Did a governmental entity's direct purchases of materials for a training center and parking garage qualify for Florida's public-works exemption?

Plain-English summary

Florida approved a governmental entity's direct purchases of materials, supplies, and equipment for a training center and parking garage as exempt public-works transactions.

The entity—not its contractor—would issue purchase orders directly to third-party vendors, provide its exemption certificate, receive the invoices, pay from public funds, take title at purchase or delivery, and assume the risk of loss. The purchased items would go into or become part of public works owned by the governmental entity.

Those procedures satisfied the five direct-purchase factors in Fla. Admin. Code R. 12A-1.094(4)(b). The ruling emphasized that the exemption applies to purchases made by the governmental entity, not purchases made by contractors acting for it.

What this means for you

Government construction projects

The governmental owner must control the transaction in substance as well as on paper: ordering, invoicing, payment, title, and risk of loss.

Contractors and vendors

Contractor or subcontractor purchases are not transformed into exempt government purchases merely because the materials are used in public works.

Common questions

Did the training-center and garage purchases qualify? Yes.

Who had to issue the purchase order and pay the vendor? The governmental entity.

Could the contractor buy the materials tax-free as the government's agent? The TAA said the exemption applied to governmental-entity purchases, not contractor purchases.

Citations and references

• Fla. Stat. Sec. 212.08(6)(b)-(c)
• Fla. Stat. Sec. 212.06(1)(a)
• Fla. Admin. Code R. 12A-1.094(4)(b)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 22A-002

Original ruling text

QUESTION: Would Taxpayer’s purchases of materials, supplies and equipment for its Training Center and
Parking Garage qualify for the exemption in section 212.08(6), F.S., for sales to governmental entities of
tangible personal property which becomes part of public works owned by the governmental entity.

ANSWER: Taxpayer’s purchases of materials, supplies and equipment for its Training Center and Parking
Garage would qualify for the exemption in s. 212.08(6), F.S. Taxpayer has established that its purchases
would meet the requirements of Rule 12A-1.094(4)(b), F.A.C., and that the items it would be purchasing
would “go into or become a part of” public works pursuant to s. 212.08(6), F.S.
January 28, 2022

XXXXXXX
XXXXXXX
XXXXXXX
XXXXXXX
XXXXXXX
Re:

Technical Assistance Advisement No. 22A-002
Sales and Use Tax – Public Works Contracts
XXXXXXX (“Taxpayer”)
FEI No. XXXXXXX
BPN: XXXXXXX
Sections 212.06(1)(a), and 212.08(6)(b) and (c), Florida Statutes (“F.S.”)
Rules 12A-1.051(2)(c)1., (2)(g), and (4), 12A-1.056(1)(a), and 1.094(4)(a), (b), and (c), (5), and
(10)(b), Florida Administrative Code (“F.A.C.”)
XXXXXXX (“Contractor”)
FEI No. XXXXXXX
BPN: N/A

Dear XXXXXXX:
This letter is a response to your petition dated March 12, 2021, for the Florida Department of Revenue’s
(the “Department’s”) issuance of a Technical Assistance Advisement ("TAA") with regard to whether
XXXXXXX (“Taxpayer”) purchase of materials, supplies and equipment for the construction of its Training
Center and Parking Garage would qualify for the exemption for purchases of supplies and materials for
use in public works contracts found in section 212.08(6), Florida Statutes. Your petition has been carefully

XXXXXXX
January 28, 2022
Florida Department of Revenue
Page 2

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.
Requested Advisement
Whether Taxpayer’s purchases of materials, supplies and equipment for its Training Center and Parking
Garage would qualify for the exemption in s. 212.08(6), F.S., for sales to governmental entities of tangible
personal property which becomes part of public works owned by the governmental entity.
Facts As Provided
Taxpayer has entered into an agreement for a construction project (“Project”) which will include the
construction of a Training Center and Parking Garage (“Training Center”). Taxpayer states that it is going
to use the Direct Purchase procedures “exclusively for the purchase of materials from third party suppliers
and not contractors or subcontractors” involved with the Project. Taxpayer states in its letter that
purchases for the Project will be made in accordance with the procedures set forth in Rule 12A-1.094(4)(a)
and (b)1.-5., F.A.C., in the following manner:
Taxpayer will be issuing its own purchase orders directly to the vendor(s) supplying
the materials the contractor(s) will use and provide the vendor(s) with a copy of XXXXXXX
Consumer’s Certificate of Exemption.
Vendor’s invoice will be issued to the Taxpayer and not the contractor.
Taxpayer will make payment directly to the vendors utilizing public funds.
Taxpayer will take title to the tangible personal property from the vendor(s) at the
time of purchase or delivery by the vendor(s).
Taxpayer will be assuming the risk of damage or loss at the time of purchase.
Taxpayer’s statements above basically paraphrase Rule 12A-1.094(b)1.-5., F.A.C.
Taxpayer states that its purchases for the Project shall include, but not be limited to, those items identified
in the Schedule of Potential Direct Owner Purchases, which it attached.
Taxpayer has reaffirmed these facts in an email dated Janury 6, 2022.
Taxpayer’s Argument

