to each purchase order.
8. Affirm that if Department of Revenue determines that sale is not a qualified exemption
   under section 212.08(6), XXXXXX County will be liable for any tax, penalty, and interest
   determined due.
9. Follow the format for Certificate of Entitlement as shown on Department of Revenue
   website.
   The following is an illustration of the “Certificate of Entitlement” that will be used for making
   purchases:

Technical Assistance Advisement
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CERTIFICATE OF ENTITLEMENT (COE)

The undersigned authorized representative of XXXXXX County (hereinafter “Governmental Entity”), Florida Consumer’s
Certificate of Exemption Number XXXXXX, affirms that the tangible personal property pursuant to the following
Purchase Order Number
from
(Vendor), purchased on or after date indicated, will
be incorporated into or become a part of a public facility as part of a public works contract pursuant to Contract No.
XXXXXX with XXXXXX, Inc. (Name of Contractor) for the construction of the XXXXXX County Convention Center
Expansion and Headquarters Hotel Projects.
Governmental Entity affirms that the purchase of the tangible personal property contained in the attached Purchase
Order meets the following exemption requirements contained in Section 212.08(6), F.S., and Rule 12A-1.094, F.A.C.:
You must initial each of the requirements.

1. The attached Purchase Order is issued directly to the vendor supplying the tangible personal property the
   Contractor will use in the identified public works.
2. The vendor's invoice will be issued directly to Governmental Entity.
3. Payment of the vendor's invoice will be made directly by Governmental Entity to the vendor from public
   funds.
4. Governmental Entity will take title to the tangible personal property from the vendor at the time of purchase
   or of delivery by the vendor.
5. Governmental Entity assumes the risk of damage or loss at the time of purchase or delivery by the vendor.
   Governmental Entity affirms that if the tangible personal property identified in the attached Purchase Order does not
   qualify for the exemption provided in Section 212.08(6), F.S., and Rule 12A-1.094, F.A.C., Governmental Entity will be
   subject to the tax, interest, and penalties due on the tangible personal property purchased. If the Florida Department of
   Revenue determines that the tangible personal property purchased tax-exempt by issuing this Certificate does not
   qualify for the exemption, Governmental Entity will be liable for any tax, penalty, and interest determined to be due.
   I understand that if I fraudulently issue this certificate to evade the payment of sales tax I will be liable for payment of the
   sales tax plus a penalty of 200% of the tax and may be subject to conviction of a third degree felony. Under the penalties
   of perjury, I declare that I have read the foregoing Certificate of Entitlement and the facts stated in it are true.
   _
   Signature of Authorized Representative

Title

Purchaser’s Name (Print or Type)

Date

_

Telephone Number: XXXXXX
Federal Employer Identification: XXXXXX
You must attach a copy of the Purchase Order to this Certificate of Entitlement. Do not send to the Florida
Department of Revenue. This Certificate of Entitlement must be retained in the vendor's and the contractor's books and
records.

LAW & DISCUSSION
Rule 12A-1.051, F.A.C., 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. Rule 12A-1.051(4), F.A.C.,
provides that real property contractors are generally considered to be the ultimate consumers
or users of the tangible personal property they purchase to perform a real property contract,
which means they are not reselling the tangible personal property. The stated general rule for
real property contractors is that they should not charge tax to their customers, regardless of
whether or not they itemize charges for materials or labor, because they are not engaged in the
activity of selling tangible personal property. Real property contractors are considered the

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ultimate consumers of the materials and supplies they use to perform real property contracts, so
they must pay tax on the costs of those materials and supplies.
Rule 12A-1.094, F.A.C., for “Public Works Contracts” states the following:
(1) This rule shall govern the taxability of transactions in which contractors manufacture
or purchase supplies and materials for use in public works contracts, as that term is
referred to in Section 212.08(6), F.S. This rule shall not apply to non-public works
contracts for the repair, alteration, improvement, or construction of real property, as
those contracts are governed under the provisions of Rule 12A-1.051, F.A.C. In applying
this rule, the following definitions are used.
(a)1. “Contractor” is one that supplies and installs tangible personal property that is
incorporated into or becomes a part of a public facility pursuant to a public works contract
with a governmental entity exercising its authority in regard to the public property or
facility. Contractors include, but are not limited to, persons engaged in building, electrical,
plumbing, heating, painting, decorating, ventilating, paperhanging, sheet metal, roofing,
bridge, road, waterworks, landscape, pier, or billboard work. This definition includes
subcontractors.

2. “Contractor” does not include a person that furnishes tangible personal property that
   is not affixed or appended in such a manner that it is incorporated into or becomes a part
   of the public property or public facility to which a public works contract relates. A person
   that provides and installs tangible personal property that is freestanding and can be
   relocated with no tools, equipment, or need for adaptation for use elsewhere is not a
   contractor within the scope of this rule.
3. “Contractor” does not include a person that provides tangible personal property that
   will be incorporated into or become part of a public facility if such property will be
   installed by another party.
   (c) “Public works” are defined as projects for public use or enjoyment, financed and
   owned by the government, in which private persons undertake the obligation to do a
   specific piece of work that involves installing tangible personal property in such a manner
   that it becomes a part of a public facility. For purposes of this rule, a public facility includes
   any land, improvement to land, building, structure, or other fixed site and related
   infrastructure thereon owned or operated by a governmental entity where governmental
   or public activities are conducted. The term “public works” is not restricted to the repair,
   alteration, improvement, or construction of real property and fixed works, although such
   projects are included within the term.
   (d) “Real property” within the meaning of this rule includes all fixtures and improvements
   to real property. The status of a project as an improvement or fixture to real property will
   be determined by reference to the definitions contained in subsection 12A-1.051(2),
   F.A.C.
   Rule 12A-1.094(4)(a), F.A.C., clarifies that the exemption in s. 212.08(6), F.S., is a general
   exemption for sales made directly to the government. Based on the facts presented in the

Technical Assistance Advisement
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Agreement between Broward County and the Developer, the work performed for the Project is
deemed a Public Works Contract. Broward County is a Florida county and should be able to make
tax-exempt purchases utilizing the DR-14.
Furthermore, Rule 12A-1.094(4)(b), F.A.C., of the rule list the five (5) criteria that governs the
status of the tangible personal property prior to its affixation to real property. In accordance
with the rule, Broward County demonstrates its purchases will be made in accordance with Rule
12A-1.094(4)(b)1., through 5., F.A.C.
CONCLUSION
Based on the information and documentation presented in this advisement, XXXXXX County is
eligible to claim tax-exempt status for direct material purchases made pursuant to the
Agreement. The Owner Direct Purchase Program, as described, is sufficient to allow XXXXXX
County to take advantage of the Public Works statute on the purchase of materials for the
Project.
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 backup documents are
public records under Chapter 119, F.S., and are subject to disclosure to the public under the
conditions of Section 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 15 days of the date of
this letter.
If you have any further questions with regard to this matter and wish to discuss them, you may
contact me directly at 850-717-6729.
Sincerely,

Joseph D. Franklin III
Joseph D. Franklin III
Tax Law Specialist
Technical Assistance & Dispute Resolution
(850)717-6729
Record ID: XXXXXX