XXXXXXX
January 28, 2022
Florida Department of Revenue
Page 3

Taxpayer states that the definition of “public works” found in Rule 12A-1.094, F.A.C., applies to the project
and that purchases will be made in accordance with Rule 12A-1.094(4)(a) and (b)1.-5., F.A.C.1
Applicable Law and Discussion
Sales tax is due at the moment of the transaction. See s. 212.06(1)(a), F.S.; Rule 12A-1.056(1)(a), F.A.C.
There is an exemption, however, in s. 212.08(6), F.S., for sales of tangible personal property made directly
to governmental entities when these items will go into or become part of public works owned by the
governmental entity. Section 212.08(6)(b), F.S., provides that one of the criteria for exemption is that the
governmental entity certify to the vendor and its contractor that it is entitled to the exemption by
providing them with a Certificate of Entitlement to such exemption. The Department has also adopted a
Rule regarding this exemption, i.e., Rule 12A-1.094, F.A.C. See s. 212.08(6)(b) and (c), F.S.
The criteria which must be met in order for a sale to be considered an exempt sale to a governmental
entity of tangible personal property that will become part of public works is set forth in Rule 12A1.094(4)(b), F.A.C., which provides:
(b) The following criteria that govern the status of the tangible personal property prior
to its affixation to real property will be considered in determining whether a
governmental entity rather than a contractor is the purchaser of materials:2

1. Direct Purchase Order. The governmental entity must issue its purchase order
   directly to the vendor supplying the materials the contractor will use and provide the
   vendor with a copy of the governmental entity’s Florida Consumer’s Certification of
   Exemption.
2. Direct Invoice. The vendor’s invoice must be issued to the governmental entity,
   rather than to the contractor.
3. Direct Payment. The governmental entity must make payment directly to the
   vendor from public funds.
4. Passage of Title. The governmental entity must take title to the tangible personal
   property from the vendor at the time of purchase or delivery by the vendor.
5. Assumption of the Risk of Loss. Assumption of the risk of damage or loss by the
   governmental entity at the time of purchase is a paramount consideration. A
   governmental entity will be deemed to have assumed the risk of loss if the governmental
   entity bears the economic burden of obtaining insurance covering damage or loss or
   directly enjoys the economic benefit of the proceeds of such insurance.

1

Taxpayer states that the definition of “public works,” as found in Rule 12A-1.094(10)(b), F.A.C., applies to this
project. The definition of “public works” is actually found in paragraph (1)(c) of the Rule.
2
The exemption only applies to purchases made by governmental entities and not to purchases made by contractors
employed directly to or as agents of the governmental entity. See s. 212.08(6)(b), F.S.

XXXXXXX
January 28, 2022
Florida Department of Revenue
Page 4

Taxpayer indicated that it would follow the steps set forth in subparagraphs (4)(b)1.-5. in its letter,
The documentation submitted, contracts; direct owner purchases and payments; schedule of potential
direct owner purchases; and other documents, indicate that Taxpayer’s procedures do satisfy the
requirements for exemption of transactions as sales to a governmental entity. Taxpayer will issue its own
purchase orders directly to the vendor of the materials, and it will issue payment for the materials directly
to the vendor. Taxpayer also assumes title to the materials at the time they are delivered to the job site.
The vendors will issue invoices directly to the Taxpayer, and Taxpayer will issue a Certificate of Entitlement
to the vendors, as well as to the contractor.

Conclusion
Taxpayer’s purchases of materials, supplies and equipment for its Training Center and Parking Garage
would qualify for the exemption in s. 212.08(6), F.S. Taxpayer has established that its purchases would
meet the requirements of Rule 12A-1.094(4)(b), F.A.C., and that the items it would be purchasing would
“go into or become a part of” public works pursuant to s. 212.08(6), 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 that 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.
Kind Regards,

Alan R. Fulton
Alan R. Fulton
Revenue Program Administrator I
Technical Assistance & Dispute Resolution
Record ID: 506426